Q2 2024 Republic Services Inc Earnings Call
Operator: Good afternoon, and welcome to the Republic Services second quarter 2024 investor conference call. Republic Services is traded on the New York Stock Exchange under the symbol RSG.
Good afternoon, and welcome to the Republic services second quarter 'twenty 'twenty four Investor Conference call Republic services is traded on the New York stock exchange under the symbol R. S. G O.
Operator: All participants in today's call will be in a 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. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to Aaron Evans, Vice President of Investor Relations.
Speaker Change: All participants in today's call will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
Speaker Change: After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: Draw. Your question. Please press Star then two please.
Please note this event is being recorded.
I would now like to turn the conference over to Erin Evans, Vice President of Investor Relations.
Erin Evans: I would like to welcome everyone to Republic services second quarter 2024 conference call.
Aaron Evans: I would like to welcome everyone to Republic Services' second quarter 2024 conference call. John van der Ark, our CEO, and Brian DelGhiaccio, our CFO, are on the call today to discuss our performance. I would like to take a moment to remind everyone that some of the information we discuss on today's call contains forward-looking statements, which involve risk and uncertainty and may be materially different from actual results. Our SEC filings discuss factors that could cause actual results to differ materially from expectations.
Speaker Change: Jon Vander Ark, our CEO and Brian Dow Gotchu, our CFO are on the call today to discuss our performance.
Speaker Change: I would like to take a moment to remind everyone that some of the information we discuss on today's call contains forward looking statements, which involve risks and uncertainties and may be materially different from actual results.
Speaker Change: Our SEC filings discuss factors that could cause actual results to differ materially from expectations.
Aaron Evans: 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 July 24th, 2024. 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 express written consent of Republic Services is strictly prohibited. I want to point out that our SEC filings, our earnings press release, which includes GAAP reconciliation tables and a discussion of business activities, along with a recording of this call, are available on Republic's website at republicservices. 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.
Speaker Change: The material that we discuss today is time sensitive if in the future you listen to a rebroadcast of reporting of this conference call you should be sensitive to the date of the original call, which is July 24 2024.
Speaker Change: 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 express written consent of Republic services is strictly prohibited.
I want to point out that our SEC filings our earnings press release, which includes GAAP reconciliation tables, and a discussion of business activities along with the reporting of this call are available on Republic's website at Republic services Dotcom.
Speaker Change: I want to remind you that Republic. This management team routinely participates in investor conferences when.
Speaker Change: 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.
Aaron Evans: With that said, I'd like to turn the call over to Jon.
Jon Vander Ark: Thanks, Aaron. Good afternoon, everyone, and thank you for joining us.
John: Thanks, Aaron Good afternoon, everyone and thank you for joining us our strong second quarter results reflect the continued positive momentum in our business.
Jon Vander Ark: Our strong second quarter results reflect the continued positive momentum in our business and are a direct outcome of executing our strategic priorities. We continue to successfully grow our business while enhancing profitability by providing world-class service and solutions to our customers. During the quarter, we achieved revenue growth of 9 percent, generated adjusted EBITDA growth of 13%, expanded adjusted EBITDA margin by 110 basis points, reported adjusted earnings per share of $1.61, and produced $1.15 billion of adjusted free cash flow on a year-to-date basis.
John: And are a direct outcome of executing our strategic priorities.
Speaker Change: We continue to successfully grow our business, while enhancing profitability by providing world class service and solutions to our customers.
Speaker Change: Okay.
Speaker Change: During the quarter, we achieved revenue growth of 9% generated adjusted EBITDA growth of 13%.
Speaker Change: We expanded adjusted EBITDA margin by 110 basis points.
Speaker Change: Reported adjusted earnings per share of $1 61.
Speaker Change: And produced $1.15 billion of adjusted free cash flow on a year to date basis.
Jon Vander Ark: The results we are delivering are made possible by executing our strategy supported by our differentiated capabilities, customer zeal, digital, and sustainability. Regarding customer zeal, our commitment to delivering world-class essential services and sustainability offerings continues to drive customer loyalty and organic growth in the business. Our customer retention rate remains high at more than 94%, and Net Promoter Scores continue to improve. Customers value our comprehensive service offerings and the quality of our service delivery.
Speaker Change: The results, we're delivering are made possible by executing our strategy supported by our differentiated capabilities customer zeal digital and sustainability.
Speaker Change: Regarding customer zeal.
Speaker Change: Our commitment to delivering world class essential services and sustainability offerings continues to drive customer loyalty and organic growth in the business.
Speaker Change: Our customer retention rate remained high at more than 94%.
Speaker Change: And net promoter scores continue to improve.
Speaker Change: <unk> value of our comprehensive service offerings and the quality of our service delivery.
Speaker Change: Organic revenue growth during the second quarter was driven by strong pricing across the business.
Jon Vander Ark: Organic revenue growth during the second quarter was driven by strong pricing across the business. Average yield on total revenue was 5.5%, and average yield on related revenue was 6.6%. This level of pricing exceeded our cost inflation and drove 110 basis points of EBITDA margin expansion. Organic volume on total revenue declined 80 basis points or 1% on related revenue.
Speaker Change: Average yield on total revenue was 5.5% and average yields and related revenue was six 6%.
Speaker Change: This level of pricing exceeded our cost inflation and drove a 110 basis points of EBITDA margin expansion.
Speaker Change: Organic volume on total revenue declined 80 basis points or 1% unrelated revenue.
Jon Vander Ark: Volume losses were heavily concentrated in the cyclical portions of our business, including construction activities. Now, turning to our expanding digital capability. The team continues to advance the implementation of digital tools that improve the experience for both customers and our employees. For example, our RISE digital operations platform is driving improved route optimization and safety performance and providing more predictable service delivery to our customers. Empower, our new fleet and equipment management system, was introduced to pilot locations earlier this month.
Speaker Change: Volume losses were heavily concentrated to the cyclical portions of our business, including construction activity.
Speaker Change: Turning to our expanding digital capabilities.
The team continues to advance the implementation of digital tools that improves the experience for both customers and our employees.
Speaker Change: Our rise digital operations platform is driving improved route optimization and safety performance.
Speaker Change: And providing more predictable service delivery to our customers.
Speaker Change: Empower our new fleet and equipment management system was introduced a pilot locations earlier this month.
Jon Vander Ark: MPOWER is expected to increase maintenance technician productivity and enhance warranty recovery. We expect to continue deploying the new system to all locations under a phased approach through the end of 2025. We estimate Empower will drive $20 million of annual cost savings once fully implemented. We continue to benefit from innovative technology on recycling and waste collection routes. Our platform utilizes cameras to identify overfilled containers and contamination in recycling containers.
Speaker Change: Empower is expected to increase maintenance technician productivity and enhance warranty recovery.
Speaker Change: We expect to continue deploying the new system to all locations under a phased approach to the end of 'twenty 'twenty five.
Speaker Change: We estimate empower will drive $20 million of annual cost savings once fully implemented.
Speaker Change: We continue to benefit from innovative technology on recycling and waste collection routes.
Speaker Change: Our platform utilizes cameras to identify overfilled containers and contamination and recycling containers.
Jon Vander Ark: This technology reduces contamination at our recycling centers and is expected to generate approximately $60 million in incremental annual revenue. To date, we have already achieved $45 million in benefits. Moving on to sustainability, we believe that creating a more sustainable world is both our responsibility and a platform for growth.
Speaker Change: This technology reduces contamination out of recycling centers and is expected to generate approximately $60 million in incremental annual revenue.
Speaker Change: To date, we have already achieved $45 million of benefit.
Speaker Change: Moving on to sustainability.
Speaker Change: We believe that creating a more sustainable world is both our responsibility and a platform for growth.
Jon Vander Ark: Earlier today, we released our latest sustainability report highlighting the progress we are making toward our 2030 goals and the positive impact we're delivering to our customers and the communities we serve. Our 2030 goals are supported by investments we are making in polymer centers, the Blue Polymers joint venture, renewable natural gas projects, and fleet electrification. Development of our Polymer Centers and Blue Polymers Joint Venture Facilities continues to move forward. For example, major customers have certified the plastic flake produced at our Las Vegas Polymer Center.
Speaker Change: Earlier today, we released our latest sustainability report highlighting the progress we are making toward our 2030 goals.
Speaker Change: And the positive impact, we're delivering to our customers and the communities we serve.
Speaker Change: Our 2030 goals are supported by investments, we're making in polymer centers, the blue Commerce joint venture renewable natural gas projects and fleet electrification.
Speaker Change: Development of our polymer centers in Blue polymers joint venture facilities continues to move forward.
Speaker Change: Major customers have certified the plastics Lake produced at our Las Vegas Polymer Center.
Jon Vander Ark: Production volumes continue to ramp up, and we expect to achieve our run rate output targets in the fourth quarter of this year. Construction is progressing on our Indianapolis Polymer Center, with equipment installation underway. The operation will be co-located with a Blue Polymers production facility. We expect construction on this facility to be complete by the end of the year, with earnings contributions beginning in mid-2025. The Renewable Natural Gas projects we're developing with our partners continue to advance. When the project came online during the second quarter... Additionally, we completed construction at our R&G project in Fort Wayne, Indiana. This will be the first project to come online in our joint venture with BP.
Speaker Change: Production volumes continue to ramp and we expect to achieve a run rate output targets in the fourth quarter of this year.
Speaker Change: Construction is progressing on our Indianapolis power center with equipment installation underway.
Speaker Change: The operation will be co located with a blue polymers production facility we.
