Well, good afternoon, everyone. Thanks so much for joining us at day two of Oppenheimer's 18th Annual Industrial Growth Conference. I'm Noah Kaye, Managing Director in Oppenheimer's Sustainable Growth and Resource Optimization Practice, and we're very happy to welcome back to the conference, the leadership of Waste Management. Tara Hemmer, Chief Sustainability Officer, Senior Vice President. Tara, thank you so much for being with us today. Thank you so much. Happy to be here, Noah. We got a deep dive a few weeks back on WM's sustainability investments in RNG and recycling, and certainly we'll spend time on those today. I wanted to ask some questions first about WM's overall sustainability strategy and how that drives growth, because I think that's become an increasing theme in the story over the last couple of years. Let me start with the offerings mix. You know, last year we were at this conference, I asked you what customers are asking for and what they're willing to pay for on sustainability. The follow-up this year is, how have you broadened your range of sustainability offerings in response to customer needs? How are you integrating sustainability services into your go-to market? Sure. It's a great question. We clearly are seeing much stronger demand from customers. That's only going to increase and be amplified. I would really put it into three key categories. Customers want increased access to traditional recycling, they want greater data transparency, and they want advisory services to help them manage the materials of the future. I'll touch on each one of those in a moment. You know, access to traditional recycling, what's fascinating is, depending upon where you live in the country, you might have great access to recycling as a service, but that may not be true across the entire country or even in Canada for that matter. Right. It's one of the reasons why we're making sure that not just with our MRF automation investments and new markets, but that our sales representatives have the tools in their toolkit to really offer recycling as a service to our customers and provide that information to them that our collection companies are structured in a way where they can make it easy for customers to recycle. A great example of that is our investment in automated side loaders and bigger bins at people's homes. While we're doing all that, we're seeing from commercial and industrial customers that they want more data, and they want more data around what's happening to the materials that they're putting out and what it means, not just from a circularity standpoint, but also from a greenhouse gas emissions standpoint, certainly larger brands, and what may happen with the new SEC rule if it gets implemented. Customers are going to have to report on their Scope 1, Scope 2, and possibly Scope 3 emissions, and we can help them with that. The third is so many of our customers come to us and say, like, "I don't know where to get started. I need some help," or, "I have these harder waste streams that I'm really looking to tackle." We're building out capabilities in advisory services and managed services so that we can have some of our team members help our customers on their journey and match some of our service offerings with what their needs are. It's an exciting time and we're definitely seeing this evolve. Yeah. It feels like customer examples are always illuminating here, so I'd love for you to give us some. Where are some customer examples where having a broader portfolio of sustainability services drove new customer acquisitions or meaningful same store growth with key accounts? Yeah. I'll give an example in the consumer goods space. We had a customer where we might have had, it was roughly three or four locations, you know, pretty large locations, but only three or four of them. They asked us to come in and help them think through every material that they were managing. That included trash, it included traditional recycling, it included, you know, metals from, some of their storefront construction and demolition debris. Mm. All of the different things that could be managed within their portfolio. At those three or four locations, we were able to do a couple things. We helped them save money in the process, which is always important to a customer. Also what we were able to help them do is get different material streams into a reuse scenario. From there, they said, "Okay, we want you to do this at the next 15 to 20 locations that we have out there." Those were locations that we didn't have. We were able to apply that same cost savings mentality along with providing solutions, again, in the circularity space. At the end of the day, over time, we increased our revenues with that customer over 10x. That's pretty compelling. We have another great example where we worked with a large big box retailer, to look at everything that comes back from their returns. When you go to a store and you return something that may not end up back on a shelf for some reason, maybe it's damaged or there could be something else that's wrong with it. We worked with them to bring all of those returns back to a centralized location, and we helped them, Do some sorting on what could get reused, what could get resold, and where could we take those materials if it was at their end of life, and expanded that to a couple of different distribution centers and increased our revenues with that customer over four times. This is about really thinking of WM as a materials handler. Yeah. Thinking about where those materials could go. Very interesting and helpful, Tara. I mean, the first two