Margin Guidance
Q: Are margin declines in Q4 due to one-time items?
A: Management noted that the third quarter benefited from two significant one-time items: an insurance recovery adding 50 basis points and a bad debt adjustment contributing 110 basis points to Environmental Solutions, amounting to about 10 basis points for the entire company. " Excluding these, margins were strong. The guidance for Q4 reflects a step down in margins more than normal seasonality due to the absence of these one-time benefits. "

2025 Incremental Drivers
Q: How much will sustainability initiatives contribute in 2025?
A: Sustainability innovations, including the RNG portfolio, polymer centers, and blue polymers, are expected to add approximately $75 million in revenue and $30 million to $35 million in EBITDA in 2025. " The Empower initiative is projected to contribute around $10 million next year, with full run-rate benefits of $20 million realized as it is fully deployed. " Additional gains from the RISE platform are anticipated, with about $25 million more to come, split between 2025 and 2026. "

M&A Pipeline and Outlook
Q: Can you update us on the M&A pipeline?
A: The company expects to close around $300 million in acquisitions this year, down from the initial $500 million target. " A strong pipeline is building, and management anticipates a robust first half next year. " The commitment to M&A remains strong, with expectations for meaningful contributions moving forward. "

Volume Trends and Construction Softness
Q: Should we expect softness in volumes to continue?
A: The industry has experienced a flat to slightly negative demand environment over the past 12 to 18 months. " Construction softness, particularly in the large container business, has impacted volumes. " However, management is optimistic about future growth due to underbuilt housing and potential increases in construction activity, with signs of improvement starting in the fourth quarter and into 2025. "

Pricing Strategy and CPI Contracts
Q: Will the pricing spread between open market and restricted contracts continue?
A: The current spread of around 400 basis points between open market and restricted pricing is higher than historical levels and is expected to narrow as inflation indices decrease. " The company has shifted 61% of contracts historically tied to headline CPI to more favorable terms, aiming to maintain pricing above cost inflation and drive margin expansion. "

Electric Vehicle Adoption
Q: How is your EV strategy progressing towards 2028 targets?
A: The company is on track with its EV strategy, having ordered about 100 electric vehicles. " Management acknowledges challenges but emphasizes the importance of early infrastructure planning and understanding incentives to accelerate adoption. " The introduction of fully electric trucks from Oshkosh is a game changer, allowing a full day's operation without sacrificing payload. "

Internal Cost Inflation Trends
Q: How is internal inflation trending compared to CPI?
A: Internal cost inflation is moderating, with labor cost inflation around 4.5%. " Maintenance costs have improved due to new truck deliveries and reduced turnover, allowing more work to be done in-house at lower labor rates. " Parts inflation has also eased, leading to overall cost inflation expected to decelerate modestly into 2025. "

Environmental Solutions Margin Improvement
Q: What's driving margin improvement in Environmental Solutions?
A: Margins in Environmental Solutions have improved to approximately 24% EBITDA due to optimized customer mix, tactical pricing, and cost management. " Strategic efforts include focusing on more profitable verticals, enhancing labor utilization, and leveraging systems and technology to support growth. "

2025 Capital Spending
Q: How will 2025 capital spending for sustainability compare to 2024?
A: Capital spending in 2025 for sustainability initiatives like the polymer center and EV investments is expected to be relatively consistent with 2024, possibly slightly higher. " Investments in RNG are made through joint ventures and accounted for like acquisitions rather than capital expenditures. " Overall, CapEx as a percentage of revenue is not expected to change significantly. "

Customer Pricing Amid Lower Inflation
Q: Are customers still accepting price increases as inflation moderates?
A: Management finds operating in a 3.5% to 4% inflation environment favorable. " Customers continue to accept price increases necessary to offset cost inflation, allowing the company to maintain margins while providing employees with regular wage increases. "

Volume Outlook and Churn
Q: What are your expectations for volume growth and churn?
A: The company anticipates volume growth as economic indicators improve over the next 3 to 9 months. " Some churn is expected due to strategic repricing and exiting less profitable contracts, especially following acquisitions. " Despite current construction volume declines, rational pricing behavior is maintaining profitability. "

Digital Initiatives and Future Capabilities
Q: What digital initiatives are planned for 2025 and beyond?
A: With the RISE platform in place, the company aims to optimize route sequencing and adherence, where each minute saved can add about $5 million annually. " Future initiatives include automating transactional processes in order-to-cash, expected to yield benefits into 2026 and 2027. " These efforts enhance employee experience, customer service, and operational efficiency. "

Recycling Center Investments
Q: Are there plans for further automation in recycling centers?
A: Annual investments are made to upgrade recycling centers with new optical sorters and automation to produce higher-quality products. " While some labor may be added, the focus is on improving product quality and increasing circularity. " Plans include building new facilities where needed and continuing to upgrade the existing 75 to 77 centers. "

Environmental Solutions Growth Outlook
Q: How is the organic growth outlook for Environmental Solutions?
A: While there has been some customer churn due to strategic pricing, management is focused on testing customer willingness to pay for valued services. " Volume has been relatively flat, but pricing has exceeded expectations. " There are plans to drive both unit growth and margin expansion in 2025. "

Core Price Deceleration
Q: What factors contributed to core price deceleration this quarter?
A: The deceleration is primarily due to the expected anniversary of new fees introduced last year and a sequential step down in the restricted portion of the business from 5.6% to 4.9%. " This reflects lower inflation indices, and as long as the company maintains the spread over cost inflation, margin expansion can continue. "

M&A Pace and Target Margins
Q: Has M&A activity slowed, and how are target margins affected?
A: M&A activity has varied due to market conditions, but the company's enthusiasm remains unchanged. " Management remains disciplined, closing approximately one out of every eight opportunities. " The focus is on strategic fit and financial returns, with less emphasis on current margins and more on potential post-integration improvements. "

Labor Availability and Wage Inflation
Q: How is labor availability affecting operations and wages?
A: Labor turnover has decreased by 100 basis points year-over-year, with labor cost inflation around 4.5%. " Labor availability is improving overall, though challenges remain for certain positions like technicians. " The company is addressing this by investing in technical education and training programs. "

Margin Expansion Outlook for 2025
Q: What is the outlook for margin expansion in 2025?
A: While specific guidance for 2025 is not provided, management expects to grow revenue at mid-single digits and EBITDA slightly faster, implying 30 to 50 basis points of margin expansion. " This aligns with the company's long-term strategy to enhance profitability. "

Q4 Guidance and Seasonality
Q: Is the Q4 guidance conservative given seasonal trends?
A: Management acknowledged that while margins typically step down from Q3 to Q4 due to seasonality, they are focused on full-year results and feel good about where they will end up in Q4. " They do not emphasize precise quarterly updates but rather provide markers for expectations. "

2025 Rollover Acquisitions and Interest Expense
Q: What should we consider regarding rollover acquisitions and interest expense in 2025?
A: Rollover impact from acquisitions already closed is expected to contribute 10 to 20 basis points to 2025 growth, with potential upside from fourth-quarter deals. " Interest expense may increase slightly due to debt maturities being refinanced at higher current rates, but no significant impact is anticipated. "