By the numbers
Net income: $371.8M
Up 12% from the same period in 2021
Acquisition investment year-to-date: $2.5B
That figure includes the $2.2B US Ecology deal. The company now expects to spend over $600M on other acquisitions this year.
- Economic outlook: Similar to reports from industry peers this earnings cycle, Republic Services CEO Jon Vander Ark said during a Thursday earnings call that the company is experiencing persistent pressures from inflation that are more significant than expected, but that its pricing outweighs inflation costs, and the company is on track for full-year results to exceed original expectations. Despite high fuel prices, the company said it made up the vast majority of that added expense through fees. As for labor, Chief Financial Officer Brian DelGhiaccio said the market seems to be improving, but “the level of margin expansion that we have in 2023 will be predicated on exactly how tight the labor market is and what we need to do with wages.”
- Pricing, volume: Second-quarter core price reached an all-time high of 6.2%, up from a previous record in the first quarter of 6%. Volumes were up 2.4% during the quarter.
- Spending: The company expects full-year capital expenditures to fall between $1.45 billion and $1.47 billion, an estimate that Republic said increased, in part, due to higher-than-expected costs for trucks, equipment and landfill cell development.
- US Ecology: Republic executives say the US Ecology integration remains on track to deliver at least $40 million in “cost synergies.” DelGhiaccio suggested the company has already achieved $15 million of the $75 million to $100 million of cross-selling it wants to realize over three years. Second-quarter revenue in the environmental solutions business increased $260 million year over year, which Republic attributes primarily to the addition of US Ecology. Some parts of the US Ecology business remain under “strategic review” to potentially sell to a new owner, but Vander Ark specified that “the vast majority of what we bought we like, and we're going to keep and operate.”
- M&A: The company expects to invest over $600 million primarily in recycling and solid waste acquisitions this year outside of the US Ecology deal. As for further investments in environmental solutions, DelGhiaccio noted the company now has “a second platform with which we can pursue further follow-on and tuck-in acquisitions.” He also said that while the company does have a pipeline there, “it's very unlikely in the near term” that Republic does another deal of scale in the environmental solutions business.
- Looking ahead: Republic raised its full-year adjusted free cash flow guidance to up to $1.725 billion. Looking ahead to 2023, next year will largely focus on “pricing in excess of cost inflation and the realization of synergies with US Ecology,” said DelGhiaccio.
