Q4 2021 Republic Services Inc Earnings Call

Okay.

Speaker 1: Good afternoon and welcome to the Republic Services fourth quarter 2021 investor conference call. The public services is traded on the New York Stock Exchange under the symbol RSG. All participants in today's call will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

Good afternoon, and welcome to the Republic services fourth quarter 2021, Investor Conference call.

The public services is traded on the New York stock exchange under the symbol <unk>.

All participants in today's call will be in listen only mode.

Should you need assistance. Please signal a conference specialist by pressing the star can you call it by email.

After today's presentation there'll be an opportunity to ask questions.

Speaker 1: To ask a question, you may press star then 1 on your touchtone phone.

To ask a question you May Press Star then one on your Touchtone phone.

Speaker 1: to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Stacey Matthews, Vice President of Investor Relief.

To withdraw your question. Please press Star then two please note. This event is being recorded.

I would now like to turn the conference over to Stacy Matthews, Vice President of Investor Relations.

Speaker 2: Hello, I would like to welcome everyone to our public services fourth quarter 2021 conference.

Hello, I would like to welcome everyone to Republic services fourth quarter 2021 conference call, Jon Vander Ark, our CEO and Brian <unk>. Our CFO are joining me as we discuss are performing.

Speaker 2: John Vander Ark, our CEO , and Brian DelGaccio, our CFO , are joining me as we discuss our...

Speaker 2: I'd 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 FCC filings discuss factors that could cause actual results to differ materially from expectations.

I'd 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.

Speaker 2: The material that we discussed today is time sensitive. If in the future you listen to a rebroadcast or recording of this conference call, you should be sensitive to the date of the original call, which is February 10, 2022.

The material that we discuss today is time sensitive.

In the future you listen to a rebroadcast or recording of this conference call you should be sensitive to the date of the original call, which is February 10 2022.

Speaker 2: Please note that this call is the property of Republic Services,

Please note that this call is the property of Republic Services, Inc. Any.

Speaker 2: Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of our public services is strictly our responsibility.

Any redistribution retransmission or rebroadcast of this call in any form without the expressed written consent of Republic services is strictly prohibited.

Speaker 2: I want to point out that our FCC filings are earning press release, which includes gap reconciliation tables.

I want to point out that our SEC filings our earnings press release, which includes GAAP reconciliation tables.

Speaker 2: and a discussion of business activities, along with a recording of this call, are all available on Republic's website at republicservices.org.

In the discussion of business activities, along with a recording of this call are all available on Republic's website at Republic services Dot com.

Speaker 2: I want to remind you that Republic's management team routinely participates in investor conferences.

I want to remind you that republic's management team routinely participates in investor conferences. When events are scheduled the dates times and presentations are posted on our website with that I'd like to turn the call over to John .

Speaker 2: When events are scheduled, the dates, times, and presentations are posted on our website. With that, I'd like to turn the call over to John . Thanks, Stacey. Good afternoon, everyone, and thank you for joining.

Thanks, Stacy and good afternoon, everyone and thank you for joining us.

Speaker 3: Our fourth quarter performance capped off a very strong year of financial results and operational execution.

Our fourth quarter performance capped off a very strong year of financial results and operational execution.

Speaker 3: We outperformed expectations throughout the year and exceeded the high end of our upwardly revised guidance. During

We outperformed expectations throughout the year.

Needed the high end of our upwardly revised guidance.

During 2021.

Speaker 3: We generated adjusted earnings per share of $4.17, which increased 17% over the prior year.

We generated adjusted earnings per share of $4, <unk>, which increased 17% over the prior year.

Speaker 3: Produced $1.52 billion of adjusted pre-cash flow, which increased 23% over the prior year.

Produce $152 billion of adjusted free cash flow, which increased 23% over the prior year.

Speaker 3: Expanded EBITDA margin 60 basis points to 30 percent.

<unk> EBIT margin 60 basis points to 30%.

Speaker 3: improved free cash flow conversion 350 basis points to 44.8 percent.

Improved free cash flow conversion 350 basis points to 44, 8%.

Speaker 3: and increase customer retention rates to an all-time high of 95%.

And increased customer retention rates to an all time high of 95%.

Profitable growth remains our strategic priority and we continue to believe that investing in acquisitions is the best use of free cash flow to create long term value.

Speaker 3: Profitable growth remains our strategic priority, and we continue to believe that investing in acquisitions is the best use of free cash flow to create long term value.

Speaker 3: In 2021, we invested over a billion dollars in acquisitions to further enhance our market position and increase free cash flow.

In 2021, we invested over $1 billion in acquisitions to further enhance our market position and increase free cash flow.

Speaker 3: This is the highest level of acquisition investment in over a decade.

This is the highest level of acquisition investment in over a decade.

Speaker 3: Our acquisition pipeline remains robust with opportunities in recycling and solid waste and environmental solutions. Yesterday we announced our...

Our acquisition pipeline remains robust with opportunities in recycling and solid waste and environmental solutions.

Yesterday, we announced our agreement to acquire U S ecology.

Speaker 3: This acquisition propels Republic into a leading position in the environmental solutions space.

This acquisition propels Republic into a leading position in the environmental solutions space and as a platform of high quality assets and difficult to replicate infrastructure.

Speaker 3: and as a platform of high quality assets and difficult to replicate infrastructure.

Speaker 3: I will discuss this strategic acquisition in more detail before we open up the call for Q&A.

I will discuss this strategic acquisition in more detail before we open up the call for Q&A.

Speaker 3: In addition to investing in acquisitions, we returned $800 million to our shareholders through dividends and share repartee...

In addition to investing in acquisitions, and we returned $800 million to our shareholders through dividends and share repurchases.

We delivered outsized growth and profitability by executing our strategy. Our strategy is supported by three differentiating capabilities customer zeal.

Speaker 3: We delivered outsized growth and profitability by executing our strategy.

Speaker 3: Our strategy is supported by three differentiating capabilities. Customer zeal, digital and sustainability.

Digital and sustainability.

Speaker 3: With respect to customer zeal, our customer retention rate remain at a record setting level of 95%, and NPS remains well above pre-pandemic score.

With respect to customer ziel, our customer retention rate remained at a record setting level of 95% and NPS remains well above pre pandemic scores.

During the fourth quarter, we delivered outsized revenue growth throughout the business.

Speaker 3: During the fourth quarter, we delivered outsized revenue growth throughout the business.

Core price reached an all time high of five 4%.

And average yield increased to three 4%.

Speaker 3: Volumes increased 3.6% compared to the prior year.

Volumes increased three 6% compared to the prior year.

Speaker 3: and acquisitions contributed an incremental 490 basis points to total revenue growth.

And acquisitions contributed an incremental 490 basis points to total revenue growth.

Speaker 3: Full year combined yield and volume of 6.7% was the highest level in company history and over 200 basis points above the next highest year of performance.

Full year combined yield and volume of six 7% was the highest level in company history and over 200 basis points above the next highest year of performance.

Turning to digital.

Speaker 3: We continue to make meaningful progress on the rollout of the next phase of the RISE platform.

We continue to make meaningful progress on the rollout of the next phase of the rise platform.

We've now implemented tablets and approximately 90% of our large and small container fleet.

Speaker 3: We have now implemented tablets in approximately 90% of our large and small container fleets.

Speaker 3: With these new capabilities, we generated operational efficiencies and delivered over one million automated proactive notifications to customers last year.

With these new capabilities, we generated operational efficiencies and delivered over 1 million automated proactive notification to customers last year.

Speaker 3: We will begin deploying tablets to the residential fleet early this year and expect to be complete by mid-2023.

We will begin deploying tablets of the residential fleet early this year and expect to be complete by mid 2023.

Next turning to sustainability.

Speaker 3: We continue to partner with developers to capitalize on landfill gas-to-energy opportunities.

We continue to partner with developers to capitalize on landfill gas to energy opportunities.

Speaker 3: We expect four of these projects to be completed this year, with another 14 in our pipeline expected to be completed over the next couple of years.

We expect for these projects to be completed this year with another 14 and in our pipeline expected to be completed over the next couple of years.

Speaker 3: We see an opportunity for another 40 projects beyond the current pipeline.

We see an opportunity for another 40 projects beyond the current pipeline.

Speaker 3: We are also making recycling investments beginning in 2022 to forward integrate into plastic value chains.

We are also making recycling investments beginning in 2022 to forward integrate in the plastics value chain. These investments will provide a platform for future revenue growth with attractive returns.

Speaker 3: These investments will provide a platform for future revenue growth with attractive returns and drive a more sustainable world.

And drive a more sustainable world for future generations.

Speaker 3: We will absorb these investments within our normal level of capital spending.

We will absorb these investments within our normal level of capital spending.

Our sustainability performance continues to be well regarded as Republic services was named to the Dow Jones sustainability index for the sixth consecutive year.

Speaker 3: Our sustainability performance continues to be well regarded as Republic Services was named to the Dow Jones Sustainability Index for the sixth consecutive year.

Speaker 3: Additionally, our MSCI ESG rating was upgraded to an A, which is the highest rating in our industry.

Additionally, our MSCI ESG rating was upgraded to AA, which is the highest rating in our industry.

Speaker 3: One of the primary factors leading to the upgrade was an increase in our human capital management score.

One of the primary factors leading to the upgrade was an increase in our human capital management score.

Speaker 3: This reflects our strong culture that embraces inclusion and diversity.

This reflects our strong culture that embraces inclusion and diversity.

Speaker 3: These strong financial and operational results will not have been possible without our dedicated employees.

These strong financial and operational results would not have been possible without our dedicated employees.

In appreciation of their hard work throughout the pandemic, we paid each frontline employees $500 committed to serve award in the fourth quarter combined.

Speaker 3: In appreciation of their hard work throughout the pandemic, we paid each frontline employee $500 committed to serve award in the fourth quarter.

Speaker 3: Combined with the award paid in January of 2021, our frontline employees received an additional $1,000 during the year.

Combined with the award paid in January of 2021, our frontline employees received an additional $1000 during the year.

Speaker 3: This brings our total support provided through our Committed to Serve initiative to $50 million since the beginning of the pandemic.

This brings our total support provided through our committed to serve initiative to $50 million since the beginning of the pandemic.

The strength of our 2021 results clearly demonstrates our ability to create sustainable value and provides the foundation from which we will continue to grow that.

Speaker 3: The strength of our 2021 results clearly demonstrates our ability to create sustainable value and provides the foundation from which we will continue to grow.

Speaker 3: That said, we expect another strong year of performance in 2022.

That said, we expect another strong year performance in 2022.

Speaker 3: Specifically, we expect to deliver adjusted earnings per share in a range of $4.58 to $4.65.

Specifically, we expect to deliver adjusted earnings per share in a range of $4 58 to $4 65.

Speaker 3: and generated just as free cash flow in the range of 1.625 billion to 1.675 billion.

And generated adjusted free cash flow in the range of $1 65 billion to $1 $6 75 billion.

Speaker 3: This represents high single digit to low double digit growth over our 2021 performance.

This represents high single digit to low double digit growth over our 2021 performance.

It is important to note that this guidance as well as any assumptions we discussed in today's call do not contemplate the impact from the pending acquisition of U S ecology.

Speaker 3: It's important to note that this guidance, as well as any assumptions we discussed on today's call, do not contemplate the impact from a pending acquisition of U.S. ecology.

Speaker 3: We will provide updates to our guidance if needed once the transaction closes.

We will provide updates to our guidance if needed once the transaction closes I will now turn the call over to Brian . Thanks, John .

Speaker 3: I will now turn the call over to Brian . Thanks, John . Core price during the fourth quarter was 5.4%, which included open market pricing of 7% and restricted pricing of 3.9%.

Core price during the fourth quarter was five 4%, which included open market pricing of 7% and restricted pricing of two 9% the.

Speaker 3: The components of core price included small container of 8.6%

The components of core price included small container of eight 6% large container of five 6% and residential a four 8%.

Speaker 3: large container of 5.6%, and residential of 4.8%.

Speaker 3: Average yield was 3.4%, which represents a 20 basis point increase from our third quarter performance.

Average yield was three 4%, which represents a 20 basis point increase from our third quarter performance.

Speaker 3: In 2022, we expect average yield of approximately 3.4% of the total

In 2022, we expect average yield of approximately three 4%.

Speaker 3: This is an increase of 50 basis points over our full year 2021 results. Fourth quarter volume increase.

This is an increase of 50 basis points over our full year 2021 results.

Fourth quarter volume increased three 6%.

Speaker 3: The components of volume included an increase in small container of 4.6%, an increase in large container of 3.7%, and an increase in landfill of 6.7%.

The components of volume included an increase in small container of four 6% an increase in large container of three 7% and an increase in landfill of six 7%.

Speaker 3: We expect organic volume growth in a range of 1.5 to 2% in 2022, which remains well above the long-term average.

We expect organic volume growth in a range of one 5% to 2% in 2022, which remains well above our long term average.

Moving on to recycling.

Speaker 3: Commodity prices were $218 per ton in the fourth quarter. This compares to $110 per ton in the prior year.

Commodity prices were $218 per ton in the fourth quarter. This compares to $110 per ton in the prior year.

Speaker 3: Recycling, processing, and commodity sales contributed 110 basis points to internal growth during the fourth quarter.

Our recycling processing and commodity sales contributed 110 basis points to internal growth during the fourth quarter.

Speaker 3: We are assuming $187 per ton for recycled commodities in 2022, which is consistent with the full year 2021 average. Next, turning to...

We are assuming $187 per ton for recycled commodities in 2022, which is consistent with the full year 2021 average.

Next turning to our environmental solutions business.

Speaker 3: Fourth quarter environmental solutions revenue increased $65 million from the prior year. This was driven by organic growth from increased activity and the contribution from acquisition.

Fourth quarter environmental solutions revenue increased $65 million from the prior year.

This was driven by organic growth from increased activity and the contribution from acquisitions.

Speaker 3: On a same-store basis, Environmental Solutions contributed 20 basis points to internal growth during the fourth quarter.

On a same store basis, environmental solutions contributed 20 basis points to internal growth during the fourth quarter.

Adjusted EBITDA margin for the fourth quarter was 28, 1%.

Speaker 3: Adjusted EBITDA margin for the fourth quarter was 28.1%. This compared to 29.9% in the prior year.

This compared to 29, 9% in the prior year.

Speaker 3: Margin performance during the quarter was impacted by a 70 basis point headwind from higher incentive compensation.

Margin performance during the quarter was impacted by a 70 basis point headwind from higher incentive compensation expense, we expect incentive compensation expense will return to target levels.

Speaker 3: We expect incentive compensation expense will return to target level.

Speaker 3: Margin performance also included a 50 basis point dilutive impact from recent acquisitions, which included deal and transition costs.

Margin performance also included a 50 basis point dilutive impact from recent acquisitions, which included deal and transition costs.

Speaker 3: It should be noted that we pulled forward certain integration costs originally planned for 2022.

It should be noted that we pulled forward certain integration costs originally planned for 2022.

Speaker 3: The remaining impact to margin was primarily driven by a 50 basis point increase in risk management.

The remaining impact of margin was primarily driven by a 50 basis point increase in risk management costs.

Speaker 3: The current period includes a one-time true up for an insurance captive that increased expense 20 basis points, and the prior year included a 30 basis point favorable reduction in reserves, which did not repeat.

The current period includes a onetime true up for an insurance captive that increased expense 20 basis points in the prior year included a 30 basis point favorable reduction in reserves, which did not repeat.

Speaker 3: We expect risk management expense in 2022 to be relatively flat with our full year 2021 performance.

We expect risk management expense in 2022 to be relatively flat with our full year 2021 performance.

Speaker 3: For reference purposes, fourth quarter margin performance at target levels of incentive compensation and excluding the one time committed to serve payment would have been 29.4%

For reference purposes fourth quarter margin performance at target levels of incentive compensation and excluding the one time committed to serve payment would have been 29, 4%.

Speaker 3: The remaining difference to prior year margin performance relates to the impact of recent

The remaining difference to prior year margin performance relates to the impact of recent acquisitions.

SG&A during the fourth quarter was 10, 6% of revenue. This represents an increase of 60 basis points over the prior year, which was driven by higher incentive compensation accruals previously discussed.

Speaker 3: SG&A during the fourth quarter was 10.6% of revenue. This represents an increase of 60 basis points over the prior year, which was driven by higher incentive compensation approvals previously discussed.

Speaker 3: Full year 2021 EBITDA margin of 30% expanded 60 basis points compared to the prior year. This resulted for pricing levels in excess of cost inflation and effective cost management, which demonstrates our ability to gain operating leverage in the business.

Full year 2021, EBITDA margin of 30% expanded 60 basis points compared to the prior year this resulting from pricing levels in excess of cost inflation and effective cost management, which demonstrates our ability to gain operating leverage in the business.

Speaker 3: To put our operating leverage into context, we estimate wage inflation, net of productivity, was approximately 3%. Our average yield of 3.4% more than covered this level of cost inflation, which is why labor and maintenance were both down as a percentage of revenue for the fourth quarter and for the year.

To put our operating leverage into context, we estimate wage inflation net of productivity was approximately 3% our average yield of three 4% more than covered this level of cost inflation, which is why labor and maintenance were both down as a percentage of revenue for the fourth quarter and for the year.

Speaker 3: In 2022, we expect EBITDA margin will continue to improve and are targeting margin expansion of 30 to 40 basis points over our full year 2021 performance.

In 2022, we expect EBITDA margin will continue to improve and are targeting margin expansion of 30 to 40 basis points over our full year 2021 performance the.

Speaker 3: The components of expected margin expansion include pricing in excess of cost inflation adding 60 to 70 basis.

The components of expected margin expansion include pricing in excess of cost inflation, adding 60 to 70 basis points and incentive compensation expense returning to target levels, adding 50 basis points.

Speaker 3: and incentive compensation expense returning to target levels, adding 50 bases.

Speaker 3: partially offset by acquisitions decreasing margin by 40 basis points, and net fuel decreasing margin by 40 basis points.

Partially offset by acquisitions decreasing margin by 40 basis points and net fuel decreasing margin by 40 basis points.

DD&A is a percentage of revenue was 11, 2% for the year.

Speaker 3: DD&A as a percentage of revenue was 11.2% for the year.

Speaker 3: We expect DDNA as a percentage of revenue of approximately 11.5% in 2022.

We expect DD&A as a percentage of revenue of approximately 11, 5% in 2022.

Speaker 3: Year-to-date adjusted free cash flow was $1.52 billion and increased $279 million, or 23%, compared to the prior year.

Year to date adjusted free cash flow was 152 billion and increased $279 million or.

We're 23% compared to the prior year.

