Waste Connections WCN Q2 2025 Earnings Call

Morning everyone and welcome to the Waste Connections Inc Q2 2025 earnings call. Participants will be in a listen-only mode. Should you need assistance, please send a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. For questions, you may press star and then one on a touch telephone. To withdraw your questions, you may press star and two. Please note this event is being recorded. I'd now like to turn the floor over to Ron Mittelstaedt, President and CEO. Sir, please go ahead.

Thank you, Ron, and good morning. The discussion during today's call includes forward-looking statements made pursuant to the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995, including forward-looking information within the meaning of applicable Canadian securities laws. Actual results could differ materially from those made in such forward-looking statements due to various risks and uncertainties. Factors that could cause actual results to differ are discussed both in the cautionary statement included in our July 23rd earnings release and in greater detail in Waste Connections filings for the US Securities and Exchange Commission and the Securities Commissions or similar regulatory authorities in Canada. You should not place undue reliance on forward-looking statements as there may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business. We make no commitment to revise or update any forward-looking statements in order to reflect events or circumstances that may change after today's date. On the call, we will discuss non-GAAP measures such as adjusted EBITDA, adjusted net income attributable to Waste Connections on both a dollar basis and per diluted share and adjusted free cash flow. Please refer to our earnings releases for a reconciliation of such non-GAAP measures to the most comparable GAAP measures. Management uses certain non-GAAP measures to evaluate and monitor the ongoing financial performance of our operations. Other companies may calculate these non-GAAP measures differently. I will now turn the call back over to Ron.

