ICYMI: Waste Management COO John Morris

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1:45Seize your opportunity at michiganbusiness.org. Bloomberg Audio Studios, podcasts, radio, news. You're listening to Bloomberg Business Week with Carol Masser and Tim Stenevek on Bloomberg Radio. Well, shares of waste management surged as much as 5.5 % today. It's the most intraday going back to late January. This after the garbage collection and recycling company posted second quarter results that beat estimates. It was helped by strong landfill volumes that benefited from wildfire cleanup in California. There's no other way to say it. John Morris loves trash. He's president and COO of WM. It's formerly known as Waste Management.

2:31Just to give you an idea of the context and how big this company is, it's got more than 500 solid and medical waste facilities, more than 260 active solid waste landfills, more than 100 recycling facilities, close to 500 hauling operations, and more than 60 ,000 employees. John joins us from Houston, Texas, where Waste Management is headquartered. John, good to have you with us. How are you?

2:53John Morris:I'm good. I'm great. Thanks for having me today. Hey, thanks for joining us. Carol and I love talking to executives in this space. We do. We find it super interesting, especially given the way that the companies do or don't respond to economic conditions. So just give us an idea about the way you can, I don't know, think about the economy right now from the perspective of trash. Well, I think it's a great question. I think in a lot of ways we're recession resistant business, but there are certainly segments of the business where I think we're lagging and leading. And you mentioned our landfill volume.

3:28John Morris:And that's certainly one where we had a strong quarter and really a strong number of quarters, which would suggest there's still some strength in the economy. If you look at our MSW volumes, our construction volumes, they were pretty strong for the quarter. And as you mentioned, some of the special waste volumes were particularly strong this quarter as we benefited from some of that, some of the event work you mentioned. Anything that in terms of presidential policy and things being done, whether it's the EPA and other environmental issues that certainly play into your space, any of it that's going to change your business dramatically?

4:04John Morris:I think for the most part, Carol, we're regulated at a state or provincial level if you look at our business up in Canada. From an EPA perspective, the one topic that gets, the one acronym that gets a lot of attention is PFAS. So we've been following that at a federal level very closely to make sure that we've got a seat at the table in terms of which way the legislation may or may not go and how that would affect the industry and, more importantly, our customers. What does it mean having a seat at the table? What is it that you want to see happen? And what are you guys doing to protect all of us?

4:35Because I think we've done some reporting here at Bloomberg about various landfills and seepage and what it does and ground fires and different things that certainly impact environments. Sure.

4:46John Morris:What I would tell you is, as you mentioned, we have over 260 active landfills in the portfolio, and we're super proud of our environmental record with those facilities. The one area I mentioned, PFAS, really has to do with some contaminants that could make their way into some of the materials we manage. But we're very confident in our ability to handle those inside of our facilities and make sure that they don't leave our facilities. And PFAS is one of those topics that's got a lot of attention. And when I say seat at the table, the one thing we've been very active in is making sure that there's this concept of a passive receivership, which we've been very vocal about.

5:20John Morris:We don't produce PFAS. We've never produced it, but we manage a lot of material that can have some of it in there. So we want to make sure that, you know, the EPA has recognized our landfills as being a repository, a safe repository for those. We just want to make sure that this passive receivership concept gets some attention in those conversations. And in case you don't know, in case, you know, PFAS are these man-made chemicals, they don't break down. They're in nonstick cookware. They're in food packaging. They're in a lot of things. But when you say about containing and managing, what does that mean?

5:50Are they stored somewhere in really thick concrete?

5:55John Morris:Well, it depends. Nobody's ever actually showed me a load of PFAS, but as you mentioned, it does come in some of the materials that we manage. And when you think about our landfills, we look at those as safe repositories where we manage the material goes in. And with respect to this conversation, more importantly, we can contain those materials inside the facility and make sure that there's not a release of those contaminants. But that basically means they're stored somewhere, either underground or whatever, correct? And the idea is that it never gets broken and never comes out. There are some technologies that we're working with right now in order to manage some of the waste and make sure that that PFAS doesn't escape from inside of our facilities.

6:33John Morris:But to your point, the question is whether if they're coming in in a waste stream, that we can make sure we can safely contain those inside our facilities and make sure that either through air or through the liquids we manage that it doesn't leave the facility. John, I got to ask you, I've got a 22-year-old at home that already is telling me how my generation is messing up the world for them. So I have to ask these questions. Thanks, Carol. You're welcome. And I thank you to your daughter, though, by the way, because she's going to fix it all. She's a tough cookie. So, John, you know, this is a very acquisitive business.

7:05And in fact, there's an entire page on WM's website about acquisitions and divestitures that asks people if they're thinking of selling their company right now. And there's a Western tier to get in touch with and an Eastern tier to get in touch with. How are you thinking about acquisitions for the remainder of this year and for next year?

7:24John Morris:Well, as you probably know, we've been a public company for over 50 years, and a big part of our growth strategy over five decades has been the fact that we've been an acquisitive company. We've been very disciplined about where and how we've been acquiring companies, certainly over the last number of years. And this year, as we mentioned earlier today in the earnings call, we expect to be over half a billion dollars of sort of what we would call tuck-in acquisitions, where we're buying smaller or regional companies and benefiting from some of the synergies that come from the SG &A lines and also from the operating lines as well.

7:58Geographically, what areas are of interest to you?

8:02John Morris:Honestly, we kind of keep an open aperture, but what we want to do is look for acquisitions where we can, one-on-one equals more than two, if you will. So we've got a team of business development folks who work with our 16 regional vice presidents, or we call them areas across the U.S. and Canada, to make sure that as we're looking at these companies, that they do fit into a portfolio concept that, you know, we're going to get more leverage out of them than simply buying the company and bolt it on to our existing business. The Stericycle acquisition, which was completed back in 2024, gave you entry into medical waste.

