WM's Integration Playbook Delivers Margins, But Volume Softness Tempers Outlook
Margin expansion and record FCF highlight Q2; Healthcare Solutions finally contributes; revenue guide trimmed on volume softness.
WM · Earnings Call · 2026-07-29
Margin Expansion and Free Cash Flow Strength
Despite a challenging volume backdrop, WM delivered another quarter of margin expansion and cash generation. Operating EBITDA grew 5.5% (9.1% ex-wildfire), and the company expanded operating EBITDA margin by 40 basis points, overcoming a 60 basis point headwind from wildfire volumes and a 40 basis point headwind from higher energy surcharges. The collection and disposal business led the way, with continued price-cost spread discipline and productivity gains. “Healthcare Solutions delivered a strong quarter, expanding operating EBITDA margin by 200 basis points through cross-selling and cost synergy capture.” — James Fish, Chief Executive Officer · 2026-07-29 Free cash flow grew 35% in the quarter and 56% in the first half, reflecting lower capex and working capital benefits. Free cash flow (less SBC) reached $799M in Q2, up 145% YoY. The company now expects to be within its leverage range and is increasing tuck-in M&A.Healthcare Solutions: From Integration to Growth
The integration of Stericycle (now WM Healthcare Solutions) is finally complete, and the benefits are showing up. Cross-selling generated $32 million of annual operating EBITDA year-to-date, and the company expects to exceed its $300 million synergy target by 2027. “We can say it's integrated now that we're seeing things like DSO dropping by 5 days, which was a nice improvement and continuing to drop.” — James Fish, Chief Executive Officer · 2026-07-29 SG&A has been rationalized from 24% of revenue at acquisition to 15–16% target. The company is seeing momentum in the back half as customer credits reverse and pricing power improves. As management noted three quarters ago, “We've made a ton of progress just in the last quarter.” — James Fish, Chief Executive Officer · 2026-01-29 That progress has now translated into tangible results, with the segment's margin expanding 200 basis points and the broader enterprise benefiting from the stronger Healthcare Solutions platform.Volume Softness and the Revenue Guide Trim
Despite the strong profit performance, revenue guidance was trimmed by ~0.5% to $26.275–$26.475 billion. Management cited softer collection & disposal volumes, particularly in commercial and National accounts, as well as lower recycling brokerage activity and delays in RNG pipeline connections. “We're seeing modest pressure from lower recycling brokerage activity and the timing of RNG plant connections to pipelines.” — John Morris, President · 2026-07-29 The company believes the volume weakness is temporary, with special waste up 4.5% ex-wildfire and industrial collections turning positive. This is reminiscent of the challenges discussed in the previous quarter's call, where management noted “We had a number of facilities that were shut down because of the weather, which impacted volumes.” — James C. Fish, Chief Executive Officer · 2026-04-29 The softer volumes are being offset by better pricing and cost controls, preserving the full-year EBITDA and FCF outlook.Our second quarter results reinforce the power and value of WM's integrated business model. Our collection and disposal operations serve as a powerful foundation, providing the scale, network, customer relationships and operational discipline that serve the broader enterprise.