Thank you, Ron. In the second quarter, revenue of 2.407 billion exceeded the high end of our outlook and was up $159 million or 7.1% year-over-year. Acquisitions completed since the year ago period contributed about $113 million net of divestitures. Core pricing of 6.6% was as expected in Q2 and reflected the typical cadence of seasonality. For the full year, core pricing of over 6% is now effectively complete or contractually provided for. Volume down 2.6% reflect the following year-over-year results. In Q2 on a same store basis, rolloff revenue was down about 1% on pulls down 3% and rates per pull up 2%. Looking at regional variances, pulls range from down high single digits in our southern region to up mid-single digits in our western region with most regions down slightly. Activity levels during the quarter, which would typically reflect a seasonal ramp of as much as 5%, showed only about a 1% sequential improvement between April and June. We would note the constantly changing tariff schedules during this period, which we believe contributed to uncertainty for customers. Landfill revenue was up about 4% on tons up 1.5%. Looking by waste type, MSW tons were up 3%, special waste was up 7% and C&D tons were down 9%. Slightly below recent quarters and indicative of limited construction activity. Values for recycled commodities already down year-over-year coming into the quarter declined another 10 to 15% during Q2. Renewable energy credits or RECs also stepped down by about 15% during Q2. And our US E&P waste activity, which is highly correlated to crude prices and related drilling activity, was down about 10% year-over-year, most notably in June, as crude volatility was magnified by ever-changing policies. By way of contrast, we did not see a corresponding decline in Canada, where our business is more production-oriented. In fact, our R360 Canada revenue was up year-over-year on both price and volume in line with our expectations, a reinforcing reminder of our rationale for pursuing this business in 2024 with ongoing growth since then to shift the balance of our E&P waste mix from drilling towards production. Adjusted EBITDA for Q2 as reconciled in our earnings release was 786.4 million up 7.5% year-over-year and slightly above the high end of our outlook. At 32.7% our adjusted EBITDA margin was in line with our outlook and up 10 basis points year-over-year in spite of an extra 20 basis point drag from commodities which declined during the quarter. In total, commodity-driven revenues were a drag of about 60 basis points in the quarter in addition to Chiquita which was another 20 basis point drag. Underlying solid waste margins were up 70 basis points similar to last quarter as Ron described. Similar to Q1, we saw margin improvement across a range of cost categories related to third-party services, labor, and maintenance as we are seeing the benefits of improved employee retention and reduced openings. In contrast, risk management cost reductions continue to lag and remained a headwind in the quarter, providing opportunity for continued outsized underlying margin expansion. As we look ahead, net interest in the quarter was $80.4 million and our effective tax rate for the second quarter was 25.4%. About 100 basis points above our outlook on higher foreign exchange rates. And finally, year-to-date, we've delivered adjusted free cash flow of $699 million on capital expenditures up over 110 million year-over-year. As such, we're well on our way to deliver adjusted free cash flow of $1.3 billion as guided. During the quarter, we completed a public offering of $500 million in senior notes to further diversify our funding sources and maintain optionality for capital allocation. Our weighted average cost of debt is about 4% with an average tenor of over 9 years. We ended the quarter with debt outstanding of about 8.35 billion about 15% of which was floating rate and liquidity of over 1.1 billion. In spite of acquisition outlays of $582 million through Q2, our leverage ratio as defined in our credit facility has increased only nominally since year end to 2.69 times debt to adjusted EBITDA. As Ron noted, we have a lot of optionality in terms of capital outlays, including opportunistic share repurchases, which year to date have totaled over $240 million. In addition, we look forward to another increase to our dividend, which we will consider when we undertake our annual review in October. I will now review our updated outlook for the full year 2025 and provide some thoughts about what that implies for the back half of the year. Before I do, we'd like to remind everyone once again that actual results may vary significantly based on risks and uncertainties outlined in our safe harbor statement and filings we've made with the SEC and the Securities Commissions or similar regulatory authorities in Canada. We encourage investors to review these factors carefully. Our outlook assumes no change in the current economic environment or underlying economic trends. It also excludes any impact from additional acquisitions that may close during the remainder of the year and expensing of transaction related items during the period. Additionally, our outlook does not anticipate material impacts to our effective tax rate or cash flows as a result of the recent tax bill except as noted. Looking first at our updated outlook for the full year as provided for and reconciled in our earnings release. Given the strength of our performance in the first half of the year and updating for recent commodity values and RECs and acquisitions completed to date, we are maintaining our full year 2025 outlook as provided in February as follows. Revenue is estimated at approximately 9.45 billion. While within the range of our February outlook, this reflects a different mix of revenue. Incremental acquisition contributions are offset by reductions in commodity related revenues based on recent values and US E&P waste and solid waste volumes based on recent trends. Adjusted EBITDA estimated at approximately 3.12 billion or 33%. Again within the range of our February outlook. In spite of that mix shift, this reflects 30 basis points higher underlying solid waste margins, overcoming the margin dilutive impact of acquisitions and lower commodity related revenue and disposal volumes on a year-over-year basis. Adjusted EBITDA margin up 50 basis points reflects over 100 basis points underlying margin expansion. And finally, in the case of adjusted free cash flow at approximately $1.3 billion within the range of our February outlook, we expect that incremental bonus depreciation associated with the recent tax bill, which we estimate may increase cash flow from operations by about $25 million would be put to work through a corresponding increase in capital expenditures. We are considering opportunistic fleet and equipment purchases to derisk potential tariff related increases as well as capex for growth projects both related to recent acquisitions and at existing operations. The closing of any additional acquisitions would provide upside to our updated 2025 outlook as would improvement in commodities and related activity and any pickup in volumes. Next, looking ahead to Q3 and Q4, as implied by our full year 2025 outlook, the adjusted EBITDA margin is expected to average 33.6% in the back half of the year, up about 60 basis points year-over-year, driven by outsized margin expansion in Q4 from easing comparisons to the prior year for Chiquita and commodities. By quarter, adjusted EBITDA margin is expected to be roughly comparable across Q3 and Q4 due to a limited seasonal ramp in Q3. And now let me turn the call back over to Ron for some final remarks before Q&A.

Ladies and gentlemen, at this time we will begin the question and answer session. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. If you are using a speaker phone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue. Our first question today comes from Tyler Brown from Raymond James. Please go ahead with your question.

Hey, good morning. Can you guys hear me?

