Q3 2024 Republic Services Inc Earnings Call

Good afternoon, and welcome to the Republic services third quarter 2024, Investor Conference call.

Operator: Good afternoon, and welcome to the Republic Services third quarter 2024 investor conference call. Republic Services is traded on the New York Stock Exchange under the symbol RSG. All participants in today's call will be in listen-only mode.

Republic services is traded on the New York stock exchange under the symbol our S T.

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Operator: Please note, this event is being recorded.

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Aaron Evans: I would now like to turn the conference over to Aaron Evans, Vice President of Investor Relations. Please go ahead. I would like to welcome everyone to Republic Services' third quarter 2024 conference call. Jon 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 information we discuss on today's call contains forward-looking statements, including forward-looking financial information, which involve risks and uncertainties and may be materially different from actual results. Our SEC filings discuss factors that could cause actual results to differ materially from expectations.

Speaker Change: I would now like to turn the conference over to Aaron <unk>, Vice President of Investor Relations. Please go ahead.

Aaron: I would like to welcome everyone to Republic Services' third quarter 2024 conference call, Jon Vander Ark, our CEO and Brian Dow Gotchu, our CFO are on the call today to discuss our performance.

Aaron: I would like to take a moment to remind everyone that some information we discuss on today's call contains forward looking statements, including forward looking financial information, which involve risks and uncertainties and may be materially different from actual results.

Aaron: Our SEC filings discuss factors that could cause actual results to differ materially from expectations.

Aaron: 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 October 29 2024.

Operator: All of the material that we discussed today is time-sensitive. If, in the future, you listen to a rebroadcast or recording of this conference call, you should be sensitive to the date of the original call, which is October 29, 2024. Please note that this call is 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.

Aaron: Please note that this call is 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.

Operator: 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 the Republic's website at republicservices.com. 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.

Aaron: Our SEC filings our earnings press release, which includes GAAP reconciliation tables, and a discussion of business activities.

Aaron: Along with a recording of this call are available on Republic's website at Republic services Dot com.

Aaron: I want to remind you that republic's management team routinely participates in investor conferences.

Aaron: When events are scheduled the dates times and presentations are posted on our website with that I'd like to turn the call over to John Thanks.

Jon van der Ark: With that, I'd like to turn the call over to Jon. Thanks, Aaron. Good afternoon, everyone, and thank you for joining us. We delivered strong third quarter results by effectively executing our strategy that supports profitable growth and value creation. The Republic Services team continues to deliver world-class service and innovative solutions to meet the needs of our customers. You're in the quarter. We achieved revenue growth of 7%. generated adjusted EBITDA growth of 14%. Expanded adjusted EBITDA margin by 210 basis points. reported adjusting earnings per share of $1.81. and produce $1.74 billion of adjusted free cash flow on a year-to-date basis.

John: Thanks, Aaron Good afternoon, everyone and thank you for joining us.

John: We delivered strong third quarter results by effectively executing our strategy that supports profitable growth and value creation.

John: Republic services team continues to deliver World class service and innovative solutions to meet the needs of our customers.

John: During the quarter.

John: We achieved revenue growth of 7% <unk>.

John: <unk> generated adjusted EBITDA growth of 14%.

John: We expanded adjusted EBITDA margin by 210 basis points.

John: Reported adjusted earnings per share of $1 81.

John: And produce $1.74 billion of adjusted free cash flow on a year to date basis.

John: Through our differentiated capabilities customer zeal and digital and sustainability.

Jon van der Ark: Through our differentiated capabilities, customer zeal, digital, and sustainability, we continue to be well-positioned to capture new opportunities and create long-term value for our stakeholders. Regarding customer Z... Our focus on delivering world-class essential services continues to support organic growth and enhance customer loyalty. Our customer retention rate remains strong at more than 94%. Third quarter organic revenue growth was driven by strong pricing across the business. Average yield on total revenue was 4.6%. An average yield on related revenue was 5.5%. This level of pricing continued to exceed our cost inflation and helped drive 210 basis points of EBITDA margin expansion.

John: Continues to be well positioned to capture new opportunities and create long term value for our stakeholders.