Speaker 3: This was driven by EBITDA growth in the business and a reduction in interest expense resulting from brief financial...

This was driven by EBITDA growth in the business and a reduction in interest expense, resulting from refinancing debt.

Speaker 3: Full year 2021 free cash flow conversion increased 350 basis points to 44.8.

Full year 2021 free cash flow conversion increased 350 basis points to 44, 8%.

Speaker 3: We are targeting high 40% level conversion within the next couple of years.

We are targeting high 40% level conversion within the next couple of years.

Speaker 3: Total debt was $9.6 billion and total liquidity was $2.8 billion.

Total debt was $9 6 billion and total liquidity was $2 8 billion.

Our leverage ratio was two nine times.

Speaker 3: With respect to taxes, our combined tax rate and non-cash charges from solar investments resulted in an equivalent tax impact of 24% during the fourth quarter. This was in line with our expectations and resulted in a 26% equivalent tax impact for the year.

With respect to taxes, our combined tax rate and noncash charges from solar investments resulted in an equivalent tax impact of 24% during the fourth quarter. This was in line with our expectations and resulted in a 26% equivalent tax impact for the year.

Speaker 3: We expect an equivalent tax impact of 26% in 2022, made up of an effective tax rate of 21%, and approximately $120 million of non-cash charges from solar investments.

We expect an equivalent tax impact of 26% in 2022 made up of an effective tax rate of 21% and approximately $120 million of noncash charges from solar investments, Let me now turn it back over to John .

Speaker 4: Thanks Brian . Before I open up the call, let me provide a little more color on our recent...

Thanks, Brian before we open up the call let me provide a little more color on our recent announcements.

Speaker 4: With the addition of US Ecology's national footprint of vertically integrated assets, leading disposal infrastructure, and comprehensive capabilities, we are better positioned to serve our customers with one of the most complete sets of products and services.

With the addition of U S ecology has a national footprint of vertically integrated assets, leading disposal infrastructure and comprehensive capabilities, we are better positioned to serve our customers with one of the most complete set of products and services.

Speaker 4: This strategic acquisition provides a platform for additional organic and inquisitive growth with cross-selling opportunities for existing customers who want a single partner to manage their environmental service.

This strategic acquisition provides a platform for additional organic and acquisitive growth.

Cross selling opportunities for existing customers, who want a single partner to manage their environmental services needs.

Speaker 4: We expect this acquisition to be immediately accretive to adjusted earnings and free cash flow, and to create significant value with double-digit returns for our shareholders.

We expect we expect this acquisition to be immediately accretive to adjusted earnings and free cash flow and to create significant value with double digit returns for our shareholders.

Speaker 4: We are excited to welcome U.S. Ecology's talented employees to the Republic team and expect the deal to close by the end of the second quarter this year.

We are excited to welcome U S ecology talented employees to the Republic team and expect the deal to close by the end of the second quarter of this year.

Speaker 4: Expanding our environmental solutions business is a strategic priority and this acquisition is a key addition. That said, the investments we are making are not limiting growth or reducing focus in the traditional recycling and solid waste...

Expanding our environmental solutions business is a strategic priority and this acquisition is a key addition.

That said the investments we are making are not limiting growth or reducing focus in the traditional recycling and solid waste businesses.

Speaker 4: This is not an either-or, but a both-and approach. We plan to make outsized investments in both businesses to accelerate growth and create lasting value.

This is not an either or but are both and approach we plan to make outsized investments in both businesses to accelerate growth and create lasting value.

Speaker 4: We remain disciplined allocators of capital and will only make investments in organic growth opportunities in M&A that increases intrinsic value and improves returns. With that, operator, I would like to open the call to questions.

We remain disciplined allocators of capital and will only make investments in organic growth opportunities in M&A that increases intrinsic value and improves returns.

That operator, I would like to open the call to questions.

We will now begin the question and answer session.

Speaker 1: To ask a question, you may press star, then one on your touchtone phone.

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Speaker 1: In the interest of time, we ask that you limit yourself to one question and one follow-up today.

In the interest of time, we ask that you limit yourself to one question and one follow up Paul.

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Thank you Youre using a speakerphone please pick up your hands.

Thank you.

Your first question comes from Noah Kaye with Oppenheimer. Please go ahead.

Speaker 1: Your first question comes from Noah Kay with Oppenheimer. Please go ahead.

Speaker 3: Thanks so much. I'm sure there'll be a bunch of questions about ecology, but I'd like to focus on the core business for now. And starting with pricing, notice the yield was really strong, especially at a full-year basis, but that core price you called out at an all-time high worth noting. The yield is very strong in collection.

Thanks, so much I'm sure there'll be a bunch of questions about psychology, but I'd like to focus on our core business for now and.

And starting with pricing noticed the yield.

It was really strong, especially on a full year basis, but that core price you called out at all time high with noting the yield is very strong and collection.

Speaker 3: What's your view on post-collection pricing and yield going into 2022? Do we start to see that a nudge up as well? Because certainly there's, you know, rising operating expenses there just like there is everywhere.

What's your view on post collection pricing and yields going into 2022, do we start to see that nudge up as well because certainly there is rising operating expenses. There just like there is everywhere else.

Yeah, certainly youll see some momentum in the first couple of quarters, and I think youll see that momentum accelerate in the second half of the year a lot of those customers are attached to CPI or something a derivative CPI and like our collections business. There is a 12 to 18 month lag so that elevated from last year.

Speaker 4: Yeah, certainly you'll see some momentum in the first couple of quarters and I think you'll see that momentum accelerate in the second half of the year. A lot of those customers are attached to CPI or something, a derivative CPI. And like our collections business, there's a 12 to 18 month lag. So that elevated print from the last year will then start to flow through and you'll see really nice economics on the yield side.

Then start to flow through and Youll see really nice economics on the yield side, especially in Q3 and Q4.

Speaker 3: That's super helpful and that feeds into the next question was how to think about the the ratability of the cadence of of yield trends over the course of the year. I know you're not like some peers and you tend to do your PI's ratably through the year. So is that is a 3.4% full year number since you're doing 3.4 here in the fourth quarter. Is that fairly smooth and stable over the balance of the year or is anything that you would call out?

That's super helpful on that piece into my next question was really how to think about the the rate ability of the cadence of.

Yield trends over the course of the year I know youre not like some peers and you tend to do your pie ratably through the year. So is that is a three 4% full year number since youre doing three four here in the fourth quarter is that fairly smooth and stable over the balance of the year or is there anything that you would call out.

Speaker 4: Yeah, it's the same thing, which is the portion of our book that's attached to CPI or something related to that. You will get more momentum in the second half. So I think you'll see really good pricing numbers here in Q1 and Q2.

Yes, it's the same thing which is the portion of our book that's attached with CPI or something related to that you will get more momentum in the second half. So I think you'll see really good pricing numbers here in Q1 and Q2.

Speaker 4: And then you'll see that start to accelerate in Q3 and Q4. You know, the open market side will end up being more ratable with the caveat that we're living in a very dynamic world.

And then youll see that start to accelerate in Q3 and Q4. The open market side will end up being more ratable ratable with the caveat that we're living in a very dynamic world right and we see inflationary cost inflationary pressure.

Speaker 4: Right. And you see inflationary cost, inflationary pressure. Right. The core thesis of this business is that we are going to price ahead of our cost. We did a great job of that last year.

Core thesis of this business is that we are going to price ahead of our cost right. We did a great job of that last year as cost start to accelerate in pockets and we will do the same thing this year nothing broad based rate, we look at every market uniquely and dynamically and make sure that our people are getting paid and we're pricing ahead of our cost.

Speaker 4: to accelerate in pockets and we'll do the same thing this year. Nothing broad-based, we look at every market uniquely and dynamically and make sure that our people are getting paid and that, again, we're pricing ahead of our

Speaker 3: Yep. And one more to sneak in. And Brian , you know, you called this out. But I want to go back to it because I think it's important, just around the margins and the impact from the higher incentive comp and the bonuses, I think, instead of the 130 bits. Yeah. You know, so, so just with that.

And one more to sneak in and Brian you called this out but I wanted to go back to because I think it's important.

Just around the margins and the impact from the higher incentive comp and the bonus. So I think you said it was 130 bps yes.

Yeah.

So just with that is how much of that was anticipated.

Speaker 3: how much of that was anticipated? And B, when you talk about that sort of being a tailwind to margins next year, I guess how do you think about that in the context of continued support for the labor force, given the tight labor market, and of course, ongoing support amidst the federal universe.

When you talk about that.

Being a tailwind to margins next year I guess, how do you think about that in the context of continued support for the Labor force given the tight labor market and of course ongoing support.

Yeah.

Speaker 3: the COVID pandemic, which is still, although easing with us.

The Covid pandemic, which is still although easing with us.

Speaker 3: Yeah, let me kind of talk about the incentive compensation piece first, and then we can talk about the committed to serve award. So, you know, clearly from an incentive compensation perspective, we put a plan together that assumes target.

Yes, let me kind of talk about the incentive compensation piece first and then we can talk about the committed to serve award so.

Clearly from an incentive compensation perspective, we put a plan together that assumes targets.

Speaker 3: And as you've seen all year long, we've outperformed. And with that came additional incentive compensation accruals, which will be expense.

And as <unk> seen all year long, we've outperformed and with that came additional incentive compensation accruals, which will be expense our <unk> expense in 'twenty. One the cash for that will be paid in 'twenty, two which is one of the reasons do when you take a look at our free cash flow to grow on a more normalized basis is actually even in excess of what we're presenting.

Speaker 3: or were expensed in 21, the cash for that will be paid in 22.

Speaker 3: Which is one of the reasons, too, when you take a look at our free cash flow, the growth on a more normalized basis is actually even in excess of what we're presenting because we've got to absorb that extra cash payment in the first quarter.

Because we've got to absorb that extra cash payment in the first quarter on the committed to serve again that was a discretionary item right that we decided to do certainly in recognition for the hard work that our frontline employees did during the pandemic, but we're not planning on making any of those additional.

Speaker 4: On the committed to serve, again, that was a discretionary item.

Speaker 4: right, that we we decided to do certainly in recognition for the hard work that our frontline employees did during the pandemic. But we are not planning on making any of those additional or incremental awards going forward. Largely, you know, because that's baked into the plan, right? We've got elevated increases for all of our frontline people given it's an inflationary environment.

Our incremental awards going forward largely to know because thats baked into the plan right. We've got an elevated increases for all of our frontline people given it's an inflationary environment and again, we're pricing ahead of that and even with that plan. We're planning to expand margins. So that's why we assume that and again as the situation moves and becomes dynamic.

Speaker 4: And again, we're pricing ahead of that, and even with that plan, we're planning to expand margin.

Speaker 4: That's why we assume that's in. Again, as the situation moves and becomes dynamic, we'll adjust accordingly.

We will adjust accordingly.

Dynamic is definitely the right word I'll turn it over thank you.

Speaker 1: Our next question comes from Jerry Revit with Goldman Sachs. Please go ahead. Yes, hi.

Our next question comes from Jerry Revich.

Goldman Sachs. Please go ahead.

Yes, hi, good afternoon.

Good afternoon Jerry.

Speaker 5: Can you talk about the cadence of the margin expansion that you folks are looking for over the course of the year? Obviously, you know, the fourth quarter we'll have the easy comp that you just mentioned, but what about as we head into the first quarter, you know, if we apply...

Can you talk about the cadence of the margin expansion that you folks are looking for over the course of the year, obviously, the fourth quarter, we will have.

The easy comp.

You just mentioned, but what about as we head into the first quarter, we apply normal seasonality. It looks like your margins might be starting the year down 50 to 100 basis points year over year first quarter unless we get.

Speaker 5: normal seasonality, it looks like your margins might be starting the year down 50 to 100 basis points year over year in the first quarter unless we get outsized pricing contribution. Is that right? Can you just talk about the cadence of the year over year margin performance that you're looking for?

Also as pricing contribution.

Is that right can you just talk about the cadence of the year over year margin performance that Youre looking for.

Speaker 4: Yeah, you know, Jerry, you're on the right path there. I would say in 2022, we're expecting normal seasonality with respect to both the revenue as well as the EBITDA margin. I think when you look at the last two years, right, so 20 and 21, you had anything but normal, right? So you really have to go back and look at that seasonal cadence prior to that, which again, when you think about seasonally, we tend to see our highest revenue and margin performance in the third and second quarters.

Yes, Jerry you are on the right path there I would say in 2022, we're expecting normal seasonality with respect to both the revenue as well as the EBITDA margin I think when you look at the last two years right. So 2020 . One you had anything but normal right. So you really have to go back and look at that seasonal cadence prior to that which again when you.

Think about seasonally we tend to see our highest revenue and margin performance in the third and second quarters Q4 thereafter, and then usually Q4 is a little bit.

Speaker 4: Q4 thereafter and then usually Q4 is a little bit the lightest for the year, really for two reasons. Winter lawmakers stick to it, pleasure automation is also a little bit for the week!

The lightest for the year really for two reasons <unk> got the winter months, so youre not seeing that uptick in particular landfill volumes as well as you've got the highest percentage of taxes in the first quarter.

Speaker 4: So you're not seeing that uptick in particular landfill volumes, as well as you've got the highest percentage of taxes in the first quarter.

Payroll taxes okay.

Yes.

Sure.

Speaker 5: I appreciate it. And then, separately, on the acquisition announcement, can you talk about the path to get to double-digit returns? What amount of bolt-on activity do we need, or how much more do we have to go from a synergy standpoint to earn that double-digit return that typically for transactions this size takes most companies at least three to five years to get?

I appreciate it and then.

Separately on me.

Acquisition announcement can you talk about the path to get to.

Double digit.

Turns.

The amount of bolt on activity do we need or how much more do we have to go from a synergy standpoint too.

That.

Double digit return that typically for transactions.

<unk> takes most companies at least three to five years to get through.

Speaker 4: Yeah, no, that double-digit return is based on the current pro forma, which again is on the $40 million of cost synergies, which don't include any of the revenue synergies, including cross-sell or bolt-on acquisitions, which we have a number in the pipeline down the road. So that would all, all those things will be opportunities to accelerate, get to double-digit sum more quickly, and then accelerate the overall returns to even a higher level.

Yes, no that double digit return is based on the current pro forma which again is on the $40 million of cost synergies, which don't include any of the revenue synergies, including cross sell or bolt on acquisitions, which we have a number in the pipeline down the road. So that would all all those things will be opportunities to accelerate.

<unk> get to double digits more quickly and then accelerate the overall returns to even a higher level.

Okay I appreciate the discussion thanks.

Speaker 1: Our next question comes from Tyler Brown with Raymond James. Please go ahead. Hey, good afternoon.

Our next question comes from Tyler Brown with Raymond James. Please go ahead.

Hey, good afternoon.

Hey, Tyler.

Hey, just real quick Bryan, but to be clear the margins in 'twenty two are assuming a normal like 100% incentive comp accrual.

Speaker 6: Hey, just real quick, Brian . But to be clear, the margins and 22 are assuming a normal, like 100% incentive comforter rule.

That's correct.

Speaker 6: OK. We hope we hope to fire. Yeah, well, we'll take higher, but we're planning on 100 percent. That is correct. Right. OK. OK, that's helpful. And then I know while we're on the talk of margin here, I know in the U.S. ecology release, you laid out that 47 percent free cash flow conversion by 24. But you didn't really make any mention of the margin target.

We have also higher well, we will take our doors or planning on 100% that is correct right. Okay. Okay. That's helpful. And then I know while we're on the talk of margin here I know in the U S. Oncology released you laid out that 47% free cash flow conversion by 'twenty four but you didn't really make any mention of the margin targets.

Speaker 6: Now, I get it that U.S. ecology is probably, I'm going to say, 70, 80 basis points dilutive to margins.

Now I get it the U S oncology is probably I'm going to say 70 to 80 basis points dilutive to margins, but does that does anything preclude you from achieving those call. It 32% margins longer term and is that something that investors should still think could be a reasonable expectations like mid mid decade.

Speaker 6: Does that does anything preclude you from a treat achieving those call it 32% margins longer term? And is that something that investors should still think could be a reasonable expectations like mid mid decade?

Speaker 4: Yeah, so it's absolutely in the solid waste and recycling side, right? We're on our marks, right? And we're going to get there and you're right.

Yes, so it's absolutely in the solid waste and recycling side, but were on our marks right and we're going to get there and youre right. This.

Acquisition in this space in general has a slightly different value creation formula a little bit lower margins, but less capital intensity right until that starts to converge more into free cash flow.

Speaker 4: Acquisition, right, and this space in general has a slightly different value creation formula, right? A little bit lower margins, but less capital intensity, right? And so that starts to converge more into free cash flow.

Speaker 4: You'll see us move later in the year to segment reporting, right, that calls those things out and really makes it clear to the investment community what kind of progress we're making on each front. And so just arithmetically, right, we'll get there just slightly slower than we would have otherwise, but our sites are still set toward that target.

Conversion you will see US move later in the year to segment reporting right that caused those things out and really makes it clear to the investment community what kind of progress, we're making on each front and so just arithmetically right. We will get there just slightly slower than we would have otherwise, but our sights are still set top.

That target overtime.

Speaker 6: Okay, yeah, segment detail would be helpful. And then, John , I think it was only 90 days ago, though, you mentioned that you wanted to get environmental services up to a billion dollar franchise.

Okay, Yes segment detail would be helpful.

And then John I think it was only 90 days ago, though you mentioned that you wanted to get environmental services up to $1 billion franchise over I think the next like three years clearly pro forma this is going to get you. There you mentioned a platform for deals in the release you mentioned it again on this call, but like where do you envision the business longer term.

Speaker 6: over, I think, the next three years. Clearly, pro forma, this is going to get you there. You mentioned a platform for deals in the release. You mentioned it again on this call. Where do you envision the business longer term? Are you targeting a certain percentage of sales that you maybe don't want to exceed or just big picture there?

Are you targeting a certain percentage of sales that you maybe don't want to exceed or just big picture there.

No listen.

Speaker 4: This deal is a very unique set of assets, right, and gives us a really attractive position.

This deal right is a very unique set of assets right and gives us a really attractive position right and we don't think there is deal with the size or scale right out there in the future and we're certainly going to take this should.

Speaker 4: Right? And we don't think there's a deal of the size or scale out there in the future. We're certainly going to take this.

Speaker 4: So we'll be able to close it and integrate it, get our people connected, the systems, right? Make sure that we're executing above the pro forma.

Should we be able to close it in <unk>.

Integrated get our people connected the systems right and make sure that we're executing above the pro forma alright, and then along the way of course, there are other deals that can fold into this while we're aggressively growing right the solid waste and recycling business. So we don't have any defined target of what percentage of the business. This is.