levers you mentioned, increasing access to traditional recycling and greater data transparency, I think those, maybe they're not straightforward, but they seem straightforward relatively to, us and to investors. The advisory services part of this is where it maybe starts to get really interesting. I think back to a couple of years ago, Jim was talking about, you know, redesigning the Starbucks cup and lid or whatever. The point is helping companies think about product formulations and product packaging differently to enhance that circularity and lower costs. Where is WM in that journey? Where is that actually impacting the business? Well, I mean, I think the reality is when you look at the world's toughest problems, the way we're gonna solve them is through the power of partnerships. An example you just used related to packaging. You know, it's not enough for consumer products companies to put a label on something that they're putting out there that says it's recyclable, and if our MRFs can't figure out how to pull it apart and get it to a market, then that recycling label is meaningless. What we've done is we've really collaborated with large CPGs, with packaging coalitions to say, "Okay, what can our systems handle? As we evolve our systems with this phenomenal automation investment journey that we're on, where we're going to be creating higher quality material, and we'll be able to look for more material types, how can we adapt these things together? You know, we're definitely seeing momentum there. You know, some of the larger brands that clearly have a lot of clout in the CPG space and also in the large retail space are putting together packaging for recyclability. That's super helpful because we wanna make sure that these materials, when they end up in the stream, can be returned to new markets. Tying this into revenue growth, you know, you've discussed the shift for national accounts towards putting more value on these services. I believe national accounts are still sub 10%? Correct. Of the book. How does their growth rate compare to kind of the average for C&I? If you go off the current pace, when might you exceed that 10% figure? Well, I don't know about the 10% figure. What I can tell you is really over the last several years, we've been able to double our national accounts revenues, and that really is because we are differentiated. If you think about large national accounts, their needs are typically more complex, and they tap into different service types that WM has. You know, we have the largest network on the solid waste side. We also have a brokerage network that is critically important. If you drive at the alley or the back of house at some of these large retailers, they all have cardboard that they're bailing. Recently, they have film that they're looking to find homes for. Right. They have, you know, off-spec material from their locations, and so their needs are complex. They also have to provide data, not just at the store level, but if you think about their company's own sustainability reporting, they need to provide that data up. Sustainability is increasingly important. And then what we found in particular over the last twoto three years with some of the tightening in the labor market, reliability of service is absolutely critical. And so we've seen some customers who might have left WM over price, go to other service providers, and within six to nine months or one year, come back and say, "You know, we didn't fully appreciate the value of working with you," and they're coming back at an even higher price point. Mm. That bodes well for us to really drive greater share in that space, and it also helps us with asset utilization across our entire network. Many of our area vice presidents, they're really excited about the national accounts business. Yeah. I think, there was some perception in the past that, it may still exist today amongst clients that, you know, national accounts are inherently lower margin or, you know, are more prone to margin compression, you know, with the economic cycle. You know, talk about that, what kind of visibility you have in terms of the sustainability of margins of those accounts? I think what's clear is we are growing and expanding margins in the national accounts business. That is what we've been able to do over that journey. It's not just about increasing the size, but we've also increased the size and increased the profitability of the business. I think that really comes down to differentiation, and sustainability is a key part of that. Right. Any finer parameters you can put around that margin expansion? Like if it or when it would get above 10%? Well, no, just in terms of what the margin expansion has looked like, right? Was this, you know, a, you know, 25% margin business that's going to 30, something like that? You know, I think it's one where, you know, and most of that business is commercial. It's the majority of the national accounts business is within the commercial line of business. you know, I don't know that we've ever put a from-to on it, but consistently year- after- year, we're seeing improvements and that's what we're gonna strive for. That's helpful. Thanks. Now some industry peers have leaned more heavily recently into industrial services and even hazardous waste management. You know, you have a presence in this space. You already have hazardous waste assets, but we don't often hear about that part of the business. To me, it seems like sustainable materials management in this sector is really value-added. How does WM view that space in terms of growth potential or any incremental