Yeah. Hey, first, congrats, Daryl. Incredible career. See you on an Arkansas lake one day. But you know, curious, we could maybe if we could double click a little bit on capital allocation, Ron, just it sounds like the M&A pipeline is solid. But you also restarted the buyback. And I just want to make sure that I have the message right here because I think 235 million in a quarter is maybe the second largest repo in your history and we're only 24 days in. So just to be clear, is this you being more opportunistic versus a change in the M&A opportunities out there?

Okay, perfect. And then just a little clarification. So I think you said that there was something like a 100 to 200 million under LOI that could close in the second half. But was that a revenue number or an outlay number?

Okay. Okay. Perfect. And then just quick modeling Maryanne just so we have it. But what is the expected M&A impact in 25 just basically based on what's in the guide?

So coming into the year, the original guidance included 300 million there. We'd closed about 75 million in deals and so the acquisition contribution from the previous year's rollover and deals done had been 300 and that stepped up by 75 million with the incremental closing of 125 million during the course of the first two quarters.

Okay, perfect. And my last one just can we talk a little bit about E&P? I know it doesn't get a ton of airtime, but it actually, if I look at the numbers, it did something like call it 180 million in revenue this quarter, which was really good. It was up something like 50 million year-over-year, but that is kind of counter to the cautious rig count. So, one, was that Secure? Because I thought that we had already lapped that. So, I could be wrong there. Was there another acquisition? And then two, just given the rig count and your US drilling exposure, should we assume that that hangs around this 180 million per quarter just for a little help on the model?

Yes. So, a couple things there, Tyler. Yes, I think that's a fair way to think about the run rate and it reflects, to your point, not only Secure, but the subsequent acquisitions we did last year. We mentioned that we've done a couple in Canada and we've also done some in the US. And so you're seeing in the rollover contribution from those deals. And as we said on the call, what stood out in Q2 was the step down in activity in the US, but that had been more than offset by the increases in Canada. Where at the legacy Secure business, for instance, we saw growth both in price and volume during the quarter on a year-over-year basis.

Yeah. You know, I think it's between 160 and 170. I mean, depending on seasonality, I think you got to meter that a little bit.

Okay. All right. Cool. Thank you.

Our next question comes from Tony Kaplan from Morgan Stanley. Please go ahead with your question.

Thanks so much. I wanted to drill down a little bit into the volume on shedding. So last quarter you had called out a large contract from Progressive that you didn't renew in October. So I was wondering if it's fair to assume a similar drag in volume in 3Q similar to 2Q but then maybe 4Q just gets back to sort of more normal shedding. And I know Chiquita is also sort of a factor in here. So like maybe there's still a little bit below normal volume in 4Q and then maybe the normal starts in 1Q of 26 like just wanted to understand the dynamics of how you think about the volume. Thanks.

Sure. Sure Tony. So as you know we think in terms of we have the shedding of course we have Chiquita which we kind of bucket separately and that does anniversary at the end of the year but we started diverting tons in Q4 so the impact is smaller in Q4 but when I think about the ongoing impacts you're right some of the shedding does anniversary. I think the way to think about it is the most negative quarter would therefore be Q3 because you have the combined impact of those ongoing impacts plus what we talked about that lower seasonal ramp impacting the revenue growth Q3 versus Q2. So, most negative in Q3 getting back to more like Q2 and Q4. And yes, I agree with your expectation that some of those pieces anniversary as we look ahead to 26.

Right. And I guess maybe just longer term when you think about volumes, Ron, like I guess you made the comment that when volumes do recover like that will be accretive. Do you expect like that volumes recover in 26 or like when does that happen? Or you know because of all the M&A like maybe it's even pushed out further than that. Just wanted to sort of get a longer term picture.

Super. Thank you.

Our next question comes from Noah from [Company]. Please go ahead with your question.

Noah, is it possible?

Yeah, now.

All right. Thank you. Yeah, we just didn't hear our name called, so appreciate everyone taking the question. Maryanne, just maybe trying to bridge from the 9.45 you saw in February on the revenue side to how you see it now because you pointed out the mix has changed. You got the 75 million higher M&A revenues. Maybe give us the other kind of moving pieces here because I think that'll help us and investors kind of understand some of the mix shift a little bit better. I mean how much more is the impact from commodities and you potentially kind of underlying volumes versus what you thought.

