Waste Management, Inc. (WM) Earnings Call Transcript & Summary

Good afternoon. It is my pleasure to welcome Jim Fish, the CEO of Waste Management; and John Morris, the COO. Over the last few years, we have been fortunate enough to host Waste Management at this conference, but this is the first time we get to host the CEO. So thank you for being here, Jim. Thank you, John. There are many investors on this fireside chat today that have obviously heard of Waste Management but might not be so familiar with the changes that have occurred at the company, especially under Jim's watch when he became the CFO and the CEO.

So I'd like us to start off with the transformation that has occurred at Waste Management. In 2020, your revenue was a little over $15 billion. That's up about 10% from a decade ago, yet your margins are up nearly 500 basis points. Your EPS and free cash flow have nearly doubled. So Jim, maybe we can just help investors understand, what are the changes over the years, even before COVID and maybe during COVID, that have allowed Waste Management to be this more profitable, cash-generative company, and if you think there's still room for this to grow and expand going forward?

Thanks, Michael. I mean, by the way, on the revenue side, just to level set a little bit, if you're looking a decade back, I mean, we did divest our waste-to-energy business, which was a big business for us. Made sense for a lot of reasons to divest it, but that is included in the revenue from a decade ago. And then, of course, 2020 obviously was a down year in terms of revenue. But what I would tell you is that, and I've said this all week, I've been on a number of calls this week, is that I've been with the company 20 years, I've never been more bullish on the company or the industry and there's 10 reasons why for that. But as I think about top line growth, to your question, I mean, there's a number of things going on, particularly as I think about 2020 to then 2021 and beyond. So obviously, 2021 is still a little bit of a strange year. We've had COVID for the first quarter. We expect to come out of COVID in the second quarter based on what Biden said about the vaccine. And so if you assume that we come out of this in the second quarter where everybody has had a chance to get a vaccine, then you really look at a very steep uptrend. And we know that because when we look at our own data, the states that are essentially open, like Texas, like Arizona, like Florida, like Tennessee, those states have seen a very significant rebound. Not a full rebound yet because the Astros at this point still haven't played a home baseball game with any fans and same with the Texans. And so we haven't seen the hospitality space come back fully, but most businesses are reopened in those states. So when I look at 2022, 2021 but also 2022, I see a very steep upward trend in the macro economy, of which we'll be a big beneficiary. I'd like to think that Congress can get its act together and come out with an infrastructure bill. If they do, we kind of equate that to about 70 basis points of volume growth for every 1 percentage point growth in GDP. So call it, let's say, it's a 2% bump in GDP. We think that benefits us to the tune of about 1.4 to 1.5 percentage points of volume growth. There's a lot of price that has been intentionally held down that affects the top line. We've talked about it at the last 2 or 3 quarters, but we didn't take price increases on customers who have not reopened or the guy that just reopened his sports bar, we're not taking a price increase on him right away. So there's a lot of volume-related price increase to come. And then, of course, the recycling business, we think, is on a very strong uptrend. And we think that's a 3- to 5-year trend based on not just recycled commodities but all commodities. We expect, mostly in the residential line of business, to get finally, after a decade of no help, to get some help from CPI. 40% of our business is tied to some type of index. Our landfill business, the MSW component, has really started to kind of get back to normal volume growth. But the special waste piece is still down pretty significantly. But the good news is, the pipeline is very strong. So once these companies see a bit of a light at the end of the tunnel, they will start to reinvest in those special waste projects. C&D, which had been literally down 41% in Q2 year-over-year, then down 19.5% in Q3, was up 5.5% in Q4. And when you look at housing starts, really showing some nice signs of strength. Still not to where they were, and I don't know that they'll ever get back to where they were in '05, '06 but close to 1 million housing starts, new home housing starts. That's very encouraging, so we think C&D is on a nice trajectory. And so I would just tell you, Michael, there are 10 reasons why I'm optimistic, and certainly, a lot of them affect the top line. And then I think we're working to really separate ourselves from the pack through differentiation. John can talk a lot about the operating cost side and what he's doing there and why that's a long-term good trend for us. He can also talk about what we expect to get out of ADS and why we're so excited about the ADS transaction. But in terms of an additional component of top line growth is differentiation. And part of our customer service digitalization is truly separating us, I kind of call it the Amazon. We're trying to imitate Amazon, not in all respects obviously. But when you think about Amazon's front end, we are building a very similar experience for our customers, but then it also goes all the way through to the back end, which is a logistics component where John and his team will replicate that. So there's differentiation which affects top line and then there's kind of true labor savings, which we don't talk a lot about because we don't want to message to our own employees that the dispatch function could go away. But all of those, I mean, there's 10 reasons why I'm as really excited about the company and the industry as I am, and those are 4 of the 10.