Speaker 4: Right, and then along the way, of course, there's other deals that can fold into this.

Speaker 4: while we're aggressively growing the solid waste and recycling business. So we don't have any defined target of what percentage of the business this is. But the bulk of this business, just arithmetically, is going to be our traditional recycling and solid waste business. And we're going to continue to grow both sides of that as we move forward.

But the bulk of this business just arithmetically is going to be our traditional recycling and solid waste business and we're going to continue to kind of grow both sides of that as we move forward.

Speaker 6: Okay. And then my last one, just real quick, you talked about the $40 million of synergies from the deal, but you never really put a finer point there. So where exactly are these synergies coming from? Are they more SG&A? Are they other operating costs? Are they even CapEx?

Okay and then my last one just real quick.

You talked about the $40 million of synergies from the deal, but you never really put a finer point there so where exactly are the synergies coming from are they more SG&A or the other operating costs are they even capex.

Speaker 4: No, it's two broad fronts. Think about half of it as just duplicative corporate costs. There's just cost of being a public company and IR treasury and all the normal things that you would think to take out. And then the other 20 would come more at the field level. Because you see, we have a Gulf Coast region. We have a Northeast region in our environmental solutions business. They have a national footprint. And we'll obviously think about harmonizing and integrating those.

No.

Two broad front thinking about half of it is just duplicative corporate costs right, because it's cost of being a public company.

IR Treasury and all the normal things that you would think to take out and then the other 20 would come more at the field level.

Because you see we have our Gulf Coast region, right, we have a northeast region in our environmental solutions business right. They have a national footprint and we will obviously think about harmonizing and integrating those.

Speaker 4: That's a relatively small number when you think about it in terms of cost take out. Because we think this is a huge platform for growth for us. We're not going into cut and flip, we're buying to keep and build. Now as we go and we learn more, if there's more opportunities to do things a bit more efficiently we'll certainly take advantage of it.

Right, that's a relatively small number right. When you think about it in terms of cost takeout. Because we think this is a huge platform for growth for US right, we're not going into cotton flip we're buying to keep and build now as we go when we learn more if there's more opportunities to do things a bit more efficiently.

Certainly take advantage of that.

Speaker 6: Okay, all right. Appreciate the time. And I think Tyler, the other thing too, just...

Okay, all right appreciate the time.

Tyler and the other thing just.

Sure.

Speaker 4: The $40 million is exclusively cost synergies. There are no revenue synergies baked into the plan. OK.

The $40 million is exclusively cost synergies there are no revenue synergies baked into the plan.

Okay. Okay. That's clear thank you.

Speaker 1: Our next question comes from Michael E. Hoffman with Siegel. Please go ahead. Thank you very much. I'm going to ask two questions.

Our next question comes from Michael Hoffman with Stifel. Please go ahead.

Thank you very much.

How can I ask two questions and get kind of a minute.

Speaker 7: You ended the year at 44% pre-cash flow conversion. Your guidance.

You ended the year at 44% free cash flow conversion in your guidance.

Speaker 7: is up almost nine, but cash flow from ops are only up about five and a half capital spending is almost flat. So I'm trying to understand what's happening in capital spending. What do you think the cash conversion ratio does in 20?

Is up almost nine but cash flow from ops are only up about five and a half capital spending was almost flat. So I'm trying to understand what's happening in capital spending what do you think the cash conversion ratio does in 'twenty.

Speaker 7: And is the cash flow from Ops as a percentage of revenues kind of the same in 22 as it was in 21? How is that defined one question? Yeah, so Michael, let me let me kind of put it to you this way here And I mentioned that we've got the additional cash incentive compensation that we're paying in 22 that's related to 21%

Two.

As the cash flow from ops as a percentage of revenues kind of the same in 'twenty two as it was in 'twenty. One how is that defined one question.

So Michael let me kind of put it to you. This way here and I mentioned that we've got the additional cash incentive compensation that we're paying in 'twenty. Two that's related to 'twenty. One performance, it's about $40 million of extra cash, which impacts free cash flow conversion by 100 basis points. So.

Speaker 7: about $40 million of extra cash, which impacts free cash flow conversion by 100 basis points.

Speaker 7: So we think we're going to be able to, from an overall perspective, get to that 45% plus even absorbing that $40 million extra, that extra 100 basis points of free cash flow.

So we think we're going to be able to from overall perspective get to that 45% plus even absorbing that $40 million extra that extra 100 basis points of free cash flow conversion.

Okay.

Speaker 7: And that'll show up in the cash form from Ops Number. That's in cash from Ops, correct. It's in working capital, where you see it. Right. And then why is CapEx relatively flat year over year?

And that that will show up in the cash flow from ops number.

From a working capital or you see it right and then what why is capex relatively flat year over year.

Speaker 7: Well, remember, we talked about in the current year, right? So again, if you take a look at our original guide and then what we ultimately spent.

Well remember we talked about in the in the current year right. So again, if you take a look at our original guide and then what we ultimately spend.

Speaker 7: You know, at the midpoint of that, we were, you know, kind of $90 million more of cap back. So we had the ability, one, to fund additional growth. So again, if you take a look at our volume performance, so from an organic perspective, we had additional growth opportunities, as well as pulled forward some capital that was originally gonna be spent in 22. So that's why it's relatively flat in 22 is because some of that spending actually happened.

At the midpoint of that we were kind of $90 million more of Capex. So we had the ability one to fund additional growth. So again, if you take a look at our volume performance from an organic perspective, we had additional growth opportunities as well as pull forward some capital.

That was originally going to be spent in 'twenty. Two so that's why it's relatively flat.

In 'twenty two is because some of that spending actually happen in 'twenty one.

Speaker 8: Got it. That's what I thought it was. Just wanted to make sure that was clear. And then, John , I think it is important for everybody to understand that don't focus on margins, focus on the discipline of Republic's cash-on-cash return.

Got it that's what I thought it was just wanted to make sure that was clear and then.

John I think it is important for everybody to understand that don't focus on margins first I guess on the discipline of Republic's cash on cash returns.

Speaker 8: And just to put it in perspective, I mean, you know, you now have about a billion, three of ES revenues and

And just to put it in perspective.

We now have about 1 billion three of Es revenues.

And what do you got maybe two.

Speaker 8: if you get the psychology closed, $2.5 billion invested. And on a like-to-like basis, the same investment is probably $2x on a per revenue basis in garbage. So that's the way people ought to put it in perspective. Am I thinking about that correctly?

If you get the psychology closed two and a half billion invested.

And on a like to like basis. The same investment is probably to Exxon on a per revenue basis in garbage.

That's the way people want to put it in perspective am I thinking about that correctly.

Speaker 4: Well, I'd probably have to do a little bit of math offline, Michael, to confirm or deny your thesis, but I think broadly speaking you're in the right zone, which is can people get very caught up in the margin? And listen, we understand the margin as a way to measure the business, and we don't run away from that. But yea, this is the kind of market where

Well I'd, probably have to do a little about math offline mic ultra confirm or deny or thesis, but I think broadly speaking you're in the right zone, which is can people get very caught up in the margin and listen we understand the margin as a way to measure the business and we don't run away from that we own that and we've done a great jaw.

Speaker 4: And we've done a great job of expanding margins the last couple of years, right, kind of creeping up on 300 basis points as we get into next year. But we don't run the business for the core. We don't run it for any single metric. We run it for the long-term and intrinsic value. So that's where cash-on-cash returns.

Job of expanding margins. The last couple of years right kind of creeping up on 300 basis points as we get into next year, but we don't run the business for the quarter, we don't run it for any single metric we run it for the long term intrinsic value. So that's where a cash on cash returns at Thats, where value creation comes in and so business that might have a slightly.

Speaker 4: That's where value creation comes in, and so a business that might have slightly different optics, which is structurally a little lower margin.

Different optics, which is structurally a little less lower a little lower margin.

Speaker 4: and then but less capital intensity that you know free cash flow conversion is a better metric that starts to harmonize.

And then but less capital intensity that free cash flow conversion as a better metric that starts to harmonize those two things and get much closer to a returns a view toward returns and we think there's margin opportunity in this business right. We think that we're going to continue to look for efficiencies and we're going to think about make.

Speaker 4: those two things and get much closer to a, you know, returns or a view toward returns. And look, we think there's margin opportunity in this business, right? We think that we're going to continue to look for efficiencies and we're going to think about, you know, make sure that we take our mindset around revenue management and our skills and capabilities and our belief that we have to price out of our costs.

Sure that we take our mindset around revenue management, and our skills and capabilities in our belief that we have to price out of our cost and be expanding margins that allows us to reinvest in the business right and take care of our customers over time.

Speaker 4: Right? And be expanding margins that allows us to reinvest in the business, right? And take care of our customers over time.

Okay. Thank you.

Our next question comes from Walter <unk> with RBC.

Speaker 1: Our next question comes from Walter Spracklin with.

Speaker 4: RBC Capital Markets. Please go ahead. Thanks very much. Good afternoon everyone. Just touching on that, I know you just kind of said it, the answer to my question being how do you grow margin and how do you take advantage of that margin opportunity in the environmental services business, you said both synergy and pricing. But if you were to...

RBC capital markets. Please go ahead, yeah. Thanks, very much good afternoon, everyone. So just touching on that I know, you're just kind of set at.

The answer to my question being how do you grow margin.

How do you take advantage of that margin opportunity in the environmental services.

Business, you said, both synergy and pricing, but if you were to.

Speaker 9: kind of frame it, is it 50-50, or is it really a business that needs to be repriced and properly priced to get those margins up, or is it more on the cost-energy side?

Kind of frame. It is it 50 50 or is it really.

In a business that needs to be repriced and properly price to get those margins up.

Or is it more on the cost synergy side that you are looking to get those margins higher.

Speaker 4: Yeah, I talked about the 40 million that we have right in front of us and then of course as we go in we'll look for opportunities. We're acquiring not just assets, we're acquiring deep expertise.

Yes, I talked about the $40 million that we have right in front of US and then of course as we.

So we will look for opportunities now we're acquiring not just assets.

Firing deep expertise in the hazardous waste value chain around compliance and operations and commercial capabilities and so we're very very mindful of that and the last thing I want to do is step over $20 bill to grab a nickel. So we're not going to be very short term focus we're going to think about.

Speaker 4: right, in the hazardous waste value chain, and around compliance and operations and commercial capabilities. And so we're very, very mindful of that. And the last thing I want to do is step over a $20 bill to grab a nickel. So we're not going to be very short-term focused. We're going to think about.

Speaker 4: long term. And as we find more and learn more, right, we'll certainly report out.

Long term and as we find more and learn more right. We'll certainly report out on that on the revenue side, but we haven't put anything into the pro forma we see opportunities across multiple fronts strategically.

Speaker 4: You know, on the revenue side, while we haven't put anything into the pro forma, right, we see opportunities across multiple fronts.

Speaker 4: Strategically, the reason that we're into this business is because of the connectivity of solid waste and recycling. Customers have asked us to go here.

Strategically the reason that were into this business is because of the connectivity of solid waste and recycling customers have asked us to go here. They want a one stop shop. They want somebody who we now think we will have the leading set of products and services in the environmental services space to serve our customers. So the cross sell opportunities to become a media and.

Speaker 4: They want a one-stop shop. They want somebody who we now think we will have the leading set of products and services in the environmental services space to serve our customers. So the cross-sell opportunities become immediate. And we've seen that with ACV and any other previous acquisition that we've done in this space. We talked about the follow-on acquisitions, and that's what we're doing.

We've seen that with ACD in any other previous acquisition that we've done in this space and we talked about the follow on acquisitions in that being a real opportunity. We think there are really interesting capital investment opportunities on the post collection side of that business that allow us to compete more broadly across <unk>.

Speaker 4: We think there are really interesting capital investment opportunities on the post-collection side of that business that allow us to compete more broadly across incineration, some other parts of the value chain we're excited about.

<unk> from other parts of the value chain. We're excited about and then we will bring our skill and capability of revenue management to the table understanding that there is no work for free. So we'll look at every individual job that we do and make sure. There is sufficient returns on that over time again that becomes important to allow us to pay our people into.

Speaker 4: And then, we will bring our skill and capability of revenue management to the table, understanding that there is no work for free. So we'll look at every individual job that we do and make sure there's sufficient returns on that over time. Again, that becomes important to allow us to pay our people and to reinvest in the business. And we haven't quantified any of those yet, right, because we're thinking concentrated on hopefully closing this transaction and integrating our colleagues, but we think there's a lot of upside over.

Best in the business and we haven't quantified any of those yet right, because we're big and concentrated and hopefully closing this transaction and integrating our colleagues, but we think theres a lot of upside over time.

Speaker 9: Great colour. My second question here is on scalability of future acquisitions, solid waste versus the environmental services side. Is that a more scalable integration of future acquisitions?

Great color and then my second question here is on.

Scalability of future acquisitions.

Solid waste versus.

The environmental services side.

Is it farmers.

That a much more scalable.

We're integration of <unk>.

Acquisitions future acquisitions.

Speaker 9: is better. It's easier to integrate. It's more upside. Is it rather that way on solid waste more so?

It is better it's easier to integrate its much more upside is it.

That way on solid waste more so.

Speaker 9: I'm looking to gauge where your opportunity set and incremental dollar will be spent now if there's a lot bigger opportunity in one of the buckets through acquisitions than the other.

I'm looking to gauge where your opportunity set an incremental dollar will be spent now if if there is a lot bigger opportunity and what are the buckets through acquisitions than the other one.

Speaker 4: Well, I think the great news is that we're not capital constrained, right? So that we don't have a dollar and choose where to put it. Again, we look strategically, where is the fit? And does it meet our discipline returns criteria? And then if it's both, we invest in both over time. I think.

Well I think the great news is that we're not capital constrained right Bill that we don't have a dollar and choose where to put it again, we look strategically.

<unk>, whereas the fit and does it meet our disciplined returns criteria and then if it's both we invest in both over time I think the space looks very similar to what solid waste and recycling look like a decade or more ago, where there's a lot of fragmentation and we've already seen this rolling in smaller.

Speaker 4: The space looks very similar to what solid waste and recycling look like, you know, a decade or more ago where there's a lot of fragmentation and we've already seen this rolling in smaller players, right, provides a ton of synergy and we've got a pipeline that we see sometimes building on a regional footprint, sometimes it's adding, even further adding to our product and service offering that will be great fits and our pipeline and acquisitions is robust on both fronts. Got it.

Players provides a ton of synergy and we've got a pipeline.

We see some sometimes building on our regional footprint, sometimes it's adding even further adding to our product and service offering that will be great fit and our pipeline on acquisitions is robust robust on both fronts got it. Okay. I appreciate the time. Thank you.

Speaker 1: Our next question comes from Sean Eastman with KeyBank Capital Markets. Please go ahead.

Our next question comes from Sean Eastman with Keybanc capital markets. Please go ahead.

Speaker 10: Thanks for taking my questions. I just wanted to make sure I understand the price versus underlying inflation expectations over the course of the year.

Hi, James Thanks for taking my question.

I just wanted to make sure I understand the price versus underlying inflation expectations over the course of the year. So.

Speaker 10: You know, if we're expecting 60 to 70 bps of margin expansion from pricing ahead of cost inflation, the average yield guidance is 3.4%. Does that mean we have 2.75% inflation kind of assumed? Or maybe just help me understand those assumptions.

If we're expecting 60 to 70 bps of margin expansion from pricing ahead of cost inflation. The average yield guidance is three 4% does that mean, we have $2 seven 5% inflation kind of assumed or.

Maybe just help me understand that that those assumptions.

Speaker 7: Yeah, so Sean, remember, one of the things you have to remember when we disclose average yield, we're using total revenue as the denominator. So when you take a look about where we price and you look in that, that, that solid waste business, if you did it on related business, it actually would be 70 basis points higher than our 2021 performance and about 20 to 30 basis points higher than on total revenue.

Yes, so Sean remember one of the things you have to remember when we disclose average yields were using total revenue as the denominator. So when you take a look about where we price and you look in that solid waste business. If you did it on related business. It actually would be 70 basis points higher than our 2021 performance in <unk>.

20 to 30 basis points higher than on total revenues. So that's the way you have to put it into context of the three or four you got to make 36 or three seven call. It based on related revenues and you look at that pricing in excess of cost inflation that would imply closer to a 3% inflation cost inflation.

Speaker 7: So that's the way you have to put it into context. So the 3-4, you got to make 3-6 or 3-7. Call it based on related revenues. And you look at that pricing in excess of cost inflation, that would apply closer to a 3% inflation, cost inflation.

Speaker 4: Okay, very helpful kind of wage and benefit number. There's probably slightly higher. Keep in mind, we're not talking a lot about it, but we're still getting a lot of productivity benefits to rise. And that's 1 of the great stories through the pandemic is it's allowed us to take keep paying our people as their bills go up while managing the cost structure, because we're just getting more efficient at that.

Okay, that's very helpful.

Kind of wage and benefit number and theres, probably slightly higher keep in mind, we're not talking a lot about it but we're still getting a lot of productivity benefits to rise.

That's one of the great stories through the pandemic as it has allowed us to keep paying our people as their bills go up while managing the cost structure, because we're just getting more efficient at the work.

Okay, great great, Yes, I am glad we are fleshed that out very helpful.

Speaker 10: Okay, great, great. Yeah, I'm glad we fleshed that out. Very helpful.

And.

Speaker 10: Maybe just on U.S. ecology, in light of your comments around...

Maybe just on U S oncology and in light of your comments around.

Speaker 10: you know, environmental solutions being less capital intensive, but also mentioning that there are some interesting CapEx.

Environmental solutions being less capital intensive, but also mentioning that there are some interesting capex.

Speaker 10: opportunities around this particular acquisition. I mean, you know, and then there's been a, seems like there's been a lot of noise around the US ecology.

Opportunities around this particular acquisition.

And then theres been a it seems like theres been a lot of noise around the U S ecology capital spending historically, so I mean, what should we expect as a baseline and then sort of variability around capex from U S oncology.

Speaker 7: capital spending historically, so, I mean, what should we expect as a baseline and sort of variability around CapEx from U.S. ecology? Yeah, look, I think there's been some elevated capital with respect to building out, right, some landfill. So, through the cycle, we would expect the CapEx to run circa 9% of revenue or so on that business.

Yes look I think there's been some.

Elevated capital with respect to building out right.

Some landfill so through the cycle, we would expect the capex to run circa 9% of revenue or so on that business and again, it's going to be less than that and that 4% to 5% range on the field services piece and a little bit more on that waste solutions piece.

