Q2 2021 Republic Services Inc Earnings Call
Good afternoon, and welcome to the Republic services second quarter 2021, Investor Conference Call Republic services is traded on the New York Stock exchange under the simple our S. G.
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I would now like to turn the conference over to Stacy Matthews, Vice President of Investor Relations.
I would like to welcome everyone to Republic Services, Inc. Second quarter, 2021 conference call, Jon <unk>, our CEO and Brian Joe Gotchu our CFO.
You're seeing are joining me as we discuss our performance.
I would like to take a moment to remind everyone that some of the information we discuss on today's call contains forward looking statements, which involve risks and uncertainties and may be materially different from actual results.
Our SEC filings discuss factors that could cause.
Actual results to differ materially from expectations.
The material that we discuss today is time sensitive if in the future you listen to a rebroadcast or reporting of this conference call you should be sensitive to the day of the original call, which is July 29.2021.
Please note.
Note that this call is the property of Republic Services, Inc. Any.
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I want to point out that our SEC filings our earnings press release.
Which includes GAAP reconciliation tables, and a discussion of business activities along with a recording of this call are all available on Republic's website at Republic services Dot com.
I want to remind you that republic's management team routinely participates in investor conferences when events are scheduled.
At times and presentations are posted on our website with that I would like to turn the call over to Jim. Thanks, Stacy Good afternoon, everyone and thank you for joining us we.
We are very pleased with our strong performance in the second quarter.
Our results reflect strong execution and continued momentum on our strategic.
Priorities, which are building capabilities to further differentiate us from competitors. These.
These capabilities include driving growth and building customer loyalty through a maniacal focus on the customer, which we call customer zeal.
Leveraging digital tools to improve the experience for our customers and employees.
Which we believe drives growth and generate operational efficiencies and prioritizing sustainability by offering environmentally responsible solutions to our customers while protecting the planet.
During the second quarter, we delivered adjusted earnings per share of $1.9 which represents a 30.
Percent increase over the prior year <unk>.
Expanded EBITDA margin of 110 basis points to 36% al.
And generated $1 billion of adjusted free cash flow on a year to date basis.
We continue to effectively allocate capital by investing in value, creating acquisitions and returning.
6 for cash to our shareholders.
Year to date, we invested $567 million in acquisitions to further enhance our market position and increased free cash flow.
Our pipeline of acquisition opportunities remains robust with opportunities in both solid waste and the environmental.
<unk> solutions portion of our business.
We expect to invest well over $600 million in acquisitions for the full year.
Year to date, we returned $363 million to our shareholders through dividends and share repurchases and our board recently approved an 8% increase in our quarterly dividend.
<unk> so the strength of the underlying business is irrefutable and we continue to see the proof points that our strategy is working.
Retention in our small and large container business remains at historically high levels at 94%.
If you have further consider all permanent units of service retention is even higher at 95.
Okay.
As anticipated the pricing environment was strong in the second quarter.
Total core price was 5.2% and average yield was 2.6%.
This level of core price matches, the highest level in our company's history.
During the second quarter, we delivered out.
<unk> drove in our business as the economy improved.
Second quarter volume increased 8.1% compared to the prior year, which exceeded our expectations.
The outlook for growth in the remainder of the year, both organically and through acquisitions is strong.
Turning to digital.
We continue to see.
The benefits of our investments in technology and are well underway on the rollout of the next phase of our <unk> platform.
Through the second quarter, we implemented tablets, and approximately 40%, 47% of our large and small container fleet.
We expect to be substantially complete by the end of this year with plans.
To further deploy to the residential fleet beginning in 2022.
The in cab tablets enable automated customer notifications, which provides customers real time information about their service.
Next we believe sustainability is more than environmental stewardship.
But also a platform for growth.
We recently published our new sustainability report, which highlights the progress we are making in our most significant opportunities to positively impact our stakeholders and the environment.
For example, we're proud to report a 5% reduction in operational greenhouse gas emissions in 2020 compared to the prior year.
This.