Speaker Change: We expect construction on this facility to be complete by the end of the year with earnings contributions beginning in mid 'twenty 'twenty five.
Speaker Change: The renewable natural gas projects, we're developing with our partners continue to advance.
Speaker Change: When project came online during the second quarter.
Speaker Change: Additionally, we completed construction at our R&D project in Fort Wayne, Indiana. This.
Speaker Change: This will be the first project to come online in our joint venture with B P.
Jon Vander Ark: We expect five additional projects to be completed in the second half of this year. We continue to bring decarbonization solutions to the market, including our industry-leading commitment to fleet electrification. We currently have 16 electric collection vehicles in operation. We expect to have more than 50 EVs in our collection fleet by the end of the year. We now have nine facilities with commercial-scale EV charging infrastructure, and we expect five additional new sites to be completed in 2024. Customers are looking for solutions to support their sustainability goals. We recently announced an agreement with the City of Louisville, Colorado, making it the first municipality to adopt a fully electric residential collection service.
Speaker Change: We expect five additional projects to be completed in the second half of this year.
Speaker Change: We continue to bring decarbonization solutions to the market, including our industry, leading commitment to fleet electrification.
Speaker Change: We currently have 16 electric collection vehicles in operation.
Speaker Change: We expect to have a more than 50 E vs. In our collection fleet by the end of the year.
Speaker Change: We now have nine facilities with commercial scale E D charging infrastructure and.
Speaker Change: And we expect five additional new sites to be completed in 2024.
Speaker Change: Customers are looking for solutions to support their sustainability goals.
Speaker Change: We recently announced an agreement with the city of Lewisville, Colorado, making it the first municipality to adopt a fully electric residential collection service.
Speaker Change: As part of our approach to sustainability, we continually strive to be the employer of choice in the markets we serve.
Jon Vander Ark: As part of our approach to sustainability, we continually strive to be the employer of choice in the markets we serve. Employee turnover continues to improve, with the second quarter turnover rate improving 70 basis points compared to the prior year. With respect to capital allocation, year-to-date, we have invested $68 million in acquisitions. Our acquisition pipeline remains supportive of continued activity in both recycling and waste and environmental solutions businesses. We currently have more than $300 million in transactions in advanced stages of diligence and are expected to close by the end of the year.
Employee turnover continues to improve with second quarter turnover rate, improving 70 basis points compared to the prior year.
Speaker Change: With respect to capital allocation.
Speaker Change: Year to date, we have invested $68 million in acquisitions.
Speaker Change: Our acquisition pipeline remains supportive of continued activity in both recycling and waste and environmental solutions businesses.
Speaker Change: We currently have more than $300 million of transactions in advanced stages of diligence and are expected to close by the end of the year.
Speaker Change: Year to date, we returned $504 million to shareholders through dividends and share repurchases.
Jon Vander Ark: Year-to-date, we have returned $504 million to shareholders through dividends and share repurchase. Additionally, we recently announced an increase in the dividend for the 21st consecutive year. Strong results we produced through the first half of the year support a full-year earnings outlook that exceeds our original expectations. We now expect revenue in the range of $16.075 billion to $16.125 billion, and adjusted EBITDA in the range of $4.9 to $4.925 billion. Adjusted earnings per share in a range of $6.15 to $6.20, and adjusted free cash flow in a range of $2.15 billion to $2.17 billion. Our updated financial guidance includes the contributions from acquisitions closed through June 30. I will now turn the call over to Brian, who will provide more details on the quarters. Thanks, John.
Speaker Change: Additionally, we recently announced an increase to the dividend for the 21st consecutive year.
Speaker Change: Strong results, we produced in the first half of the year supporting full year earnings outlook that exceeds our original expectations.
Speaker Change: We now expect revenue in the range of 16.075 billion to $16 $1 billion to $5 billion.
Speaker Change: Adjusted EBITDA in the range of 4.9 to $4 $90 billion to $5 billion.
Speaker Change: Adjusted earnings per share in a range of $6 15 to $6.20.
Speaker Change: And adjusted free cash flow in a range of 2.15 billion to $2.17 billion.
Speaker Change: Our updated financial guidance includes the contributions from acquisitions closed through June 30th.
Speaker Change: I will now turn the call over to Brian who will provide more details on the quarter. Thanks.
Brian: Thanks, John core price on total revenue was six 8%.
Brian M. DelGhiaccio: Core price on total revenue was 6.8%. Core price on related revenue was 8.1%, which included open market pricing of 9.8% and restricted pricing of 5.4%. The components of the core price on related revenue included small container of 11.8%, large container of 7.4%, and residential of 7.8%. Average yield on total revenue was 5.5%, and Average Yield on Related Revenue was 6.6%. Second quarter volume on total revenue decreased 80 basis points, and volume on related revenue decreased 1%.
Brian: Core price on related revenue was eight 1%, which included open market pricing of nine 8% and restricted pricing of five 4%.
Brian: Components of core price unrelated revenue included.
Paul: Paul container up 11, 8% large container of seven 4% residential up seven 8%.
Paul: Average yield on total revenue was five 5% and average yield on related revenue was six 6%.
Brian: Second quarter volume on total revenue decreased 80 basis points.
Speaker Change: And volume unrelated revenue decreased 1%.
Brian M. DelGhiaccio: Our volume results included a decrease in large container of 3.3%, primarily due to continued softness and construction-related activity, and a decrease in residential of two and a half percent, primarily due to municipal contracts lost in 2023, that anniversary in the fourth quarter of this year. During the quarter, small container volume decreased 60 bases, while landfill MSW increased 1.1%. The small container volume loss is a direct result of intentionally shedding broker-related business obtained through M&A transactions. We continue to adhere to our long-standing strategy of prioritizing direct relationships with our customers.
Speaker Change: Our volume results included a decrease in large container of three 3% primarily due to continued softness in construction related activity.
Speaker Change: And a decrease in residential up two 5% primarily due to municipal contracts lost in 2023 that anniversary in the fourth quarter of this year.
Speaker Change: During the quarter small container volume decreased 60 basis points.
Speaker Change: Landfill MSW increased one 1%.
Small container volume loss as a direct result of intentionally shedding broker related business obtained through M&A transactions.
Speaker Change: Continue to adhere to our long standing strategy of prioritizing direct relationships with our customers.
Brian M. DelGhiaccio: Moving on to recycling, commodity prices were $173 per ton during the second quarter. This compared to $119 per ton in the prior year. Recycling, processing, and commodity sales increased revenue by 50 basis points during the quarter. Our updated full-year guidance assumes commodity prices remain at approximately $170 per ton for the remainder of the year. Now, we turn to our environmental solutions business.
Speaker Change: Moving on to recycling.
Speaker Change: Commodity prices were $173 per ton during the second quarter.
Speaker Change: This compared to $119 per ton in the prior year.
Speaker Change: Recycling processing and commodity sales increased revenue by 50 basis points during the quarter.
Speaker Change: Our updated full year guidance assumes commodity prices remain at approximately $170 per ton for the remainder of the year.
Speaker Change: Now turning to our environmental solutions business.
Brian M. DelGhiaccio: Second quarter environmental solutions revenue increased $74 million compared to the prior year, fueled by price-led organic growth and contribution from acquisitions. On a same-store basis, Environmental Solutions contributed 40 basis points to total company internal growth during the quarter. Adjusted EBITDA margin in the environmental solutions business expanded 130 basis points to 23.8% in the second quarter. Environmental Solutions' adjusted EBITDA margin was 22.5% in the prior year. Total company adjusted EBITDA margin expanded 110 basis points to 31.1%. Margin performance during the quarter included margin expansion in the underlying business of 130 basis points and a 20 basis point increase from recycled commodity prices. This was partially offset by a 40 basis point decrease from acquisition. Year-to-date adjusted free cash flow was $1.15 billion.
Speaker Change: Second quarter, environmental solutions revenue increased $74 million compared to the prior year fueled by price led organic growth and contribution from acquisitions on.
Speaker Change: On a same store basis environmental solutions contributed 40 basis points to total company internal growth during the quarter.
Speaker Change: Adjusted EBITDA margin in the environmental solutions business expanded 130 basis points to 23, 8% in the second quarter.
Speaker Change: Environmental solutions EBITDA margin was 22, 5% in the prior year.
Total company adjusted EBITDA margin expanded 110 basis points to 31, 1%.
Speaker Change: Margin performance during the quarter included margin expansion in the underlying business of 130 basis points and 20 basis point increase from recycled commodity prices.
Speaker Change: This was partially offset by a 40 basis point decrease from acquisitions.
Speaker Change: Year to date adjusted free cash flow was $1.15 billion.
Brian M. DelGhiaccio: The decrease from the prior year is primarily due to the timing of capital expenditures. Year-to-date net capital expenditures of $767 million represent an increase of $234 million, or 44%, compared to the prior year. Capital spending is more routable in 2024, whereas 23 was heavily weighted to the second half of the year. Prior year capital expenditures were impacted by vendor-related delays in truck and equipment deliveries. Total debt was $13.1 billion, and total liquidity was $3.5 billion.
Speaker Change: The decrease from the prior year is primarily due to the timing of capital expenditures.
Speaker Change: Year to date net capital expenditures of 760 $767 million represents an increase of $234 million or <unk> 44 per cent compared to the prior year.
Speaker Change: Capital spending is more ratable in 'twenty 'twenty, four whereas twenty-three was heavily weighted to the second half of the year.
Speaker Change: Prior year capital expenditures were impacted by vendor related delays and truck and equipment deliveries.