8:35Is that an area that you wish to grow in?

8:38John Morris:Well, right now, obviously, we purchased what we're calling WM Healthcare Services, which was formerly Stericycle. Terrific set of assets, great team of folks. Our focus right now is really digesting that business. And if you listen to the call today, a lot of the conversation was about between now and the end of the year, working through some ERP system issues that we knew when we bought the company, and more importantly, making sure that we're thoughtful about how we integrate that team and those assets into our network and make sure that we build the right customer relationships. I would tell you those are our focal areas right now with regard to the healthcare business.

9:14How does technology, and I'm just thinking about AI, what's the role of it in your world?

9:20John Morris:You know, it's a great question, Carol. We've talked a lot about that. We had an investor day a handful of weeks ago up in New York, and a lot of what we talked about was using technology, whether you define it through AI or automation or optimization, there's a lot of phrases you'd use around it. But one of the things that's unique is, you know, we still see, although it's moderated, there is still a lot of pressure on what we would call these trade type jobs, which we have obviously probably about 40 ,000 of those. So we've been looking at ways to take technology broadly and use that to augment our labor force.

9:49John Morris:One, we can upskill a lot of the folks we have on our team today. But the reality is, is that we have seen a strain in terms of what that workforce is going to look like in the future. So this has really been about future-proofing our business in the short term, but also over time using automation, using technology actually to structurally lower the cost of our operating model. And as we've said, modernize it to give us a long-term differentiated advantage in the space. Carol and I are obsessed with self-driving cars. And I'm wondering when this technology, if you're testing it, When it comes to WM vehicles that haul trash, are we getting to a period of time where this part will be automated?

10:28Because I also saw like I was recently outside Charleston, South Carolina, and I think it was the recycling. There was somebody driving, but it was all automated. It just picked up the trash container and just put it in like this person didn't even have to get out. I was kind of I know I could have been on the beach, but this is what I was watching.

10:48John Morris:Well, I happen to have a home in Charleston. That's a great part of the country. I would tell you that there's different phases. So to answer the question, Tim, the technology out there, if you think about autonomy, it's there. If you look at the mining industry and some of those places, there's autonomous equipment running out there now. We're actually piloting some remote heavy equipment operations at a few of our facilities. facilities and i think there's also over the road technology probably more for the for the long-haul tractor trailer combination where that technology is more advanced but i think the answer your question is we are looking at opportunities whether it's on remote equipment operation or certainly the pathway to autonomy but to your point there's also the point that carol made is an important one there's also components of the jobs that used to be very manually uh reliant are now being automated and i think the example you gave is a great one where you know you used to have two folks on the back of a truck kind of tossing the material into the back.

11:41John Morris:Well, now we have one person in there and it's a fully automated job. And that's important because it does a couple of things. One, it makes the job less physically demanding. It certainly reduces our labor dependency. And it also makes the job a little bit more appealing. And when you look at what's happened to the company, we are experiencing the lowest turnover rates we've seen in an industry that's been 25 to 30 percent. We're now sub-20. So there's a confluence of where all these technology advancements are benefiting us. And I do think down the road, we're going to continue to press on remote operation as well as autonomous capabilities.

12:18All right, John, just got about 40, 50 seconds left here. I mean, I've got a recycling bin. I've got another bin. I know Tim's got a compost bin. How much really gets recycled? Because we've had some reality checks here. And forgive me for just giving you about 40 seconds here.

12:33John Morris:No, that's okay. Well, we are and have been the largest recycler in North America for decades. And we manage about 12 million tons a year. About half of that gets processed directly in one of our facilities and half of it we manage for some of our big customers. Generally, when you put material into one of our traditional single stream recycling facilities, we've actually done a great job in partnership with our customers and the technology providers to really get that residual rate down south of 20%. So think about 100 % of the recycling that goes in, about 17 or 18 % could come out as residual.

13:04John Morris:The rest of it, Carol, though, in our facilities is absolutely recycled. Good to know. I'm going to save you 10, 15 seconds. If you have one piece of advice about what we do with our garbage that would make it a better process for you guys and maybe help clean up our environment, what would it be real quickly? I think it's what you just mentioned. It's the fact that we can do a lot in partnership with our customers, both residential and commercial, to recycle right. And one of the things we talk about is we're always working for sustainable tomorrow. John Morris, thank you so much. So appreciate it.

13:33President and Chief Operating Officer at WM joining us on Business Week Daily.

13:42Before you sign off, you tuned in for ways to help teams move faster, make sharper decisions, and turn scattered context into work they can use. ChatGPT for Business can help. Chat GPT for Business gives teams a shared workspace with admin controls, permissions, and access to work and codecs in Chat GPT. This means your business can move from question to answer and code to rollout quicker. Join over 10 million business and enterprise users worldwide already using Chat GPT for Work. Download the Chat GPT desktop app or contact sales to learn more. When you're running a business, the best days are the ones where priorities stay on track.

14:21For midsize and large companies, risk can affect multiple parts of the organization at once, from property and liability to cyber and regulatory challenges. At that level, managing risk becomes an ongoing discipline. At the Hartford, the focus is on helping businesses manage risk before it turns into something more disruptive. And when losses do happen, that work is paired with insurance coverage shaped by years of underwriting, risk engineering, and claims experience. Learn more at the Hartford.com slash risk mitigation. Policies provided by Hartford Fire Insurance Company and its property and casualty affiliates, Hartford, Connecticut.

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