By the numbers
Q1 net income: $511.5M
Up 19.7% versus prior year, with a margin of 12.6%
- Results: Republic Services reported a strong quarter overall, with revenue up across most business lines, including recycling commodity sales. Costs were also down as a percentage of revenue across several categories, including maintenance, repairs and fuel. The company raised its full-year guidance and now expects revenue to be between $16.075 billion and $16.125 billion. CEO Jon Vander Ark attributed that to “strong results we produced through the first half of the year,” on the company’s earnings call Wednesday.
- Volume: Collection volumes were down overall, with declines in small container, large container and residential sectors. CFO Brian DelGhiaccio said he now expects Republic’s volumes for the year to be down slightly compared to its original full-year guidance. C&D waste was also down 1.6% by volume, while MSW landfill volumes were up 1.1%. Executives said construction softness contributed to some of those volume losses, though they expected that to change soon. Republic also intentionally sped up its shedding of broker-related contracts in the small-container category that it had acquired through M&A deals in recent months.
- Pricing: Core pricing was 6.8% in Q2, down from 7.3% in Q2 2023. Open market pricing in Q2 of this year was 9.8% while restricted pricing was 5.4%. Pricing continued to exceed Republic’s internal cost of inflation for the quarter and drove margin expansion in earnings before income, taxes, depreciation and amortization. The company now has a 32% core solid waste margin, and executives said they could push that margin further. “What we’re looking at is the consistent cadence of margin expansion across our business,” DelGhiaccio said. “We continue to see that opportunity as we move forward.”
- Recycling: Republic reported improved commodity prices for recycled materials this year, averaging $173 per ton in Q2. That’s compared to $119 per ton in Q2 2023. Those stronger prices increased revenue, and the company’s new full-year guidance assumes commodity prices will average $170 per ton through the remainder of the year. Republic plans to achieve its run-rate output targets at its first recycled polymer center in Las Vegas by the end of this year. Construction also continues at its polymer center in Indianapolis.
- Sustainability: Republic also released its latest sustainability report, comprised of 2023 data. The company announced it had surpassed an interim goal ahead of schedule to reduce operational emissions by 10% by 2025. Emissions are falling due to several initiatives, including fleet electrification. On the call, Vander Ark highlighted those efforts, including a recently signed agreement to deliver and operate a fully electrified waste collection fleet in the small city of Lousiville, Colorado.
- M&A: While Republic had a relatively quiet start to the year, the company still has a large pipeline of deals it expects to close this year and has executed $68 million in deals so far. DelGhiaccio said Republic has especially been quiet on the environmental services front as it works to incorporate previous acquisitions like ACTenviro onto its IT platforms. He said he expects the company will be more active in buying environmental services businesses next year, and it will continue to identify solid waste tuck-in deals this year.
- Workforce: Labor costs were 20% of revenue in Q2, a small improvement both sequentially and year over year. Executives said the company's turnover rate has normalized after the pandemic, helping to bring down those costs. They noted Republic is still looking for ways to further decrease turnover.