Speaker 7: And again, it's gonna be less than that in that four to 5% range on the field services piece and a little bit more on that waste solutions piece. But on average, call it about nine.

But on average call it about nine.

Okay, Alright excellent thanks, guys.

Okay.

Speaker 1: Our next question comes from Angela Mazari with Jeffries. Please go ahead.

Our next question comes from Ken <unk> with Jefferies. Please go ahead.

Speaker 11: Hey, thank you very much. I just had a question around as you think about synergies on revenue from has waste and solid waste.

Hey, Thank you very much just had a question around.

As you think about synergies.

On revenue from has wished and solid waste do you have a sense of how many customers can subscribe to sort of both services and then also you know.

Speaker 11: Do you have a sense of how many customers?

Speaker 11: can subscribe to sort of both services and then also, you know, in the past.

In the past.

Speaker 11: You know, there's been people that have looked at medical waste and solid waste together, and that hasn't quite worked out.

There's been people that have looked at medical waste and solid waste together and that hasn't worked quite worked out whats different about this space do you have a lot of manufacturing customers that sort of.

Speaker 11: What's different about this space? Do you have a lot of manufacturing customers that sort of?

Speaker 11: are asking you to do both. Just give us a sense of revenue synergies. You don't have to quantify it. Just help us.

Asking you to do both.

Just give us a sense of revenue synergies you don't have to <expletive> supplier just.

Just help us understand that.

Speaker 4: Yeah, so I think versus your previous thesis, I think when you start with this sounds like an interesting bundle, let me try to go sell it, right? That may or may not work, right? We start with asking the customer what they want, what they need, and how they want to buy, and have worked our way back into this. So it's true certainly for our broad set of industrial customers, right, who produce an ongoing recurring set of waste streams.

Yeah, So I think versus.

Versus your previous thesis I think when you start with this sounds like an interesting bundled let me try to go sell it that may or may not work right. We start with asking the customer what they want what they need and how they want to buy and have worked our way back into this so yes. It is true certainly for a broad set of industrial customers.

Alright, who produce an ongoing recurring set of waste streams.

Speaker 4: And this really has accelerated over the last decade. They want fewer people into their plant. And second, they're taking a very hard look at the sustainability footprint of their supply base. That's a big part of their...

And this really has accelerated over the last decade, they want fewer people into their plant.

And second there look taking a very hard look at the sustainability footprint of their supply base right. That's a big part of their <unk>.

Speaker 4: sustainability story and so people who have the ratings we have, who have the record we have become really meaningful for them.

Sustainability story, and so people who have the ratings, we have who have the record we have become really meaningful for them.

Speaker 4: And keep in mind, we're still a very, very small percentage of their overall cost drop.

And keep in mind, we're still a very very small percentage of their overall cost structure. So the idea that they'd be willing to pay a little bit more for somebody who can handle their needs compliant Lee and provide the speed they need right. That's the value proposition and that's what we've seen proven out with the ACB transaction immediately.

Speaker 4: So the idea that they'd be willing to pay a little bit more for somebody who can handle their needs compliantly and provide the speed they need, that's the value proposition. And that's what we've seen proven out with the ACV transaction immediately. And we think we'll get that just at a much bigger scale with the US Ecology transaction. It also applies to some event type work.

Right and we think we'll get that just had a much bigger scale with a U S ecology transaction. It also applies to some.

Event type work when you think about the infrastructure Bill and brownfield sites elimination of the same thing you are a contractor there who's really unwise to understand speed and a single provider that can handle all of the different waste streams becomes a really big strategic advantage.

Speaker 4: Are you thinking about the infrastructure bill and brownfield sites, remuneration? The same thing. You have a contractor there who really wants to understand speed. And a single provider that can handle all the different waste streams becomes a really big strategic advantage.

Speaker 11: Got it. So, you know, can you give us a sense of post US ecology? What is your market share and has waste and where do you think it can go? And do you do you do? I know US ecology is heavy on landfills. They're heavy on event work.

Got it got it so can you give us a sense of post U S ecology.

What is your market share and has waste and where do you think that can go and do you view.

U S ecology is heavy on land sales.

Do you want to event work.

Speaker 11: They have this NRG business that they over-leveraged to buy. How are you thinking about the portfolio? Does incineration matter or not? Does hazardous waste landfills mean more? Is NRG a good business? Just walk us through how you're thinking about the portfolio because they do have a few businesses.

They have this NRG business that they are over levered to buy.

What how are you thinking about the portfolio does incineration murder, our knocks it does has waste landfills mean more.

NRG a good business I, just just walk us through like how you are thinking about the portfolio because they do have a few businesses and how's. He asked is obviously a very big market.

Speaker 11: And HazWaste is obviously a very big market that has a number of other players and also their captive incinerators. It's very different than SolidWaste as you obviously already know.

<unk> has a number of other players and also the captive incinerators.

It's very different than solid waste as you obviously you already know.

Speaker 4: Yeah, sure. So, I mean, it starts with their historic business, which was really on the post-collection hazardous landfill side. And they have TSDFs and 10-day plans and other things around that, but those five sites.

Yeah sure. So I mean, it starts with their historic business, which was really on the post collection hazardous landfills side and they are <unk> and advanced and other things around that but those five sites right give them about a 36% market share position in <unk>.

Speaker 4: Give them about a 36% market share position and hazardous post collection. That's been the strength of their business.

<unk> is post collection right that's been the strength of their business.

Speaker 4: really, really strong and we're excited about that.

Really really strong and we're excited about that they bought a company called NRC, which has largely field services, which are the thesis of which is getting closer to the customer.

Speaker 4: They bought a company called NRC which has largely field services, which is the thesis of which is getting close to the customer.

Speaker 4: We believe and agree with that thesis, right? And we've seen that and proved that out, that that works.

We believe and agree with that thesis right and we've seen that and prove that out that that works right. There with the ACB deal and we see that in our Gulf Coast region as well over time.

Speaker 7: We're there with the ACV deal and we see that in our Gulf Coast region as well over time.

Speaker 4: That NRC transaction brought with it a couple of other types of businesses. They've got a little bit of business in Europe , and they've got some things, a marine standby business, which really focuses on oil spill recovery.

The NRC transaction brought with it a couple of other types of businesses, they've got a little bit.

Business in Europe , and they've got some things marine standby business drove focuses on oil spill recovery.

Speaker 4: But those are things that we'll go in and clearly take a look at and evaluate and understand, hey, what is the, what's the fit with the rest of the business? Is it connected from a customer standpoint, from an asset sharing standpoint? I take a very fair view of, is this something we think we can build and grow, we'll be excited about it, or if this is something that might be a little more standalone and not very scalable and somebody else might be the more natural owner of that, we'll of course evaluate that as well.

Those are things that will go into clearly take a look at any evaluate and understand hey, what is the what's the fit with the rest of the business as it connected from a customer standpoint from an asset sharing standpoint.

A very fair view of is this something we think we can build and grow will be excited about it or if this is something that might be a little more standalone and not very scalable and somebody else might be the more natural owner of that will of course evaluate that as well.

Got you that's very clear thank you so much.

Speaker 1: Our next question comes from Kevin Chang with CIBC. Please go ahead.

Our next question comes from Kevin Chiang with CIBC. Please go ahead.

Speaker 12: Megan, thanks for taking my question here. Maybe I could ask, you talked about some of these revenue synergies as you build up your environmental solutions, capabilities, the vertical integration, I guess you spoke a little bit about this.

Thanks for taking my question here.

After that.

Talked about.

Some of these revenue synergies as you build up your environmental solutions.

Mobility with vertical integration.

I guess, you spoke a little bit about that.

What does the customer get out of that it sounds like you might give them better service under one umbrella and maybe just.

Speaker 12: What does a customer get out of it? It sounds like you might give them better service under one umbrella, and maybe it's just not clear to me why that would be, but do they also get like a cost savings? Like does a bundled program offer a level of pricing discount that they wouldn't get if they were using two different vendors, just, what else does a customer get out of this, having this all come out of Republic versus maybe dealing with U.S. Ecology and Republic separately?

Clear to me why that would be.

<unk> also got little cost savings like the bundled program offer them a level of pricing discount, but that wouldn't get up into two different vendors.

What else does the customer get out of the hub.

Putting this all come out of Republic versus moving to U S oncology and Republic separately website.

Speaker 4: Yeah, I know the thesis and it's true in some industries where hey, the more you put together, the more you bundle, the more price pressure you could be under. And we see this in our business today, actually, that the more products a customer and services a customer buy, the average price per product or service goes up, not down.

Yes, I know the thesis that it's true in some industries. We're ahead of the more you put together the more you bundle the more price pressure you could be under and we see this in our business today actually that the more products the customer and services a customer by the average price per product and service goes up not down.

Speaker 4: And keep in mind, waste and recycling broadly are a very, very, very small portion of a customer's cost structure.

And keep in mind waste and recycling broadly are they.

Very very very small portion of our customers' cost structure, if you will.

Speaker 4: If you run a manufacturing facility, you think first about all of your direct costs. Could be steel or copper, anything else. And then you think about your labor. And then you think about your SG&A costs of IT and everything else.

Run a manufacturing facility you think first about all of your direct costs could be steel or copper anything else and when you think about your labor and then you think about your SG&A cost of it and everything else waste and recycling rate, we're talking about basis points right on some of the overall cost structure. So a small price premium on it.

Speaker 4: Waste and recycling, right, we're talking about basis points, right, of someone's overall cost structure.

Speaker 4: So a small price premium on a very small number is still a very, very small number. So for them, it's around compliance, right? Think about producer liability.

Very small number is still a very very small number so for them. It's around compliance rate think about producer liability right. When they produce a waste stream, especially more complex and complicated one they have the liability of that forever. So having somebody who is going to handle that in a sustainable and appropriate manner is of enormous value them.

Speaker 4: When they produce a waste stream, especially more complex and complicated ones, they have the liability of that forever. So having somebody who is going to handle that in a sustainable and appropriate manner is of enormous value.

Speaker 4: The speed, right, of being able to get things out of their facility and keep the container empty because a full container can sometimes shut down the manufacturing process. So there's enormous value created by speed, ease of service, right, digital interface and billing. And those are all pieces that we start to put together for people. So that's the value proposition.

The speed of being able to get things out of their facility and keep the container empty because a bulk container can sometimes shutdown the manufacturing process. So there's enormous value created by speed ease of service right digital interface and billing and those are all pieces that we start to put together.

For people so that's the value proposition for customers.

Speaker 12: That's a great clarification answer and as you know, compliance has got to be a big part of the value proposition. My second question, maybe it's more of a philosophical question, but the industry, and you're seeing it yourself, you're getting strong pricing, you're covering your inflation, the churn of that.

No that's it.

Great clarification downturn.

As you know the components of that.

A big part of the value proposition.

Second question, maybe it's more of a philosophical question, but the industry.

You are seeing yourself getting strong pricing covering inflation the churn is that.

Speaker 12: at record lows as well, so you kind of get best of both worlds. But I guess what churn level would force you to reevaluate your pricing strategy? You said you're at 95 percent. I think it's a Q4 number. At what point or at what level of churn would you rethink the pricing you're putting out into the market in order to maintain a certain level of market share?

Record low those wells and kind of dip.

Best of both worlds, but.

What churn level would force you to re evaluate your pricing strategy.

Sort of a 95%.

It was a Q4 number.

At what point or what level of churn.

The pricing, we're putting out into the market in order to maintain.

A certain level of market share or volume.

Speaker 4: Well, we look at that all the time, right? We understand the, and we have a very sophisticated pricing, both pricing new customers as well as pricing existing customers, and the latter becomes more important for us, obviously, because we have such a long customer tenure, right? That's what that high customer attention drives, or underneath that is long customer tenure. And so we have all kinds of experiences with customers around test and learn, right? We take A and B sampling in terms of understanding a price that customers are willing to

Well, we look at that all the time right, we understand the and we're very sophisticated pricing both pricing new customers as well as pricing existing customers in the latter becomes more important for us obviously, because we have such a long customer tenure right that is what that high customer retention drives are underneath that is <unk>.

Loan customer tenure, and so we have all kinds of experiences with customers around test and learn right. We take A&P sampling in terms of understanding our price that customers are willing to pay.

Speaker 4: Pay and then at what price does that start to drive turn right and start to drive defection? And there's an incredible amount of science underneath that process that's been developed over the last two decades So it's really not the top-down number. We look at and if we go 92 We change pricing across the board or the opposite direction, right? It's much more surgical almost at a customer by customer level, right? And that's what produces the you know pricing number while driving great volume growth Well, that's that's clear

And then at what price does that start to drive churn.

To drive defection and Theres, an incredible amount of science underneath that process. That's been developed over the last two decades. So it's really not a top down number we look at and if we go 92, we changed pricing across the board or the opposite direction right. It's much more surgical almost a customer by customer level right and Thats what <unk>.

<unk>, the pricing number well driving great volume growth.

Okay. That's helpful. Thank you very much for taking my question.

Speaker 1: Our next question comes from David Manthi with Baird. Please go ahead.

Our next question comes from David Manthey with Baird. Please go ahead.

Yes, thank you very much.

Speaker 4: Yeah, thank you very much. Two quick ones here.

Two quick ones here.

Speaker 7: John , you mentioned at the beginning something about forward integrating into the plastic supply chain. Could you tell me what that means? I'm completely clueless about that. And 2nd.

John You mentioned at the beginning something about forward integrating into the plastics supply chain could you tell me what that means are completely clueless about that and second on.

Speaker 7: On the Eco deal, it looks like margins, free cash flow and returns are lower than Core Republic are out of the box here.

The <unk> deal.

It looks like margins free cash flow and returns are lower than core Republic right out of the box here.

Speaker 7: Organic growth may be a little bit more attractive, and the platform for bolt-on acquisition seems to be one of the best attributes of it. Could you just compare and contrast?

Organic growth, maybe a little bit more attractive than the platform for bolt on acquisition that seems to be one of the best attributes of it.

Could you just compare and contrast.

Speaker 7: sort of the pipeline at E-Call, as you've gone through your due diligence, talk to them about deals, versus what you know about the average MSW deal.

Sort of the pipeline at equal as you've gone through your due diligence talk to them about deals versus what you know about the average.

W deal.

Speaker 4: Yeah, sure. So on plastics within the world, has a single-use plastics problem, right? And you don't have to read too many.

Yes, sure so on plastics within the World has a single use plastics problem right and you don't have to read too many.

Speaker 4: websites, or magazines, or watch too many television shows to figure that out. Now, it's very different, nature of those problems is very different across geography. But in the U.S., the problem is, right, circularity, right? We produce single-use water bottles or anything else and we don't capture enough of those.

Websites, our magazines are watching TV shows to figure that out now.

Different nature of those trials is very different across geography.

The problem is circularity, we produce single use water bottles or anything else and we don't capture enough of those.

Speaker 4: And, you know, that plastic ultimately gets lost or gets downgraded, right? And there's huge pressure on the CPG companies to drive more reusable product rather than just using virgin plastic.

And that plastic ultimately gets lost or get downgraded right and there is a huge pressure on the CPG companies to drive more reusable product.

And rather than just using Virgin plastic.

Speaker 4: And the constraint in all this is aggregation and supply. And so we are uniquely positioned in the value chain because we have that material. Today that value chain isn't very well constructed. So you have product that moves very inefficiently. We sell that product for a relatively low value for what it's ultimately worth when it returns into the hands of the CPG company.

And the constraint and all of this is aggregation and supply.

And so we are uniquely positioned in the value chain, because we have that material.

Today that value chain is it very well constructed so you have product that moves very inefficiently, we sell that product for a relatively low value for what it's ultimately worth when it returns into the hands of the CPG companies. So.

Speaker 4: A lot of dialogue, a lot of discussion going on across every stage of the value chain. But we think we've got an opportunity to take a next step.

A lot of dialogue lot of discussion going on across every stage of the value chain right, but we think we've got an opportunity to take a next step and.

Speaker 4: and move forward with some pretty simple processing that is going to allow us to capture a higher selling price and take more volatility out of those sales.

And move forward with some pretty simple processing that is going to allow us to capture a higher selling price and take more volatility out of those sales through longer term contracting I am not going to get into any more detail.

Speaker 4: through longer term contracting. I'm not going to get into any more detail right now than that, but stay tuned here because I think in the next few months you're going to hear far more color on that.

Right now than that but stay tuned here because I think in the next few months, you're going to hear far more color on that topic.

Speaker 4: And then on US Ecology, listen, we have a really robust and capable business development team, both out and geographically dispersed as well as here in Florida.

And then on U S ecology listen we have a really.

Robust and capable business development team.

And geographically dispersed as well as here in Phoenix that maintains a perspective on every company big and small and builds a pipeline. So we've been working on this for years on the environmental solutions side of the business and have we're very disciplined buyers.

Speaker 4: that maintains a perspective on every company, big and small, and builds a pipeline. So we've been working on this for years on the environmental solution side of the business, and we're very disciplined buyers.

Speaker 4: Very patient, but we've had discussions with dozens of companies. So this isn't talking to U.S. Ecology and saying, what's in your pipeline? Of course, we'll do that, but we have our own robust pipeline that we know will fit in well to the U.S. Ecology platform post-closing.

Very patient, but we've had discussions with dozens of companies. So this isn't talking to U S ecology, and saying what's in your pipeline of course, we'll do that but we have our own robust pipeline that we know will fit in well to the U S oncology platform right post closing.

Thank you very much.

Speaker 1: At this time, there appear to be no further questions. Mr. Vander Ark, I'll now turn back over to you for closing remarks.

At this time.

No further questions. Mr. Balbo I'll now turn back over to you for closing remarks.

Speaker 4: Thank you, Sarah. In closing, the strength of our 2021 performance demonstrates the power of our platform and the value our strategic investments are creating.

Thank you Sarah in closing the strength of our 2021 performance demonstrates the power of our platform and the value of our strategic investments are creating.

Speaker 4: We exceeded our upwardly revised financial goals by delivering double-digit growth in revenue, EBITDA, EPS, and free cash flow.

We exceeded our upwardly revised financial goals by delivering double digit growth in revenue EBITDA, EPS and free cash flow.

Speaker 4: We continue to manage the business well to create long-term value for all stakeholders and expect continued profitable growth in 2022.

We continue to manage the business well to create long term value for all stakeholders and expect continued profitable growth in 2022.

Speaker 4: I would like to thank all our employees for their continued hard work and commitment to our customers.

I would like to thank all our employees for their continued hard work and commitment to our customers.

Speaker 4: Results like these are made possible by our team of dedicated employees. Have a good evening and be...