focus? I'm glad you asked the question. I think sometimes it's because we have so many positive things going on that often, we leave some of the other positives out, certainly the industrial side of our business is critically important. As you mentioned, we have a network of hazardous waste landfills, it really goes beyond that. You know, our industrial services sector where we increasingly are doing industrial liquids processing at customer locations. We are actively thinking about what our response is going to be to PFAS and creating solutions for PFAS. We are looking at and have a patent out there related to biosolids and PFAS. All of these are pretty complementary to a lot of the customers that we already touch. Many instances, we already have a strong presence at manufacturing and industrial customers. They're looking for solutions for these more complex waste streams, some of which that may not be able to go to a traditional landfill. We have, you know, trucking capabilities where we can move material that. Very sorry. I don't know what happened. It's all right. Life comes in the way sometimes. We're glad we got Noah. You know, Tara, I do wanna actually pick up on your point about PFAS where everyone's gonna prick up their ears. You know, still a lot of uncertainty around PFAS regulation in the industry. You mentioned patent related to biosolids and PFAS. You know, if not settled at all in terms of how to handle that and how to dispose of it, you know, how could this be a tailwind for WM? You know, we're in a unique position because if you think about it, so many of our landfills are located in areas where there are likely going to be significant PFAS cleanups. There are things that we can do depending upon how EPA thinks of these as a waste stream, including monofilling material, and we've successfully done that with full combustion residue. We also have an arm that rolls up within me called Remediation and Construction Services, where, you know, we have worked on excavating coal combustion residuals from large power plants. We can transfer some of those capabilities to help with some of these cleanups and have some of the material coming to our facilities. We're trying to be thoughtful about it because there's still a fair amount of unknowns and certainly what's happening with, you know, the drinking water standards. Yeah. We are not subject to. You know, we're gonna watch all this and make sure that we can tap into this as an opportunity for WM. That's very helpful. Thanks. You know, moving to recycling, before we talk about the new investments, just give us some perspective on where WM's now at with the economic model, just in terms of creating a higher floor independent of commodity prices and where you want to move the model to over time in terms of further reducing volatility. We are so proud of this. We worked really hard to fix the operating model here and we're proud to say that we really do now have a fee-for-service model. In fact, one of our contracts that was probably the biggest laggard and drag finally sunset. Virtually all of our contracts now are in that fee-for-service model where, you know, we get paid first for processing, and then if commodity prices are high, there's a revenue share with customers. I think what's really important to point out is if you go back six or seven years when commodity prices were 70% higher than what they are today, the EBITDA that we're planning for from the recycling business in 2023 was roughly the same. That just speaks to the fact that we've improved the profitability of this business and done it in any commodity price environment. I wanna be clear, 'cause sometimes this gets misunderstood when we have dips in commodity prices like we saw in Q4 or Q1. Right. This is still a very profitable business for WM and certainly strong return on invested capital. I mean, to your point, that's a higher floor and we can see it now. I think this is true across the industry, right? There's still some sensitivity, you know, to the commodities. Does that sensitivity potentially lessen over time? I mean, certainly the floor is higher, does the sensitivity lessen over time? If so, how could that be the case? The sensitivity, I'm not sure that it will lessen over time. Like, we'll always have some sensitivity to commodity prices. Mm-hmm. Of the way that, you know, revenue shares are structured. What we should never have is a situation where this business is not profitable, and that was the case, you know, going back six to 10 years ago. That is not the case today. We will be able to have a resilient business model that makes money and has appropriate returns in any commodity price cycle. Yeah. That's really what we were trying to structure. And by the way, your decrementals on this decline have been very healthy, right? Certainly the brokerage part of the business helps with that. You know, I think as we tie that all together, it does seem more sustainable from an economic standpoint than it was many years ago. You know, when we think about the Sustainability Investor Day and the granular assumptions you provided around the size of recycling investments and the different profit pools you're expecting to come out of those investments, just how closely do those assumptions tie into what you've seen at your, you know, leading automated MRFs? Are you embedding any further improvements in productivity into the outlook versus what you've seen to date in places like the MRF of the Future? Yeah. You know, the best example that we have, and it's the one that has come online most recently, is, you know, our Houston MRF. In