This year, we expanded and converted a landfill gas energy plant to high Btu and have 15 additional projects in the pipeline.
These projects reduced landfill emissions generate more renewable energy and improve our economics.
We are also making the communities in which we operate better places to live.
So far this year, we've supported more than 25 charitable efforts and neighborhood revitalization projects through financial contributions and volunteer efforts.
This is in addition to the ongoing support of our local divisions provide to their communities.
In recognition of our ESG performance and transparency.
We were named to <unk> Medias 100, best corporate citizens list for the second consecutive year.
Finally, turning to our outlook for the remainder of the year.
We expect continued strengthen our business and to exceed the full year guidance, we upwardly revised last quarter.
Accordingly, we are updating.
CBER guidance financial guidance as follows.
Adjusted EPS is now expected to be in a range of $4 to $4 <unk>.
And adjusted free cash flow is now expected to be in a range of 145 billion to 1 point for.
475 billion this represents.
Presents an increase of over 6% from the midpoint of the prior guidance I will now turn the call over to Brian.
Thanks, John second quarter core price was 5.2%, which included open market pricing of 6.5% and restricted pricing of 3%.
Core price in the open market was the highest.
<unk> full level in company history.
The components of core price included small container of 7.9% large container of 5.3% and residential of 5%.
Average yield was 2.6%, which increased 30 basis points from the first quarter this level.
Hi, informants was in line with our expectations.
Second quarter volume increased 8.1%.
While we expected second quarter to be the highest reported volume for the year, the 8.1% growth exceeded our expectations the.
The components of volume included an increase in small container of 8.
Look for 6% an increase in large container of 13, 7% and an increase in landfill of 12, 6% for.
For reference second quarter volumes in our small and large container businesses were down less than 1% from 2019 pre pandemic baseline.
And MSW.
And C&D landfill volumes were both above the pre pandemic baseline.
Moving on to recycling.
Commodity prices increased to $170 per ton in the second quarter this compared to $101 per ton in the prior year.
Cycling processing and commodity sales contributed 100.
Hundred basis points to internal growth during the second quarter.
Next turning to our environmental solutions business.
Second quarter Environmental solutions revenue was essentially flat with the prior year approximately 30% of our environmental solutions business is in the upstream oil and gas sector and 70.
As in the downstream petrochemical and broader industrial manufacturing sectors.
Downstream petrochemical and industrial manufacturing portion of this business grew 8% compared to the prior year.
Adjusted EBITDA margin for the second quarter was 36% and increased to 1.
Percent basis points over the prior year this.
This included.
130 basis points.
A 50 basis point increase from recycled commodity prices and a 70 basis point headwind from net fuel.
The margin expansion is a direct result of pricing in excess of our cost.
Cost inflation, realizing operating leverage as volumes return and continued effective cost management.
SG&A was 10, 7% of revenue, which was flat with the prior year.
SG&A included higher levels of incentive compensation due to projected financial outperformance.
<unk> hundred cash G&A would have been approximately 10% excluding the additional incentive compensation expenses.
Year to date, adjusted free cash flow was $1 billion and increased $276 million or 38% compared to the prior year. The drivers of growth included EBITDA growth in the business.
A positive contribution.
From a 1.5 day improvement in DSO and the timing of capital expenditures.
We received approximately 40% of our projected full year capex during the first half of the year.
During the quarter total debt was $9 billion in total.
<unk> was $2.9 billion.
Interest expense decreased $13 million due to refinancing activities completed last year.
And our leverage ratio was 2.9 times.
With respect to taxes, our second quarter adjusted effective tax rate was 21, 6%.
<unk> at an equivalent tax impact of 23, 7%. If you include noncash charges from solar investments.
Bill expect a full year equivalent tax impact of 26%, which includes the effective tax rate and noncash solar charges with that operator, I would like to open the call.
We have.
Thank you we will now begin the question and answer session.
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Our first question today comes from Tyler Brown with Raymond James.
Hey, good afternoon, everyone.
Afternoon.
<unk>.