That was great, Jim. And maybe just to expand on one of those factors that you just provided. Investors constantly ask, is waste early-cycle? Is it a late-cycle play on the economy? They look back at the last recession and they see that it took a few quarters to really get volume growth humming again. This was a different type of recession. Normally, commercial customers, it takes a few quarters into a recession to make any adjustments on their waste services, service levels, if any adjustments at all, Jim. This is a very different recession. So can you help us understand how maybe Waste Management will participate in this type of economic recovery that we have coming forward compared to maybe the past recoveries?

Well, look, you're absolutely right about the fact that this is a very different type of recession. In fact, it's a type of recession that we haven't ever experienced. I mean, we don't have '08, '09 recessions very often, fortunately, but we have gone through those. And then the other downturns that aren't quite as deep as '08, '09, we've had multiple opportunities to experience those. This one, we've never had. I'm not sure in the history of humankind. So it's, when we look at how quickly it's recovered, I mean, in '08, '09, it took us a couple of years to fully recover on the volume side. This one is, when we look specifically at some of those areas like Texas that have really recovered quickly, they still have, as I said, more recovery to go, but we think that's a quarter or 2. I mean, we think the bounce coming out of this is very steep. We think there's a ton of pent-up demand. Look, people want to go to college basketball games. They want to go to sporting events. They want to go to Broadway plays. They want to go take vacations. And all of that was essentially turned off overnight in March of 2020. And for the most part, it hasn't been turned back on. We are hearing some good signals from Florida, that Florida is starting to turn back on. I talked to the CEO of Sabre the other day, and he said that they're showing some pretty encouraging signs in terms of hotel bookings in Florida. But look, New York City is a big tourist destination, too, and it's not turned back on, and Hersheypark in Pennsylvania. All of those, including all of the sporting events, I think, Michael, we pick up about half of Major League Baseball and it was 0. It was literally 0 last year. We're hopeful that when the season starts here in a month or so that they have fans. But even if they don't have fans right away or if they do, it's 25%, we're hopeful that by the time we get to late summer and fall, that they really are back to full baseball stadiums, that college football is up and running. And all of that has a big impact on us. Schools is 12% of our commercial business. That's universities. That's high schools. That's middle schools. That's grade schools. 12% of our commercial business that literally went to 0 overnight. It's why this recession, to your point, it was very different. Nothing has ever fallen off a cliff the way it has. I don't think the economy has ever, literally in a period of 7 days, shut down everything and everyone went home. All these central business districts downtown, even in Houston and Austin in Texas where the state is pretty open, 11% of downtown Houston office space is full right now. Nobody has come back downtown yet and that includes WM. And they are all customers of ours or a big percentage of them are customers of ours. So that's why we feel like the rebound is going to be very steep. And that's why even though we only gave 1.5% volume growth guidance, look, we don't control it. So I don't have a hotline to the governor of California. If I did, I'd be calling him and saying, open the damn state up. But I do think that he will eventually open that state. And I think Pennsylvania and Illinois, those states will open because the residents, once they feel comfortable, especially once they've gotten the vaccine, I think there's going to be so much pressure on those governors. They're going to have to open those states, and we become a huge reopening play at that point.

And Jim, just on that, can you talk about the relationship between price and volume? Do we need to see volumes recover to a certain level before we can get those price increases coming through? If we look at 2019, a year of very strong growth for WM, the industry also observed very strong pricing and really strong yield. So I'm curious if you believe the volumes need to recover to a certain level and for a sustained period of time before we can really get back to those yields that we saw right before the pandemic.