our Houston MRF, we're seeing, again, 30% improvement on labor, which aligns really well with previous MRFs, including the Chicago MRF of the Future and Salt Lake City. Mm-hmm. We're very confident that we'll be able to get that benefit. I think the thing that we haven't highlighted as much in some seminars and webinars like this is the safety performance improvement that we see in automated MRFs, north of 40% improvement in our Total Recordable Incident Rate, which is huge for us. Yeah. On the revenue side, you know, we're seeing significant improvement on, you know, our ability to upsell based on revenue quality. All of this, you know, we're looking at all the metrics now across every automated MRF and comparing them to the non-automated MRFs, and you can see very clearly the improvement. Those numbers are what we've baked in on the Sustainability Investor Day. We, of course, are always gonna look for ways where we can make improvements and hopefully ramp those up even higher than what we committed to. Right. Right. Any kind of further technology improvements, you know, or process improvement is outside the outlook. Mm-hmm. That's great. You know, you're the largest recycler in North America, right? It just strikes me that if you're meaningfully improving bale quality as one of the effects of, you know, going to this automated system, that just opens up a lot of possibilities for circular reuse. Maybe you can talk about your investments in Avangard and some of the opportunities you're most excited about in recycling or upcycling, if you wanna call it that. Well, the improvements in bale quality, I'll start there. It's really, it's so important because if you think about some of the states in California and New Jersey, which with minimum content legislation, and if you think about the Coca-Colas and Pepsis of the world who are really trying to get more material back to bottle to bottle. Yeah. we're already seeing in our automated MRFs where we have higher quality bales, you know, they're interested in buying those bales, right? Others are interested in buying those bales 'cause it's a cleaner, higher quality product. By doing that, we'll be able to unlock, you know, other opportunities within our network. Speaking of those other opportunities, you mentioned Avangard Innovative, which we call Natura PCR, just to confuse everyone. That's the name of the company that mechanically recycles film and converts that into a post-consumer resin or PCR pellet that can be blended in with virgin pellets to produce new products, primarily in the film space. What's so exciting about this is there's two key opportunities. I'll stick with the MRF thread first. We have a partnership with Dow, where we're testing the ability to take film in our automated MRFs. Why is this so important? Well, I, you know, I ask all of you to go home and look in your kitchen trash bin. Yeah. Look at what's in there, and it's all film. It's overwrap from, you know, the 24 pack of water bottles that you might have purchased or it's film from your online shopping habit, which I know I have, I'm sure you all do too. If we can find ways to capture that and be able to put it into the traditional recycling stream and pull it out with technology, there is very strong demand for that as a product. Likewise, on our national accounts business, I mentioned back of house, we have, you know, cardboard. All those loading docks for the most part, they have film because there's film that comes, you know, wrapped around the pallets or also in take-back programs at front of store. If we can build a solution where we can get that material back into a circular stream, it can go into any multitude of things. This is a great example of building a capability. Mm-hmm. That really doesn't exist in the space today. Let's end with RNG. I honestly could have spent the whole time on this, but, you know, we'll just do four or five questions. You know, we're a month and a half away from the EPA's deadline to finalize the 2023 RVOs. You and the industry have been working to demonstrate that RNG growth will be more robust than the draft proposal, you know, and that the D3 RVO should be increased. What does the industry think is likely to happen with the final rule? Well, like you said, I mean, the industry and many others have really been trying to educate EPA on the supply that's come online and will be coming online over the next three years. I think EPA is really trying to be thoughtful about the amount of comments that they've received and really understand the problem, because at the end of the day, their goal is they wanna support the growth of, you know, RNG as a transportation fuel, and they don't wanna be introducing volatility. That is something that they heard loud and clear several years ago, and all sides shared in that. I think we're optimistic that they're, you know, taking these comments into consideration, and if they do raise the RVO, you know, we think that there could be a bit of a price bump on the RIN side in 2023, but cautiously optimistic. Yeah. There was also an article, right, suggesting in the media that EPA might move the eRIN rulemaking to another track so as not to delay the RVO process. You know, what's your view on that? I guess more broadly, what guidance, you know, might WM have for the EPA on how to develop a sustainable and high-functioning eRIN market? Well, you know, on the EPA front, you know, they're legally obligated to issue an RVO from the Renewable Fuel Standard, and that really applies more to the conventional biogas pathway. Them separating it, you know, a delay on the eRIN