- Results: Republic Services exceeded its guidance for the year in several key metrics and returned $900 million to shareholders through dividends and share repurchases, CEO Jon Vander Ark said on the company’s earnings call Tuesday. Republic saw “simultaneous” increases in price and volume for its organic revenue, and its customer retention rate remained over 94%, he said. In addition to new revenue from acquisitions, the company also drove down costs via lower employee turnover rate, which fell 400 basis points.
- Technology: Republic has several active technology initiatives, including implementation of its “RISE” dispatch software. The technology, which Republic “substantially completed” in 2020, optimizes routes, improves safety and provides “more predictable service to customers,” Vander Ark said. It has contributed about $65 million in annual earnings to date and is expected to provide $100 million once fully implemented. Republic is also developing a new asset management system, which it expects to begin using late this year.
- Pricing: Core pricing in the fourth quarter was 8.8%, up from 8.4% in the fourth quarter of 2022. For 2023, Republic saw core pricing of 8.9% versus 7.3% in 2022. In 2024, the company expects a “sequential step down in the level of pricing,” Vander Ark said, with the average yield falling throughout the year. That’s in part due to the fact that the consumer price index remains elevated but is falling, CFO Brian DelGhiaccio noted.
- PFAS: Executives said they expect revenue from PFAS solutions could reach $100 million as soon as 2024 as companies look to identify disposal options ahead of expected EPA regulations. “This is a real growth opportunity for us,” said DelGhiaccio. He said that the Department of Defense’s own cleanup efforts are also leading to growth in the business.
- Polymer centers: Construction of Republic’s plastic processing facilities remains on track, Vander Ark said. The company’s Las Vegas polymer center is finalizing commissioning this week, and will begin delivering flake to offtake partners in “the coming weeks,” he said. Meanwhile, construction on the company’s Indianapolis facility, co-located with joint venture partner Ravago, is expected to be complete late this year.
- Recycling: Revenue from recycling processing and commodity sales was up substantially in the fourth quarter of 2023, but the gains were not enough to prevent a decline for the full year — 2023 revenue was $312.3 million, down about 13%. That’s due in part to commodity sales, which were priced at $117 per ton in 2023 versus $170 per ton in 2022.
- Environmental solutions: The segment’s revenue was flat in the fourth quarter on a year over year basis, but adjusted earnings before interest, taxes, depreciation, and amortization increased by 250 basis points. DelGhiaccio said that Q4 revenue flatness was mostly due to strong Q4 results in 2022, but he noted some distinct issues like a facility that shut down temporarily and is expected to reopen in mid-2024.
- M&A: Republic spent about $1.8 billion on acquisitions last year. For the fourth quarter, acquisitions added $200 million in annualized revenue for the company’s environmental services segment and $140 million in annualized revenue for recycling and waste, executives said on the call. Despite the continued focus on tuck-in acquisitions and “some nice medium-sized deals,” as Vander Ark described the company’s activity, Republic’s M&A spending was down year-over-year — in 2022, it spent about $2.7 billion.
- Fleet: The company is on track to make good on its goal of 50 electric vehicles in service this year, Vander Ark said. It currently has 11 EVs in operation and anticipates receiving additional vehicles through an order with McNeilus this year. Republic has six facilities with EV charging infrastructure and 40 more in varying stages of development. Across fuel types, executives said they’re getting about 80% of the trucks they want on time, and they expect supply chains to normalize for the vehicles in 2025.
- 2024 outlook: Republic is projecting $16.1 billion to $16.2 billion of revenue in 2024 and roughly $2.1 billion of free cash flow. Vander Ark said the company would continue to plow free cash flow into acquisitions, focusing on the “strategic fit and financial return of any type of deal.” The company estimated it will spend at least $500 million on acquisitions, the same figure it provided for 2023 in early guidance last year. “We have a lot of capacity across the enterprise. We wouldn’t necessarily do a couple big deals in the same part of the country at the same time, because the local team does play a pretty strong role in that day-to-day integration activity,” Vander Ark said.
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Republic reports strong core business growth in 2023, eyes new opportunities in 2024
The company surpassed its full-year guidance as core pricing and average yield increased in the fourth quarter.
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