Speaker Change: Total debt was $13 $1 billion in total liquidity was $3 $5 billion, our leverage ratio at the end of the quarter was approximately two eight times.
Brian M. DelGhiaccio: Our leverage ratio at the end of the quarter was approximately 2.8 times. With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 25.5% during the quarter. We expect a full-year equivalent tax impact of approximately 25.5%. With that, Operator, I'd like to open the call to questions.
Speaker Change: With respect to taxes, our combined tax rate and the impact from equity investments in renewable energy resulted in an equivalent tax impact of 25.5% during the quarter.
We expect our full year equivalent tax impact of approximately 25, 5%.
Speaker Change: With that operator, I'd like to open the call to questions.
Speaker Change: Well now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Operator: We'll now begin the question-and-answer session. To ask a question, you may press star, then 1 on your touchtone phone. In the interest of time, we ask that you limit yourself to one question and one follow-up question today. If your question has been answered, and you would like to withdraw your request, you may do so by pressing star then 2. If you are using a speakerphone, please pick up your handset before pressing the keys. We will now pause momentarily to assemble our roster. The first question comes from Toni Kaplan of Morgan Stanley. Please go ahead.
Speaker Change: In the interest of time, we ask that you limit yourself to one question and one follow up question today.
Speaker Change: If your question has been answered and you would like to withdraw your request you may do so by pressing Star then two.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: We'll now pause momentarily to assemble our roster.
Speaker Change: The first question comes from Toni Kaplan of Morgan Stanley. Please go ahead.
Toni Michele Kaplan: Thanks so much. I was hoping to ask about sustainability projects in the wake of the Chevron decision. It sounds like you're still going strong with your projects. Just wondering if there will be any impacts on the market, for example, supply and demand for RINs as a result of the decision, and then maybe separately in light of the U.S. election coming up. Would that impact the timing of any projects, M&A, or anything else not related to sustainability, just anything in general that you'd call out?
Toni Michele Kaplan: Thanks, so much.
Toni Michele Kaplan: Hoping to ask about sustainability projects in the wake of the Chevron decision. It sounds like you're still going strong with your projects I was wondering if you think there'll be any impacts affecting the market for example supply and demand for Rins and as a result of that decision and then maybe.
Toni Michele Kaplan: Separately in light of the U S.
S election, coming up with that impact timing of any projects M&A or anything else I'm not related to sustainability, just anything in general that that you'd call out. Thanks.
Jon Vander Ark: Thanks.
Speaker Change: Sure Yeah. The low so we feel good about the projects aren't approach specifically on landfill gas to energy.
Jon Vander Ark: Sure, yeah, listen, we feel good about the project and our approach specifically to landfill gas to energy. As you know, we're in a joint venture model, and these are a series of independent decisions around projects. And so to accept that, you know, the RINs market changes and that takes some of those projects kind of below our return threshold, those are projects that we won't do on that front.
Speaker Change: As you know we're in a joint venture model and there is there's a series of independent decisions around projects and so to the extent that you know the rins market changes and that takes some of those project kind of below our return threshold. Those are projects that we won't do on that front, but keeping in mind also that we had a very conservative set of assumptions.
Jon Vander Ark: But keep in mind also that we had a very conservative set of assumptions on $2 RINs that we built out the initial set of assumptions and, Well, we talked to you about financial impact, so we still feel, you know, really confident, which ties into the second point. There'll be puts and takes, whether there's an administration change, and there'll certainly be a new president, whether that's a party change or not. I think, in general, the conventional wisdom is that the Republican administration is going to be more business-friendly, and the Democratic one may be less business-friendly.
Speaker Change: $2 rents that we built out the initial set of assumptions and.
Speaker Change: Well, we talked to you about financial impact so we still feel really confident which ties into the second point.
Speaker Change: There'll be puts and takes whether there's an administration change and there's certainly be a new new president whether that's a party change or not.
Speaker Change: I think in general the conventional wisdom is a Republican administration is going to be more business friendly and Democratic one maybe less business friendly.
Jon Vander Ark: I think if you look at the last three years, our businesses have performed really well in the context of a Democratic administration. So I think in any environment, we feel confident there will be some puts or takes on the margin for sure, but our team will navigate that.
Speaker Change: I think if you look at the last three years, our business performed really well in the context of a Democratic administration. So.
Speaker Change: I think in any environment, we feel confident there'll be some puts or takes on the margin for sure, but we'll our team will navigate that.
Jon Vander Ark: terrific, and then as a follow-up, just want to ask about volume. Bit of a late quarter again. I think you called out the large container and then also some of the resi contracts from 2023 on the muni side. Are you still thinking that this year will be flat to modestly positive on volume, and just anything to flesh out the sort of slightly lower top line?
Speaker Change: Sure that and then as a follow up just wanted to ask about volume a bit of a late quarter again, I think you called out the large container and then also some of the resin contracts from 'twenty to 'twenty three on the Muni side.
Speaker Change: Are you still thinking that this year will be flat to modestly positive on volume and just anything to flesh out the sort of slightly lower top line guide. Thanks.
Jon Vander Ark: Yeah, I think from a volume standpoint, we'll be slightly below our original expectations, and that's a function of, listen, the construction market is still pretty challenged. With high interest rates, commercial construction activity, and residential construction activity have been, you know, very muted. And you see that in our volume numbers in the TEMP large container.
Speaker Change: Sure.
Speaker Change: Yeah, I think from a volume standpoint will be slightly below our original expectations and that's a function of listen the construction market is still pretty challenged.
Speaker Change: With high interest rates commercial construction activity in residential construction activity has been very muted.
Speaker Change: And you see that in our volume numbers and temp large container. The great News is that you know pricing is holding up in there I think the industry has behaved very responsibly in that context, and I also am a relatively optimistic that that is somewhat of a short term phenomenon, we need more housing stock in the United States and I think you are.
Jon Vander Ark: The great news is that, you know, pricing is holding up, and I think the industry is behaving very responsibly in that context. And I also am relatively optimistic that that is, you know, somewhat of a short-term phenomenon. We need more housing stock in the United States, and I think you're starting to see that.
Speaker Change: We're starting to see.
Jon Vander Ark: Rays of hope here on interest rate cuts, which I think will be the catalyst for that to happen, whether that happens three months from now or six or nine months from now. I do think that's becoming more transitory versus permanent on that front. And then there's also, Ben, you talked about the residential contracts. We've accelerated some of the broker exits that we acquire in our M&A deals, so let's talk about require somebody we never value to work on brokers because we know it's going to matriculate out of the system.
Rays of hope here on interest rates cuts, which I think will be the catalyst for that to happen whether that happens three months from now or six or nine months from now I do think that's more transitory versus permanent on that front and then there's also been can you talk about the other you talked with the residential contracts we've accelerated some of the broker exits that we acquired in our M&A deals always talk about.
Speaker Change: <unk> requires somebody we never value the work on brokers, because we know what's going to matriculate out of the system.
Speaker Change: We've accelerated that so that drove a little bit of outsized volume decline in the quarter and then for the overall revenue guide you a part of that is the volume outlook, which I. Just gave you part of that is the sustainability projects landfill gas energy, we're gonna hit or a number of timing of the starts are those going to be a little bit later in the year like ourselves and the industry have.
Jon Vander Ark: We've accelerated that, so that drove a little bit of an outsized volume decline in the quarter. And then for the overall revenue guy, part of that is the volume outlook I just gave you. Part of that is the sustainability projects, landfill gas energy. We're going to hit our number.
Jon Vander Ark: The timing of the start of those is going to be a little bit later in the year. I think ourselves and the industry have faced a little bit of delays in terms of permits, getting the equipment in place, etc. So that's not a big surprise. And then our Polymer Center, well, we're teams executing phenomenally in terms of the product we're producing. We got to a little bit of a later start than we expected, through all kinds of things ancillary to the system, like permits for the facility and other things. So that caused a little delay in the timing on that front. Again, that's transitory; it won't be a full run rate, as I discussed in my prepared, Super. Thank you.
Speaker Change: Faced a little bit of delays in terms of permitting and getting the equipment in place et cetera. So that's not a big surprise and then our polymer center, while it's work teams executing phenomenally in terms of the product we're producing we got too a little bit of a later start than we expected through all kinds of things ancillary to the system like permitting for the facility and other things so.
Speaker Change: That caused a little delay in the timing on that front again, that's transitory won't be at full run rate as I discussed in my prepared remarks.
Speaker Change: Alright, thank you.
Speaker Change: Next question comes from Tyler Brown with Raymond James. Please go ahead, Hey.
Patrick Tyler Brown: The next question comes from Tyler Brown with Raymond James. Please go ahead.
Speaker Change: Good afternoon.
Speaker Change: Afternoon.
Brian M. DelGhiaccio: Hey, Brian, any color on the shape of pricing into the back half? Should we expect it to sequentially decelerate in Q3 and Q4? And just any color on how that might impact margins? Because it does feel like the margin expansion is expected to slow. My hunch is that's largely in Q4, but any color there would be helpful.
Hey, Ryan any color on the shape of the pricing into the back half should we expect it to sequentially decelerated in Q3, and four and just any color on how that might impact margins because it does feel like the margin expansion is expected to slow my hunch is that largely in Q4, but any color there would be helpful.
Patrick Tyler Brown: Yeah, and and Tyler Good observation you know we talked about.
Brian M. DelGhiaccio: Yeah, and Tyler, good observation. You know, we talked about in Q1 that we thought that would be our highest level of pricing this year, and then it would sequentially decline, in part just because of some of the index-based pricing and just the impact that has throughout the year. As you've seen, though, we've also seen cost moderate, cost inflation moderate, so our spread we've maintained. So we have a similar level of margin expansion in Q1 and Q2. We would expect that spread to decrease a little bit as we move into the second half of the year, but again, if you take a look, driving outsized margin expansion well above our initial expectations.