Results like these are made possible by our team of dedicated employees have a good evening and be safe.

Speaker 1: Ladies and gentlemen, this concludes the conference call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, this concludes the conference call.

Thank you for attending you may now disconnect.

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Speaker 1: Good afternoon and welcome to the Republic Services fourth quarter 2021 investor conference call. Republic Services is traded on the New York Stock Exchange under the symbol RSG. All participants in today's call will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

Good afternoon, and welcome to the Republic services fourth quarter 2021, Investor Conference call.

Public service it is traded on the New York stock exchange under the symbol our SK.

All participants in today's call will be in listen only mode.

Should you need assistance. Please signal conference specialist by pressing the star can you call it by email.

After today's presentation there'll be an opportunity to ask questions.

Speaker 1: To ask a question, you may press star, then 1 on your touch-tone phone.

To ask a question you May Press Star then one on your Touchtone phone.

Speaker 1: To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Stacy Matthews, Vice President of Investor Relief.

To withdraw your question. Please press Star then two please.

Please note this event is being recorded.

I'd now like to turn the conference over to Stacy Matthews, Vice President of Investor Relations.

Speaker 2: Hello, I would like to welcome everyone to our public services fourth quarter 2021 conference.

Hello, I would like to welcome everyone to Republic services fourth quarter 2021 conference call.

Speaker 2: John Vander Ark, our CEO , and Brian DelGaccio, our CFO , are joining me as we discuss our

Jon Vander Ark, our CEO and Brian <unk>, our CFO are dreaming as we discuss our performance.

Speaker 2: I'd 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 FCC filings discuss factors that could cause actual results to differ materially from expectations.

I'd 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.

Speaker 2: The material that we discussed today is time sensitive. If in the future you listen to a rebroadcast or recording of this conference call, you should be sensitive to the date of the original call, which is February 10th, 2022.

The material that we discuss today is time sensitive if in the future you listen to a rebroadcast or recording of this conference call you should be sensitive to the date of the original call, which is February 10 2022.

Speaker 2: Please note that this call is the property of Republic services.

Please note that this call is the property of Republic services, Inc. Any redistribution retransmission or rebroadcast of this call in any form without the expressed written consent of Republic services is strictly prohibited.

Speaker 2: Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of our public services is strictly our responsibility.

Speaker 2: I want to point out that our FCC filings are earning press release, which includes gap reconciliation too.

I want to point out that our SEC filings our earnings press release, which includes GAAP reconciliation tables.

Speaker 2: and a discussion of business activities, along with a recording of this call, are all available on Republic's website at republicservices.com.

In the discussion of business activities, along with a recording of this call are all available on Republic's website at Republic services Dotcom.

Speaker 2: I want to remind you that Republic's management team routinely participates in investor conferences.

I want to remind you that republic's management team routinely participates in investor conferences. When events are scheduled the dates times and presentations are posted on our website with that I'd like to turn the call over to John Thanks, Stacy and good afternoon, everyone and thank you for joining us.

Speaker 2: When events are scheduled, the dates, times, and presentations are posted on our website. With that, I'd like to turn the call over to John . Thanks, Stacey. Good afternoon, everyone, and thank you for joining.

Speaker 4: Our fourth quarter performance capped off a very strong year of financial results and operational execution.

Our fourth quarter performance capped off a very strong year of financial results and operational execution.

Speaker 4: We outperformed expectations throughout the year and exceeded the high end of our upwardly revised guidance.

We outperformed expectations throughout the year and exceeded the high end of our upwardly revised guidance.

During 2021.

Speaker 4: We generated adjusted earnings per share of $4.17, which increased 17% over the prior year.

We generated adjusted earnings per share of $4, <unk>, which increased 17% over the prior year.

Speaker 4: Produced $1.52 billion of adjusted free cash flow, which increased 23% over the prior year.

Produce $152 billion of adjusted free cash flow, which increased 23% over the prior year.

Speaker 4: Expanded EBITDA margin 60 basis points to 30 percent.

Expanded EBIT margin 60 basis points to 30%.

Speaker 4: Improved free cash flow conversion 350 basis points to 44.8%.

Improved free cash flow conversion and 350 basis points to 44, 8% in.

Speaker 4: and increase customer retention rates to an all-time high of 95%.

And increased customer retention rates to an all time high of 95%.

Speaker 4: Profitable growth remains our strategic priority, and we continue to believe that investing in acquisitions is the best use of free cash flow to create long term value.

Profitable growth remains our strategic priority and we continue to believe that investing in acquisitions is the best use of free cash flow to create long term value.

In 2021, we invested over $1 billion of acquisitions to further enhance our market position and increase free cash flow.

Speaker 4: In 2021, we invested over a billion dollars in acquisitions to further enhance our market position and increase free cash flow.

Speaker 4: This is the highest level of acquisition investment in over a decade.

This is the highest level of acquisition investment in over a decade.

Our acquisition pipeline remains robust with opportunities in recycling and solid waste and environmental solutions.

Speaker 4: Our acquisition pipeline remains robust with opportunities in recycling and solid waste and environmental solutions. Yesterday we announced our

Yesterday, we announced our agreement to acquire U S ecology.

Speaker 4: This acquisition propels Republic into a leading position in the environmental solutions space.

This acquisition propels Republic into a leading position in the environmental solutions space and.

Speaker 4: and as a platform of high-quality assets and difficult-to-replicate infrastructure.

And as a platform of high quality assets and difficult to replicate infrastructure.

Speaker 4: I will discuss this strategic acquisition in more detail before we open up the call for Q&A.

We'll discuss this strategic acquisition in more detail before we open up the call for Q&A.

In addition to investing in acquisitions, we returned $800 million to our shareholders through dividends and share repurchases.

Speaker 4: In addition to investing in acquisitions, we returned $800 million to our shareholders through dividends and share repurchase.

Yes.

Speaker 4: We delivered outsized growth and profitability by executing our strategy.

We delivered outsized growth and profitability by executing our strategy. Our strategy is supported by three differentiating capabilities customers deal digital and sustainability.

Speaker 4: Our strategy is supported by three differentiating capabilities, customer zeal, digital and sustainability.

Speaker 4: With respect to customer zeal, our customer retention rates remain at a record-setting level of 95%, and NPS remains well above pre-pandemic scores.

With respect to customer ziel, our customer retention rate remained at a record setting level of 95% and NPS remains well above pre pandemic scores.

Speaker 4: During the fourth quarter, we delivered outsized revenue growth throughout the business.

During the fourth quarter, we delivered outsized revenue growth throughout the business.

Speaker 4: Core price reached an all-time high of 5.4% and average yield increased to 3.4%.

Core price reached an all time high of five 4% and average yield increased to three 4%.

Speaker 4: Volumes increased 3.6% compared to the prior year.

Volumes increased three 6% compared to the prior year and.

Speaker 4: And acquisitions contributed an incremental 490 basis points to total revenue growth.

And acquisitions contributed an incremental 490 basis points to total revenue growth.

Speaker 4: Full-year combined yield and volume of 6.7% was the highest level in company history and over 200 basis points above the next highest year of performance.

Full year combined yield and volume of six 7% was the highest level in company history and over 200 basis points above the next highest year of performance.

Turning to digital.

Speaker 4: We continue to make meaningful progress on the rollout of the next phase of the RISE platform.

We continue to make meaningful progress on the rollout of the next phase of the rise platform.

Speaker 4: We have now implemented tablets in approximately 90% of our large and small container fleets.

We have now implemented tablets and approximately 90% of our large and small container fleet.

Speaker 4: With these new capabilities, we generated operational efficiencies and delivered over 1 million automated proactive notifications to customers last year.

With these new capabilities, we generated operational efficiencies and delivered over 1 million automated proactive notification to customers last year.

Speaker 4: We will begin deploying tablets to the residential fleet early this year and expect to be complete by mid-2023.

We will begin deploying tablets to the residential fleet early this year and expect to be complete by mid 2023.

Next turning to sustainability.

Speaker 4: We continue to partner with developers to capitalize on landfill gas-to-energy opportunities.

We continue to partner with developers to capitalize on landfill gas to energy opportunities we.

Speaker 4: We expect four of these projects to be completed this year, with another 14 in our pipeline expected to be completed over the next couple of years.

We expect for these projects to be completed this year with another 14 in our pipeline expected to be completed over the next couple of years.

Speaker 4: We see an opportunity for another 40 projects beyond the current pipeline.

We see an opportunity for another 40 projects beyond the current pipeline.

Speaker 4: We're also making recycling investments beginning in 2022 to forward integrate in the plastics value chain.

We are also making recycling investments beginning in 2022 to forward integrate in the plastics value chain.

Speaker 4: These investments will provide a platform for future revenue growth with attractive returns and drive a more sustainable world.

These investments will provide a platform for future revenue growth with attractive returns.

And drive a more sustainable world for future generations.

Speaker 4: We will absorb these investments with our normal level of capital spending.

We will absorb these investments within our normal level of capital spending.

Speaker 4: Our sustainability performance continues to be well-regarded, as Republic Services was named to the Dow Jones Sustainability Index for the sixth consecutive year.

Our sustainability performance continues to be well regarded as Republic services was named to the Dow Jones sustainability index for the sixth consecutive year.

Speaker 4: Additionally, our MSCI ESG rating was upgraded to an A, which is the highest rating in our industry.

Additionally, our MSCI ESG rating was upgraded to AA, which is the highest rating in our industry.

Speaker 4: One of the primary factors leading to the upgrade was an increase in our human capital management score. This reflects our strong culture that embraces inclusion and diversity.

One of the primary factors leading to the upgrade was an increase in our human capital management score. This.

This reflects our strong culture that embraces inclusion and diversity.

These strong financial and operational results will not have been possible without our dedicated employees.

Speaker 4: These strong financial and operational results would not have been possible without our dedicated employees.

Speaker 4: In appreciation of their hard work throughout the pandemic, we paid each frontline employee $500 Committed to Serve Award in the fourth quarter.

And appreciation of their hard work throughout the pandemic, we paid each frontline employees $500 committed to serve award in the fourth quarter combined.

Speaker 4: Combined with the award paid in January of 2021, our frontline employees received an additional $1,000 during the year.

Combined with the award paid in January of 2021, our frontline employees received an additional $1000 during the year.

Speaker 4: This brings our total support provided through our committed to serve initiative to $50 million since the beginning of the pandemic.

This brings our total support provided through our committed to serve initiative to $50 million since the beginning of the pandemic.

Speaker 4: The strength of our 2021 results clearly demonstrates our ability to create sustainable value and provides the foundation from which we will continue to grow.

The strength of our 2021 results clearly demonstrates our ability to create sustainable value and provides the foundation from which we will continue to grow that.

Speaker 4: That said, we expect another strong year of performance in 2022.

That said, we expect another strong year performance in 2022.

Speaker 4: Specifically, we expect to deliver adjusted earnings per share in a range of $4.58 to $4.65.

Specifically, we expect to deliver adjusted earnings per share in the range of $4 58 to $4 65.

Speaker 4: and generated adjusted free cash flow in the range of $1.625 billion to $1.675 billion.

And generated adjusted free cash flow in the range of $1 65 billion to $1 $6 75 billion.

This represents high single digit to low double digit growth over our 2021 performance.

Speaker 4: This represents high single-digit to low double-digit growth over our 2021 performance.

Speaker 4: It's important to note that this guidance, as well as any assumptions we discussed in today's call, do not contemplate the impact from a pending acquisition of U.S. ecology.

It is important to note that this guidance as well as any assumptions we discussed in today's call do not contemplate the impact from our pending acquisition of U S ecology.

Speaker 4: We will provide updates to our guidance if needed once the transaction closes.

We will provide updates to our guidance if needed once the transaction closes I will now turn the call over to Brian . Thanks, John .

Speaker 7: I will now turn the call over to Brian . Thanks, John . Core price during the fourth quarter was 5.4%, which included open market pricing of 7% and restricted pricing of 2.9%.

Core price during the fourth quarter was five 4%, which included open market pricing of 7% and restricted pricing of two 9% the.

Speaker 7: The components of core price included, small container of 8.6%

The components of core price included small container of eight 6% large container of five 6% and residential a four 8%.

Speaker 7: large container of 5.6% and residential of 4.8%.

Average yield was three 4%, which represents a 20 basis point increase from our third quarter performance.

Speaker 7: In 2022, we expect average yield of approximately 3.4%.

In 2022, we expect average yield of approximately three 4%.

Speaker 7: This is an increase of 50 basis points over our full year 2021 results. 4th quarter volume increase.

This is an increase of 50 basis points over our full year 2021 results.

Fourth quarter volume increased three 6%.

Speaker 7: The components of volume included an increase in small container of 4.6%, an increase in large container of 3.7%, and an increase in landfill of 6.7%.

The components of volume included an increase in small container of four 6% an increase in large container of three 7% and an increase in landfill of six 7%.

We expect organic volume growth in a range of one 5% to 2% in 2022, which remains well above our long term average.

Moving on to recycling.

Commodity prices were $218 per ton in the fourth quarter. This compares to $110 per ton in the prior year.

Speaker 7: Recycling, processing, and commodity sales contributed 110 basis points to internal growth during the fourth quarter.

Our recycling processing and commodity sales contributed 110 basis points to internal growth during the fourth quarter.

Speaker 7: We are assuming $187 per ton for recycled commodities in 2022, which is consistent with the full year 2021 average next turning.

We are assuming $187 per ton for recycled commodities in 2022, which is consistent with the full year 2021 average.

Next turning to our environmental solutions business.

Fourth quarter environmental solutions revenue increased $65 million from the prior year.

Speaker 7: Fourth quarter environmental solutions revenue increased $65 million from the prior year. This was driven by organic growth from increased activity and the contribution from acquisition.

This was driven by organic growth from increased activity and the contribution from acquisitions.

Speaker 7: On a same-store basis, Environmental Solutions contributed 20 basis points to internal growth during the fourth quarter.

On a same store basis, environmental solutions contributed 20 basis points to internal growth during the fourth quarter.

Speaker 7: Adjusted EBITDA margin for the fourth quarter was 28.1 percent. This compared to 29.9 percent in the prior year.

Adjusted EBITDA margin for the fourth quarter was 28, 1%.

This compared to 29, 9% in the prior year.

Speaker 7: Margin performance during the quarter was impacted by a 70 basis point headwind from higher incentive compensation.

Margin performance during the quarter was impacted by a 70 basis point headwind from higher incentive compensation expense, we expect incentive compensation expense will return to target levels.

Speaker 7: We expect incentive compensation expense will return to target level.

Speaker 7: Margin performance also included a 50 basis point dilutive impact from recent acquisitions, which included deal and transition costs.

Margin performance also included a 50 basis point dilutive impact from recent acquisitions, which included deal and transition costs.

Speaker 7: It should be noted that we pulled forward certain integration costs originally planned for 2022.

It should be noted that we pulled forward certain integration costs originally planned for 2022.

Speaker 7: The remaining impact to margin was primarily driven by a 50 basis point increase in risk management.

The remaining impact of margin was primarily driven by a 50 basis point increase in risk management costs.

Speaker 7: The current period includes a one-time true-up for an insurance captive that increased expense 20 basis points, and the prior year included a 30 basis point favorable reduction in reserves which did not repeat.

The current period includes a onetime true up for an insurance captive that increased expense 20 basis points in the prior year included a 30 basis point favorable reduction in reserves, which did not repeat.

Speaker 7: We expect risk management expense in 2022 to be relatively flat with our full year 2021 performance.

We expect risk management expense in 2022 to be relatively flat with our full year 2021 performance.

Speaker 7: For reference purposes, fourth-quarter margin performance at target levels of incentive compensation and excluding the one-time committed-to-serve payment would have been 29.4%.

For reference purposes fourth quarter margin performance at target levels of incentive compensation and excluding the one time committed to serve payment would have been 29, 4%.

Speaker 7: The remaining difference to prior year margin performance relates to the impact of recent activity.

The remaining difference to prior year margin performance relates to the impact of recent acquisitions.

Speaker 7: SG&A during the fourth quarter was 10.6% of revenue. This represents an increase of 60 basis points over the prior year, which was driven by higher incentive compensation approvals previously discussed.

SG&A during the fourth quarter was 10, 6% of revenue. This represents an increase of 60 basis points over the prior year, which was driven by higher incentive compensation accruals previously discussed.

Speaker 7: Full year 2021 EBITDA margin of 30% expanded 60 basis points compared to the prior year. This resulting from pricing levels in excess of cost inflation and effective cost management, which demonstrates our ability to gain operating leverage in the business.

Full year 2021, EBITDA margin of 30% expanded 60 basis points compared to the prior year this resulting from pricing levels in excess of cost inflation and effective cost management, which demonstrates our ability to gain operating leverage in the business.

Speaker 7: To put our operating leverage into context, we estimate wage inflation net of productivity was approximately 3%. Our average yield of 3.4% more than covered this level of cost inflation, which is why labor and maintenance were both down as a percentage of revenue for the fourth quarter and for the year.

To put our operating leverage into context, we estimate wage inflation net of productivity was approximately 3% our average yield of three 4% more than covered this level of cost inflation, which is wide labor and maintenance were both down as a percentage of revenue for the fourth quarter and for the year.

Speaker 7: In 2022, we expect EBITDA margin will continue to improve and are targeting margin expansion of 30 to 40 basis points over our full year 2021 performance.

In 2022, we expect EBITDA margin will continue to improve and are targeting margin expansion of 30 to 40 basis points over our full year 2021 performance the.

Speaker 7: The components of expected margin expansion include pricing in excess of cost inflation adding 60 to 70 basis.

The components of expected margin expansion include pricing in excess of cost inflation, adding 60 to 70 basis points and incentive compensation expense returning to target levels, adding 50 basis points.

Speaker 7: and incentive compensation expense returning to target levels, adding 50 bases.

Speaker 7: partially offset by acquisitions decreasing margin by 40 basis points, and net fuel decreasing margin by 40 basis points.

Partially offset by acquisitions decreasing margin by 40 basis points and net fuel decreasing margin by 40 basis points.

DD&A is a percentage of revenue was 11, 2% for the year.

We expect DD&A as a percentage of revenue of approximately 11, 5% in 2022.

Year to date adjusted free cash flow was 152 billion and increased $279 million or 23% compared to the prior year.

Speaker 7: This was driven by EBITDA growth in the business and a reduction in interest expense resulting from refinancing.

This was driven by EBITDA growth in the business and a reduction in interest expense, resulting from refinancing debt.

Speaker 7: Full year 2021 free cash flow conversion increased 350 basis points to 44.8%.

Full year 2021 free cash flow conversion increased 350 basis points to 44, 8%.