front, you know, our hope would be that they wouldn't delay it, but if they do, then it's not a long delay, because obviously it has a significant impact and a lot of upside for WM, given our network of landfill gas to electricity plants. I think what we've been trying to share with the EPA is we wanna make sure that one doesn't impact the other and that they're truly additive. So there's room for both, and we wanna make sure that, the introduction of, you know, eRIN, say, doesn't, sort of devalue the investment in RNG and likewise in the, in the opposite. I think it's a bit of an needle that they're looking to thread, but they're really trying to be thoughtful about this. Mm. I think that may be a little bit of what we're hearing. All right. That's really helpful and something we'll look forward to seeing play out next month. You know, one item that surprised us at the Sustainability Day was your OpEx number, you know, $6 per MMBtu to run the plants. You know, we'd seen the industry tracking closer to $8. You know, what operational improvements have you made to kinda get you there? Is it also appropriate to think of the $6 as fairly independent of plant size, or does it really depend on scale? I can't really speak to what other companies' operating costs are and why they are structurally that way. What we would say is, you know, we have four plants that we're tracking and that sort of fit in that bucket, and that has been our experience from an operating cost side. Our plants tend to be a little bit bigger than perhaps maybe the others that are talking about operating costs. Certainly, the ones that we have in the pipeline, we have some pretty big plants in the pipeline. Yeah. Certainly smaller plants, you might see that, trends closer to the $8 number, but certainly the larger plants and larger sized plants, we're confident in that $5-$7 range. Right. I mean, really the what matters here is the total quantity of MMBtus produced and, you know, obviously, you know, the MMBtu per plant that you're bringing on, we can all do the math, is substantial. Exactly. I mean, we've learned how to maximize efficiency within these plans to maximize revenue quality, so. Yeah. Yeah. I guess, you know, just in terms of the offtake arrangements here, you know, you. By the way, I mean, we regularly discuss this topic, right? RNG offtake and how to trade off upside. Right. At Investor Day, you know, you announced this 50% three-year rolling offtake strategy. It was front-loaded to the early years. Maybe talk to us about how you're approaching the voluntary market and how you see the share of voluntary versus transportation offtake trending over time, because obviously the voluntary market could afford some longer term visibility to you. Yeah. You know, the voluntary market is rapidly emerging, and we're seeing, you know, several states that have blending requirements for public utilities to blend renewable natural gas in with their traditional natural gas. Also the BAC is another great example. As those are evolving, we're looking at how can we tap into those markets and structure agreements in the right way, recognizing that, you know, if you think about it, we wanna structure this almost like our debt maturity portfolio, where you have, you know, longer term agreements, you have shorter term agreements. Our hope is, as both of these markets emerge and evolve, we'll be able to do short, mid, and long-term agreements in both the voluntary market and the transportation. Mm. Obviously for WM, we're a bit unique because we have this compressed natural gas fleet, and we're able to, you know, match our fleet to our renewable natural gas production and generate a RIN without giving away... Right. -any of that value, so that's an important consideration as well. It's a great point, that internalization. I guess the last one here is, you know, that the industry's seen some share of project delays over the past several years, and that can be permitting, you know, equipment shortages, kind of typical for a growth industry. Just what gives you confidence in standing up the projects you've forecasted through 2026 on schedule? I think the most important thing is we view these 20 projects as a portfolio of projects, and so we're always looking at, you know, which project is maybe moving behind, which is moving ahead. You know, how can we accelerate certain ones while other ones might be slowed down for any number of reasons. Mm. In that portfolio view, we've done a couple things. We were very intentional about tapping into the supply chain and procuring, you know, the bigger components on, sort of a, not on a project basis, but again, on a portfolio basis, so we can move those pieces of equipment around as we need to, based on how projects are trending. We also developed standard designs for these projects where, you know, we have a small size, a medium size, and a large size so that, you know, plans are the same, and we can just basically plug those in at locations. You know, we're actively working with all of our areas on the local permitting that's gonna be required. I say that sustainability is a team sport and renewable energy is a big piece of that. Sure, sure. Listen, as always, terrific conversation, we really thank you for the time here. For anyone who would like to do more work on WM and sustainability strategy, please don't hesitate to reach out to us, as well as to Heather, and to Ed Egl, to learn a little bit more. I hope everyone has a great rest of the conference. Great rest of your day. Thank you so much for joining us, Tara. Thank you. Thank you, Noah. Have a great day.