I don't think there's a certain amount of volume required. We have so much price discipline. We've centralized pricing across the board. All of that is very positive for price. So there's been absolutely no loss of discipline. So I don't think it necessarily is driven by a certain amount of volume. It's just really driven by the fact that those businesses have to reopen. Now maybe more time. I mean, look, on Day 1, when a Chinese food restaurant opens up, I'm not smacking him with a price increase. But I do think, let's give him a little bit of time, get their business back up and running. We did, in many cases, give those customers a free month of service. And that free month of service has largely been used. So I think there may be a couple of percentage points left, but probably 98% of those free months have been taken by those customers. So that was a pretty significant cost for us, especially in Q3 of 2020. But I don't think we're going to sit back and wait for volume to hit a certain level before we turn the pricing machine back on. I think you'll see pricing tick back up almost in parallel. And then the other piece that John can talk about is really what he's been doing on the residential price side. And John, you want to talk about that a bit?

Sorry, Michael, can you hear me?

Yes. Got you.

Sorry, I was muted there, sorry. Yes. I think residential, listen, it's no secret, that's a significant line of business for us that we've struggled really to make progress on the price and margin side. And what you saw here just most recently is a little bit of a decline in revenue, but we're making progress on the margin side. And not lost in that, Michael, is also the fact that the recycling business, which we've been very vocal about what our plans are to move that to a fee-for-service model and the progress we've made, and we see that as large tailwind for 2021. That is in addition to what we're doing in recycling, excuse me, in residential. That recycling business is a big chunk of what flows through residential. So when we're talking about residential, I don't want to get lost in that discussion that our recycling business is improving as well. So even though there was, I think, 1.4% volume loss last quarter, I look at really more at the margin and returns on that business and striking a balance between how we're deploying shareholders' dollars in that line of business has really been a focus for us. So after, as Jim said, he's probably right. It's been probably a decade since we've made any real progress there. Not only we stemmed the margin erosion, we've actually showed progress even in a COVID environment on the margin front. So all that to say that we're managing our costs better across the company, specifically in residential. We're being extremely thoughtful about how we incorporate recycling when we're bidding on that residential work and both lines of business are showing a lot of progress. So that's another reason why we feel really good about 2021.

That makes sense. And inflation is a key topic on the minds of investors. Where do you start to see inflation in your business? What business lines in collection, landfill? What cost? And where can you pass this along? What's the normal cost inflation for this business? And what yield, price yield do you guys have to see to really offset that?

Well, I'll take a shot and John can jump in. I mean, look, Michael, that's kind of reason #8 why I'm as optimistic as I am. I mean, when we think about inflation and specifically about how that flows through into our business and where we get help on price and where it impacts us from a cost standpoint, the good news for us is, while we haven't had any help for a decade on the price side, and I think that finally, for a change, it appears like that might be coming. Of course, keep in mind, as we've said, 40% or so of our business is tied to an index of some type, whether it's a regional index or a national index but some type of CPI-based index. And we've really gotten no help from that for the last 10 years. But we have seen already the impact on the cost side. So I don't think you're going to see the ramp-up in price but you won't see the ramp-up in cost because we've already seen it. We've had labor pressure now for 3 or 4 years. We've had landfill cost pressure for 3 or 4 years. And so part of the labor pressure, part of the reason John has gotten as active as he has, in addition to just me pounding on his door all the time, is that he sees that he has to offset the labor pressure with efficiency gains. So that's why John and Tara Hemmer and Steve Batchelor, they've been doing a really good job of that over the last couple of years because they've seen that labor pressure already. So there's a bit of a timing mismatch there. We've already seen the impact of cost increases or inflation, if you will, on the labor side. And yes, we have not seen them reflected in CPI. It's part of why we said, look, CPI, it's not a good reflection of the cost increases to our business. And therefore, we needed to move to the water, sewer, trash index. We've done some of that but a lot of them won't move. So now for a change, they're going to start to see inflation in their contracts that are tied to CPI, but we won't see necessarily a commensurate increase in cost because we've already seen it.

Jim, I think it's also -- sorry, Michael, go ahead.

No, go ahead, John. That was a great point by Jim.