Speaker Change: In Q1, we thought that would be our highest level of pricing of this year and then it would sequentially decline in part just because of some of the index based pricing and just the impact that has throughout the year as you've seen though we've also seen cost moderate cost inflation moderates our spread we've maintained so we have a similar level of margin expansion in Q1 and Q2.
Speaker Change: We would expect that spread to decrease a little bit as we move into the second half of the year, but again, if you take a look driving outsized margin expansion and well above our initial expectations.
Brian M. DelGhiaccio: Right, okay, that's very helpful. So I believe... my math is correct. This was the first quarter that you guys put up a 32% core solid waste margin, if my math is right. But if we go back, you guys have always said that this could be a 32% EBITDA margin business if price compounds, and recycling normalizes, and both have. So, since 32 was the new 30, just any high-level thoughts on what the new 32 could be over the next few years? I mean, is there any reason to believe that a mid-30% margin in core solid waste couldn't be achievable in time if price-cost dynamics cooperated?
Speaker Change: Right. Okay, that's very helpful. So.
Speaker Change: I believe my math is correct. This is the first quarter that you guys have put up a 32% core solid waste margin. If my math is right.
Speaker Change: But if we go back you guys have always said that this could be a 32% EBITDA margin business at price compounds normalizes and both have.
Speaker Change: So since 32 was the new 30, just any high level thoughts on what the new 32 could be over the next few years. I mean is there any reason to believe that a mid 30% margin and core solid waste couldn't be achievable in town.
Speaker Change: This cost dynamics cooperate.
Brian M. DelGhiaccio: And Tyler, I think our words were that we saw that in the near term, we saw 32% as achievable. Really, what we're looking at is the consistent cadence of margin expansion across our business. And we've talked about that in the 30 to 40 basis points of margin expansion for recycling and waste business, and a little bit more in the environmental solutions business, call it, you know, 75 basis points plus, just given where it is and its maturity.
Speaker Change: Yeah, and and Tyler I think are our words were that we saw that in the near term. We saw 32% is achievable, but really what we're looking at is the consistent cadence of margin expansion across our business and we've talked about that in the 30 to 40 basis points of margin expansion in the recycling and waste business had a little bit more in the environmental solution.
Speaker Change: Call. It 75 basis points, plus just given where it is and its at its maturity and so we continue to see that opportunity as we move forward. So we're not going to call you know what the theoretical cap is but again, it's about pricing in excess of cost inflation, it's about realizing the benefits from our initiatives, including our digital initiatives and driving cost out of the system.
Brian M. DelGhiaccio: And so we continue to see that opportunity as we move forward. So we're not going to call, you know, what the theoretical cap is, but again, it's about pricing in excess of cost inflation. It's about realizing the benefits from our initiatives, including our digital initiatives, and driving costs out of the system. And we see that runway for years to come.
Speaker Change: And we see that runway for years to come.
Brian M. DelGhiaccio: Excellent. My last one was real quick.
Speaker Change: Excellent My last one real quick so John there'd been a number of deals excuse me and call. It hazardous waste slash industrial waste less non traditional waste markets. Some are big some are small but can you just talk about your appetite specifically in that market will be slow and steady or would you entertain something that would be much chunkier.
Jon Vander Ark: So, Jon, there have been a number of deals, excuse me, and call them hazardous waste slash industrial waste slash non-traditional waste markets. Some are big, some are small, but can you just talk about your appetite specifically in that market? Will it be slow and steady, or would you entertain something that would be much chunkier? Alyssa Wheeler
Jon Vander Ark: Listen, we look at everything. We have a perspective on any type of transaction. If it's going to create value for our shareholders and fits with us strategically, we'll certainly be at the table on that front. So, look, we do about 20 deals a year on average over the last decade, but most of those are small tuck-ins, which we're great at, and we've got a good pipeline looking forward. And then the bigger ones become more opportunistic, just in terms of is it a fit for us time-wise, does it create value, are we the natural owner of that? active in that space over time.
John: Well listen we look at everything we have made it perspective on any types of transaction.
Speaker Change: If it's going to create value for our shareholders and fits with US strategically, we'll certainly be at the table on that front. So plus the we do about 20 deals a year on average over the last decade. The most of those are the small tuck ins that which were you know great at and we've got a good pipeline looking forward and then you know the bigger ones become more opportune.
Speaker Change: Mystic just in terms of is it a fit for US time wise does it create value or we the natural owner of that and again, you'll see us be a act.
Speaker Change: Active in that space over time.
Speaker Change: Perfect. Thank you all.
Speaker Change: The next question comes from Kevin Chiang with CIBC. Please go ahead.
Kevin Chiang: The next question comes from Kevin Chiang with CIBC. Please go ahead.
Jon Vander Ark: Hi, good afternoon. Thanks for taking my question. Maybe if I can follow up on that, you know, just given some of the activity we've seen in kind of this hazardous waste environmental service space on the M&A front, are you seeing any changes in the transaction multiples or the type of assets coming to sale that might give you an opportunity to fill in, you know, service areas you want to pursue or white space on the map that might become available?
Kevin Chiang: Hi, good afternoon. Thanks for taking my question, maybe maybe if I can follow up on that just given some of the activity we've seen in.
Speaker Change: God this hazardous waste environmental service space on the M&A front are you seeing any changes in the transaction multiples or or the type of assets coming to sell that that might give you an opportunity to fill in.
Speaker Change: Service areas, you want to pursue or white space on the map that are that might be might come available.
Speaker Change: Yeah, well, there's plenty of opportunities no question on the small tuck ins on the environmental solutions side of the business, we've been intentionally a little bit slow on that this year because the team is doing a lot of integration work from an IP standpoint, and again that it's very analogous to recycling of waste, we create value in that space.
Jon Vander Ark: There are plenty of opportunities, no question. On the small tuck-ins on the environmental solutions side of the business, we've been intentionally a little bit slow on that this year because the team is doing a lot of integration work from an IT standpoint. And again, it's very analogous to recycling and waste. We create value in that space because we've got well-run systems, highly integrated, and we can take a smaller company and layer that operationally right into our density, and just draw right off of our system.
Speaker Change: Because we've got well run systems highly integrated and we can take a smaller company and layer that operationally right into our density and just draft right off of our systems right until we get that on the environmental solutions side right, you're just adding to your complexity, so you're not getting that synergy.
Jon Vander Ark: Right, until we get that on the environmental solutions side, right? You're just adding to your complexities, you're not getting that synergy. And so you'll see us again. That pipeline is building. You'll see us be much more active next year.
Speaker Change: And so you'll see us again that pipeline is building, you'll see us be much more active next year in this space.
Jon Vander Ark: And just anything on the transaction multiples you're seeing, has that changed at all versus, let's say, 18 months to 24 months ago?
Speaker Change: And just anything on the transaction multiples, you're seeing has that changed at all versus let's say 18 months to 24 months ago.
Speaker Change: I think it's consistent which is.
Jon Vander Ark: I think it's consistent, which is, there's variation in deals that may be of a little lower quality from our perspective. I think the high-quality deals, right, you're going to pay a certainly a higher multiple for, but then I think we've done a good example of that with the U.S. Ecology Acquisition, right? If you're buying quality and you've got a plan against it, you can certainly drive value post-acquisition.
Speaker Change: There's variation in deals.
Speaker Change: Deals that may be a little lower quality from our perspective, I think the high quality deals right, you're going to pay certainly a higher multiple for <unk>.
Speaker Change: But then I think we've done a good example of that where the U S ecology acquisition right, if you're buying something quality and you've got a plan against it you can certainly drive value post acquisition.
Jon Vander Ark: Okay, that's helpful. Maybe just on the EV comments you made in your prepared remarks, you talked about, I guess, the nine EV infrastructure sites you have. You'll have five new ones or five additional ones by the end of 2024, and you'll have, I guess, a target of 50 EVs. Are those, you know, when you think of those 14 sites that you ran, I guess, how many electric vehicles could you support based on the, I guess, the exit rate infrastructure platform you will have invested in? Is it significantly more than 50? Or is it, you know, the kind of number 50 the right number? And if you want to grow more than that, would you have to make more investments in your charging infrastructure?
Speaker Change: Okay.
Speaker Change: That's helpful and maybe just on the E V comments you made in your prepared remarks.
Speaker Change: You talked about the I guess the nine a nine.
Speaker Change: <unk> EV infrastructure sites, you have you'll have five new one or five additional ones by the end of 'twenty 'twenty four and you have a target of 50 he views.
Speaker Change: Are those you know when you think of those 14 sites at yearend I guess, how many electric vehicles could you support based on the I guess the exit rate infrastructure platform. You'll have invested in is it significantly more than 50 or is it kind of 50 is the right number and if you want to grow more than that you'd have to make more investments into your charging infrastructure.
Jon Vander Ark: Yeah, no, it's hundreds. So think about putting in the initial infrastructure and getting connected to the grid. And then you think about charging stations, which become modular once that infrastructure is put in. And so the strategy is we were going, you know, a five-year plan at each of these sites to understand that we'll be layering more vehicles in. And so you're bearing the upfront cost right now, and then it's just an incremental cost to put in the charging station as the fleet grows in that space.