Sure. So as you pointed out, 75 million incremental in acquisition contribution, a little bit of a good guy from FX because it's in our view improved by about a point which is about 20 million and then the offsets are primarily those commodity-driven reductions where you've got recycled commodities down about 25 million, RECs down another 5 million and then we have about half a point less in terms of overall solid waste volume. And so, those are the moving pieces that effectively net net to neutral. But the really important part of that is the differences in the margin contributions from each of those and the fact that what that really requires is that the underlying business improves by 30 basis points in order to offset the fact that there's a little margin dilution sub 10 basis points from the incremental M&A but it's primarily the 30 basis points incremental headwinds from those lower recycled commodities and RECs.

Yes. Thanks, Ron. Yep.

Yeah. So 20 to 25 million lower versus what you thought in February?

Just 50 million in July, 25 in the second half.

Yep.

Yep.

Okay. And then for again for our models appreciate you giving us sort of the margin expectations for 3Q. You did also comment not much of a sort of sequential ramp expected in kind of underlying macro. So, just some rough guideposts on how to think about the revenue step up because typically it is a seasonally strong quarter, but you know, between the commodities step down and some of the other headwinds you mentioned, perhaps we don't see as big of a step up as usual.

Yep. That's the right way to think about it because the typical seasonal ramp could be as much as 3 to 4% and so this would be muted and there would be that step down in commodities. So you could certainly work your way to more like one and a half percent in terms of the step up Q3 versus Q2.

Thank you. And just one last I mean you know Tyler I think as always asked a great question earlier around capital allocation. I just want to follow up on the buybacks. Should we think about additional buyback activity and any way to dimension that over the back half of the year? I understand you're being opportunistic here. But kind of given where the stock is and your view on the multi-year growth opportunity, fair to think about additional buyback activity and any way to dimension it.

Yeah. And the only thing I would add Noah is look you saw us in a very short period of time as we thought there was a disproportionate dislocation spend close to a quarter billion dollars and so we remain positioned to do that in the same manner.

Very helpful. Thank you all.

Our next question comes from Kevin Chang from CIBC. Please go ahead with your question.

Hi. Thanks for taking my question. Good morning and congratulations, Daryl, echoing what others have said already. Maybe just two quick ones for me. You're obviously making great progress on your voluntary turnover and safety incident metrics and trends. If memory serves me correct, I think that was 100 basis point margin opportunity. I think you've achieved about two-thirds of that. Just given the trends you're seeing, should we expect that additional one-third or let's call it 33-34 basis points, does that fully materialize in 2026 just given the trends you're seeing through 25 here?

Sure. So, you're right, Kevin. We've talked a lot about as we described it, there was about 100 basis points of margin that we thought would get unlocked by these improving trends. And then we actually revisited that and said it's probably a little north of that given the magnitude of the headwinds we were still absorbing from those lagging improvements associated with risk management costs. And I think last quarter we said we were about halfway through the 100 basis points. We'd realized about 50. And the update is now we're north of that. Maybe 60 to 70 basis points in terms of good guys that we're seeing. You know, it's interesting. We look across about 10 different cost items every quarter, and I can't remember a time where they'd all been green up until now. Meaning that margin, the cost as a percentage of revenue was improving. And so many of them are related to third-party costs, whether it's subcontracting, contract labor, whether it's overtime compared to straight time, all the benefits, third party repairs, etc. All the benefits that we thought over time should start to accrue to us. So, what we haven't seen yet, as I said, is that risk costs, while they're abating, meaning it's been less of a bad guy, less of a headwind on a year-over-year basis, it hasn't become a tailwind. So, to answer your question, there's still more to come. Tough to say that we would get it all in 26 because of the way that the risk costs lag, but we expect to continue to realize the benefits and the trends we've seen make us bullish about seeing more by the end of the year than we're seeing right now.

