- Business trends: Compared with the first quarter of 2021, volumes were up 3.6%. Executives noted that volumes are returning in California, which lifted pandemic restrictions later than other states, and that people flocking to Sun Belt states have also provided a boost. Adjusted free cash flow increased approximately 14%. Net income was $352 million, up about 16%. Customer retention stands at 95%.
- Archaea partnership: Republic announced ahead of its earnings report a joint venture with Archaea Energy to develop 39 renewable natural gas projects at Republic's landfills across 19 states. Building on 18 other RNG projects Republic has in the works, the new ones with Archaea are slated to come online between 2023 and 2027, "at which point approximately 70% of our total landfill gas collected will be beneficially reused," CEO Jon Vander Ark said during a Thursday earnings call. Archaea will contribute approximately $800 million to the venture, to Republic's $300 million, over five years. The partnership will provide royalties for Republic.
- US Ecology integration: Republic closed its $2.2 billion acquisition of US Ecology earlier this week, which it estimates provides a cross-selling opportunity worth $75 million to $100 million. The company estimates revenue contribution from US Ecology will be about $720 million for the remainder of the year, with one full year of revenue likely to total around $1 billion. Republic said it will incorporate impacts from the deal into its full-year guidance in July. When asked about potential divestitures, Republic said it will take a look at US Ecology's small international business as well as its "standby" business. In addition,Vander Ark said, “this platform with US Ecology gives us great geographic coverage and an opportunity to do follow-on tuck-in acquisitions to build out some product and service lines or to fill out a few smaller geographies.”
- Environmental solutions: Republic is bullish that, with US Ecology on board, it has the leading position in the environmental services market, valued at a $1.4 billion revenue opportunity annually. Revenue in the segment was approximately $99 million during Q1, about $64 million more than the same period last year.
- Other M&A: Vander Ark said the company's M&A outlook remains strong, and investing in acquisitions is the best use of free cash flow. He cited recent years’ ongoing selling catalysts in the industry, including fears around tax reform, the coronavirus pandemic, inflation, a constrained labor market, and smaller companies' inability to compete on digitalization that “drives the opportunity for us to not only grow organically, but also have a very attractive M&A pipeline going forward.”
- Labor: Wage inflation is 4% in the underlying business, Chief Financial Officer Brian DelGhiaccio reported, and hiring and retention continue to be a challenge. The company says it's gaining back some of the productivity lost due to factors like traffic on roads increasing through more implementation of in-truck tablets with route optimization benefits. It completed the rollout to small and large container fleets, and its plan is to begin deploying tablets in its residential fleets this month, to be completed by mid-2023.
- Fleet electrification: The company reiterated the commitment to electrifying its fleet. “We are long on electrification,” Vander Ark said. He noted that about 20% of the fleet is using compressed natural gas, “but all of our energy going forward is on electric vehicles.” Despite current functionality challenges for electric trucks related to weight and range, and supply-chain limitations, he's "optimistic about the progress of starting to buy electric vehicles at scale within the next two-and-a-half, three years."
Republic Services plugs US Ecology-driven expansion, Archaea RNG deal
Fresh off of finalizing its $2.2 billion US Ecology acquisition, Republic said it has $400 million in solid waste and recycling deals "in the advanced stages of closing."
– Maria Rachal @
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