Speaker Change: Yeah, no. It's hundreds so think about putting in the initial infrastructure and getting connected to the grid and then do you think about charging stations, which become modular once that infrastructure is put in and so the strategy is we're going to get to a five year out plan at each of these sites understand that won't be layering more vehicles in.
Speaker Change: And so you're bearing the upfront cost right now and then it's just an incremental cost to put in the the charging station as the fleet grows in that space.
Jon Vander Ark: Okay, that's what's happening there. Okay, perfect. Thanks for the clarification there. That's all for me. Congratulations on a good quarter. Thank you.
Speaker Change: That's what's what's happening okay perfect. Thanks for the clarification, there, but that's all for me congrats on the good quarter.
Jon Vander Ark: Thank you. Thank you.
Speaker Change: Thanks.
Speaker Change: The next question comes from Noah Kaye with Oppenheimer. Please go ahead.
Noah Duke Kaye: The next question comes from Noah Kaye with Oppenheimer. Please go ahead.
Jon Vander Ark: Hey, good afternoon. Thanks for taking the questions. I'll start with environmental services.
Noah Duke Kaye: Hey, good afternoon, thanks for taking the questions start with environmental services just on the organic performance of the business a pretty big sequential improvement in the trends quarter over quarter. You know you had a headwind organically in the segment last quarter and I know you've called out.
Jon Vander Ark: Just on the organic performance of the business, pretty big sequential improvement in the trends quarter over quarter. You had a headwind organically in the segment last quarter, and I know you called out some weather events and the like. But then to go to kind of this sort of mid-single-digit organic growth in the segment this quarter, can you just maybe help us understand what you saw from the business on an organic basis and how to think about organic growth going forward through the balance of the year?
Noah Duke Kaye: Some weather events and the like but but then to go to kind of this sort of mid single digit organic growth in the segment. This quarter can you just maybe help us understand what you saw from the business on an organic basis and how to think about organic growth going forward through the balance of the year.
Noah Duke Kaye: Yes.
Jon Vander Ark: Yeah, strong. We're still in the growth mode in that business, right? And so recycling and waste is a very mature business. And, you know, we could kind of give you a really clear and clean outlook, right?
Speaker Change: We're still in the growth mode in that business right and so we're recycling and waste is a very mature business and you know we could kind of give you a really clear and clean outlook right, there's going to be a little more up and down in this business as we grow and build it out and part of that is on the customer side right on one hand, we are churning out customers on one end of the business.
Jon Vander Ark: There's going to be a little more ups and downs in this business as we grow and build it out, and part of that is on the customer side. On the one hand, we are churning out customers at one end of the business who weren't willing to pay returns, and we're going to beat our returns. And we're going to put upward pressure on industry pricing, as we always do. And on the flip side, we're layering in cross-sell opportunities that we've talked about. And so those don't all come in kind of randomly month to month; those come in kind of a different timing and wave.
Speaker Change: Weren't willing to pay returns that were booked to beat our returns and we're going to put upward pressure on industry pricing as we always do and on the flip side, we're layering in cross sell opportunities that we've talked about and so those don't all come in kind of ratably month to month those come in kind of a different timing in waves. So really pleased with the progress.
Jon Vander Ark: So really pleased with the progress. I'd encourage you on that business, if you're measuring it by the quarter, right, you're probably not going to get the best signal quarter to quarter. That's the case over the next one to two years, certainly, right? Measuring it over the year, I think gives you a much better view of the trajectory. And we're really pleased with both the top line and, certainly, the bottom line performance of that business.
Speaker Change: I encourage you in that business like if you're measuring it by the quarter right, you're probably not going to get the best signal quarter to quarter. If that's the over the next one to two years certainly measuring it over the year I think gives you a much better view of the trajectory and we're really pleased on both the top line and certainly bottom line performance of that business and I know it just.
Jon Vander Ark: And Noah, just based on when we put in our annual price increase, we didn't see the full impact of that until the second quarter. And so I think that's also reflective of what you're seeing in the EBITDA margin performance of that business at the same time.
Speaker Change: Just on when we put in our annual price increase we didn't see the full impact of that until the second quarter.
Speaker Change: So I think that's also reflective of what you're seeing in EBITDA margin performance of that business at the same time.
Speaker Change: Very good points do you feel comfortable underwriting you know organic growth. Thanks for the P is for the balance of the year.
Jon Vander Ark: Very good points. Do you feel comfortable underwriting, you know, organic growth?
Jon Vander Ark: Thanks to the PIs for the
Speaker Change: I'm I'm, sorry, do we expect.
Jon Vander Ark: I'm sorry, do we expect organic growth for the balance? Are you expecting, like in the Outlook, organic growth in ES for the balance? Yes, yeah, we are. And as you know, that business, the nature of it, because it's so mixed sensitive, there isn't a very clear kind of unit versus price that kind of pairs apart or peels apart volume versus price like we do in recycling and waste. And it hasn't been for lack of trying, but there are just too many variables that don't allow us to do that. But underlying organic unit growth will be there.
Speaker Change: Are you expecting like embedded in the outlook are you expecting organic growth and yes for the balance of the year.
Speaker Change: Yes, yes, we are okay, and as you know that business the nature of it because it's so mix sensitive.
Speaker Change: Isn't it very clear kind of unit versus price.
Speaker Change: Sure.
Speaker Change: Tear apart or Peel apart volume versus price like we do in recycling and waste and it hasnt been for lack of trying but there's just too many variables that don't allow us to do that but the underlying organic growth will be there.
Jon Vander Ark: Very helpful. Just on the margins, a really strong performance here. I wondered if we could maybe unpack a little bit that underlying 130 bps a little bit, as you've provided some nuggets in the past. That'd be helpful. And then I think to add additional color on the response to Tyler's question, it seems like we could be looking at kind of margins of maybe 100 bps or so year-over-year in 3Q and kind of flattish in 4Q. If there's any kind of nuance you would give in terms of how to shape that, that would be helpful for modeling purposes. Yeah, let me start with the last part of your question.
Speaker Change: Very helpful. It just on the margins are really strong performance here I wondered if we could maybe unpack a little bit that underlying hundred and 30 Bips as you provided some nuggets in the past that'd be helpful. And then I think to put to put additional color on on the response to Tyler's question.
Speaker Change: You know it seems like we could be looking at kind of margins up you know me.
Speaker Change: Maybe 100 bps or so Q over a year over year in <unk> and kind of flattish and for Q. If there's any kind of a nuance you would give in terms of how how to shape that there would be helpful for modeling purposes.
Jon Vander Ark: Yeah, let me start with the last part of your question first. I think the shape, you know, you're on the right path there, maybe, you know, a little bit less in Q3 and a little bit more in Q4, but I think the shape, you're directionally correct.
Speaker Change: Yeah, well, let me start with your the last part of your question first I think the shape you know you're on the right path. There are maybe a little bit less in Q3, and a little bit more in Q4, but I think the shape you're directionally correct.
Jon Vander Ark: Looking at the performance in the underlying business, we saw 120 basis points in recycling waste. We saw actually more than that in the environmental solutions business because for the 130 basis points for the company taken as a whole, remember, we had to overcome, you know, 80 to 100 basis points of dilution from the acquisitions we completed in the environmental solutions business in Q4 of 23. When you take a look at the underlying business within environmental solutions, it was close to 200 bases.
Speaker Change: Looking at the performance in the underlying business, we saw 120 basis points and recycling waste, we saw actually more than that and in the environmental solutions business because for the 130 basis points for the company taken as a whole remember we had to overcome.
Speaker Change: 80 to 100 basis points of dilution from acquisition, we completed in the environmental solutions business in Q4 of 23 so.
Speaker Change: When you take a look at the underlying business within and virus minor amount of solutions. It was close to 200 basis points.
Speaker Change: Very helpful. Thank you.
Speaker Change: Yeah.
Speaker Change: The next question comes from Brian Birchmeier with Citi. Please go ahead.
Bryan Nicholas Burgmeier: The next question comes from Bryan Burgmeier with Citi. Please go ahead.
Bryan Nicholas Burgmeier: Good afternoon. Thanks for taking the question you know in the prepared remarks, I think you mentioned a little bit of intentional shedding in the small container business. So maybe just wondering if you could expand on that give us a sense of.
Jon Vander Ark: Good afternoon. Thanks for taking the question. You know, in your prepared remarks, I think you mentioned a little bit of intentional shedding in the small container business. So maybe I was wondering if we could expand on that, give us a sense of the size.
Speaker Change: The size of the brokerage business, you're running there maybe it's possible to say, maybe what inning. The volume shedding is aimed at this point.
Well I'd say the good news is you know from our ongoing standpoint, right. We had a bigger broker business a decade ago, and we made a very clear choice that we believe customers are people, who generate recycling of waste and we wanted to have direct relationships with them. So we're very intentional.
Jon Vander Ark: Well, I'd say the good news is, you know, from an ongoing standpoint, we had a bigger broker business a decade ago. And we made a very clear choice that we believe customers are people who generate recycling waste, and we want to have direct relationships with them. So we're very intentional.
Jon Vander Ark: What's happened is that over the last four or five years, as we've become much more acquisitive, we've seen that portion of the business increase because when we acquire companies, we see that 10% of their book, for example, might be serving brokers. And we don't value one nickel, right, when we bid on the purchase price of the deal, because we know that business is going to come out of this. Typically, we do that over the course of six to maybe even 12 or 18 months, honoring contracts in a very ratable fashion, right?
Speaker Change: What's happened is over the last four or five years as we've become much more acquisitive.
Speaker Change: We've seen that portion of the business increase because when we acquire companies we see that 10% of their book for example might be a survey of brokers and we don't value one nickel right. When we made the purchase price of the deal because we know that business is going to come out of the system typically we do that over the course of.
