Devina Rankin
Executive Vice President and Chief Financial Officer at Waste Management
Thanks, John, and good morning. Our third quarter results reflect our continued focus on the fundamental value drivers of our business, disciplined revenue growth and cost optimization. Executing on these fundamentals positioned us to deliver WM's best ever operating EBITDA margin in the third quarter at 29.6%. This is a 100 basis point improvement compared to Q3 of 2022 and it can be attributed almost entirely to 70 basis points of margin expansion in the collection and disposal business.
SG&A leverage provided the remaining expansion. We're pleased with the team's focus on optimizing costs and reducing discretionary spending, which together positioned us to deliver SG&A costs as a percentage of revenue of 9%, showing that this long-term goal is not just achievable, it is largely in hand. While the current quarter result has some benefit from lower current year incentive compensation costs, we see this level of SG&A is sustainable, particularly as revenue grows.
While there were a number of other margin impacts in the quarter, mostly related to fuel, energy and commodities, these items basically offset each other, giving us confidence that this quarter's results are based on the steps we are taking to price our services above inflation and to permanently reduce our cost structure. Through the first nine months of 2023, we have expanded operating EBITDA margin by 40 basis points to 28.5%, putting us squarely on track to achieve our full year target of operating EBITDA margin of 28.4% to 28.6%. Our operating performance has translated into robust cash flow from operations.
Through the first three quarters of the year, cash flow from operations exceeded $3.3 billion, positioning us to deliver more than $4.5 billion of cash from operations for the year. As we expected, cash flow associated with operating EBITDA growth in 2023 has been largely offset by higher interest, taxes and incentive compensation payments. Despite these known headwinds, our conversion of revenue dollars to cash from operations and operating EBITDA dollars to free cash flow in the base business were both near peak levels in the quarter, demonstrating the value creation from our diligent focus on optimizing the middle of the P&L and/or capital expenditures.
Capital spending in the first nine months of the year totaled almost $1.9 billion with $1.456 billion related to normal course capital and $397 million of spending on sustainability growth projects. We now expect sustainability growth capital spending of about $750 million in 2023. The $150 million decrease from prior expectations is based on a shift in the timing of spending across the next two to three quarters. As a result of this lower anticipated capital spending 2023 free cash flow is expected to be $150 million above our prior expectations and in the range of $1.825 billion to $1.925 billion.
Free cash flow through the first nine months of the year was $1.552 billion, and free cash flow before sustainability growth investments was $1.949 billion. We're confident in our ability to achieve our full year targeted free cash flow before sustainability growth investments of between $2.575 billion and $2.675 billion.
Year-to-date, we've returned $855 million to shareholders through dividends and repurchased $990 million of our stock. Our leverage ratio at the end of the quarter was 2.73 times, which is at the midpoint of our target ratio of between 2.5 and 3 times. 9% of our total debt portfolio is at variable rates, and our pretax weighted average cost of debt for the quarter was 3.9%. Our balance sheet is strong, and we remain well positioned to fund growth opportunities. Looking at our full year expectations, our solid operational performance in the first nine months of the year positions us to achieve the operating EBITDA guidance we provided last quarter of $5.75 billion to $5.875 billion.
This strong result will be achieved with continued focus on pricing our services to recover cost inflation differentiating WM's value proposition with customers to maintain and grow the right volumes and optimizing both operating costs and SG&A. We expect full year revenue growth to be modestly below the midpoint of our July 2023 guidance of 3.25% to 4.25%. Most aspects of our revenue outlook remain intact, but we have seen lower revenue than planned in our recycling brokerage businesses. Given the relatively small operating EBITDA impact from the brokerage business, this refreshed revenue outlook does not impact any other component of our guidance.
To sum it up, we're pleased with our performance throughout 2023. We firmly believe that leveraging technology and automation to enhance our operations and investing in our sustainability businesses are positioning us for future success. We're grateful for the hard work of the entire WM team. Their dedication to safely serve our customers and communities will ensure we finish the year strong and move into 2024 even stronger.
With that, Victor, let's open the line for questions.
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