Brian I don't know if it was just my phone or not but you kind of cut out when you were unpacking. The 110 basis point improvement in EBITDA margins can you run through that again real quick.
Yes.
Underlying business Tyler was 130 basis points of expansion.
We had a headwind from net fuel of 70.
<unk> points.
And then higher commodity prices contributed 50 basis points of the increase.
Okay, Okay, perfect and then on the 26% increase in EPS at the midpoint can you just break down the moving pieces there what I'm really trying to get at is kind of get a feel for how much was kind of core price and volume versus.
Other things like commodities.
So let me.
Put it in these terms so commodity prices from our prior guide is about <unk> of the increase.
The railcar.
Rest of it is in the underlying business and that's just a combination of price volume.
Better and more effective cost management.
And as I mentioned due to the financial outperformance, we are recording higher incentive compensation expense in that underlying business, we are absorbing those higher incentive compensation accruals.
Great and then just lastly here I know you don't give EBITDA guidance, but if.
Run it through our we kind of flirting with 30% EBITDA margins for the year.
Yes, yes.
Okay.
Hi, guys. Thank you.
Thanks, Joe.
Our next question will come from Hamzah <unk> with Jefferies.
Hi, This is Mario <unk> filling in for Hamzah.
Maybe just to kind of piggyback off of Tyler's last question and maybe it implies the same thing, but could you just talk about your current free cash flow conversion and what's implied in your 2021 guidance and then where does that go longer term and what are the big levers.
Levers you can pull in order to continue to see that increase.
Yeah sure so our original guidance and free cash flow conversion in call it a 43% range.
Since then right we are increasing both the EBITDA as well as the free cash flow, but we think the conversion.
It is also improving at the same time, so it's trending closer to the 44% range longer term, we've talked about our ability to get to mid 2.2.
45, 46, 47% type free cash flow conversion, we think we can just get there quicker just because.
Voters are having.
Better.
Spring springboard here in 'twenty 1.
Got you and then just a quick follow up on head count could you just.
Remind us how youre thinking about further head count additions and how you are also contemplating that with potential labor inflation.
Again forward.
Well, we'd certainly take more drivers if we could get them right now or more probably.
Although we are certainly are foregoing some growth opportunities in certain markets.
We're listen the economy is booming and lots of spots.
And we'd take more we're doing a great job on turnover.
<unk> speaking.
Just love to be able to hire some more people.
Particularly in the industrial.
Our large container line of business and then we're seeing very modest inflation in this year's economics are going to do an annual increase and we give our people fare increase every year we expect.
<unk> go ahead, certainly to tick up next year, but to be more than offset by our ability to price through that and so we think that inflation net net will be margin expanding for us.
Understood. Thank you.
Our next question comes from Walter <unk> with RBC capital markets.
<unk>.
Thanks, very much operator, good afternoon, everyone.
Like to come back here.
Comments on waste gas conversion.
You mentioned I think 15 facilities, where you can ramp that up can you give us any quantification on the revenue and cash flow generation from that the level of investment you would you would have.
Have to make or whether you are going to partner up here with any Ed.
Anybody for off take arrangements and generally what the strategic direction is around this is this something that youre just going to have is this nice steady stream of new revenue or could you contemplate down the road.
Monetizing. This obviously there has been some significant valuations for this type of this type of revenue stream and whether you could look at some value enhancing opportunities there.
Just on the waste guys conversion love to hear your thoughts on that sure. Yes, strategically we think it fits right into where we're going it I mentioned in my prepared.
Comments it supports our sustainability aspirations and we think it drives money to the bottom line and Thats. What we look at things that are both environmentally sustainable and economically sustainable they happen to be related most of the time.
Well broadly speaking, we will look to partner.
Prepared comp because we can't do it ourselves we do do that in a handful of cases.
Think about our resources and it's less financial capital, it's more of our talent I don't want to tie up all of our time and energy in a place where I think it'll be a nice ancillary revenue stream certainly profitable for us, but it doesn't provide exponential.
Growth right. There is a cap to that and so we can work with other people, who can help us get there quicker and again capture all of those environmental benefits and some of the financial benefits without having to having to tie up our resources, there, which I think are better placed elsewhere.