Speaker Change: <unk>.
Speaker Change: Fixed it maybe even 12 or 18 months honoring contracts that are very ratable fashion right. In this case, we celebrated it because we felt like with one broker but in particular, we had a receivables risk and so we took more accelerated action, but there'll always be a small portion of the business that's going to be a drag on our revenue that were shut.
Jon Vander Ark: In this case, we accelerated it because we felt like with one broker in particular, we had a receivables risk. And so we took more accelerated action, but there'll always be a small portion of the business that's going to be a drag, right, on our revenue that we're shedding because it's coming in through Eminent. And a point that I'd make there as well is that if you take a look at the volume decline in small containers, it was almost exclusively due to these broker-related losses. If you take a look at the open market, we're actually seeing positive unit growth in that.
Speaker Change: Because it's coming in through M&A.
Speaker Change: And a point that I'd make there as well is that if you take a look at the volume decline in small container. It was almost exclusively due to these broker related losses. If you take a look in the open market, we're actually seeing positive unit growth in that business.
Speaker Change: Got it got it that makes that makes total sense I'm just kind of last question for me is just on the guidance increase apologies if I. If I missed this is it possible to maybe just bucket.
Jon Vander Ark: Got it. Got it. That makes total sense. It is kind of the last question for me. It's just on the guidance increase. Apologies if I missed this.
Speaker Change: Maybe what is going better on the net price side or just kind of touch on it anecdotally is it you know prices coming in higher.
Speaker Change: Costs coming in lower or is it labor or is it repair just any.
Speaker Change: Any finer points you can kind of put on what's really been better throughout the first six months. Thank you and I'll turn it over.
Jon Vander Ark: Yeah, I would say overall we're looking at prices in a similar way that we did at the beginning of the year. I would say the spread between price and cost inflation is favorable. So that's one of the reasons why we're seeing the better-than-expected margin expansion. And then I would say the other big piece is really just favorable commodity prices and the flow-through that has on the bottom line. But an overwhelming majority is again going to be in that price-cost spread.
Jon Vander Ark: Is it possible to maybe just bucket maybe what is going better on the net price side or just kind of touch on it anecdotally? Is it, you know, price is coming in higher? Are costs coming in lower? Is it labor? Is it repaired? Just any finer points you can kind of put on what's really been better throughout the first six months? Thank you. And I'll turn it over to you. Yeah, I would say overall, we're looking at
Yeah, I would say overall, we're looking at price and in a similar way that we did in the beginning of the year I would say the spread between price and cost inflation is favorable so.
Speaker Change: That's one of the reasons why we're seeing the better than expected margin expansion and then I would say the other big piece is really just favorable commodity prices and the flow through that has to the bottom line.
Speaker Change: But an overwhelming majority again is going to be in that price cost spread.
Speaker Change: Our next question comes from Jerry Revich with Goldman Sachs. Please go ahead.
Jerry David Revich: The next question comes from Jerry Revich with Goldman Sachs. Please go ahead.
Jerry David Revich: Hi, good afternoon, everyone.
Jon Vander Ark: Hi, good afternoon everyone. Hi.
Jon Vander Ark: I'm wondering if we could just talk about free cash flow conversion. So, you know, you folks are now up to the mid-40s in EBITDA, free cash flow conversion, and that's while making the growth investments that you spoke about earlier. You know, as we think about what the free cash flow conversion will look like once the growth investments are producing EBITDA and cash flow, is it reasonable to think about free cash conversion ultimately rising to the high 40s, or what kind of guideposts would you think about over the next couple of years as you complete those CapEx and get the cash flow coming in?
Jerry David Revich: Can you guys talk about hi, I'm wondering if you're just talking about free cash flow conversion to you folks are now up to the mid Forty's and EBITDA to free cash flow conversion and that's while making the growth investments that you spoke about earlier you know as we think about what the free cash flow conversion will look like once the ground.
Speaker Change: Growth investments are producing EBITDA and cash flow is it reasonable to think about free.
Speaker Change: Free cash conversion ultimately rising due to the high forty's or what kind of a guidepost would you think about over the next couple of years as you complete those capex.
Speaker Change: The cash flow.
Jerry David Revich: Again.
Speaker Change: Yeah, well, what I would say Gerry is that you know again back to we're not looking at a at a theoretical cap or just looking for that consistent improvement in performance. So RF.
Jon Vander Ark: Yeah, what I would say, Jerry, is that, you know, again, we're not looking at a theoretical ceiling; we're just looking for that consistent improvement in performance. So, our expectations are that just because, again, when you think about some of the things that we can do on the balance sheet, as far as improving working capital, being more efficient with the CapEx, and start with the, you know, 30 to 50 basis points of EBITDA margin expansion, we expect growing free cash flow conversion a little bit more.
Speaker Change: Our expectations is that just be because again when you think about some of the things that we can do on the balance sheet as far as improving working capital being more efficient with the Capex start with the you know 30 to 50 basis points of EBITDA margin expansion, we expect growing free cash flow conversion, a little bit a little bit more now that said we've got over it.
Jon Vander Ark: Now, that said, we've got to overcome things like the expiration of bonus depreciation and some other things that we've had to sit there and overcome that are a little bit outside of our control. So, you've got to overcome those.
Speaker Change: Things like the exploration of bonus depreciation and some other things that we've had to sit there and overcome that are a little bit outside of our control. So you've got to overcome that from the base business. Though you can think of that you know call. It 50 to 75 basis points of improvement and then you got to net out the impact of bonus depreciation which is different by year.
Jon Vander Ark: From the base business, though, you can think of that, you know, call it 50 to 75 basis points of improvement, and then you've got to net out the impact of bonus depreciation, which is different by year.
Speaker Change: Got it thanks, Brett and then.
Jon Vander Ark: Got it. Thanks, Brent. And then on the U.S. EECOL ERP rollout, it was an area of opportunity for you folks. Can you just update us on the timing and, you know, when will we get the sort of route-level intelligence that you guys are used to for your overall business that could drive some further margin opportunities? Yeah, we see being on a common platform
Speaker Change: On the U S. You call your ERP rollout it was an area of opportunity for you folks can you just update us on the timing and you know, which point will we get the sort of route level intelligence that you folks are used to for your overall business that could drive some further margin opportunities.
Jon Vander Ark: Yeah, we'd see being on a common plat... right on the, you know, on that business, on the environmental solutions business in early 25; then we can then iterate the, you know, the system itself in order to be able to get smarter with respect to the information that we have. So we can be more strategic with respect to pricing, get better as far as productivity, and just become more profitable over time. But right now, we still have a number of systems that we're trying just first to consolidate, so then we can continue to enhance and improve the system that we're operating on.
Speaker Change: Yeah, we'd see being on a common platform right on the you know on that business on the environmental solutions business and in early 'twenty. Five then we can then iterate. The you know the system itself in order to be able to get smarter with respect to the information that we have so it could be more strategic with respect to pricing get.
Speaker Change: As far as productivity and just become more profitable over time, but right now we still have a number of systems that we're trying just first to consolidate then we can continue to enhance and improve the system that were operating on.
Speaker Change: Okay Super Thank you.
Speaker Change: The next question comes from Massawa Hot Kahn with RBC capital markets. Please go ahead.
Sabahat Khan: The next question comes from Sabahat Khan with RBC Capital Markets. Please go ahead.
Jon Vander Ark: Thanks and good afternoon. You provided a bit of color on sort of the M&A landscape. I guess within this guidance, are you still sort of on pace for this 500 for the full year? Maybe we can just talk about the availability of transactions at the right multiples. Obviously, some big transactions out there, but trying to see what you're facing out there on the smaller tuck-in acquisition types and just sort of pace for the rest of the year.
Speaker Change: Okay, great. Thanks, and good afternoon private as you provided a bit of color on towards the M&A landscape I guess within this guidance are you still sort of on pace for this 500 for the full year and maybe if you can just talk about the availability of transactions at the right multiples, obviously, some big transactions out there, but trying to see what's your.
Speaker Change: Facing out there on the smaller tuck in acquisition types industrial pace for the rest of the year.
Speaker Change: Yeah.
Jon Vander Ark: Yeah, the pipeline looks good. Keep in mind, we don't operate the business for the quarter. We operate it forever. So we did $800 million in acquisitions in Q4 last year. So there's some natural.
Speaker Change: Yeah, the pipeline looks good but keep in mind.
Speaker Change: We don't operate the business for the quarter, we operated forever. So we did $800 million of acquisitions in Q4 last year. So there's some natural lumpiness.
Jon Vander Ark: Lombinists, especially the M&A pipeline. So a little quieter for the first quarter this year. Listen, we could end up at 500. We could have between four to five, or we could end up north of five. If other stuff kicks in here, I think we'll be north of 400 million just based on what we have in front of us, and then do we get closer to five or above that? We'll see, you know, what happens sometimes; deals hit you in there in an accelerated fashion.
So, especially the M&A pipeline, so a little quieter for the first quarter. This year, let's say, we could end up at 500 or we get it up between.
Speaker Change: Four to five or we could end up north of five if other stuff kitkat kicks in here I think we'll be north of.
Speaker Change: For a million just based on what we have in front of US and then do we get closer to five or above that we'll see kind of what happens sometimes.
Speaker Change: He has hit you in there in an accelerated fashion most of the time at this point, we're kind of looking into Q1 and Q2 for clothes for those transactions. So that's why I didn't even think bigger I would certainly be out a little bit of a longer timeframe in terms of our closing next year wouldn't close this year or anything or are substantial.
