Republic Services, Inc. Q3 FY2025 earnings call

• Delivered strong third quarter results with 3.3% revenue growth, 6.1% adjusted EBITDA growth, 80 basis points margin expansion, $1.90 adjusted EPS, and $2.19B adjusted free cash flow YTD.
• Customer retention rate at 94%, Net Promoter Score improved. Organic revenue growth from strong pricing, offset by volume declines in collection business.
• Sustainability progress: Indianapolis Polymer Center commenced commercial production, 7 RNG projects expected in 2025, over 150 EVs in fleet by year-end, 32 facilities with commercial scale EV charging infrastructure.
• Invested over $1B in strategic acquisitions YTD, returned $1.13B to shareholders via dividends and share repurchases.

In the third quarter, Republic Services achieved revenue growth of 3.3%. The Recycling & Waste business had adjusted EBITDA margin of 34.3%, up 150 basis points compared to the prior year. Environmental Solutions saw third quarter revenue decrease $32 million year-over-year, with adjusted EBITDA margin at 20.3%. Organic revenue growth was driven by strong pricing; average yield on total revenue was 4% and on related revenue was 4.9%. Volume performance included outsized C&D and special waste landfill activity offset by a decline in collection business. Environmental Solutions was impacted by soft manufacturing activity, lower event-driven volumes, and softer E&P volumes, creating a 140 basis point headwind to total company revenue.

• Plan to provide full year 2026 guidance in February 2026.
• Long-term growth algorithm of mid-single-digit revenue growth, faster EBITDA and free cash flow growth, 30-50 basis points EBITDA margin expansion annually.
• 2026 growth assumption affected by tougher comp, need to overcome commodity headwinds and macro challenges.

• Macroeconomic headwinds in construction and manufacturing end markets impacting volume.
• Commodity price volatility affecting Recycling & Waste business.
• Labor issues and legal settlements impacting Environmental Solutions margin (e.g., $6M cost spread from legal settlement and bad debt recovery).
• Sluggish emergency response and delayed project-based work affecting Environmental Solutions revenue and margin.

Q: Tyler Brown asked about 2026 guidance, event-driven volumes, and Environmental Solutions margin.

A: Jon Vander Ark noted 2026 growth affected by tougher comp, Brian Delghiaccio provided event-driven volume breakdown (Q1: $12M, Q2: $53M, Q3: $36M). Jon also discussed factors like slow manufacturing, delayed projects, and low emergency response affecting ES.

Q: Noah Kaye asked about open market pricing strength and Polymer Centers return expectations.

A: Jon Vander Ark discussed positive open market pricing, Polymer Centers' progress with Indianapolis commencing production and Blue Polymers expected in Q4, and excitement about long-term assumptions despite ramp-up challenges.

Q: Noah Kaye also asked about ES expectations for Q4 and margin.

A: Jon Vander Ark said ES has found the bottom, margin performance in same range, and will build from there in 2026.

Q: Kevin Chiang asked about labor disruption residual impact and EV targets.

A: Brian Delghiaccio said labor disruption impact mostly captured, Jon Vander Ark stated confidence in EV targets despite OEM deprioritization, citing customer demand and economic feasibility.

Q: Trevor Romeo asked about manufacturing industrial volume trends and capital allocation.

A: Jon Vander Ark discussed manufacturing volume stabilization after initial negative trend, Brian Delghiaccio said buybacks will continue as opportunistic value creator.

Q: Other questions covered topics like expense inflation, commodity hedging, labor productivity, ES verticals, solid waste pricing drivers, union contract impact, ES M&A areas, and data center/energy M&A opportunities.