Okay, and just in terms of quantifying the potential opportunity.
The <unk> facility.
Facilities you mentioned.
No we're not talking about the specific economics, I'd say broadly speaking, if we think about kind of pushing out debt not every site that you're talking about kind of a 200 million revenue type opportunity for us and a shared arrangement. So.
From the figures are multi year.
Plan to get there so that just dimension it could it be a little more could it be a little less of course, but that just dimensions that why we're not spending all of our energy there because there is a ceiling to the opportunity got it and Thats a fairly low capital intensive opportunity is that right correct.
We're not going to again, that's why we partner with others, because we've got people lining up at the door to put capital to work and so we think the most attractive place way for us to play in that is working with others got it. Okay. Thank you very much and congrats on a great quarter.
<unk>.
Our next question comes from Jeff Goldstein with.
Morgan Stanley.
Okay.
Jeff You May have your line on mute.
All right, we're going to go ahead.
And move to Kevin Chang with CIBC.
Hi, Thanks for taking my question congrats on a good quarter there.
If I could just sort of price sales.
Called out the 5.2 highest in company history.
I guess it isn't inflation everywhere. So your ability to offset that is obviously.
Playing out.
I'm wondering are you starting to see any pushback here is.
As you look to capture pricing to offset inflation.
Central bankers, telling us this is a transitory issue or are any of your clients coming back saying.
No we're not willing to pay that price from what might be appointed time increase in inflation or.
Or has it been pretty you know how these conversations have been pretty.
Pretty pretty normal I guess.
No, we're certainly getting it right, where you're seeing the volume growth and youre seeing the prices stick and again, our capture pricing tool allows us to adjust real time as we've seen some inflationary pressures for example in steel prices on containers.
We priced that right through but keep in mind most of the inflationary benefit of pricing hasnt, yet flow through that will come on the con.
The contracted portion of our book, which is about 50% and most of that will flow into 2022.
Right now broadly speaking, we are seeing customers take price and are we're showing.
Painters are doing a great job and getting paid for the work, we do and Kevin remember that core price metric as the price increase net of rollbacks. So that was already included in that metric.
That's a good point that that's a great clarification.
Just maybe just just looking at your free cash flow you know you did increase your capex assumptions a little bit.
Or can I know you had a big spend in the first half of the year.
Just listening to some other companies talking about the supply chain disruptions 1 of the areas are seeing it as the equipment, they're planning to get this year and Jim.
Looking at your raised guidance, how you would frame the confidence in getting to that number just given some of the supply chain disruptions around.
Around getting equipment and Andrew.
Getting the resources to get that stuff built.
Yeah, we're pretty confident in the number of course.
It's an uncertain environment, so anything can happen with supply chains here, but we're on track to do that and the incremental spend versus the original guide is really for growth capital.
And some of our bigger spends obviously on the capital side, our trucks and heavy equipment and we're on track we're going to take about 1200 trucks. This year. We've already received 700 of those and have good line of sight to the the 500 and have been working really closely our procurement team working really closely with our.
Our partners, which are strategic and long term and they have been.
On track in terms of supplying us so we're hitting our marks there.
That's great. Thank you very much.
Quarter.
Our next question comes from Jerry Revich with Goldman Sachs.
Yes, hi, good afternoon.
I'm wondering if you could just talk about the recycling investment opportunity that you folks have you called out in our sustainability report.
<unk> that you've made in enhancing productivity at some plants can you just talk about how much runway you have to continue.
That investment in any greenfield or.
Acquisition opportunities that you're focusing on.
Part of the business.
Yes, we have some of both clearly.
Broadly speaking, we're going through a opportunity that does the capex opex tradeoff right and if we do it for 2 reasons, 1 we think by putting more capital and we can modernize those facilities at.
It allows.
Act produce a better product on the other end.
Better segmentation less contamination, and we think we're getting higher yield on the other Andrew higher throughput at those facilities also back to the labor market, which is tight right now those are very challenging jobs. So the more automation, we put in those facilities. The better off we think we're going to be long term.
