By the numbers
Net income: $416.9M
Core price: 6.9%
This is Republic’s highest-ever level of pricing. Asked how the market was responding to price increases, Chief Financial Officer Brian DelGhiaccio said it’s been “very receptive,” adding that the company “will be continuing with pricing action into 2023 and beyond.”
M&A spending: $2.6B
Including $2.2 billion on US Ecology
- Economic outlook: CEO Jon Vander Ark noted “increased volatility in the broader marketplace” during a Thursday earnings call sharing third-quarter results. Like executives at Republic’s competitors, Vander Ark called out lower recycling commodity prices, higher interest rates, persistent cost inflation and rising fuel costs as headwinds. “Cost pressures remain elevated and more persistent than we originally anticipated,” he said.
- Retention and volumes: Customer demand remains strong, with retention above 94%, the company reported. Quarterly volumes were up by 2.3% and 1.7% in small and large container categories, respectively.
- Pricing: In recycling, average recycled commodity price per ton sold during the quarter fell to $162. The company expects fourth-quarter commodity prices to be approximately $90 per ton.
- US Ecology integration: Executives said that the integration of US Ecology is going according to plan, with at least $40 million in “cost synergies” still expected. This side of the business has seen price increases, too. The company has also made over $25 million in new sales related to cross-selling products and services, Vander Ark reported. Environmental solutions revenue during the quarter totaled $411 million, up from $308 million in the second quarter.
- M&A: Outside of its US Ecology purchase, M&A investment this year has totaled $400 million, representing deals within recycling and solid waste, with more to come. Vander Ark teased deals not closing until the first and second quarters of 2023. “There is significant willingness to sell,” he said, noting “it’s getting harder to do business” amid labor challenges and the need for digital investments.
- Working with BP: Regarding its renewable natural gas investments and its joint venture with Archaea, Republic expects the first of those related projects “to come online beginning in late 2023,” Vander Ark said. He acknowledged BP’s recent plans to acquire Archaea, saying it “provides additional opportunities to work together on decarbonization and environmental services initiatives.”
- Plastic: In another possible benefit from the BP relationship, DelGhiaccio noted the potential for better plastic recycling collection at gas stations. In addition, Republic says it’s accelerating development of polymer center projects; it expects to spend an additional $40 million this year to begin work on future sites.
- Other investments: In digital investments, Republic reported its in-cab RISE tablets have been fully rolled out across large-container and small-container routes. They’re now in about a quarter of residential routes, with plans to be fully scaled by mid-2023. Republic also launched a “Track My Truck” feature for customers that uses data from the GPS-enabled tablets.
- Looking ahead: Vander Ark said the company stands by the full-year guidance it provided in July — when it raised adjusted free cash flow expectations up to $1.725 billion — “even with the recent drop in recycled commodity prices and increase in interest rate.”
