Q1 2025 Earnings Summary
- Robust M&A Pipeline: Executives emphasized active acquisition activity with annualized revenues from deals already exceeding $125 million and strong momentum toward surpassing previous annual averages, with most transactions being small enough to avoid lengthy HSR filings.
- Strong Pricing and Volume Performance: The team reported a 6.9% core price increase in Q1 and reinforced high pricing retention compared to past years, supporting guidance of around 6% for the full year, which underpins margin stability despite a modest normalized volume decline.
- Improving Operational Efficiency and Safety: Record-low safety incidents driven primarily by cultural change and effective coaching, coupled with reductions in labor-related expenses, are expected to lower future insurance costs and enhance margins over time.
- Extended M&A Delays: The new HSR process now requires 90 to 150 days versus the previous 30 to 60 days, potentially delaying future large acquisitions and integration efforts, which could slow growth momentum.
- Persistent Volume Declines: The company continues to face negative volume trends—citing a 2.8% decline in Q1 (adjusted for weather and contract shedding)—indicating ongoing pressures that could impact revenue growth.
- Margin Pressure from Commodity Headwinds: Q2 guidance shows incremental margin headwinds, as commodity-related costs (like lower OCC prices) and less favorable cost dynamics are expected to erode margins compared to Q1 results.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +7.6% (from $2.073B to $2.228B) | Q1 2025 revenue increased by $155.0 million driven largely by price-led organic growth, ongoing acquisition contributions, and better commodity pricing. This follows previous period trends of acquisitions and price increases that had boosted Q1 2024 revenue. |
Operating Income | +6.4% (from $366.80M to $390.21M) | Operating income grew by approximately $23.41 million as cost efficiencies and improved revenue mix led to a better margin picture, continuing the improvement seen in Q1 2024. The modest gains suggest that controlled expenses and operational synergies from acquisitions are having a positive impact compared to prior periods. |
Net Income | +5.4% (from $229.13M to $241.51M) | Net income increased by about $12.38 million thanks to higher revenue and operational improvements which marginally outpaced cost and interest expense increases. The change aligns with previous period trends where revenue enhancements and cost management contributed to profitability gains. |
Basic Earnings per Share (EPS) | +5.6% (from $0.89 to $0.94) | EPS rose by $0.05 as a result of the improved net income and steady share count, reinforcing the earnings benefit from the same drivers that bolstered net income. The 5.6% increase builds on the foundation set in Q1 2024 where similar factors—price increases and acquisition benefits—were key drivers. |
Eastern Region Revenue | +12% (from $360.06M to $403.3M) | Eastern region revenue jumped by approximately $43.24 million due to strong contributions from acquisitions and robust price increases, partially offset by typical seasonal headwinds. This improvement reflects a continuation and amplification of prior period trends in the Eastern market. |
Southern Region Revenue | +8% (from $418.95M to $453.4M) | Revenue in the Southern region increased by about $34.45 million, supported primarily by solid waste price increases and growing E&P waste revenues. This aligns with Q1 2024 trends where acquisitions and strategic pricing continue to positively influence the region’s performance. |
Canada’s Revenue | +8% (from $280.36M to $302.7M) | Canada’s revenue grew by roughly $22.34 million as acquisition activity and higher pricing helped overcome volume softness. This modest growth mirrors previous period improvements while also acknowledging currency headwinds and lower collection volumes that partly offset gains. |
Operating Cash Flow | +10.5% (from $490.31M to $541.54M) | Operating cash flow improved by approximately $51.23 million driven by increased net earnings, improved collections (e.g., a favorable movement in accounts payable and accrued liabilities), and deferred revenue benefits. The change is a continuation of positive operational adjustments seen in previous periods, offset slightly by higher closure/post-closure expenditures and receivables impacts. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q1 2025 | $2.2B to $2.225B | no current guidance | no current guidance |
Adjusted EBITDA | Q1 2025 | $700M to $710M or 31.8%–31.9% of revenue | no current guidance | no current guidance |