Term and we've got a very consistent steady plan to upgrade a number of our facilities and then there's a handful of markets that over the next few years will I 4 greenfield facilities, they could be by opportunities, but most likely it will go.
Studs up on those just because we can get the right equipment and get the right.
As Tony and I have the right kind of Capex opex tradeoff in place when we do it clean sheet.
Got it.
And in terms of how much capital you might be able to deploy in that direction over the next couple of years can you just give us a rough sense.
If we think about what we've done historically around our recycling processing.
Facilitate those investments, it's been anywhere from $30 million to $40 million per year.
And again that could that could bump up at any given year right. If we're going to do a truly new facility.
You don't get were return to base, we'll look at that we think it's got a good returns profile will certainly make the investment.
Okay.
And lastly, excellent core price performance in the quarter the pick up in core price was higher than the pickup in <unk>.
Yield can you talk about what was the driver of the.
A little bit lower pickup in yield versus core price and how you're thinking about.
Sequential pricing from here compared to.
I mean, we saw last year.
Yes, I would say we are in.
In the midst of coming out of an economic shock and so when you go down really fast and we can come up really fast which is what we're doing now.
That tends to create some noise in some certain stats. So small container is a great example of that right really strong core pricing.
<unk> yield of only 2.2 a lot of that is mix, so you've got lower priced custom.
Customers coming back online there for example education.
You got a low cost position because you've got a lot of containers in a small facility, but that also is a smaller price impact so that will normalize here.
What we said in the Q2 Q3, and Q4, you'll see some better year over year comps.
We did historically trust me, we have not lost our aspiration for price, especially in an inflationary environment, our people need to get paid right in his goods increase we will certainly pass that price down through to customers and Jerry you can actually.
As we get so on the way down so back in Q2 of 2020, if you look at small container that's when yield was over 4%. That's when some of those those education customers were exiting the system with service decreases now that theyre coming in back in back online you are seeing that impact that mix is having but just like we said with our large container portfolio.
Leo it's come back to 3% it was running lower Brian for the last couple of quarters Manhattan Al.
All of a function of lower ways, Brian So theres, a little bit of noise as John mentioned here that we're seeing in some of these metrics, but the core pricing is strong we're pricing in excess of our cost inflation and we're generating over 100 basis.
<unk> seen some margin expansion.
Terrific I appreciate the conversation thanks.
Thanks, Joe.
Our next question comes from Noah Kaye with Oppenheimer.
Hey, good afternoon, everyone. Thanks for taking the questions.
You were talking and thinking last quarter and before about.
At this point special waste pipeline and looking for some of that to actually break free and it looks like that started to happen.
This quarter I guess, what was driving your view that this kind of recovery in C&D and special waste was it regionally concentrated anywhere and then how does the pipeline look heading into the back half.
Yes, I, just think special waste in times of uncertainty those jobs, they often get awarded right. They just don't move and so we saw good special waste pipeline that continued to build even though the actual performance wasn't great in times of uncertainty we are seeing those things get released.
The pipeline is strong we've seen places.
California for example has not really opened up like other parts of the country have so we see more and more upside in the pipeline remained strong.
Okay, Great and then you talked before about the M&A opportunities in environmental services, I guess first to clarify would that be more in the downstream part.
Part of the business and second what does the tail of opportunities look like for you in that market.
It is primarily about tuck ins do you have targets that could move the needle from a total company growth perspective.
Yes, our strategy there is really good.
Mix of acquisitive and organic growth right and so we're building.
<unk> product lines building out geographies on that and this.
This is these are businesses or service lines that we've been in for long periods of time, and very incremental ways and customers have asked us to play a better better and bigger role as they look to consolidate their supply base around fewer providers who can.
Have a great safety track record.
I have a digital interface and good sustainability record. So we kind of fit all those marks for them and so we're on a steady sequential path and we see the pipeline there to be full.
Over time could we do something bigger.
Of course, we could but the near to medium term path is kind of.