I was going to say, you've heard us talk about some of the efforts around customer service digitalization and what that means, connecting the front end to the back end of the business. And while we're careful about how we message this on maybe an earnings call, but this in a lot, this is a manually-intensive business, capital-intensive business and really a big component of CSD is what I'm calling behind the curtain, right? It's great. We want to have, as we've talked about, maybe a front end that where customers can transact, how they want, when they want more on their iPhone as opposed to over the phone. And we're making a lot of progress there. But behind the curtain is where a lot of the benefit is going to come. And you heard Jim talk about that in the earnings call. And when you think about us being a world-class logistics company, right now, we've got a lot of folks who work really hard on the support side, but it is still somewhat of an analog model, not entirely. And part of what CSD is going to do is make it more of a digital model, if you will. And we see, over time, the ability to really get a lot more efficient in how information moves from the customer through the operation and back. And right now, there's a lot of manual processes that happen where we're doing those handoffs. And obviously, every time we have one of those handoffs, there's obviously customer risk and whatnot that we make a mistake. But as hard as we work there, we see these technology investments we're making in CSD are really going to make us a lot more efficient over the next handful of years behind the curtain, whether it's dispatch, whether it's op support, whether it's setup, I mean, some of these functions that you folks don't necessarily see but we're very focused on.

That makes sense. And Jim and John, you're in early days of your integration with ADSW. It's the largest acquisition of Waste Management history. You already laid out $50 million to $60 million of synergies in year 1. Help the investors on the call understand why this was the right acquisition for Waste Management compared to maybe going through your typical process of acquiring lower-risk, smaller tuck-ins, repurchasing your shares? What does ADSW footprint and that customer base offer Waste Management, which is, at the time, was already the largest player in the country?

Sure. Jim, I'll take a crack at this first and you can jump in. There were certainly opportunities on the smaller side, Michael. But from a risk standpoint, I don't necessarily think they're lower risk. This is a bigger acquisition, for sure. It's the largest one we've done, arguably other than the merger of Waste and USA Waste way back when in 1999. Why was it a good fit? Because if you look at that business and how it laid over the WM assets and the type of business it was, it was kind of, I think, Jim and I both said, it's kind of down the middle of a fairway. It was collection, transfer, disposal. It was, I think, a set of assets that right now fit over what we kept, obviously, what we retained. It lays over the Waste Management assets really well. So that's one of the reasons why we feel confident. Secondly, Richard and that team did a nice job of building and pruning that company over the last bunch of years. For those of you who know the history, that was Superior Waste, that was private equity, that was Advanced out of Florida. There was a lot of things that made up Advanced Disposal. And if you look at what Richard and his team did, they were disciplined around how they pruned the business, where they invested in the business. They were making progress on the margin front. But they were arguably under, the way we would calculate EBITDA, about 24%, 24.5%, so 400-plus, 450 basis points under us. And we look at all the things we're doing around CSD, around our operating practices, around technology advancements and go down the list, all those reasons that Jim was talking about, and then we take that and lay that over what was an acquisition we already had pretty, we were very confident in our ability to achieve the traditional synergies, that's why we feel that good about that. And I will tell you, we're 120 days in, Michael, and I said this on the call, I could not be more happy with the way that was done. The planning team has done an exceptional job. We had a little bit more time to plan than we had hoped for. But to the credit of the team, they took full advantage of it. And Day 1 have done just an exceptional job. And when I say an exceptional job I've said Day 1 is about taking care of the people at Advanced and making sure we take care of the customers. That team has done a great job of that. And now we're at the point, 120 days in, where we're really getting focused on some of the operating efficiencies. The early days was really the easy SG&A synergies. And once we get through the data migration, basically pulling their customers into our system, which we've been very thoughtful and careful about how we do that. The early pilots are going well. And as that customer data migrates over, that's when our operating team can really start to make some hay on the additional routing and operational synergies.