Speaker 7: We are targeting high 40% level conversion within the next couple of years.

We are targeting high 40% level conversion within the next couple of years.

Total debt was $9 6 billion and total liquidity was $2 8 billion our leverage.

Speaker 7: Total debt was $9.6 billion and total liquidity was $2.8 billion.

Ratio was two nine times.

Speaker 7: With respect to taxes, our combined tax rate and non-cash charges from solar investments resulted in an equivalent tax impact of 24% during the fourth quarter. This was in line with our expectations and resulted in a 26% equivalent tax impact for the year.

With respect to taxes, our combined tax rate and noncash charges from solar investments resulted in an equivalent tax impact of 24% during the fourth quarter. This was in line with our expectations and resulted in a 26% equivalent tax impact for the year.

We expect an equivalent tax impact of 26% in 2022 made up of an effective tax rate of 21% and approximately $120 million of noncash charges from solar investments, Let me now turn it back over to John .

Speaker 7: We expect an equivalent tax impact of 26% in 2022, made up of an effective tax rate of 21%, and approximately $120 million of non-cash charges from solar investments.

Speaker 4: Thanks, Brian . Before I open up a call, let me provide a little more color on our recent...

Thanks, Brian before we open up the call let me provide a little more color on our recent announcements.

Speaker 4: With the addition of US Ecology's national footprint of vertically integrated assets, leading disposal infrastructure, and comprehensive capabilities, we are better positioned to serve our customers with one of the most complete sets of products and services.

With the addition of U S ecology has a national footprint of vertically integrated assets, leading disposal infrastructure and comprehensive capabilities, we are better positioned to serve our customers with one of the most complete set of products and services.

Speaker 4: This strategic acquisition provides a platform for additional organic and inquisitive growth with cross selling opportunities for existing customers who want a single partner to manage their environmental service.

This strategic acquisition provides a platform for additional organic and acquisitive growth with cross selling opportunities for existing customers, who want a single partner to manage their environmental services needs.

We expect we expect this acquisition to be immediately accretive to adjusted earnings and free cash flow and to create significant value with double digit returns for our shareholders.

Speaker 4: We expect this acquisition to be immediately accretive to adjusted earnings and free cash flow, and to create significant value with double-digit returns for our shareholders.

We are excited to welcome us ecology talented employees to the Republic team and expect the deal to close by the end of the second quarter of this year.

Speaker 4: We are excited to welcome U.S. Ecology's talented employees to the Republic team and expect the deal to close by the end of the second quarter this year.

Expanding our environmental solutions business is a strategic priority and this acquisition is a key addition.

Speaker 4: Expanding our environmental solutions business is a strategic priority and this acquisition is a key addition. That said, the investments we are making are not limiting growth or reducing focus in the traditional recycling and solid waste...

That said the investments we are making are not limiting growth or reducing focus in the traditional recycling and solid waste businesses.

Speaker 4: This is not an either-or, but a both-and approach. We plan to make outsized investments in both businesses to accelerate growth and create lasting value.

This is not an either or but are both and approach we plan to make outsized investments in both businesses to accelerate growth and create lasting value.

We remain disciplined allocators of capital and will only make investments in organic growth opportunities in M&A that increases intrinsic value and improves returns with that operator, I would like to open the call to questions.

Speaker 4: We remain disciplined allocators of capital and will only make investments in organic growth opportunities in M&A that increases intrinsic value and improves returns. With that, operator, I would like to open the call to questions.

We will now begin the question and answer session.

Speaker 1: To ask a question, you may press star, then 1 on your touchtone phone.

To ask a question you May Cross Star then one on your Touchtone phone.

In the interest of time, we ask that you.

Speaker 1: In the interest of time, we ask that you limit yourself to one question and one follow-up today.

Limit yourself to one question and one follow up Paul.

Speaker 1: If your question has been answered and you would like to withdraw your request, you may do so by pressing star 2. If you are using a speakerphone, please pick up your handset before pressing the key.

Thank you. Your question has been answered and you would like to withdraw. Your question you may do so by pressing star.

Thank you Youre using a speakerphone please pick up your handset before pressing mckean.

Speaker 1: Your first question comes from Noah Kay with Oppenheimer. Please go ahead.

Your first question comes from Noah Kaye with Oppenheimer. Please go ahead.

Speaker 3: Thanks so much. I'm sure there'll be a bunch of questions about anthropology, but I'd like to focus on the core business for now. And starting with pricing, notice the yield, you know, was really strong, especially at a full year basis, but that core price you called out at all time high with noting the yield is very strong in collection.

Thanks, so much I'm sure there'll be a bunch of questions about psychology, but I'd like to focus on our core business for now and.

And starting with pricing noticed the yield.

It was really strong, especially on a full year basis, but that core price you called out at all time high with noting the yield is very strong and collection.

Speaker 3: What's your view on post-collection pricing and yield going into 2022? Do we start to see that a nudge up as well? Because certainly there's, you know, rising operating expenses there, just like there is everywhere.

What's your view on post collection pricing and yields going into 2022, do we start to see that.

Jeff as well because certainly there is rising operating expenses there just like there is everywhere else.

Speaker 4: Yeah, certainly you'll see some momentum in the first couple of quarters and I think you'll see that momentum accelerate in the second half of the year. A lot of those customers are attached to CPI or something, a derivative CPI, and like our collections business, there's a 12 to 18 month lag. So that elevated print from the last year will then start to flow through and you'll see really nice economics on the yield side.

Yeah, certainly youll see some momentum in the first couple of quarters, and I think youll see that momentum accelerate in the second half of the year a lot of those customers are attached to CPI or something a derivative CPI and like our collections business. There is a 12 to 18 month lag so that elevated from last year.

Start to flow through and Youll see really nice economics on the yield side, especially in Q3 and Q4.

That's super helpful and that feeds into my next question was really how to think about the the rate ability of the cadence of.

Speaker 3: That's super helpful, and that feeds into the next question, which is really how to think about the ratability or the cadence of yield trends over the course of the year. I know you're not like some peers, and you tend to do your PIs ratably through the year. So is a 3.4% full-year number, since you're doing 3.4 here in the fourth quarter, is that fairly smooth and stable over the balance of the year, or is it anything that you would call out?

Yield trends over the course of the year I know youre not like some peers and you tend to do your pie.

Ratably through the year. So is that is a three 4% full year number since youre doing three four here in the fourth quarter is that fairly smooth and stable over the balance of the year or is there anything that you would call out.

Speaker 4: Yeah, it's the same thing, which is the portion of our book that's attached to CPI or something related to that. You will get more momentum in the second half, so I think you'll see really good pricing numbers here in Q1 and Q2.

Yes, it's the same thing which is the portion of our book that's attached to CPI or something related to that you will get more momentum in the second half. So I think you'll see really good pricing numbers here in Q1 and Q2.

Speaker 4: And then you'll see that start to accelerate in Q3 and Q4, you know, the open market side will end up being more ratable with the caveat that we're living in a very dynamic world.

And then youll see that start to accelerate in Q3 and Q4. The open market side will end up being more ratable ratable with the caveat that we're living in a very dynamic world right and we see inflationary cost inflationary pressure.

Speaker 4: Right. And if you see inflationary costs, inflationary pressure, right, the core thesis of this business is that we are going to price ahead of our cost, right? We did a great job of that last year.

Core thesis of this business is that we are going to price ahead of our cost revenue did great job of that last year as cost certain accelerated pockets and we will do the same thing this year nothing broad based rate, we look at every market uniquely and dynamically and make sure that our people are getting paid and that we're pricing ahead of our call.

Speaker 4: So we're going to accelerate in pockets and we'll do the same thing this year. Nothing broad based, right? We look at every market uniquely and dynamically and make sure that our people are getting paid. And that, again, we're pricing ahead of our-

Speaker 3: Yep. And one more to sneak in. And Brian , you know, you called this out. But I want to go back to that. It's important, just around the margins and the impact from the higher incentive comp and the bonuses, I think, there was 130 bits. Yeah. You know, so just to aid with that.

And one more to sneak in and Brian you called this out but I wanted to go back to because I think it's important.

Just around the margins and the impact from the higher incentive comp and the bonuses I think instead of the 130 bps.

So just with that is how much of that was anticipated.

When you talk about that.

Being a tailwind to margins next year I guess, how do you think about that in the context of continued support for the Labor force given the tight labor market and of course ongoing support.

Speaker 3: the COVID pandemic, which is still, although easing with us.

The Covid pandemic, which is still although easing with us.

Speaker 7: Yeah, let me kind of talk about the incentive compensation piece first, and then we can talk about the committed to serve award. So, you know, clearly from an incentive compensation perspective, we put a plan together that assumes target.

Let me kind of talk about the incentive compensation piece first and then we can talk about the committed to serve award so.

Clearly from an incentive compensation perspective, we put a plan together that assumes target.

Speaker 7: And as you've seen all year long, we've outperformed. And with that came additional incentive compensation accruals, which will be expense.

Brian and as <unk> seen all year long, we've outperformed and with that came additional incentive compensation accruals, which will be expense or expense in 'twenty. One the cash for that will be paid in 'twenty, two which is one of the reasons Don when you take a look at our free cash flow to grow on a more normalized basis is actually even in excess of what we're presenting.

Speaker 7: or were expensed in 21, the cash for that will be paid in 22.

Speaker 7: Which is one of the reasons, too, when you take a look at our free cash flow, the growth on a more normalized basis is actually even in excess of what we're presenting because we've got to absorb that extra cash payment in the first quarter.

Renting because we've got to absorb that extra cash payment in the first quarter on the committed to serve again that was a discretionary item right that we decided to do certainly in recognition for the hard work that our frontline employees did during the pandemic, but we are not planning on making any of those.

Speaker 7: On the committed to serve, again, that was a discretionary item.

Speaker 7: right, that we we decided to do certainly in recognition for the hard work that our frontline employees did during the pandemic. But we are not planning on making any of those additional or incremental awards going forward. Largely, you know, because that's baked into the plan, right? We've got elevated increases for all of our frontline people given it's an inflationary environment.

<unk>, our incremental awards going forward largely to know because thats baked into the plan right. We've got elevated increases for all of our frontline people given it's an inflationary environment and again, we're pricing ahead of that and even with that plan. We're planning to expand margins. So that's why we assume that and again as the situation moves and becomes.

Speaker 4: And again, we're pricing ahead of that, and even with that plan, we're planning to expand margin.

Speaker 4: That's why we assume that's in, again, as the situation moves and becomes dynamic, we'll adjust accordingly.

<unk> will adjust accordingly.

Dynamic is definitely the right word I'll turn it over thank you.

Speaker 1: Our next question comes from Jerry Revitch with Goldman Sachs. Please go ahead. Yes, hi.

Our next question comes from Jerry Revich with Goldman.

Goldman Sachs. Please go ahead.

Yes, hi, good afternoon.

Good afternoon Jerry.

Speaker 5: Can you talk about the cadence of the margin expansion that you folks are looking for over the course of the year? Obviously, you know, the fourth quarter will have the easy comp that you just mentioned, but what about as we head into the first quarter, you know, if we apply...

Can you talk about the cadence of the margin expansion that you folks are looking for over the course of the year, obviously, the fourth quarter, we will have that.

Easy comp.

You just mentioned, but what about as we head into the first quarter.

Speaker 5: normal seasonality, it looks like your margins might be starting the year, you know, down 50 to 100 basis points year-over-year in the first quarter unless we get outsized pricing contribution. Is that right? Can you just talk about the cadence of the year-over-year margin performance that you're looking for?

Normal seasonality it looks like your margins might be starting the year down 50 to 100 basis points year over year in the first quarter, unless we get outside of pricing contribution.

Is that right can you just talk about the cadence of the year over year margin performance that Youre looking for.

Speaker 7: Yeah, you know, Jerry, you're on the right path there. I would say in 2022, we're expecting normal seasonality with respect to both the revenue as well as the EBITDA margin. I think when you look at the last two years, right, so 20 and 21, you had anything but normal, right? So you really have to go back and look at that seasonal cadence prior to that, which again, when you think about seasonally, we tend to see our highest revenue and margin performance in the third and second quarters.

Yes, Jerry you're on the right path there I would say in 2022, we're expecting normal seasonality with respect to both the revenue as well as the EBITDA margin I think when you look at the last two years right. So 2020 . One you had anything but normal right. So you really have to go back and look at that seasonal cadence prior to that which again when you.

About seasonally we tend to see our highest revenue and margin performance in the third and second quarters Q4 thereafter, and then usually Q4 is a little bit.

Speaker 7: Q4 thereafter, and then, you know, usually Q4 is a little bit, you know, the lightest for the year, really for two reasons. You've got the winter months.

The lightest for the year really for two reasons, you've got the winter months, so youre not seeing that uptick in particular landfill volumes as well as you've got the highest percentage of taxes in the first quarter.

Speaker 7: So you're not seeing that uptick in particular landfill volumes, as well as you've got the highest percentage of taxes in the first quarter.

Payroll taxes.

Yes.

Speaker 5: I appreciate it. And then, you know, separately on the acquisition announcement, you know, can you talk about the path to get to double-digit returns, you know, what amount of bolt-on activity do we need or, you know, how much more do we have to go from a synergy standpoint to earn that double-digit return that, you know, I think typically for transactions this size takes most companies at least three to five years to get there.

Sure.

I appreciate it and then.

Separately on the.

Acquisition announcement can you talk about the path to get to.

Double digit returns.

The amount of bolt on activity do we need or how much more do we have to go from a synergy standpoint too.

That.

Double digit return that typically for transactions.

<unk> takes most companies at least three to five years to get through.

Yes, no thats a double digit return is based on the current pro forma which again is on the $40 million of cost synergies.

Speaker 4: Yeah, no, that double-digit return is based on the current pro forma, which again is on the $40 million of cost synergies, which don't include any of the revenue synergies, including cross-sell or bolt-on acquisitions, which we have a number in the pipeline down the road. So that would all, all those things will be opportunities to accelerate, get to double-digit sum more quickly, and then accelerate the overall returns to even a higher level.

Which don't include any of the revenue synergies, including cross sell or bolt on acquisitions, which we have a number in the pipeline down the road. So that would all all those things will be opportunities to accelerate get to double digits more quickly and then accelerate the overall returns to even a higher level.

Okay I appreciate the discussion thanks.

<unk>.

Our next question comes from Tyler Brown with Raymond James. Please go ahead.

Speaker 1: Our next question comes from Tyler Brown with Raymond James. Please go ahead. Hey. Good afternoon.

Hey, good afternoon.

Speaker 6: Hey, just real quick, Brian , but to be clear, the margins in 22 are assuming a normal like 100% incentive comp accrual.

Hey, just real quick Bryan, but to be clear the margins in 'twenty two are assuming a normal like 100% incentive comp accrual.

That's correct.

Speaker 6: We hope to hire. We'll take hire, but we're planning on 100%. That is correct. Right. Okay. That's helpful. And then I know while we're on the talk of margin here, I know in the U.S. Ecology release, you laid out that 47% free cash flow conversion by 2024, but you didn't really make any mention of the margin target.

Okay.

Although fire, we will take our borders.

<unk> on 100% that is correct alright, okay. Okay. That's helpful. And then I know while we're on the talk of margin here I know in the U S. Oncology release, you laid out that 47% free cash flow conversion by 'twenty four but you didn't really make any mention of the margin targets now I get it the U S. Oncology is probably I'm going to say 70 to 80 basis <unk>.

Speaker 6: Now, I get it that U.S. ecology is probably, I'm going to say, 70, 80 basis points dilutive to margins, but...

It's dilutive to margins, but does that does anything preclude you from a treat achieving those call. It 32% margins longer term and is that something that investors should still think could be a reasonable expectations like mid mid decade.

Speaker 6: Does that does anything preclude you from achieving those call it 32 percent margins longer term? And is that something that investors should still think could be a reasonable expectations like mid mid decade?

Speaker 4: Yeah, so it's absolutely in the solid waste and recycling side, right? We're on our marks, right? And we're going to get there. And you're right, this.

Yes, absolutely in the solid waste and recycling side right. We're on our marks right and we're going to get there and Youre right. This.

Speaker 4: Acquisition, right, in this space in general, has a slightly different value creation formula, right? A little bit lower margins, but less capital intensity, right? And so that starts to converge more into free cash flow.

Acquisition right in this space in general has a slightly different value creation formula a little bit lower margins, but less capital intensity and right until that starts to converge more than our free cash flow.

Speaker 4: You'll see us move later in the year to segment reporting, right, that calls those things out and really makes it clear to the investment community what kind of progress we're making on each front. And so just arithmetically, right, we'll get there just slightly slower than we would have otherwise, but our sites are still set toward that target.

Conversion Youll see us move later in the year to segment reporting.

That caused those things out and really makes it clear too.

Estimate community, what kind of progress, we're making on each front and so just arithmetically right. We will get there just slightly slower than we would have otherwise, but our sights are still set towards that target over time.

Speaker 6: Okay, yes, segment detail would be helpful. And then, John , I think it was only 90 days ago, though, you mentioned that you wanted to get environmental services up to a billion-dollar franchise.

Okay, Yes segment detail would be helpful.

And then John I think it was only 90 days ago, though you mentioned that you wanted to get environmental services up to $1 billion franchise over I think the next like three years clearly pro forma this is going to get you. There you mentioned a platform for deals in the release you mentioned it again on this call, but like where do you envision the business longer term.

Speaker 6: over, I think, the next three years. Clearly, pro forma, this is going to get you there. You mentioned a platform for deals in the release. You mentioned it again on this call. Where do you envision the business longer term? Are you targeting a certain percentage of sales that you maybe don't want to exceed or just big picture there?

Are you targeting a certain percentage of sales that you maybe don't want to exceed or just big picture there.

No listen.

Speaker 4: This deal is a very unique set of assets and gives us a really attractive position.

This deal right is a very unique set of assets right and gives us a really attractive position right and we don't think there is a deal of size or scale out there in the future and we're certainly going to take this.

Speaker 4: Right. And we don't think there's a deal of the size or scale out there in the future. We're certainly going to take this.

Speaker 4: So we'll be able to close it and integrate it, get our people connected, the systems, right? Make sure that we're executing above the pro forma.

So we'll be able to close it in.

Integrated get our people connected the systems right make sure that we're executing above the pro forma alright, and then along the way of course, there are other deals that can fold into this.

Speaker 4: Right. And then along the way, of course, there's other deals that can fold into this.

Speaker 4: while we're aggressively growing the solid waste and recycling business. So we don't have any defined target of what percentage of the business this is. But the bulk of this business, just arithmetically, is going to be our traditional recycling and solid waste business. And we're going to continue to grow both sides of that as we move forward.

