Republic Services, Inc. Q2 FY2025 earnings call

• The company delivered robust earnings growth and margin expansion despite lower demand from construction and manufacturing. • Achieved revenue growth of 4.6%, adjusted EBITDA growth of 8%, and expanded adjusted EBITDA margin by 100 basis points. • Customer retention rate remains strong at over 94%, and NPS is favorable. • Invested nearly $900 million in strategic acquisitions year-to-date and returned $407 million to shareholders. • Focused on sustainability, including commencing commercial production at the Indianapolis Polymer Center, advancing RNG projects, and expanding electric vehicle fleet with over 150 EVs expected by year-end.

During the second quarter, Republic Services achieved revenue growth of 4.6%. Adjusted EBITDA grew by 8%, and adjusted EBITDA margin expanded by 100 basis points to 32.1%. The Environmental Solutions business saw revenue decrease by $11 million compared to the prior year. Recycling commodity prices were $149 per ton in the second quarter, down from $173 per ton in the prior year, with current prices around $130 per ton. Volume performance on total and related revenue increased 20 basis points, with landfill C&D and special waste volumes boosted by hurricane cleanup and wildfire remediation, but collection and residential volumes declined due to soft construction and manufacturing markets.

• Updated revenue guidance: $16.675 billion to $16.75 billion. • Maintained adjusted EBITDA guidance: $5.275 billion to $5.325 billion, and adjusted earnings per share guidance: $6.82 to $6.90. • Increased adjusted free cash flow guidance to $2.375 billion to $2.415 billion, driven by a $80 million benefit from bonus depreciation, partially offset by a $25 million increase in CapEx. • Removed the impact of labor disruptions from adjusted results.

• Labor disruptions: Localized impact, but negotiating fair and equitable agreements with employees. • Macro uncertainties: Challenges from lower demand in construction and manufacturing, and tariffs affecting the business. • Commodity price fluctuations: Impacting recycling revenue and margins due to changing commodity prices.

Q: Patrick Tyler Brown asks about the $200 million reduction in the revenue guide.

A: Brian M. DelGhiaccio explains it includes ~$65 million from Recycling & Waste volume weakness due to construction and manufacturing issues, and the rest from Environmental Solutions.

Q: Noah Kaye inquires about the higher free cash flow outlook.

A: Brian M. DelGhiaccio states it's from a $80 million benefit of bonus depreciation, partially offset by a $25 million increase in CapEx.

Q: Toni Kaplan asks about labor disruption impact.

A: Jon Vander Ark says it's contained and specific, with local contracts and confident in cost competitiveness.

Q: Sabahat Khan asks about pricing for next year.

A: Jon Vander Ark mentions working on tariffs with suppliers and pushing back, expecting similar pricing trajectory.

Q: Tami Zakaria asks about volume cadence and pricing.

A: Brian M. DelGhiaccio says second half volume expected to be flat to slightly negative, and pricing to be just under 5% for the full year.