I think, Michael, the only thing I would add is that really, we saw ADS and now that we own it, we see it as a company that was well run, similar culture to ours, but probably where WM was 10 years ago in all aspects. Whether it's in the sophistication of their operations, onboard computers, pricing sophistication, centralization of certain things, they are where we were a decade ago. And hence, the huge opportunity to kind of take that business. John mentioned margins, we were at 24% 5 or 6, 7 years ago and have raised those margins by 450 basis points and still going. But we feel like we have a similar opportunity with now this ADS business. So we've talked a lot about the synergies being $100 million plus. By the way, there's not a nickel of price in there and we are a pretty sophisticated pricer. And ADS, no fault of theirs, just wasn't as sophisticated on any metric or any measure as WM, and that's a good thing for us as we've acquired their business now.

That makes sense. And Jim, I asked you this on the call. I get the strategic rationale on ADSW, and you guys are likely going to be back in your leverage target by the middle of this year. John made a joke about how it took a little longer to get that approval. I'm just curious going forward, once you get into that leverage target, does Waste Management need to look at other areas for growth outside of the nonhazardous waste space? Could we wake up and see Waste Management going more international, more into hazardous or other route-based services? Could there be an extra pillar of business or growth that we're not thinking of today that could be with Waste Management 3, 4, 5 years down the road?

There could be. Look, here's what I would say. I don't want to get too enamored with acquisitions. I mean, I'm excited about ADS because it's right, as John said, right down the middle of the fairway for us. But there's an awful lot of examples out there. I own 2,000 shares of AT&T and it literally sucked for 25 years. It has been flat for 25 years. I mean, and they did a bunch of acquisitions. And none of them did anything for me as a shareholder. So I don't want to get too enamored with acquisitions. Yes, we could buy something international. We sold out of international in '99, 2000 because the margins were not great. And so I mean, what do I get by going and buying a British company or a company in Singapore? There's no synergies to it for me. Maybe a little bit of SG&A at the corporate office but I don't get a lot out of that. There's certainly no operating synergies. Really, there's no overlap at all so. Or we could look at other verticals. If you kind of subscribe to Jack Welch's theory that you want to be 1 or 2 in every one of your verticals. And those businesses that are kind of waste-related, we're obviously 1 in solid waste. We're 1 in traditional recycling. And then there's hazardous waste where we're probably 2, behind maybe a Clean Harbors. Medical waste, where really there's only one player there. We've had a little bit of business over the years. We sold most of it. So the question is, do you want to be in that vertical? But I guess that's an opportunity. But again, you really have to be careful when you go buy these companies that it's adding shareholder value. And that's my primary focus. It's not whether I want to be bigger or not. I mean, would I like to be $25 billion in revenue? If I could be $25 billion in revenue and 33% EBITDA margins, then absolutely. And really strong return on invested capital, you bet. But there's no guarantees of that with any of this. I think what you'll see us do and what I can promise you is you will see us continue to grow the business organically, which we've proven to be pretty good at. And we said at Investor Day, we thought we'd see 4% to 6% organic revenue growth. I think you can see that at the top end of that as we get into 2022. We haven't given, obviously, any direct guidance on 2022, 2023, but 2021 is still a bit of an anomaly. But I think M&A growth will be lower end of that $100 million to $200 million this year and probably ramp up a little bit. You might see us do some solid waste acquisitions where ADS was not, meaning west of the Mississippi. There may be something in, I don't know, Denver or Phoenix or Seattle or L.A. or whatever. But I think we have a huge opportunity to grow organically by taking a bigger slice of the pie. Some of it comes from landfills where you guys have talked a lot about us getting a bigger share, meaning WM, Republic and Waste Connections getting a bigger share in the disposal space because these other landfills have shorter lives and they are coming to the natural end of those lives. So we get a bigger share there. That is organic growth for us. And similar, you see a similar relationship maybe for a little different reason on the collection side of the business. Add to that what we're doing with technology that truly makes us a more desirable interaction with our customers. And I think we've got pretty significant opportunity to grow organically before I go and take a big risk buying somebody international or buying another vertical that may or may not add value.

And Jim, on that, that kind of leads to my next question. I mean, in 2019, you hosted the first Investor Day in a decade, and you laid out these 2019 to 2021 targets, excluding M&A, as you said, revenue growth 4% to 6%, EBITDA growth 5% to 7%, free cash flow growth 5% to 7%. Obviously, COVID impacted everything, but we're going to finish off 2021 this year. How do you think these targets stack up going into an economic recovery now? I mean, it sounds like you said growth could be at the higher end. How do I think about these other moving pieces with the EBITDA growth and free cash flow growth as we're moving into this next phase of the economic cycle?