While we are aggressively growing right the solid waste and recycling business. So we don't have any defined target of what percentage of the business. This is.

The bulk of this business just arithmetically is going to be our traditional recycling and solid waste business and we're going to continue to kind of grow both sides of that as we move forward.

Speaker 6: Okay. And then my last one, just real quick, you talked about the $40 million of synergies from the deal, but you never really put a finer point there. So where exactly are these synergies coming from? Are they more SG&A? Are they other operating costs? Are they even CapEx?

And then my last one just real quick.

You talked about the $40 million of synergies from the deal, but you never really put a finer point there so where exactly are these synergies coming from are they more SG&A or the other operating costs are they even capex.

Speaker 4: No, it's two broad fronts. Think about half of it as just duplicative corporate costs. There's just the cost of being a public company and IR treasury and all the normal things that you would think to take out. And then the other 20 would come more at the field level. Because you see, we have a Gulf Coast region. We have a Northeast region in our environmental solutions business. They have a national footprint. And we'll obviously think about harmonizing and integrating those.

No.

Two broad front think about half of it is just duplicative corporate costs right, because it's cost of being a public company.

IR Treasury and all the normal things that you would think to take out and then the other 20% would come more at the field level.

Because you see.

We have our Gulf Coast region, right, we have a northeast region in our environmental solutions business right to have a national footprint and we will obviously think about harmonizing and integrating those.

Speaker 4: Right, that's a relatively small number, right, when you think about it in terms of cost takeout, because we think this is a huge platform for growth for us, right? We're not going into, you know, cut and flip. We're buying to, you know, keep and build. Now, as we go and we learn more, if there's more opportunities to do things a bit more efficiently, we'll certainly take advantage of

That's a relatively small number right. When you think about it in terms of cost takeout. Because we think this is a huge platform for growth for US right, we're not going into cotton slip we're buying to keep and build now as we go when we learn more if there's more opportunities to do things a bit more efficiently we will see.

Certainly take advantage of that.

Speaker 7: Okay. All right. Appreciate the time and I think and I think Tyler, you know, the other thing to just.

Okay, all right I appreciate the time and I think Tyler and the other thing.

Speaker 7: The $40 million is exclusively cost synergies. There are no revenue synergies baked into the plan. OK.

The $40 million is exclusively cost synergies there are no revenue synergies baked into the plan.

Okay. Okay. That's clear thank you.

Speaker 1: Our next question comes from Michael E. Austin with CFO . Please go ahead. Thank you very much. I'm going to ask two questions.

Our next question comes from Michael Hoffman with Stifel. Please go ahead.

Thank you very much.

And I ask two questions and get kind of a minute.

You ended the year at 44% free cash flow conversion in your guidance.

Speaker 8: is up almost nine, but cashflow from ops are only up about five and a half. Capital spending is almost flat. So I'm trying to understand what's happening in capital spending. What do you think the cash conversion ratio does in 20...

Is up almost nine but cash flow from ops are only up about five and a half capital spending was almost flat. So I'm trying to understand what's happening in capital spending what do you think the cash conversion ratio does in 'twenty.

Speaker 7: and is the cash flow from Ops as a percentage of revenues kind of the same in 22 as it was in 21? How does that work combined one question? Yeah, so Mike let me kind of put it to you this way here and I mentioned that we've got the additional cash incentive compensation that we're paying in 22 that's related to 21%.

Two is the cash flow from ops as a percentage of revenues kind of the same in 'twenty two as it was in 'twenty. One how is that defined one question yes.

Yes, so Michael let me kind of a pretty that's why here and I mentioned that we've got the additional cash incentive compensation that we're paying in 'twenty. Two that's related to 'twenty, one performance about $40 million of extra cash, which impacts free cash flow conversion by 100 basis points. So we think we're going to be able to from overall.

Speaker 7: about $40 million of extra cash, which impacts free cash flow conversion by 100 basis points.

Speaker 7: So we think we're going to be able to, from an overall perspective, get to that 45% plus even absorbing that $40 million extra, that extra 100 basis points of free cash flow.

Perspective get to that 45%, plus even absorbing that $40 million extra that extra 100 basis points of free cash flow conversion.

Okay.

Speaker 8: And that'll show up in the cash flow from ops number. That's in cash flow, correct. It's in working capital, where you see it. Right. And then why is CapEx relatively flat year over year?

And that that will show up in the cash flow from ops number.

From a working capital or to say it right and then what why is capex relatively flat year over year.

Well remember we talked about in the in the current year right. So again, if you take a look at our original guide and then what we ultimately spend.

Speaker 7: Well, remember, we talked about in the in the current year, right? So again, if you take a look at our original guide and then what we ultimately spent

Speaker 7: You know, at the midpoint of that, we were, you know, kind of $90 million more of cap back. So, we had the ability, one, to fund additional growth. So, again, if you take a look at our volume performance, from an organic perspective, we had additional growth opportunities, as well as pulled forward some capital that was originally going to be spent in 22. So, that's why it's relatively flat in 22, is because some of that spending actually

At the midpoint of that we were kind of $90 million more of Capex. So we had the ability one to fund additional growth. So again, if you take a look at our volume performance from an organic perspective, we had additional growth opportunities as well as pulled forward some capital.

It was originally going to be spent in 'twenty. Two so that's why it's relatively flat.

In 'twenty two is because some of that spending actually happen in 'twenty one.

Speaker 8: Got it. That's what I thought it was. Just wanted to make sure that was clear. And then, John , I think it is important for everybody to understand that don't focus on margins, focus on the discipline of Republic's cash-on-cash return.

Got it Thats, what I thought it was just wanted to make sure that was clear and then.

John I think it is important for everybody to understand that don't focus on margins first thing goes on the discipline of Republic's cash on cash returns.

Speaker 8: And just to put it in perspective, I mean, you know, you now have about a billion three of ES revenues and

And just to put it in perspective, I mean, we now have about $1 billion three of Es revenues.

And what do you got maybe two if you get in the psychology close to $5 billion invested.

Speaker 8: if you get you the psychology close two and a half billion invested and on a like-to-like basis the same investment is probably 2x on a per revenue basis in garbage. So that's the way people ought to put it in perspective. Am I thinking about that correctly?

And on a like to like basis. The same investment is probably to Exxon on a per revenue basis in garbage.

That's the way people want to put it in perspective am I thinking about that correctly.

Speaker 4: Well, I'd probably have to do a little of that math offline, Michael, to confirm or deny your thesis. But I think, broadly speaking, you're in the right zone, which is, again, people get very caught up in the margin. And listen, we understand the margin as a way to measure the business. And we don't run away from that. We own that.

Well I'd, probably have to do a little of that math offline mic ultra confirm or deny or thesis, but I think broadly speaking you're in the right zone, which is can people get very caught up in the margin and listen we understand the margin as a way to measure the business and we don't run away from that we own that and we've done a great job of it.

Speaker 4: And we've done a great job of expanding margins the last couple of years, right, kind of creeping up on 300 basis points as we get into next year. But we don't run the business for the core. We don't run it for any single metric. We run it for the long-term and intrinsic value. So that's where cash on cash returns.

Spanning margins the last couple of years right kind of creeping up on 300 basis points as we get into next year, but we don't run the business for the quarter, we don't run it for any single metric we run it for the long term intrinsic value. So that's where our cash on cash returns are thats, where value creation comes in and so a business that might have a slightly different.

Speaker 4: That's where value creation comes in, and so a business that might have slightly different optics, which is structurally a little lower margin.

Optics, which is structurally a little less lower a little lower margin.

Speaker 4: And then, but less capital intensity that, you know, free cash flow conversion is a better metric that starts to harmonize.

And then but less capital intensity that free cash flow conversion as a better metric that starts to harmonize those two things and get much closer to our returns.

Speaker 4: those two things and get much closer to a, you know, returns or a view toward returns. And look, we think there's margin opportunity in this business, right? We think that we're going to continue to look for efficiencies and we're going to think about, you know, make sure that we take our mindset around revenue management and our skills and capabilities and our belief that we have to price out of our costs.

You toward returns and we think there's margin opportunity in this business right. We think that we're going to continue to look for efficiencies and we're going to think about make sure that we take our mindset around revenue management and our skills and capabilities in our belief that we have to price out of our cost and expanding margins.

Speaker 4: And be expanding margins that allows us to reinvest in the business and take care of our customers over time.

It allows us to reinvest in the business right and take care of our customers over time.

Okay. Thank you.

Speaker 1: Our next question comes from Walter Scragglin with.

Our next question comes from Walter Scott, Glenn with RB.

Speaker 9: RBC Capital Markets. Please go ahead. Yeah, thanks very much. Good afternoon, everyone. So just touching on that, I know you just kind of said it, the answer to my question being, how do you grow margin and how do you take advantage of that margin opportunity in the environmental services business? You said both synergy and pricing, but if you were to...

RBC capital markets. Please go ahead, yeah. Thanks, very much good afternoon, everyone. So just touching on that I know, you're just kind of set at the answer to my.

Question being how do you grow margin and how do you take.

Vantage of that margin opportunity in the environmental services.

Business, you said, both synergy and pricing, but if you were to.

Speaker 9: kind of frame it, is it 50-50 or is it really a business that needs to be repriced and properly priced to get those margins up, or is it more on the cost energy side?

Kind of frame. It is it 50 50 or is it really.

In a business that needs to be repriced and properly price to get those margins up.

Or is it more on the cost synergy side that you are looking to get those margins higher.

Speaker 4: Yeah, I talked about the 40 million that we have right in front of us. And then of course, as we go in, we'll look for opportunities. Now, we're acquiring not just assets, we're acquiring deep expertise.

Yes, I talked about the $40 million that we have right in front of US and then of course as we.

So we will look for opportunities now we're acquiring not just assets.

Firing deep expertise in the hazardous waste value chain around compliance and operations and commercial capabilities and so we're very very mindful of that and the last thing I want to do is step over $20 bill to grab a nickel. So we're not going to be very short term focus we're going to think about.

Speaker 4: right, in the hazardous waste value chain, around compliance and operations and commercial capabilities. And so we're very, very mindful of that. And the last thing I want to do is step over a $20 bill to grab a nickel. So we're not going to be very short-term focused. We're going to think about.

Speaker 4: long term. And as we find more and learn more, right, we'll certainly report out.

Long term and as we find more and learn more right. We'll certainly report out on that on the revenue side, but we haven't put anything into the pro forma we see opportunities across multiple fronts strategically.

Speaker 4: You know, on the revenue side, while we haven't put anything into the pro forma, right, we see opportunities across multiple fronts.

Speaker 4: Strategically, the reason that we're into this business is because of the connectivity of solid waste and recycling. Customers have asked us to go here.

Strategically the reason that were into this business is because of the connectivity of solid waste and recycling customers have asked us to go here. They want a one stop shop. They want somebody who we now think we will have the leading set of products and services in the environmental services space to serve our customers. So the cross sell opportunity to become a media and.

Speaker 4: They want a one-stop shop. They want somebody who we now think we will have the leading set of products and services in the environmental services space to serve our customers. So the cross-sell opportunities become immediate. And we've seen that with ACV and any other previous acquisition that we've done in this space.

We've seen that with HCV in any other previous acquisition that we've done in this space and we talked about the follow on acquisitions in that being a real opportunity. We think there are really interesting capital investment opportunities on the post collection side of that business that allow us to compete more broadly across the <unk>.

Speaker 4: We talked about the follow-on acquisitions and that being a real opportunity.

Speaker 4: We think there are really interesting capital investment opportunities on the post-collection side of that business that allow us to compete more broadly across incineration, some other parts of the value chain we're excited about.

Incineration from other parts of the value chain. We're excited about and then we will bring our skill and capability of revenue management to the table understanding that there is no work for free. So we'll look at every individual job that we do and make sure. There is sufficient returns on that over time again that becomes important to allow us to pay our people into <unk>.

Speaker 4: And then, listen, we will bring our skill and capability of revenue management to the table, understanding that there is no work for free, so we'll look at every individual job that we do and make sure there's sufficient returns on that over time. Again, that becomes important to allow us to pay our people and to reinvest in the business. We haven't quantified any of those yet, right, because we're being concentrated on hopefully closing this transaction and integrating our colleagues, but we think there's a lot of

Best in the business and we haven't quantified any of those yet right, because we're big and concentrated and hopefully closing this transaction and integrating our colleagues, but we think theres a lot of upside overtime.

Speaker 9: Great color. And then my second question here is on scalability of future acquisitions. You know, solid waste versus the environmental services side. Is that a more scalable or integration of acquisitions, future acquisitions?

Great color and then my second question here is on.

Scalability of future acquisitions.

Solid waste versus.

The environmental services side.

Is it very much.

That a much more scalable.

We're integration of acquisitions future acquisitions.

Speaker 9: is better, it's easier to integrate, it's more upside, is it rather that way on solid waste more so?

It is better it's easier to integrate its much more upside is it.

That way on solid waste more so.

Speaker 9: I'm looking to gauge where your opportunity set and incremental dollar will be spent now if there's a lot bigger opportunity in one of the buckets through acquisitions than the other.

I am looking to gauge where your opportunity set an incremental dollar will be spent now if if there is a lot bigger opportunity and what are the buckets through acquisitions than the other one.

Speaker 4: Well, I think the great news is that we're not capital constrained, so that we don't have a dollar and choose where to put it. Again, we look strategically, where is the fit? And does it meet our discipline returns criteria? And then if it's both, we invest in both over time.

Well I think the great news is that we're not capital constrained right. So that we don't have a dollar and choose where to put it again, we look strategically.

<unk>, whereas the fit and does it meet our disciplined returns criteria and then if it's both we invest in both over time I think.

Speaker 4: The space looks very similar to what solid waste and recycling looked like, you know, a decade or more ago, where there's a lot of fragmentation. And we've already seen this rolling in smaller players, right, provides a ton of synergy. And we've got a pipeline that we see sometimes building on a regional footprint. Sometimes it's adding, even further adding to our product and service offering that will be great fits, and our pipeline and acquisitions is robust on both fronts. Got it. Okay.

The space looks very similar to what solid waste and recycling look like a decade or more ago, where there is a lot of fragmentation and we've already seen this rolling in smaller players provides a ton of synergy and we've got a pipeline.

We see some sometimes building on our regional footprint, sometimes it's adding even further adding to our product and service offering that will be great fit and our pipeline on acquisitions is robust robust on both fronts got it. Okay. I appreciate the time. Thank you.

Our next question comes from Sean Eastman with Keybanc capital markets. Please go ahead.

Speaker 1: Our next question comes from Sean Eastman with KeyBank Capital Markets. Please go ahead.

Speaker 10: Hi team, thanks for taking my questions. I just wanted to make sure I understand the price versus underlying inflation expectations over the course of the year.

Hi team Thanks for taking my question.

I just wanted to make sure I understand the price versus underlying inflation expectations over the course of the year. So.

Speaker 10: You know, if we're expecting 60 to 70 bps of margin expansion from pricing ahead of cost inflation, the average yield guidance is 3.4%. Does that mean we have 2.75% inflation kind of assumed, or maybe just help me understand that, those assumptions.

If we're expecting 60 to 70 bps of margin expansion from pricing ahead of cost inflation. The average yield guidance is three 4% does that mean, we have $2 seven 5% inflation kind of assumed or.

Maybe just help me understand that that those assumptions.

Speaker 7: Yes. So, Sean, remember, one of the things you have to remember when we disclose average yield, we're using total revenue as the denominator. So, when you take a look about where we price and you look in that solid waste business, if you did it on related business, it actually would be 70 basis points higher than our 2021 performance and about 20 to 30 basis points higher than on total revenue.

Yes, so Sean remember one of the things you have to remember when we disclose average yields were using total revenue as the denominator. So when you take a look about where we price and you look in that solid waste business. If you did it unrelated business. It actually it would be 70 basis points higher than our 2021 performance in <unk>.

20 to 30 basis points higher than on total revenues. So that's the way you have to put it into context. So the $3 four you got to make 36 or three seven call. It based on related revenues and you look at that pricing in excess of cost inflation that would imply closer to a 3% inflation cost inflation.

Speaker 7: So that's the way you have to put it into context. So the 3.4, you got to make 3.6 or 3.7. You know, call it based on related revenues. And you look at that pricing in excess of cost inflation, that would apply closer to a 3% inflation, cost inflation.

Speaker 4: Okay, very helpful kind of wage and benefit number. There's probably slightly higher. Keep in mind. We're not talking a lot about it, but we're still getting a lot of productivity benefits to rise. And that's 1 of the great stories through the pandemic is it's allowed us to keep paying our people as their bills go up while managing the cost structure, because we're just getting more efficient at that.

Okay, that's very helpful.

Kind of wage and benefit number there is probably slightly higher it keep in mind, we're not talking a lot about it but we're still getting a lot of productivity benefits to rise.

That's one of the great stories through the pandemic as it has allowed us to keep paying our people as their bills go up while managing the cost structure, because we are just getting more efficient at the work.

Speaker 10: Okay, great, great. Yeah, I'm glad we fleshed that out. Very helpful.

Okay, great great, Yes, I am glad refresh that out very helpful.

And.

Speaker 10: Maybe just on U.S. ecology, in light of your comments around...

Maybe just on U S oncology and in light of your comments around.

Speaker 10: you know, environmental solutions being less capital intensive, but also mentioning that there are some interesting CapEx.

Environmental solutions being less capital intensive, but also mentioning that there are some interesting capex.

Speaker 10: opportunities around this particular acquisition. I mean, you know, and then there's been a seems like there's been a lot of noise around the US ecology.

Opportunities around this particular acquisition.

And then theres been it seems like Theres been a lot of noise around the U S oncology capital spending historically, so I mean, what should we expect as a baseline and then sort of variability around capex from U S oncology.

Speaker 7: capital spending historically. So, I mean, what should we expect as a baseline and sort of variability around CapEx from U.S. ecology? Yeah, look, I think there's been some elevated capital with respect to building out, right, some landfill. So, through the cycle, we would expect the CapEx to run circa 9% of revenue or so on that business.

Yeah look I think there's been some.

Elevated capital with respect to building out right.

Some landfill so through the cycle, we would expect the capex to run circa 9% of revenue or so on that business and again, it's going to be less than that and that 4% to 5% range on the field services piece and a little bit more on that waste solutions piece.

Speaker 7: And again, it's gonna be less than that in that four to 5% range on the field services piece and a little bit more on that waste solutions piece. But on average, call it about nine.

But on average call about known.

Okay, Alright excellent thanks, guys.

Okay.

Speaker 1: Our next question comes from Hamza Mazari with Jeffries. Please go ahead.