That's super helpful. Maybe just my second question here, you know, Ron, you talked about the EPA taking a more active role at Chiquita and you think that's a favorable outcome or development. If you can maybe just provide a little bit of detail in terms of how that benefits your remediation efforts and maybe some of the challenges you have been facing I suspect dealing with multiple agencies and trying to deal with the ETLF issue at Chiquita.

That's a great color, Ron. Thank you. And that's it for me. Thank you very much.

Our next question comes from Trevor Romeo from William Blair. Please go ahead with your question.

Hey, good morning Ron and Maryanne. Thanks so much for taking the questions. I wanted to hit on price first for solid waste. So still kind of call it upper sixes range to start the first half. Anything from a regional or line of business perspective that you'd call it as kind of stronger than you expected and then any thoughts on the trajectory or the cadence for the second half? Seems like maybe you're trending above 6% for the full year even if you do see some deceleration, but maybe any specific thoughts on that would be great.

Sure. So, Trevor, as we said coming into the year, we got it to about 6% price and then following our Q1 results, we talked about the fact that price retention had been a little better than we had anticipated and therefore pricing in Q1 at 6.9 was a little bit higher. We've now since said that pricing is effectively done for the year and maintain that it'll be above 6%. So, really nothing to point out. Of course, we have our CPI linked markets and then we've got our competitive markets, but as I said, we're trending to better than we originally anticipated. We attributed that, at least a portion of it, to better pricing retention and the fact that all those trends in employee retention and open positions had all improved so well that we're not surprised that retention was a little better than expected. As we move through the year, in general, the cadence of our pricing and really the math around what the denominator is that we're measuring the dollar amount of price increases on, by math, by definition, that does step down sequentially through the course of the year. And that's why you started 6.9, we did 6.6. You're right, it implies that it steps down a little bit between now, if you were modeling it and you put it somewhere between the 6.6 and the 6 over the course of the rest of the year. That's probably the right way to think about it.

Okay, thanks Maryanne. That is helpful. And then for my followup, just wanted to touch on, I think you mentioned with the bonus depreciation comments, maybe some opportunistic fleet or equipment purchases to get ahead of, yeah, maybe potential changes with the tariffs. Could you maybe just give a little bit more color or detail on your latest thoughts maybe on what your suppliers are telling you what the potential impact could be with the latest deals and guidance in place?

Hey, that's all very helpful. I appreciate it.

Our next question comes from Sabahat Khan from RBC Capital Markets. Please go ahead with your question.

Great. Thanks and good morning. Just wanted to revisit the discussion earlier around some of the components around volume. You know, I think before some of the Chaita volume drag, I think we're talking about the progress or so the historical sort of volume shedding largely getting to the tail end. Can you just help us think through as we get into '26 and beyond, putting the GDP or the economic growth aside, how's sort of the leftover shedding volumes going to look like in the next couple of years from your vantage point? Thanks.

Got it. And then just following up on the EMP side of the business a little bit, as you think about the sort of the volume trends and things like that, maybe just talk us through sort of the flexibility on the cost structure there. Obviously just a small blip here this year, but just over the long run, how do you think about the cost structure there? How much of that is variable and just the ability to sort of tweak that over more of a multi-year basis, not just in reaction to the short-term like we might see in H2 this year. Just wanted to understand sort of how you think about that business. Thanks.

And just to be clear when we think about that business, as I mentioned earlier, that's part of the rationale for derisking the business more broadly because only about half of that 6 or 6.5% is drilling oriented. It's the US piece of the business and as we mentioned the Canadian business is holding up fine and in fact was up year over year, really in line with our expectations. We haven't seen an impact there.

Great. Thanks very much.

Our next question comes from Brian Bergmire from Citi. Please go ahead with your question.

Good morning. Thank you for taking the question. Maybe just on the volume headwinds that are impacting your '25 guidance. Is it accurate to say that's sort of really concentrated in a 3Q event just kind of focused on construction activity or did you start to see slowdown in 2Q? And would you say there's any sort of meaningful difference between the activity in US and Canada or is it just kind of the same everywhere?