I don't want to sound like a kind of a crazy optimist here, but I mean, and normally, I am more realistic. I'm always looking for, as a CEO, what should I worry, what's around the corner that can bite me? But if you look at just Q4 and 1 month or 1 quarter doesn't make a trend, but I mean, on an apples-to-apples, if you pull out the EBITDA from ADS and truly look at apples-to-apples, I think Q4 was 4% EBITDA growth, and that's always the long pole in the tent is EBITDA as you think about free cash flow. So 4% EBITDA growth in a quarter where our commercial line of business was still down 4.5% in volume, which is the most important, commercial. Commercial is the most important line of business to us in terms of margin, our collection line of business in terms of margin, in terms of return on invested capital. I mean, it is the most important collection line of business. And yet, it still is the most impacted by COVID. So it's why I kind of sit here and go, wow, we telegraphed 4% to 6% or I'm sorry, 5% to 7% EBITDA growth at Investor Day and obviously weren't considering a pandemic. We came in at 4%. And our 2 biggest lines, our 2 strongest lines of business in terms of producing EBITDA are landfill and commercial, and those were the 2 that were most impacted by COVID and it still persists. I mean, if you think about landfill, and John went through some of the numbers, MSW has pretty much recovered, not fully, but special waste still way down. The good news is, the pipeline is super strong. C&D has shown tremendous recovery but it's not where we think it will be. So look, I think when Devina and John and I talked about this as we were preparing to give guidance, we said, what do we think EBITDA on an organic basis will look like and why wouldn't it be at a minimum? Once we get into the recovery, why wouldn't it be? If we're going to give 5% to 7% and we don't know about COVID, then why wouldn't we be at the top end of that range? Otherwise, when will we ever hit 7%? So look, I think there's huge opportunity. And then when you add to that what's going on with recycling. We didn't anticipate when we gave that 5% to 7% back in May of '19, we didn't anticipate how successful the new recycle plants would be for us. We did not anticipate that we would finally get into a kind of a 3- to 5-year uptrend in commodity prices. We didn't anticipate $2.5 RINs prices from RNG plants. None of that was contemplated or anticipated. And again, it's why I'm feeling like, geez, I mean, I don't want to sound like a crazy optimist here, but boy, there sure are a lot of things that look to be for us specifically and for our industry going in the right direction. It's hard for me to find one that's not going in the right direction.

That makes sense, Jim. I mean, I just want to touch on one area about the commercial customer, which I think you've said it's kind of lifeblood of the business. You get great operating density, great returns. I'm just curious, after COVID, do you see more waste being generated at home? We've obviously seen the Amazon effect and what that's done to brick-and-mortar. There's more food being ordered at home rather than eating in restaurants. And again, this is obviously due to the pandemic. But just if you had a crystal ball, how do you think some of these trends with e-commerce, takeout, what we've seen in brick-and-mortar, how does this kind of impact your commercial business, if at all, down the road?

