Republic weathered the pandemic year with revenue improving to almost flat versus the prior year in the fourth quarter. Pros like improved commodity pricing for recycling were balanced by challenges like still depressed special waste volumes and other economic effects from the pandemic.
On the M&A front, executives said on Monday's earnings call they now expect the delayed acquisition of Tennessee-based Santek Waste Services to close by the end of the first quarter.
As for what lies ahead, Republic agrees with others in the industry that the gradual economic improvement on display in the second half of 2020 will continue in 2021. Unlike during the Great Recession, Republic sees things bouncing back more quickly — "the economy is coming out of it and we're coming out of it with it," CEO Don Slager said.
- Republic offered few new details on its alliance with battery maker Romeo Power, but President Jon Vander Ark noted it will take "trial and error" to "get to scale with the technology." Alluding to the now defunct partnership with Nikola, he called the exit "disappointing," but noted that due to performance-based thresholds the breakup cost Republic nothing. "[W]e are confident that we've got the right set of partners and we're going to be excited to update you on our progress as we move forward."
- Vander Ark said safety incidents during the quarter decreased 21% versus the prior year period, driving risk management costs down 14%. Additionally, Republic paid a $500 bonus to frontline workers last month, which it said brought its total financial support to those employees to $45 million since the beginning of the pandemic.
- On recycling, revenue reached $297.1 million for the full year, up from $273.3 million in 2019. The company reported a 67% year-over-year jump in commodity prices in the fourth quarter, which was offset slightly by a 3% decrease in inbound volume. Long-term, Republic is "bullish on recycling," Vander Ark said, with the company poised to become "a big player in that. We just have to make sure that to be environmentally sustainable, it is economically sustainable and we get a fair return for the work that we do."
Republic has a goal of reducing Scope 1 and 2 emissions by 35% by 2030, which it plans to achieve in part by supporting recycling and making fleets more efficient. So far, the company has been among the industry's most vocal on moving toward electrification quickly.
Leaders affirmed Republic’s all-in commitment on embracing fleet electrification. "The destination is clear. The path to get there has some uncertainty," said Vander Ark, noting the importance of having multiple manufacturer partners and pilots.
He described electric as "truly the only zero-based emission technology out there" and "the right technology long-term," calling out compressed natural gas as "incrementally better than diesel, but only incrementally better." When asked by an analyst about hydrogen fuel cells, Republic noted that most investment by truck manufacturers has occurred in the long haul space. Vander Ark concluded that "electrification is going to be the right technology for our application" and explained Republic specifically is a good fit to make the transition to electric, citing the fact its trucks return to the same location every night which would reduce "range anxiety" and allow for overnight charging.
- Overall 2020 volumes were down 3.1%, versus a less steep year-over-year drop of 1.8% in the fourth quarter. That was an improvement from a 3.4% drop in the third quarter.
- Fourth-quarter landfill volumes were down 2.4%, with municipal solid waste and C&D volume growth in the green but special waste growth negative. The fourth quarter saw a 1.7% increase in MSW, versus a 0.2% increase on the year, and a C&D increase of 1%, versus 3.7% on the year. Special waste volumes declined 9.8% during the quarter and 10.7% on the year.
- As far as service levels impacted by the pandemic: "We continue to see more increases than decreases," Slager said. On the collections side, residential volumes finished the year down 1.3%, with small container down 4.3% and large container down 5.5%.
- Republic said it invested $613 million in acquisitions over the course of 2020, and anticipates matching that level in 2021 in "an equally robust year of activity."
- Moving forward, Republic sees plenty of additional acquisition opportunities. "As we build, we’re going to do a nice balance of new platform acquisitions, new markets, but also our bread and butter is still tuck-ins in markets we’re already in," Slager said.
- As for 2021 financial guidance, Republic expects volumes to grow between 1.5% and 2%, and revenue to increase approximately 2.5%. Adjusted free cash flow could be between $1.3 billion and $1.375 billion.