Well, to give you some context, if you look at C&D tons, so that piece of our business year-over-year, Q2 was the seventh quarter in a row for those being down year-over-year, and it's averaged between 7 and 8%, Q1 to Q2. Q1 was down 6%, Q2 was down 8.5%. So there was some incremental weakness, but the point is even though the comps are easy, we're not seeing increases year-over-year. So we did see what we called out as being a little different in Q2 where for that activity and also for our roll-off activity which again if I just look at pulls down, this was the sixth quarter in a row where pulls were down and those have been down on the order of kind of an average of about 3% year-over-year in each of those quarters. So we wouldn't say this is a new trend but what we saw during the quarter was some continued moderation as we would say, some incremental weakness meaning June was tougher than April was and we called out the fact that ordinarily between April and June you would see more of a seasonal ramp and the fact that that was missing is what informed our expectations for the back half of the year specifically Q3 which is typically your seasonally strongest quarter. These are the pieces of the business where you see it because they're more construction driven.

Got it. Got it. Thank you. And just to follow up, would you say there's any sort of difference between activity in between US and Canada or just kind of the same everywhere? And then just as a followup, just kind of for modeling purposes, are you able to share sort of the recycled commodity price assumption that you started the year with and then what you're kind of assuming now for the back half given the recent decline?

Yeah, let's take the second part of that first, Brian. We assumed when we started in February, we assumed a basket of about 105 to 110 on OCC, excuse me, which is the largest piece of our basket. And we're now seeing that more in that 85 to 90, probably, closer to 90 as I look down in sort of the second half in real time right now. And shifting to your question about differences across Canada or other regions, I'd say that if I look across again these more cyclically exposed pieces, the markets that are holding up a little better on a relative basis do include Canada actually being a little better and our west coast markets and the softest, the greatest weakness we saw in our southern region which includes like Florida, Texas, Louisiana and then also our eastern region which includes the northeast and then some of the southeastern markets.

Got it. Thanks a lot for that detail. I'll turn it over.

Our next question comes from Jerry Revich from Goldman Sachs. Please go ahead with your question.

Hi, good morning. This is Adam on for Jerry. Today I think the 2025 margin guidance implies over 100 basis points underlying margin expansion compared to 70 basis points in the first half of the year. What are some of the moving pieces driving that accelerating underlying margin expansion in the balance of the year? Is that the improvements in voluntary turnover? Any color there?

Great. And then you closed on the 75 million of annualized revenues incremental in the quarter and then expect potential to close on the 100 million to 200 million later this year or early next year. Can you just comment on the mix and margin profile of these acquisitions and how we should think about the incremental in-year EBITDA associated with the 75 million in incremental revenues acquired in 2Q.

Yeah, if you assume some dilution on the order of 10 to 15 basis points from incremental M&A given our size and the relative contribution, that's probably the right way to think about it.

Great. Thanks so much.

Our next question comes from Chris Murray from ATB Markets. Please go ahead with your question.

Yeah, thanks folks. Good morning. Maybe I don't know who wants to take this one, but we've had a lot of discussion about volumes. But one of the things that at least we've been seeing is that a bit of a split between kind of the construction manufacturing world of services. Just wondering if you have any thoughts about what you're seeing from some of the end markets. If you're seeing kind of some of the volume decline in the services like I'm thinking like restaurants, different things that we're seeing just on consumer behavior versus what you've been calling out for like C&D and manufacturing.

So I guess the reason I asked the question is if I think about a volume recovery it feels like we're kind of in a period of we get by the uncertainty the whole bit but the underlying majority of the economy still feels like it's doing okay. Is that the right way to approach it or how you guys are seeing how this happens so that the volume recovery could happen maybe faster than we expect?