<unk> growth on that front and again, its not either or it's both and we still have a very strong pipeline in the more traditional recycling and solid waste portion of the business as well.
Okay, Thanks, and congratulations on the great execution.
Andrew.
Our next question comes from Sean.
Steady Eastman with Keybanc capital markets.
Hi, guys. Thanks for taking my question nice job again.
Could we could we put a finer point around the updated margin EBITDA margin guidance.
Sure what would you like to be.
John the exact number that's in the guidance that would be wonderful.
So our quarter and year to date, we're running 36%, we see margin circa 30% in the back half of the year.
Put you in a call. It a 33.34 on a full year basis, which would result.
Results in 90 to 100 basis points of margin expansion, our 'twenty 1 over 'twenty.
And Thats.
Following a year 'twenty over 19, where we had 130 basis points of margin expansion. So it would be over 200 basis points of margin expansion in 2 years.
Yes, it's certainly impressive.
That kind of implies a flattish trajectory in the back half.
There's just so many moving parts in the business right now could you just kind of help me parse that out.
A flattening out trend here makes sense.
And maybe how they're recycled commodity uplift has been.
<unk> built into that outlook.
Yes, I'd say listen there is certainly some awareness that we're still in a pandemic right and with a delta variant and the third way of happening.
Pockets of the country, starting to retrench a bit right. We're very mindful that we don't know exactly what's.
Is going to happen in the next 6 months we're not.
Past this thing and into a new normal we're very excited about the recovery in lots of spots.
Certainly the longer term growth profile as well as our ability to execute on that I think in the near term there remains some uncertainty and 1 of the things too that we were seeing really.
You know from the beginning of the year and throughout the second quarter is that as units have recovered we have seen higher container weights in particular on our business customers and so again, that's 1 of those things that we continue to expect going forward. We've talked about these macro benefits modulating as units return quite honestly, we've held on to those benefits.
It's longer than we originally anticipated.
Of these.
Thinking could become structural changes in our business, but that said we're being prudent.
And we're still expecting some of those to modulate as we continue to see the recovery and that's why we expect a little bit of a sequential decline, but if it doesn't.
What happened in that could be upside to our expectations.
Okay got it and then just just on the recycled commodities I'm, just curious relative to where were sitting today, how you feel to them. If there is a bit of a cushion there as well.
Well, let me so our average recycled commodity prices were $170 per ton in the second quarter, we have.
Have assumed that that will stay flat at that level for the rest of the year.
Okay excellent.
Okay. Thanks, very much guys I'll turn it over.
Thank you.
Our next.
Question comes from Michael Hoffman with Stifel.
Hey, Glenn Thanks for taking the questions. Thanks, Michael.
Brian The 125 free cash flow from your original February 2 your current.
Midpoint to midpoint.
Broke up the $125 million difference the increase how much is operating leverage and how much is commodities.
Commodities is about 25% of that Michael.
And the rest of it is operating leverage and when I when I say operating leverage remember, we're absorbing the higher incremental incentive compensation in that number.
So ex that the operating leverage is even higher.
Right and.
Okay.
And this is a 1 time adjust I. This is not my second question Justin.
So that's a onetime adjustment to your incentive comp. So next year I would expect SG&A to find a different percent of revenues because it will that will all normalize.
Well, we hope to further exceed our plan next year, but yes.
Gravity takes us back to hitting our number we certainly.
Certainly that would anniversary well for us okay.
On the sustainability commentary and.
I'm trying to tease out just so people begin to appreciate some of the data on the greenhouse gas improvement can you help us understand.
16, 17, and 18 the numbers were reasonably flattish.
Teeth in them.
Scope, 1 and 2 and then it spikes in 19, and then it comes back down to 5% and 20.
Why does that lift in that manner or is there a measurement issue is a peculiarity of way. The data is collected based on algorithms and we.
Production to be aware of that.
Put that in context force.
Yes, we can get back into the specifics of the kind of a jump in 19 and certainly there is some.
This space is not fully settled out as you might imagine right in terms of all everybody is measuring it improvement last year.
