WM’s Healthcare Solutions segment met some key milestones in Q3, a sign that the integration of the former Stericycle assets is finally paying off after the 2024 acquisition, said executives in an earnings call on Wednesday.
CEO Jim Fish led his last call as CEO on Thursday. President John Morris will take the helm as CEO in January when Fish retires. “The company is in such a great place strategically, financially, customer-wise,” Fish said.
Morris noted that WM’s diversified business helped drive growth in all of its major operating segments. The sustainability segment, which includes recycling and RNG commodities, saw an earnings before interest, taxes, depreciation, and amortization increase of 30% in the quarter.
Notably, the Healthcare Solutions segment also achieved an operating EBITDA increase of 33%. Revenue in the sector was up 3.7% for the quarter — the first time since the acquisition that revenue was up year over year, Morris said. WM acquired Stericycle in 2024 for $7.2 billion.
To improve integration efforts, WM set two year-end targets for the healthcare business: One was to achieve 5.5% core price, and the other was to hit selling, general and administrative expense targets of between 15% and 16%.
For Q3, core price was right at that 5.5% goal, while SG&A hit 15.2% of revenue — a 390-basis-point improvement compared to the previous year, said CFO David Reed.
“This reinforces our confidence in the integration and earnings potential of the business as we continue to streamline support functions, drive operating leverage and scale the platform,” Reed said.
That news comes after a few challenging quarters for WM Healthcare Solutions, which included ongoing billing challenges, a rocky ERP system integration and some customer churn.
Some improvements in the quarter have to do with WM getting pricing in line with the costs of providing services, as well as being able to automate more of those processes, Morris said. Billing problems have been largely fixed, too.
“There was a lot more manual effort being put in in the early days to make sure that we were improving and getting to the point where folks were getting an accurate bill,” he said.
The healthcare business is still seeing some volume headwinds, Morris said. He expects volumes to improve in 2027, though a bit more slowly on the medical waste side compared with the secure document destruction side of the business that WM also acquired from Stericycle.
Morris also estimated that WM was on track to hit its Stericycle cost saving goals by mid-2027. Executives had previously estimated that it could hit $300 million in synergies by late 2027.
Looking to the future, Morris said the company will likely not make major changes to the way it operates the Healthcare Solutions business, in part because of Fish’s upcoming retirement. But WM will continue to build on the healthcare business “and look for further ways to integrate and and take the advantages of cross-selling, in addition to some of the operating expense opportunities we have in that business.”
For his part, Fish said he will look at the Stericycle acquisition as part of his legacy. “I believe this is going to prove to be one of the best acquisitions in the history of the company,” he said.
The Healthcare Solutions milestones contributed to positive earnings results for WM’s larger business, executives said.
Other drivers of revenue growth included increased energy surcharges to balance out high diesel prices. Meanwhile, both the recycling and renewable energy businesses saw higher volumes due to the completion of recent infrastructure projects, said COO Tara Hemmer.
Collection and disposal volume declined 0.4% in the quarter, driven partly by a continuous shedding of what WM considers to be “lower-margin residential business” and commercial declines that came from national account broker losses.
WM anticipates achieving its full-year guidance. Reed said revenue is expected to be at the high end of the $26.275 billion to $26.475 billion range, while adjusted operating EBITDA is expected to be within the range of $8.15 billion to $8.25 billion.