Depreciation & Amortization | Q1 2025 | ~13.4% of revenue; $48M | no current guidance | no current guidance |
Interest Expense (Net) | Q1 2025 | ~$80M | no current guidance | no current guidance |
Tax Rate | Q1 2025 | 23% | no current guidance | no current guidance |
Revenue | Q2 2025 | no prior guidance | $2.375B to $2.4B | no prior guidance |
Adjusted EBITDA Margin | Q2 2025 | no prior guidance | 32.7% | no prior guidance |
Depreciation & Amortization | Q2 2025 | no prior guidance | 13.1% of revenue; ~$50M or $0.14 per diluted share | no prior guidance |
Interest Expense (Net) | Q2 2025 | no prior guidance | $82M | no prior guidance |
Effective Tax Rate | Q2 2025 | no prior guidance | 24.5% | no prior guidance |
Adjusted Free Cash Flow | FY 2025 | $1.3B to $1.35B | $1.3B to $1.35B | no change |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q1 2025 | $2.2B to $2.225B | $2,228,176 | Beat |
Depreciation & Amort | Q1 2025 | About 13.4% of revenue, including about $48M intangible amort. | 289,949 total (~13.0% of revenue), including $47,642 | Met |
Net Interest Expense | Q1 2025 | About $80M | ~$79.1M (Interest Exp. of $80.875M minus Interest Inc. of $1.77M) | Met |
Tax Rate | Q1 2025 | ~23% | 22.8% (71,467 ÷ 312,977) | Met |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
M&A and Strategic Acquisitions | Previous calls (Q2–Q4 2024) focused on a robust pipeline, minimal regulatory delays (with the HSR filings rarely affecting deals), and strong integration capabilities; several acquisitions including tuck‐ins and large revenue contributions were highlighted. | In Q1 2025, the call reiterated a robust pipeline with high deal activity, a strategic acquisition of a recycling facility in New Jersey, and confidence that regulatory changes (HSR process) will not delay most deals. | Consistent focus on an active M&A strategy with sustained optimism and similar qualitative themes across periods. |
Pricing Strategy and Retention | Across Q2–Q4 2024, the company emphasized strong pricing power (price increases ranging from 6%–7.5% across markets) and significant improvements in employee retention through proactive engagement and training; a clear link was made between pricing strength and margin expansion. | In Q1 2025, pricing was even stronger with a core increase of 6.9%—above guidance—and continued improvements in retention were noted as a driver of operational performance. | Stable and positive sentiment: the company maintained its pricing discipline and retention improvements, with Q1 2025 performance slightly exceeding earlier expectations. |
Persistent Volume Declines | Q2–Q4 2024 discussions attributed volume declines to purposeful shedding of unprofitable contracts and a challenging economic environment, with specific references to a 2.7%–2.8% decline and ongoing adjustments to optimize contract quality. | In Q1 2025, a similar volume decline of 2.8% was reported—driven partly by weather impacts and continued shedding of undesired contracts—but with detailed attribution to both price‐volume trade‐offs and economic factors. | Steady but nuanced: The challenge remains persistent, though the call in Q1 2025 provides a clearer breakdown of impacts, reinforcing the ongoing nature of the issue with slight sequential improvements. |
Commodity Price Headwinds | In Q2–Q4 2024, the company explained that volatile recyclable commodity prices, especially for OCC and RINs, had created margin headwinds; earlier periods noted both short-term benefits (in Q2) and anticipated near-term declines (in Q3 and Q4). | In Q1 2025, declining recyclable prices (e.g. OCC down 20% YoY) led to a measurable margin headwind (10–30 basis points), with expectations of tougher comparisons in Q2. | Persistent pressure: Commodity headwinds continue to affect margins, with a similar outlook and challenges noted across the periods. |
Renewable Natural Gas (RNG) Projects | Q2–Q4 2024 calls highlighted RNG projects as an emerging growth area with significant CapEx commitments (projected spending and cumulative outlays near $250 million) and delayed EBITDA contributions, with material benefits expected mainly post-2025. | Q1 2025 reaffirmed that 2025 remains a CapEx year for RNG, with new facilities expected by late 2026, emphasizing that EBITDA benefits will be delayed while RIN values remain stable. | Consistently forward-looking: The growth potential remains strong but with an ongoing theme of delayed cash flow and EBITDA benefits due to high initial investments. |