We also are twofold..1 is we just have fewer miles driven right as we got more productive and there was a little bit of a demand fall as well as we.
Landfill gas to energy projects right, those coming online and not.
Not even just new ones coming online, it's also optimizing and driving the performance and the output of the existing.
That's certainly helping as well and most of that reduction, though Michael at the 5% that was related to just enhance the landfill gas collection, which is a direct outcome of just those additional projects that have come online.
Okay, that's very helpful.
Thank you.
<unk>. Our next question comes from Kyle White with Deutsche Bank.
Hey, good afternoon. Thanks for taking the question just wondering what the New guide are you, providing an updated thoughts on where you think volumes and average yield did end up for the full year.
Yeah look average yield for right now we're thinking is relatively consistent with what we.
We originally guided with maybe a slight upward bias volume, though we are expecting to see 50 to 100 basis points better than what we originally said I think we said 1.5% to 2% we're thinking it's probably closer to 2 and a half at this point.
Okay. That's helpful and then on M&A following the sand type deal.
We expect.
Back to you guys to be kind of take a pause here for this year on an M&A spend or do you still see a pretty robust pipeline and opportunity there for tuck ins for the remainder of the year.
No no no pause.
Hard at work pipeline is strong and we expect to have a really strong year on that front.
Got it thanks, I'll turn it over.
Yeah.
Our next question comes from Jeff Goldstein with Morgan Stanley.
Hey can you guys hear me O'connor.
Yes.
Great. So you mentioned earlier, some labor headwinds, which I get but at the same time, you've got a fairly high amount of leverage leverage on the labor line. This quarter I think it was about.
70 basis points. So maybe you can just talk about what efficiencies you're seeing is that just lower overtime generally is that really just price maybe you could just talk about some of those drivers.
Yes, I think youre seeing a rise platform really take root right, we're just driving efficiencies into the system.
So for a large container driver rather than doing 7 actions in a day were getting an 8 action right in the same time period.
And we'll really worked hard over the last 3 or 4 years to design that platform and now we talked about that being embedded in about half of our.
Small and large container.
Right.
And while we're seeing the fruits of that come through the P&L and again, we expect more benefit as we go forward on that.
Still a little bit of opportunity or a little bit of benefit from.
Work from home and traffic patterns, although we would have expected that to be a bigger headwind again to Brian's earlier comments.
Moving onto that benefit so we think thats a modest headwind at best as we move forward.
Okay, Great and then your buybacks have been fairly limited since the onset of Covid I know that partially has to do with a robust M&A market, but I'm curious how we should think about your appetite for repurchases I.
We're holding to the year end and really into next year as well.
We certainly have appetite will first priority, if we find value, creating acquisitions that meet our that are strategically aligned and meet our return profile, that's who will start but.
We'll be active with our stock as well because we think that also was a great investment.
Yes for the Renton.
And we think we are trading well below our intrinsic value 1 of the things we talked about all along is that we want to preserve that capacity and kind of maintain that debt leverage ratio at or below 3 times.
Quite honestly, we were doing it with the <unk> acquisition and given our outperformance it created more capacity, which is why we were a buyer of our stock in the second quarter.
Investment.
Alright, thanks for the color.
At this time there appear to be no further question Mr. Vander Ark I'll turn the call back over to you for closing remarks.
Thank you Eiley, our second quarter results highlight the strength and momentum in the business, which positions us well.
Well for continued growth over the remainder of this year and beyond.
We continue to create value for our stakeholders by executing against our strategic priorities, which drive profitable growth and increases returns.
I would like to thank all of our employees for their continued hard work and dedication they continue to demonstrate their passion.
And for taking care of our customers each other and the environment.
Each year, the NW Ara honors the best of the best the drivers and operators of the year I.
I'd like to take them.
With employees, who swept every available award in our category. This year. These.
These individuals.
James Davis.
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R J P value <unk>.
Have a good evening and be safe.
Ladies and gentlemen, this concludes the conference call. Thank you for attending you may now disconnect.