Jon Vander Ark: Most of the time at this point, we're kind of looking into Q1 and Q2 for the close of those transactions. So anything bigger would certainly be at a little bit of a longer timeframe in terms of a close next year, wouldn't close this year on anything more substantial.
Speaker Change: Okay, Great and then maybe you can just share a little bit of color on some of the cost line items. As you think about the back end of this year and heading into 'twenty five how are some of the costs that you are seeing on the ground level comparing to some of the headline inflation numbers, maybe across you know labor and some of the other bigger line items. Thank you.
Jon Vander Ark: Okay, great. And then maybe if we could just share a little bit of color on some of the cost line items as you think about the back end of this year and heading into 2025, you know, how are some of the costs that you're seeing on the ground comparing to some of the headline inflation numbers maybe across, you know, labor and some of the other bigger line items. Thank you. Yeah, we certainly saw good.
Speaker Change: Yeah, we certainly saw good sequential improvement from Q1 to Q2 across maintenance transportation.
Jon Vander Ark: Yeah, we certainly saw good sequential improvement from Q1 to Q2 across maintenance, transportation, and you know, labor. The cake is already baked on labor for the year, but the comp year over year is certainly improving on that. So, as Brian mentioned, that's certainly what's fueling, along with price, our margin expansion. And, you know, we see continued modulation of that in the second half of the year. So I feel really good about the team's execution on cost control.
Bryan Nicholas Burgmeier: Labor that you know the cake is already baked on labor for the year, but the comp year over year, certainly improving on that so that as Brian mentioned, that's certainly what's fueling along with price or margin expansion and you know we see continued modulation of that in the second half of the year. So feel really good about the team's execution on cost control.
Speaker Change: Alright, thanks very much.
Speaker Change: Next question comes from David Manthey with Baird. Please go ahead.
David John Manthey: The next question comes from David Manthey with Barrett. Please go ahead.
David John Manthey: Alright, Thank you and good afternoon, everyone I'm, hoping you can give us an update on the $100 million digital opportunity that you previously outlined and boy.
Jon Vander Ark: Thank you. Good afternoon, everyone. I was hoping you'd give us an update on the $100 million digital opportunity that you previously outlined and the Empower Asset Management System that you talked about, the $20 million benefit there. Is that included or separate from the $100 million?
Speaker Change: Empower asset management.
Speaker Change: You talked about the $20 million benefit there is that included or separate from the $100 million.
Speaker Change: Yeah. So I think David I think you're talking about a rise a digital platform. So we said there was $100 million of opportunity there are cumulative and we've realized about $65 million to date.
Jon Vander Ark: Yeah, so I think, David, I think you're talking about our RISE digital platform. So we said there was $100 million of opportunity. They're cumulative, and we've realized about $65 million to date. And we would expect to continue to sit there and realize those benefits in future periods, which is embedded in that 30 to 50 basis points of margin expansion that we're calling for on a regular cadence. That would certainly be part of it over the next couple of years.
Jon Vander Ark: But the new asset management system is not in the $100 million; it's separate.
Speaker Change: And we would expect to continue to sit there and realize those benefits in future periods, which is embedded in that 30 to 50 basis points of margin expansion that we're calling for on a regular cadence that would certainly be part of that over the next couple of years.
Speaker Change: But the new asset management system, that's not in the $100 million it's separate.
Jon Vander Ark: That's an additional $20 million. Now, it's going to be deployed in a phased approach. So, we actually just hit our first pilot locations. We're going to be deploying that through the end of 2025. So, we really don't expect to get that full run rate benefit until 2026.
Speaker Change: Sure that's I'm sorry, Yeah, I think our model that's an additional $20 million now it's gonna be deployed in a phased approach. So we actually just had our first pilot locations. We're gonna be deploying that through the end of 2025. So we really don't expect to get that full run rate benefit until 'twenty 'twenty six.
Jon Vander Ark: Okay, and then if I heard you right on the margin improvement in environmental solutions, are there areas of the legacy U.S. ecology business that you've leaned into or maybe de-emphasized over the past two years that have helped improve the mix of that business, or is it the pricing and efficiency that you're getting just by using the legacy systems and seeing some improvement there? No, it's all of the above.
Speaker Change: Got it Okay and then if.
Speaker Change: If I heard you right on the margin improvement and environmental solutions.
Speaker Change: Are there areas of the legacy U S ecology business that you've leaned into or maybe de emphasized over the past two years that have helped to improve the mix of that business or is the the placing inefficiencies when you're getting just by using the legacy systems and seeing some improvement there.
Speaker Change: Oh, it's all the above it's certainly pricing for the value we're delivering.
Jon Vander Ark: It's all of the above, and it's certainly priced for the value we're delivering. It is challenging then the mix. We make more money in certain areas, especially on the field services side of the business; you make more money in certain areas and less in others. And then even within some of those categories within field service challenge each customer account, right? What isn't really earning their cost of capital? And therefore, those are things we're pricing or replacing over time, and the team's done a great job of that. I'd say as we get our IT systems in place, which Joel talked about, that gives us an opportunity to get even more refined and drive even more value from a pricing standpoint.
Speaker Change: It is challenging then the mix right, we make more money in certain especially in the field services side of the business you make more money in certain areas and less than others and then even within.
Speaker Change: Some of those categories have been field service challenging each customer account right, what isn't really earning their cost of capital and therefore, those are things, we're pricing or replacing overtime and the team's done a great job of that I'd say as we get our I T systems in place, which still talked about that gives us an opportunity to get even more refined to drive even more value from it.
Speaker Change: Racing standpoint.
Speaker Change: Got it thank you.
Stephanie Lynn Benjamin Moore: Our next question comes from Stephanie more with Jefferies. Please go ahead.
Jon Vander Ark: The next question comes from Stephanie Moore with Jeffries. Please go ahead.
Stephanie Lynn Benjamin Moore: Hey, good afternoon, and thank you.
Stephanie Lynn Benjamin Moore: Hey, good afternoon. Thank you.
Stephanie Lynn Benjamin Moore: I want to take that maybe a high level view here.
Jon Vander Ark: I wanted to take a maybe a high-level view here. I think the margin expansion opportunity over the next, you know, I think this year you've given us some color, but I think about 2025 and maybe early 2026. I mean, I think, you know, if you put together everything that you've outlined, whether it's continued nice price costs for solid waste, nice ES expansion, some of your R&G or Polymer centers coming online here at the end of the year.
Stephanie Lynn Benjamin Moore: It's an opportunity over the next you know I think this year you'd given some color, but that's the thing about 2025 and maybe even early 2026.
Speaker Change #107: Thank goodness, he put together everything that you've outlined whether continuing by price cost spread up solidly.
Stephanie Lynn Benjamin Moore: Yeah.
Speaker Change #101: I Love your Orange G a polymer.
Speaker Change #101: Coming online here at the end of the year.
Jon Vander Ark: You know, it kind of makes it seem like we could see another outsized year of margin expansion, all things considered, for, you know, the foreseeable future beyond 2024. Is there anything I'm missing there, or how would you kind of frame the margin opportunity here beyond 2024?
Speaker Change #105: It seemed like we could see another outsized year of margin expansion all things considered for the fourth.
Speaker Change #102: Campbell future beyond 'twenty 'twenty four is there anything I'm missing there or how did you kind of frame that.
Speaker Change #106: Margin opportunity here beyond 2024.
Speaker Change #103: Well to get del highlight earlier think about recycling waste 30 to 50 basis points of margin expansion a year, we talked about environmental solutions.
Jon Vander Ark: I think Del highlighted earlier, think about recycling waste 30 to 50 basis points of margin expansion a year. We talked about environmental solutions, you know, getting to 25%. Now again, we're reaching there, getting there probably a little quicker than we thought, but again, there'll be some, you know, ups and downs in any given quarter, but over the sequence, certainly a line of sight to a 25% margin for the year in that category. And then that's not the ending point, right?
Speaker Change #103: Getting to 25% now again.
Speaker Change #104: Reaching they're getting there.
Speaker Change #104: A little quicker than we thought but again there'll be some ups and downs in any given quarter, but over the sequence certainly have line of sight to 25% margin for the year in that category and then that's not the ending point right. We will continue to move I think in the long term, we would aspire to have EBITDA margins across the two different parts of our business that converge.
Jon Vander Ark: We'll continue to move. I think, in the long term, we would aspire to have even margins across the two different parts of our business thatconverge over time because we think there's that much opportunity and value that's delivered in the environmental solutions space. And again, that's a long-term target on that, but I've given you kind of a marker for kind of what kind of radical improvement. And we're reticent to kind of choose an individual year because, again, we don't, that's not how we run the business. We will run it forever.
Speaker Change #104: Over time, because we think there's that much opportunities value that's deliberate in the environmental solutions space and again, that's a long term target on that but I've given you kind of a marker for kind of what kind of ratable improvement and were reticent to kind of choose an individual year because again, we don't that's not how we run the business and you run it forever.
Speaker Change #104: Yeah.
Speaker Change #108: Great. That's helpful. And then maybe as you think about just the pricing environment you know as the.
Jon Vander Ark: Great, that's helpful. And then maybe as you think about the pricing environment, you know, as the year progresses, and more so next year, just kind of your mix across, you know, other various index-based pricing, kind of your thoughts about, you know, potentially above historical average pricing, even as inflation comes down. Thanks. Yeah, so you know, again, you've
Speaker Change #109: The year Progressive and more so next year, just kind of your mix across the various index based pricing kind of your thoughts about potentially above historical average pricing even as inflation comes down.