It's the truly the $64,000 question is, how does the world permanently change coming out of COVID? I think there are some permanent changes. For example, on our cost structure side, we're not going to ever travel as much as we traveled. I mean, we found that whether it's WebEx or Microsoft Teams or Zoom, we don't need to do as much travel. Now I do think there's value in going out and shaking hands with a customer, but we don't need to spend $70 million a year on air and hotel, which is what we were spending pre-COVID. I'd be surprised, and Devina and I have had this talk, I'd be surprised if we get back to half of that ever, honestly. I mean, and it's why I don't own any airline stocks. I just don't. I'm not sure I'd want to be an airline CEO right now because I worry that their business travel will, if it recovers, it's going to be a long time before it fully recovers. I do think that there's something to be said for people moving home. And so the e-commerce piece, certainly, it has affected our -- but basically, it just changes the channel, right? It changes it from a commercial channel with OCC to a residential channel but it still comes to us. And assuming we can do a good job of separating it, we still get the cardboard. And actually, there's more cardboard in an e-commerce model than there is in a commercial model just because when you send it all to a big-box store like a Best Buy or whatever, it comes in big boxes. And so it's more efficient to combine all those, whatever they are, Bluetooth speakers, that you might buy at your Best Buy to combine them all into one big box as opposed to 25 little boxes. The 25 little boxes is actually going to take up more cardboard. So there is more cardboard and demand for that cardboard through an Amazon model than there is through a Best Buy store model. So that actually works in our favor. I think the other thing that is an interesting consideration here is, how much is our commercial business impacted by this big move home? And here's just my personal opinion on this. I heard an interesting stat from one of our Board members the other day. And she happened to sit on Cigna's Board. And she said, in 2020, Cigna, of course, owns Express Scripts, that antidepressants were up almost 40% year-over-year. So I would tell you, I think a lot of people, while we like being at home initially, we are all social creatures, and sitting at home forever does not sound like an attractive prospect to me at least. I mean, maybe to you, Michael, but to me, I don't want to sit at home forever. I think a lot of people, we hear it from our own employees, are anxious to get back downtown to the office and interact. And I do believe that there's a -- I had a conversation with Satya Nadella about this. I mean, there is a cultural aspect to working at home versus working in the office. And all those kind of impromptu conversations are dependent on working in a collaborative setting. Everything that you do via Teams or Zoom seems to be a structured setting. And so the impromptu, let's go grab lunch and talk about the marketing for next year's WMPO, Waste Management Phoenix Open, I mean, that doesn't happen very often in a structured Zoom setting. So I do think you're going to see our commercial business come back, and that includes all of the central business districts, which, even in Texas and Houston, were 11% occupied in downtown Houston. That will come back. And so I do believe commercial comes back strong.

And well, Jim, speaking to you from a room where everyone can see my Peloton right next to my desk and my furniture so I am definitely ready to get out, without question. I would like to ask you just one last question before we go, and again, it's more big picture. I mean, Jim, Waste Management is now a $50 billion market cap. Are there other large companies that you look at outside of waste and look at and say, the steadiness, the cash flow generation, the moat, the consistent cash return to shareholders, that's who we should be benchmarking ourselves towards rather than maybe some of your peers that are much smaller and are in a different type of phase of the journey of their cycle.

Yes. So I said that last year at Investor Day that I would, as opposed to being best-in-class, I think we are best-in-class, but I want to be in a different class. I mean, it's why I've spent a fair amount of time developing relationships, not only because it gives us good means for comparison and something to learn from those other companies. But look, I've spent a lot of time with Jim Umpleby at Caterpillar and Jim Fitterling at Dow Chemical, even Kevin Johnson at Starbucks. I mean, those types of folks that are in very different industries, but I feel like we have something to learn from them. I mean, obviously, Starbucks is a different business than Waste Management. We've talked to them a lot about things like sustainability. But even the tech guys, I mean, I went to graduate school with Satya. And he has been very helpful for us through the pandemic with helping us get this move to home setup with some Microsoft Surface laptops, but he's also helpful in terms of making observations and helping me out. So Doug McMillon has been fantastic at Walmart and they have some similar challenges. They're a customer of ours, for sure. But when you think about ESG, Doug has been very thought-provoking for me. And so more than just kind of comparing and looking at how we compare to other big industrial companies but also kind of leveraging those relationships to help us learn coming out of this has been really valuable. And I think it's been good for me to not only learn on how to become a better CEO but also learn from what their businesses are doing. And we've introduced some of our folks to their people. Dow Chemical is an example of that, where they're known for safety and we've introduced our safety people to them. So yes, I think there's a lot of opportunity to compare ourselves outside of just the traditional waste space.

Agreed. We're actually a little bit over. I want to thank Jim. I want to thank John so much for doing this fireside chat with us and participating in this conference. It really makes our conference having the largest waste management company in the country send their CEO and their COO to the conference. So thanks for joining, everyone. If you have any direct questions after listening to this fireside chat, please reach out to me. I'll connect you to Ed who could help with any questions and set you guys up for any follow-ups. Thanks, everyone.

Take care, Michael.