John J. Morris
Executive Vice President, Chief Operating Officer at Waste Management
Thanks, Jim, and good morning. 2023 has started off as planned and we're pleased to have achieved our first quarter targets. Overall adjusted operating EBITDA grew nearly 4% and operating EBITDA in the collection and disposal group business grew 7% in the quarter.
One area that exceeded our expectations was pricing as we continue to execute on our revenue management programs to recover cost increases and improve margins. As Jim mentioned, our first quarter, organic revenue growth in the collection and disposal business was 7%, this growth was led by core price of 7.4%, which exceeded both last year and our plan for the first quarter. This strong core price translated into collection and disposal yield of 6.2%, a 70 basis point improvement compared with Q1 of 2022. We saw strong yield performance across all lines of business and are particularly proud of our post-collection yield. We have consistently emphasized the importance of post-collection pricing and in Q1, we delivered yield of 8.9% in one of our transfer stations and 5.4% for landfill MSW, both increased from last year. In fact, the transfer station yield is a new high for that line of business which is helping to offset increasing costs of labor and transportation.
Our collective focus continues to be striking the right balance between maximizing customer lifetime value and increasing price to recover higher costs. We remain confident that we can achieve our full-year pricing expectations for a core price of 6.5% to 7% and yield approaching 5.5%.
Turning to volumes. First quarter collection and disposal volume grew 0.8%, landfill volumes led the way with C&D volumes up almost 37% in the quarter, driven by the Hurricane Cleanup in Florida, and MSW volumes increased by almost 3%. Special waste volumes moderated in the quarter due to the timing of event-driven work, but our pipeline remains robust and we believe that those volumes will provide incremental revenue growth as we progress through Q2 and the balance of the year. Our collection volumes were down modestly in the quarter driven by intentional steps we continue to take to price every contract to achieve acceptable returns. This has led to some non-regrettable volume losses in our residential and commercial business. With profitability improving in each line of business and contract wins with healthy price increases we're pleased to see our differentiated service and disciplined approach to yield benefits. For the full year, we continue to expect flat overall volumes at the midpoint of our guidance.
Turning to operating expenses, which increased 70 basis points as a percentage of revenue to 63%. I want to frame these results and then talk about the efforts in place to optimize our cost to serve in 2023 and over the long-term. There were two primary contributors to our first quarter results. The dilutive impact of recent acquisitions and continued inflationary cost pressure. As a reminder, we closed on about $365 million of acquisitions of solid waste and recycling businesses in the second half of the year. Integration costs and upfront dilutive margins of these acquisitions had about a 35 basis-point impact in the quarter. While this impact was a little more than expected, overall, we're very pleased with the progress being made in creating value from these businesses.
The remaining impact was due to persistent cost inflation, which was most significant in wages, repair and maintenance, and subcontractor costs. The good news is we see signs of using cost pressures and the steps we are taking to combat higher costs are also showing benefits. Frontline wage increases are now in the mid-single-digit range as compared to the high single to low-double-digit increases that we saw in late 2021 and 2022 and we're starting to see truck orders fulfilled, which benefits every aspect of our cost structure because employee engagement is better, downtime on route is minimized, repair costs reduce and expensive rentals can be eliminated. Getting trucks delivered will also be key to residential automation as we move from traditional reload to automated side loaders we're taking help off the back and getting about a 30% productivity pickup, which equates to lower driver technician and truck capital needs.
We've talked a lot about the work we're doing to optimize our cost to serve. Investments we are making in our people and process are also important. We're always working to make WM a great safe place to work and delivering our team members a best-in-class compensation and benefits package. One of the benefits we know that comes from these efforts has improved retention, which then translates into even better customer service and optimized cost structure because our tenured drivers are the safest and most efficient. In the first quarter of 2023, we saw the best driver retention, we've seen in two years. This positions us to drive down our training and overtime hours, improve overall efficiency, and most important see continued improvement in our safety performance.
In closing, I want to thank the entire WM team for the fantastic job they do safely and reliably serving our customers day in and day out. We've had a solid start to 2023 and look forward to building on our success.
I'll now turn the call over to Devina to discuss our financial results in further detail.