Our next question comes from Ken <unk> with Jefferies. Please go ahead.

Hey, Thank you very much just had a question around.

Speaker 11: Hey, thank you very much. I just had a question around as you think about synergies on revenue from has waste and solid waste.

As you think about synergies.

On revenue from has west in solid waste do you have a sense of how many customers can subscribe to sort of both services and then also you know.

Speaker 11: Do you have a sense of how many customers?

Speaker 11: can subscribe to sort of both services and then also, you know, in the past.

In the past.

Speaker 11: you know that uh... you know there's been people that have looked at medical waste and solid waste together and that hasn't worked quite worked out

There's been people that have looked at medical waste and solid waste together and that hasn't worked quite worked out whats different about this first do you have a lot of manufacturing customers that sort of.

Speaker 11: What's different about this space? Do you have a lot of manufacturing customers that sort of?

Speaker 11: are asking you to do both. Just give us a sense of revenue synergies. You don't have to quantify it. Just help us.

Asking you to do both.

Just give us a sense of revenue synergies you don't have to warn supplier just.

Just help us understand that.

Speaker 4: Yeah, so I think versus your previous thesis, I think when you start with this sounds like an interesting bundle, let me try to go sell it, right? That may or may not work, right? We start with asking the customer what they want, what they need, and how they want to buy and have worked our way back into this. So it's true certainly for our broad set of industrial customers, right, who produce an ongoing recurring set of waste streams.

Yeah, So I think versus.

First is your previous thesis I think when you start with this sounds like an interesting bundle. Let me try to go sell it that may or may not work right. We start with asking the customer what they want what they need and how they want to buy and have worked our way back into this so yes. It is true certainly for our broad set of industrial customers.

Alright, who produce an ongoing recurring set of waste streams.

Speaker 4: And this really has accelerated over the last decade. They want fewer people in their plant. And second, they're taking a very hard look at the sustainability footprint of their supply base. That's a big part of their.

And this really has accelerated over the last decade, they want fewer people into their plant.

And second there look taking a very hard look at the sustainability footprint of their supply base right. That's a big part of their <unk>.

Speaker 4: Sustainability story and so people who have the ratings we have who have the record we have become really meaningful for that

Sustainability story, and so people who have the ratings, we have who have the record we have become really meaningful for them.

Speaker 4: And keep in mind, we're still a very, very small percentage of their overall cost structure.

And keep in mind, we're still a very very small percentage of their overall cost structure. So the idea that they'd be willing to pay a little bit more for somebody who can handle their needs compliant Lee and provide the speed they need right. That's the value proposition and that's what we've seen proven out with the ACB transaction immediately.

Speaker 4: So the idea that they'd be willing to pay a little bit more for somebody who can handle their needs compliantly and provide the speed they need, that's the value proposition. And that's what we've seen proven out with the ACB transaction immediately. And we think we'll get that just at a much bigger scale with the U.S. Ecology Transaction. It also applies to some event-type work.

And we think we'll get that just at a much bigger scale with the U S ecology transaction. It also applies to some.

Event type work, if you think about the infrastructure Bill and brownfield sites elimination of the same thing you are a contractor there it was really.

Speaker 4: Are you thinking about the infrastructure bill and brownfield sites, the same thing. You have a contractor there who really wants to understand speed. And a single provider that can handle all the different waste streams becomes a really big strategic advantage.

Really unwise to understand speed and a single provider that can handle all the different waste streams becomes a really big strategic advantage.

Speaker 11: Got it. So, you know, can you give us a sense of post US ecology? What is your market share and has waste? And where do you think it can go? And do you, do you, I know US ecology is heavy on landfills. They're heavy on event work.

Got it got it so can you give us a sense of both U S. Ecology, what is your market share and has waste and where do you think are getting goal and do you view.

I know U S ecology is heavy on land sales.

Event work.

Speaker 11: They have this NRG business that they over-leveraged to buy. How are you thinking about the portfolio? Does incineration matter or not? Does hazardous waste landfills mean more? Is NRG a good business? Just walk us through how you're thinking about the portfolio because they do have a few businesses.

This NRG business that they are over levered to buy.

What how are you thinking about the portfolio does incineration murder or not it does has waste landfills mean more.

NRG good business, just just walk us through like how you're thinking about the portfolio because they do have a few businesses and how's yes, there's obviously a very big market.

Speaker 11: And HAZWaste is obviously a very big market that has a number of other players and also the captive incinerators, it's very different than solid waste as you obviously already know.

<unk> has a number of other players and also the captive incinerators.

It's very different than solid waste as you will obviously you already know.

Speaker 4: Yeah, sure. So, I mean, it starts with their historic business, which was really on the post-collection hazardous landfill side. And they have TSDFs and 10 Day Fads and other things around that. But those five sites.

Yeah sure. So I mean, it starts with there.

Historic business, which was really on the post collection hazardous landfills side may have <unk> intended to add some other things around that but those five sites.

Speaker 4: right? Give them about a 36% market share position, right? And hazardous post collection, right? That's been the strength of their business.

Give them about a 36% market share position and hazardous post collection rate that's been the strength of their business.

Speaker 4: really, really strong and we're excited about that.

Really really strong and we're excited about that they bought a company called NRC, which has largely field services, which are the thesis of which is getting closer to the customer we believe and agree with that thesis and we've seen that improve that out that that works alright.

Speaker 4: They bought a company called NRC, which has largely field services, which is the thesis of which is getting close to the customer.

Speaker 4: We believe and agree with that thesis. And we've seen that and proved that out, that that works. We're there with the ACV deal, and we see that in our Gulf Coast region as well over time.

With the ACB deal and we see that in our Gulf Coast region as well over time.

Speaker 4: That NRC transaction brought with it a couple of other types of businesses. They've got a little bit of business in Europe and they've got some things, marine standby business, which really focuses on oil spill recovery.

The NRC transaction brought with it a couple of other types of businesses, they've got a little bit.

Business in Europe , and they've got some things.

Marine standby business drove focuses on oil spill recovery Bret.

Speaker 4: But those are things that we'll go in and clearly take a look at and evaluate and understand, hey, what is the, what's the fit with the rest of the business? Is it connected from a customer standpoint, from an asset sharing standpoint? I take a very fair view of, is this something we think we can build and grow, we'll be excited about it, or if this is something that might be a little more standalone and not very scalable and somebody else might be the more natural owner of that, we'll of course evaluate that as well.

But those are things that will go in and really taking a look at and evaluate and understand hey, what is the what's the fit with the rest of the businesses are connected from a customer standpoint from an asset sharing standpoint, I would take a very fair view of is this something we think we can build and grow will be excited about it or if this is something that might be a little more stand alone and not very <unk>.

Scalable and somebody else might be the more natural owner of that will of course evaluate that as well.

Got you that's very clear thank you so much.

Our next question comes from Kevin Chiang with CIBC. Please go ahead.

Speaker 1: Our next question comes from Kevin Chang with CIBC. Please go ahead.

Speaker 12: and thanks for taking my question here. Maybe I could ask, you talked about, you know, some of these revenue synergies as you build up your environmental solutions, capabilities, the vertical integration. I guess you spoke a little bit about this, but.

Thanks for taking my questions here with us at all when you talked about.

Some of these revenue synergies as you build up your environmental solutions.

Capabilities with vertical integration.

I guess, you spoke a little bit of both.

Speaker 12: What does the customer get out of it? It sounds like you might give them better service under one umbrella, and maybe it's just not clear to me why that would be, but do they also get like a cost savings? Like does a bundled program offer a level of pricing discount that they wouldn't get if they were using two different vendors? What else does the customer get out of this, having this all come out of Republic versus maybe dealing with U.S. Ecology and Republic separately?

What does the customer get out of it sounds like we might give them better service under one umbrella and maybe it's just not clear to me why that would be.

Forget about the cost savings.

<unk> program also a level of pricing discount, but that wouldn't get it into two different vendors.

What else does the customer get out of this.

Well come out of Republic versus maybe dealing with U S oncology and Republic separately website.

Yes.

Speaker 4: Yeah, I know the thesis, and it's true in some industries where, hey, the more you put together, the more you bundle, the more price pressure you could be under. And we see this in our business today, actually, that the more products a customer and services a customer buy, the average price per product or service goes up, not down.

Yes, I know the thesis that it's true in some industries. We're ahead of the more you put together the more you bundle the more price pressure you could be under.

And we see this in our business today actually that the more products the customer and services a customer by the average price per product and service goes up not down.

Speaker 4: And keep in mind, waste and recycling broadly are a very, very, very small portion of a customer's cost structure.

And keep in mind waste and recycling broadly are very very very small portion of our customers' cost structure. If you run a manufacturing facility. You think first about all of your direct cost could be steel or copper anything else I think when you think about your labor and then you think about your SG&A cost of it and everything.

Speaker 4: If you run a manufacturing facility, you think first about all of your direct costs, could be steel or copper, anything else, and then you think about your labor, and then you think about your SG&A costs of IT and everything else.

Ill.

Speaker 4: Waste and recycling, right, we're talking about basis points, right, of someone's overall cost structure.

Waste and recycling rate, we're talking about basis points right in some of the overall cost structure. So a small price premium on a very small number is still a very very small numbers. So for them. It's around compliance right think about producer liability right when they produce a waste stream, especially more complex and complicated one.

Speaker 4: So a small price premium on a very small number is still a very, very small number. So for them, it's around compliance. Think about producer liability.

Speaker 4: When they produce a waste stream, especially more complex and complicated ones, they have the liability of that forever. So having somebody who is going to handle that in a sustainable and appropriate manner is of enormous value.

They have the liability of that forever, so having somebody who is going to handle that in a sustainable and appropriate manner is of enormous value them.

Speaker 4: the speed, right, of being able to get things out of their facility and keep the container empty because a full container can sometimes shut down the manufacturing process. So there's enormous value created by speed, ease of service, right, digital interface and billing, and those are all pieces that we start to put together for people. So that's the value proposition.

Speed of being able to get things out of their facility and keep the container empty because a bulk container can sometimes shutdown the manufacturing process. So there's enormous value created by speed ease of service right digital interface and billing and those are all pieces that we start to put together for people.

So that's the value proposition for customers.

Speaker 12: That's a great clarification answer and as you know, compliance has got to be a big part of the value proposition. My second question, maybe it's more of a philosophical question, but the industry, and you're seeing it yourself, you're getting strong pricing, you're covering your inflation, the churn is at...

No.

Great clarification.

As you know the <unk>.

So it's not a big part of the value proposition.

Second question, maybe it's more of a philosophical question, but the industry.

We're seeing that.

So we are getting strong pricing covering inflation the churn is at.

Speaker 12: at record lows as well, so you kind of get best of both worlds, but I guess what churn level would force you to re-evaluate your pricing strategies? You said you're at 95%, I think it was a Q4 number. At what point or at what level of churn would you rethink the pricing you're putting out into the market in order to maintain a certain level of market share?

Rapid logos wells, we've kind of done.

The best of both worlds, but.

What churn level with force you to reevaluate your pricing strategy.

<unk> hundred 95%.

I think it was a Q4 number.

At what point or what level of churn.

Another pricing, we're putting out into the market in order to maintain.

A certain level of market share or volume.

Speaker 4: Well, we look at that all the time, right? We understand the and we have a very sophisticated pricing, both pricing new customers, as well as pricing existing customers. And the latter becomes more important for us, obviously, because we have such a long customer tenure, right? That's what that high customer retention drives or underneath that is long customer tenure. And so we have all kinds of experiences with customers around test and learn, right? We take A and B sampling in terms of understanding a price that customers are willing to

Well, we look at that all the time right, we understand the and we're very sophisticated pricing both pricing new customers as well as pricing existing customers in the latter becomes more important for us obviously, because we have such a long customer tenure right thats what that high customer retention drives are underneath that is <unk>.

One customer tenure and so we have all kinds of experiences with customers around test and learn right. We take A&P sampling in terms of understanding our price that customers are willing to.

Speaker 4: Pay and then at what price does that start to drive turn right and start to drive defection? And there's an incredible amount of science underneath that process that's been developed over the last two decades So it's really not the top-down number. We look at and if we go 92 We change pricing across the board or the opposite direction, right? It's much more surgical almost at a customer by customer level, right? And that's what produces the you know pricing number while driving great volume growth Well, that's that's clear

Pay and then at what price does that start to drive churn right and start to drive defection and Theres, an incredible amount of science underneath that process. That's been developed over the last two decades. So it's really not the top down number we look at and if we go 92, we changed pricing across the board or the opposite direction right. It's much more so.

<unk> almost at a customer by customer level right and that's what produces the pricing number well driving great volume growth.

Okay. That's helpful. Thank you very much for taking my questions.

Speaker 1: Our next question comes from David Manthe with Baird. Please go ahead.

Our next question comes from David Manthey with Baird. Please go ahead.

Speaker 13: Yeah, thank you very much. Two quick ones here.

Yes, thank you very much.

Two quick ones here, John you mentioned at the beginning something about forward integrating into the plastics supply chain could you tell me what that means are completely clueless about that and second on.

Speaker 13: John , you mentioned at the beginning something about forward integrating into the plastic supply chain. Could you tell me what that means? I'm completely clueless about that. And second.

Speaker 13: On the ECO deal, it looks like margins, free cash flow, and returns are lower than core republic right out of the box here.

On the <unk> deal.

It looks like.

Margins free cash flow and returns are lower than core Republic right out of the box here.

Speaker 13: Organic growth may be a little bit more attractive, and the platform for bolt-on acquisition seems to be one of the best attributes of it. Could you just compare and contrast?

Organic growth, maybe a little bit more attractive than the platform for bolt on acquisitions seems to be one of them.

The best attributes of it.

Could you just compare and contrast.

Sort of the pipeline at equal as you've gone through your due diligence talk to them about deals versus what you know about the average.

Speaker 13: sort of the pipeline at E-Call as you've gone through your due diligence, talk to them about deals versus what you know about the average MSW deal.

That's W deal.

Speaker 4: Yeah, sure. So on plastics, listen, the world has a single use plastics problem, right? And you don't have to read too many.

Yes, sure so on plastics within the World has the single use plastics problem right and you don't have to read too many.

Speaker 4: websites or magazines or watch too many television shows to figure that out. Now, it's very different, the nature of those problems is very different across geography. But in the U.S., the problem is, right, circularity, right? We produce single-use water bottles or anything else, and we don't capture enough of those.

Websites, our magazines and watching TV shows to figure that out now it's very different nature of those trunk with very different across geography.

The U S. The problem is circularity, we produce single use water bottles or anything else and we don't capture enough of those.

Speaker 4: And, you know, that plastic ultimately gets lost or gets downgraded, right? And there's huge pressure on the CPG companies to drive more reusable product rather than just using virgin plastic.

And that plastic ultimately gets lost or gets downgraded right and there is a huge pressure on the CPG companies to drive more reusable product.

Rather than just using Virgin plastic.

Speaker 4: And the constraint in all this is aggregation and supply. And so we are uniquely positioned in the value chain because we have that material. Today, that value chain isn't very well constructed. So you have product that moves very inefficiently. We sell that product for a relatively low value for what it's ultimately worth when it returns into the hands of the CPG company.

And the constraint and all of this is aggregation and supply and so we are uniquely positioned in the value chain, because we have that material.

Today that value chain is it very well constructed so you have product that moves very inefficiently, we sell that product for a relatively low value for what it's ultimately worth when it returns into the hands of the CPG companies. So lot of dialogue lot of discussion going on across every stage of the value chain right, but we think we've got an opportunity.

Speaker 4: A lot of dialogue, a lot of discussion going on across every stage of the value chain. But we think we've got an opportunity to take a next step.

Take a next step.

Speaker 4: and move forward with some pretty simple processing that is gonna allow us to capture a higher selling price and take more volatility right out of those sales.

Move forward with some pretty simple processing that is going to allow us to capture a higher selling price and take more volatility right out of those sales through longer term contracting I'm not going to get into any more detail.

Speaker 4: through longer-term contracting. I'm not going to get into any more detail right now than that, but stay tuned here because I think in the next few months you're going to hear far more color on that.

Right now than that but stay tuned here because I think in the next few months youre going to hear far more color on that topic.

And then on U S ecology listen we have a really.

Speaker 4: And then on U.S. Ecology, listen, we have a really robust and capable business development team, both out and geographically dispersed, as well as here in Florida.

Robust and capable business development team, both out and geographically dispersed as well as here in Phoenix that maintains the perspective on every company big and small and builds a pipeline. So we've been working on this for years on the environmental solutions side of the business and.

Speaker 4: that maintains a perspective on every company, big and small, and builds a pipeline. So, we've been working on this for years on the environmental solutions side of the business and have, you know, we're very disciplined buyers.

We're very disciplined buyers.

Speaker 4: Very patient, but we've had discussions with dozens of companies. So this isn't talking to U.S. Ecology and saying, what's in your pipeline? Of course, we'll do that, but we have our own robust pipeline that we know will fit in well to the U.S. Ecology platform post-closing.

Very patient, but we have had discussions with dozens of companies. So this isn't talking to use the call do you think whats in your pipeline of course, we'll do that but we have our own robust pipeline that we know will fit in well to the U S oncology platform right post closing.

Thank you very much.

At this time.

Speaker 1: At this time, there appears to be no further questions. Mr. van der Ark, I'll now turn back over to you for closing remarks.

To be no further questions. Mr. Alvarado I'll now turn back over to you for closing remarks.

Speaker 4: Thank you, Sarah. In closing, the strength of our 2021 performance demonstrates the power of our platform and the value our strategic investments are creating.

Thank you Sarah in closing the strength of our 2021 performance demonstrates the power of our platform and the value of our strategic investments are creating with.

Speaker 4: We exceeded our upwardly revised financial goals by delivering double-digit growth in revenue, EBITDA, EPS, and free cash flow.

We exceeded our upwardly revised financial goals by delivering double digit growth in revenue EBITDA, EPS and free cash flow.

Speaker 4: We continue to manage the business well to create long-term value for all stakeholders and expect continued profitable growth in 2022.

We continue to manage the business well to create long term value for all stakeholders and expect continued profitable growth in 2022.

Speaker 4: I would like to thank all our employees for their continued hard work and commitment to our customers.

I would like to thank all our employees for their continued hard work and commitment to our customers.

Speaker 4: Results like these are made possible by our team of dedicated employees. Have a good evening and be safe.

Results like these are made possible by our team of dedicated employees have a good evening and be safe.

Ladies and gentlemen, this concludes the conference call.

Speaker 1: Ladies and gentlemen, this concludes the conference call. Thank you for attending. You may now disconnect.

Thank you for attending you may now disconnect.