Operational Efficiency and Technology Investments | In Q2 and Q4 2024, the company discussed leveraging advanced technologies—such as robotics, AI, and dynamic routing systems in recycling facilities and on trucks—to drive productivity, optimize routes, and further improve safety and quality, alongside robust employee engagement programs. Q3 2024 focused more on ongoing retention and safety improvements without explicitly mentioning robotics/AI. | In Q1 2025, the focus shifted away from new technology investments; there was no mention of robotics or AI, with emphasis instead on cultural safety improvements driven by coaching, which accounts for 90% of incident reductions. | Notable divergence: Earlier periods emphasized tech advancements (robotics/AI) while Q1 2025 underscored a return to cultural and behavioral safety improvements. |
Free Cash Flow and Capital Expenditure Concerns | Q2–Q4 2024 earnings calls discussed the gap between strong EBITDA growth and free cash flow conversion pressures, largely due to acquisition-related CapEx, RNG investments, and site-specific events; normalized conversion figures ranged around 45–50%, with significant commentary on optimizing CapEx spending. | In Q1 2025, adjusted free cash flow was reported robustly at $332.1 million for the quarter with a reaffirmed full‐year outlook, and there was no explicit mention of cash flow pressures, suggesting a less problematic view compared to prior periods. | Improving sentiment: There is a shift from earlier concerns about CapEx impacts on cash flow to a more positive, stable free cash flow outlook in Q1 2025. |
Regional Operational and Logistics Challenges | In Q2–Q4 2024, challenges and strategic responses in the Northeast were a significant focus—discussions included issues with rail logistics, cost pressure from local market pricing, and efforts to leverage assets like Arrowhead and franchise acquisitions in NYC to mitigate operating challenges. | Q1 2025 did not mention any issues related to regional operational or logistics challenges, particularly in the Northeast, indicating that this topic was either resolved or deprioritized in the most recent call. | Discontinued mention: The absence of discussion in Q1 2025 signals a potential resolution or shift in focus away from Northeast-specific logistical issues. |
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M&A Process Impact
Q: How does HSR change affect M&A?
A: Management explained that due to the new HSR process—now 3–5x more time and cost intensive—nearly all deals (under $125M) avoid this hurdle, so there’s little impact on overall deal flow. -
Incremental M&A Update
Q: Should incremental M&A figures change?
A: They expect an additional $25–30M in M&A activity, keeping the annual targets near $300M, with the deal mix remaining typical and no large HSR deals expected this year. -
Margin Outlook amid Inflation
Q: What impact does inflation have on margins?
A: Despite cost inflation running at about 4–4.5%, strong pricing retention supports margins near 32–32.7%, as management’s disciplined cost control buffers these pressures. -
Price Cost Spread Dynamics
Q: Is pricing strong despite rising costs?
A: Q1 core pricing hit 6.9%, but management expects a natural seasonality step-down, maintaining a full‑year average of at least 6%—thus keeping a healthy price-cost spread. -
Special Waste Pipeline
Q: How visible is the special waste pipeline?
A: They have roughly 90 days of visibility, with recurring industrial waste (about 60–70%) and more speculative event-driven jobs (around 30%), offering both predictability and some variability. -
Chiquita Canyon Update
Q: What’s the status on Chiquita Canyon costs?
A: The project remains budgeted in the $100–150M range, with effective containment measures in place—odor complaints are down over 90% and production volumes have declined by about 30% from peak levels. -
Landfill Tons and Volume Trends
Q: Are landfill ton trends stable?
A: Recent data shows a +4.5% four‑week average and a +3% year‑to‑date increase in landfill tons, with weather‑normalized volume declines slightly better than previous periods. -
Recycling Facility Acquisition
Q: What’s the value of the new NJ facility?
A: The state‑of‑the‑art NJ recycling facility, processing up to 20,000 tonnes per month, is key for expanding capacity in the NY/NJ region amid rapid internal volume growth. -
Tariff and Supplier Impact
Q: Are tariffs affecting truck fleet costs?
A: They work with about 4 chassis and body suppliers; while tariffs might add up to $3,500 per chassis, overall 2025 CapEx remains largely unaffected by these limited exposures. -
Arrowhead Landfill Ramping
Q: How is Arrowhead ramping up?
A: Arrowhead’s throughput has increased from 2,700 tonnes to about 7,500–8,000 tonnes on peak days, aiming to process roughly 2 million tonnes this year with a strong focus on capturing third‑party volumes.