Speaker Change #110: Yeah. So you know again, you've we've talked about our initiative in order to move to those favorable indices water sewer trash garbage trash and those tend to run higher than CPI. So if you're going back and comparing to five or six years ago. Yes, we would expect the restricted portion of our book to perform better than it had.
Jon Vander Ark: Yeah, so, you know, again, we've talked about our initiative in order to move to those favorable indices, water, sewer, trash, garbage, and those tend to run higher than CPI. So, if you're going back and comparing to five or six years ago, yes, we would expect the restricted portion of our book to perform better than it did historically. But, you know, we've made really good progress and movement against that. So, you know, again, we're close to 60% of that book that was historically linked to CPI now on a favorable index or a fixed rate increase. So, that's already reflected in the numbers that you saw in or that you're seeing in 2024. But certainly, yes, we would expect to be better than where we were historically.
Speaker Change #109: Historically, but you know we've made really good progress in movement against that so you know again, we're close to 60% of that book that was historically linked to CPI now on a favorable index or fixed rate increase so that is already reflected in the numbers that you saw in there that you're seeing in 'twenty 'twenty four but certainly yes, we would expect.
Speaker Change #109: To be better than where we were historically.
Speaker Change #111: Thanks, so much.
Speaker Change #111: Our next question comes from Brian Butler with Stifel. Please go ahead.
Brian Joseph Butler: The next question comes from Brian Butler with Stiefel. Please go ahead.
Jon Vander Ark: Okay, thanks for taking my question. Let's start with just on the small container side. When you think about the service intervals, maybe some color on how that's trending and what you kind of have built into the back half of 24. And maybe if you were to exclude the brokerage piece, you know, how positive was the small container volume side?
Brian Butler: Hey, Thanks for taking my questions.
Brian Butler: Let's start with just.
Just on the on the small container side. When you think about the survey animals, maybe some color on how that's trending and what do you kind of have built into the back half of 'twenty four.
Speaker Change #113: Maybe if you would exclude the brokerage piece you know how how positive was the small container volume side.
Jon Vander Ark: Yeah, so service increases continue to exceed decreases. And as I mentioned before, net new business within our open market small container business is positive. So if you just take the open market, it would have been modestly positive. But I would sit there and say, you know, in the quarter, which was completely offset by what we saw from the broker-related business.
Speaker Change #114: Yeah. So service increases continue to exceed decreases and as I mentioned for net new business within our open market small container is positive.
Speaker Change #115: So when you just take the open market. It would have been modestly positive I would sit there and say you know in in the quarter, which was completely offset by what we saw from the broker related business.
Speaker Change #116: Okay and then my second question when you think about the midpoint guidance kind of going up on EBITDA kind of $60 million to $65 million.
Jon Vander Ark: Okay, and then the second question, when you think about the midpoint guidance kind of going up on EBITDA, kind of 60, 65 million, and you break that out, you talked about price cost being the biggest chunk of that, can you give some color just on how big maybe the recycling is on a dollar amount for that kind of increase?
Speaker Change #117: And you break that out you talked about price cost being the biggest chunk of that can you give some color just on how big maybe the recycling, Arizona on a dollar amount for the trailer for that kind of increase.
Jon Vander Ark: Yeah, so we call it 25 to 30, with the balance all being in the underlying business.
Speaker Change #118: Yeah. So it's it's call it 25 to 30 with the balance all being in the underlying business.
Speaker Change #119: Alright, and then if I could slip one last one in there is there a sensitivity to the RIN prices really changed at all I mean rents have been kind of elevated for a while now but maybe just if you have any color on kind of where that sensitivity kind of stand.
Jon Vander Ark: All right, and if I could put one last one in there, is your sensitivity to the RIN prices really changed at all? I mean, RINs have been kind of elevated for a while now, but maybe you could give some color on kind of where that sensitivity kind of stands.
Jon Vander Ark: Our sensitivity hasn't changed that much just because we haven't added that much to the portfolio. It will certainly increase over time as more projects come online. But right now, if you think about just rough math, a $0.10 change in RIN prices is approximately $1 million of operating income annually for us.
Speaker Change #120: Our sensitivity hasn't changed that much just because we haven't added that much to the portfolio. It will certainly that sensitivity will increase over time as more projects come online.
Speaker Change #121: Right now if you think about just rough math at a time.
Speaker Change #122: 10 cent change in RIN prices is approximately $1 million of operating income annual Ross.
Speaker Change #123: Great. Thank you very much.
Jon Vander Ark: Great. Thank you very much.
Speaker Change #123: Next question comes from Tobey Sommer with Truest Securities. Please go ahead.
Tobey O'Brien Sommer: The next question comes from Tobey Sommer with Truist Securities. Please go ahead.
Jon Vander Ark: Thanks. On the acquisition front, over time, is 500 million a good number for annual spend, or does that change as we go out in the future because you know the company clearly is growing, and perhaps that needs to increase to maintain the same impact?
Tobey O'Brien Sommer: Thanks on the acquisition front overtime is 500 million of a good number for annual spend or does that change as we go out in the future.
Speaker Change #125: You know the company clearly is growing and perhaps that needs to increase to.
Speaker Change #126: Maintaining the same impact.
Speaker Change #127: Yeah, we don't really have a target on the acquisition number and so we kind of give you a rough guide because it's helpful. I think for your modeling purposes, but as we think about opportunities right. We want to buy companies that are getting first fit our strategic filter, where we think we're the natural owner there and we can create value for them.
Jon Vander Ark: Yeah, we don't really have a target for the acquisition number. And so we kind of give you a rough guide because it's helpful, I think, for your modeling purposes.
Speaker Change #127: Customers and then the financial filter, which is are we going to exceed our cost of capital and create economic profit for our shareholders. Those are the two things we look at and so.
Jon Vander Ark: But as we think about opportunities, right, we want to buy companies that first fit our strategic filter; we think we're the natural owner there, and we can create value for our customers. And then the financial filter, which is, are we going to exceed our cost of capital and create economic profit for our shareholders? Those are the two things we look at. And so we're not an opportunity, or we're not capital constrained in that respect.
We're not opportunity, where we're not capital constrained in that respect and so the extent we find those opportunities we're going to go do that and so we've spent as much as.
Jon Vander Ark: And so to the extent that we find those opportunities, we're going to go do that. And so we've spent as much as possible. 3 billion in a given year. And this year is going to be a little more muted, obviously, partly again, for the internal constraint of wanting to make sure that we can digest and execute what we buy over time. So, you know, we'll give you an update as we get closer to 2025 on what we think the outlook is, but it's going to be more of a year-to-year look rather than some longer-term outlook of what
Speaker Change #127: 3 billion in a given year and this year is gonna be a little more muted. Obviously, you know partly getting for the internal constraint of we want to make sure that we can digest and execute what we buy.
Speaker Change #127: Over time, so you know, we'll give you an update as we go get into 2025, what we think the outlook is but it's going to be more of a year to year looked in some longer term outlook of what we're going to spend.
Speaker Change #128: Thanks, and on the employee attrition front I know, it's down from a peak of several years ago and that that helps labor expense expenses and margin expansion, but if I look at it from a different angle to say how low has it gotten before during economic slowdowns in downturns, how far away are.
Jon Vander Ark: Thanks. On the employee attrition front, I know it's down from the peak of several years ago, and that helps labor expense and margin expansion. But if I look at it from a different angle and say, how low has it gotten before during economic slowdowns and downturns? How far away are we from that at this juncture? Well, I'd say if you think about it this way,
Speaker Change #128: Are we from that at this juncture.
Speaker Change #129: Well I'd say, if you think about where we're at right kind of our benchmark level. If you think about any normal run off period now if you take a very short look like.
Jon Vander Ark: Well, I'd say if you think about us at the right kind of our benchmark level, if you think about any normal run of period. Now, if you take a very short look, like April and May of 2020 after COVID hit, right, it dropped near zero because everyone was just trying to hold on and figure out what was happening in the world. But if you think about any longer run across, you know, a set of quarters, we're certainly at our best performance, and we're not stopping. We think there's further opportunity for improvement, and obviously the rate of improvement will be zero is never the right answer in this category, but we think we can get better.
Speaker Change #129: April and May of 'twenty 'twenty after Covid hit rate dropped near zero, because everyone was just trying to hold on and figure out what's happening in the world, but if you think about any longer run across a set of quarters. We're certainly at our.
Speaker Change #129: Past performance and we're not stopping we think there's further opportunity for improvement and obviously the rate of improvement will.
Speaker Change #129: Hello Zero is never the right answer in this category, but we think we can get better.
Speaker Change #130: At this time there appears to be no further questions. Mr. Vander Ark I'll turn the call back over to you for closing remarks.
Jon Vander Ark: At this time, there appears to be no further questions. Mr. van der Ark, I'll turn the call back over to you for closing remarks.
Speaker Change #131: Thank you Nick I would like to thank the entire Republic services team for their focus on exceeding customer expectations and commitment to driving value for all of our stakeholders.
Jon Vander Ark: Thank you, Nick. I would like to thank the entire Republic Services team for their focus on exceeding customer expectations and commitment to driving value for all of our stakeholders. Have a wonderful rest of the summer, and be safe.
Speaker Change #132: Have a wonderful rest of the summer and be safe.
Speaker Change #133: Ladies and gentlemen, this concludes the conference call. Thank you for attending you may now disconnect.
Operator: Ladies and gentlemen, this concludes the conference call. Thank you for attending. You may now disconnect.
Speaker Change #133: [music].