Right. Sounds good. Maybe one more question if you don't mind. As I listen to the call and I listen to some of the things you talk about in terms of turnover, in terms of technology, we really haven't talked on about RNG development and things like that. But we, you go back a few calls and we've been talking about outsized margin expansion as we went into '26-'27 given where you're sitting and I appreciate volumes maybe going to hurt but I think as you pointed out, second half margin expansion is already kind of aiming at 100 basis points which probably carries into the early part of '26. How should we be thinking about that margin cadence as we go into sort of the later years as you get some of the benefit of some of the investments you made over the last little while of some of the new initiatives that you're implementing?

Okay, I'll leave it there. Thanks folks.

Our next question comes from Connor Gupta from Scotia Bank. Please go ahead with your question.

Hey, good morning everyone. Maybe on the price cost spread, it seems like you guys are still hitting as an industry, maybe near the high end of the typical ranges or maybe above, with the 6.5% pricing and whatnot. Heading into '26, like exiting '25, do you feel like that the price cost spread can potentially come down or normalize towards sort of the normal levels or that's still kind of like a far-fetched idea and if at all this spread narrows or stays the same, would it be more driven by the price or the cost?

That's great Ron. Thanks. And just to follow up, Chaita, just kind of like understanding here, you said, having the EPA as the adult in the room should help obviously. Do you see an opportunity to reduce your cost obligation for the next several years with the EPA involved here or that's pretty much a given?

Okay, that's glad to hear. Thanks so much for the time.

Our next question comes from Michael Dit from National Bank. Please go ahead with your question.

Hey, good morning guys. So obviously nice job on the employee retention improvement. I wonder if you'd characterize that improvement as largely complete, obviously understanding the impact to margins is lagged. And if that's the case, what are your thoughts on some of the other, call it buckets, of potential efficiencies that you can drive incremental price cost spread going forward, I think, such as the AI initiative you mentioned at the top of the call.

Really interesting comments on the price optimization. Ron, just to follow up on that, does that, in your opinion, could that change the calculus for the typical price cost spread that you guys historically had?

Got it. Thanks for the comments.

Our next question comes from Stephanie Moore from Jefferies. Please go ahead with your question.

Hi, good morning. Just one question for me. In this current, it does appear that this current administration could potentially be a little bit more lenient in terms of large M&A than at least the prior administration. So wanted to maybe ask a higher level thought and if the current backdrop would make you a bit more amenable to doing maybe larger deals or anything that might be outside of kind of the core average deals that you look at on an annual basis. Thank you.

Great. Thank you.

Our next question comes from James Shum from TD Cowen. Please go ahead with your question.

Hey, good morning. Thanks. With respect to free cash flow, you mentioned you're on track to hit your Chaita Canyon spending guidance, but can you update on your best estimate for next year's spending on Chaita? Was that 50 million? Where was that the last update? And can the EPA give you some relief on leachate disposal or does that have to come from the state and maybe just give us a sense of the 100 to 150 that you spend this year? Give us a sense like how much is leachate or if you could bucket some of the cost that would be super helpful.

And they were contemplated by...

And then Ron just, as you look for different options to sort of ameliorate those costs, like will you be appealing to the EPA or would that still have to go through the state in terms of getting some...

Okay, very good. And then just lastly for recycling, what does your overall book of business look like right now? Is it majority fee for service or are you assuming the full commodity price risk? What does the book look like currently?

Okay. Thank you.

Our next question comes from Toby Smer from Truist. Please go ahead with your question.

Hi all. It's Henry on for Toby here. Thanks for squeezing me in. I just have a quick one on M&A. You touched on this briefly before, but what's the typical timeline we should look at for tuck-ins to reach, kind of company average margins and has that average timeline changed here as you've stepped up these acquisitions? Thank you.

And our next question comes from Tammy Zakaria from JP Morgan. Please go ahead with your question.

Hi, good morning. Thank you so much for fitting me in. I just have one quick clarification question about the opportunistic buyback. So if the 100 to 200 million M&A in the pipeline closes this year, could we still expect some opportunistic repo or will it be sort of an either or outcome?

Got it. Perfect. Thank you.

And ladies and gentlemen, with that, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Ronald Mittelstaedt for any closing remarks.

And ladies and gentlemen, with that we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.