John: Regarding customer zeal.

John: Our focus on delivering world class essential services continues to support organic growth and enhance customer loyalty.

John: Our customer retention rate remained strong at more than 94%.

John: Third quarter organic revenue growth was driven by strong pricing across the business.

John: Average yield on total revenue was four 6%.

John: And average yields on related revenue was five 5%.

This level of pricing continued to exceed our cost inflation and helped drive 210 basis points of EBITDA margin expansion.

John: Organic volume on total revenue declined 1.2%.

Jon van der Ark: Organic volume on total revenue declined 1.2 percent.

Jon van der Ark: Volume losses were heavily concentrated to the cyclical portions of our business, including special waste and construction activities.

John: Volume losses were heavily concentrated to the cyclical portions of our business, including special waste and construction activity.

John: Turning to our expanding digital capabilities.

Jon van der Ark: Turning to our expanding digital capability. We continue to advance the implementation of digital tools to improve the experience for both customers and employees. Deployment of Empower, our new fleet and equipment management system, is underway. Empower is designed to increase maintenance technician productivity and enhance warranty recovery. Deployment of the new system is anticipated to be completed by the end of 2025. We estimate Empower will deliver $20 million in annual cost savings once fully implemented.

John: Continued to advance the implementation of digital tools to improve the experience for both customers and employees.

John: Deployment of empower our new fleet and equipment management system is underway.

John: Empower is designed to increase maintenance technician productivity and enhanced warranty recovery.

John: Deployment of the new system is anticipated to be completed by the end of 'twenty 'twenty five.

John: We estimate empower will deliver 24.

John: Annual cost savings once fully implemented.

John: We continue to benefit from innovative technology on our recycling and waste collection routes.

Jon van der Ark: We continue to benefit from innovative technology on a recycling and waste collection route. Our platform utilizes cameras to identify overfilled containers and recycling contamination. This technology generated more than $60 million in incremental revenue in the first year of operation.

John: Our platform utilizes cameras to identify overbuilt containers and recycling contamination.

John: This technology generated more than $60 million in incremental revenue.

John: The first year of operation.

John: Moving on to the sustainability.

Jon van der Ark: Moving on to sustainability. We believe that our sustainability innovation investments in plastic circularity and renewable natural gas position us to continue, grow, and create long-term value creation. Development of our Polymer Centers and Blue Polymers Joint Venture Facilities continues to move forward. Las Vegas Polymer Center production volumes continue to increase throughout the quarter. Construction is progressing on our Indianapolis Polymer Center with initial equipment commissioning underway. This operation will be co-located with a Blue Polymers production facility. We expect construction on this facility to be complete by the end of this year with earnings contribution in the second half of 2025.

John: We believe that our sustainability innovation investments in plastics, circularity and renewable natural gas position us to continue grow and create long term value creation.

John: Development of our polymer centers in Blue polymers joint venture facilities continues to move forward.

John: Las Vegas Palmer Center production volumes continued to increase throughout the quarter.

John: Construction is progressing on our Indianapolis Palmer center with initial equipment commissioning underway.

John: This operation will be co located with a blue polymers production facility.

John: We expect construction on this facility to be complete by the end of this year with earnings contribution in the second half of 2025.

John: We recently broke ground on a blue polymers production facility in Buckeye, Arizona. This facility will complement the Las Vegas Palmer Center, we expect the completion of this facility in late 2025.

Jon van der Ark: We recently broke ground on a blue polymers production facility in Buckeye, Arizona. This facility will complement the Las Vegas Polymer Center. We expect the completion of this facility in late 2025.

John: We continue to bring de carbonization solutions to the market that will unlock value for all of our stakeholders, including the communities we serve.

Jon van der Ark: We continue to bring decarbonization solutions to the market that will unlock value for all of our stakeholders, including the communities we serve. The Renewable Natural Gas Projects we're developing with our partners continue to advance. Two projects came online during the third quarter, bringing the total completed this year to four projects. We expect four additional R&G projects to be completed during the fourth quarter.

John: The renewable natural gas projects, we're developing with our partners continue to advance.

John: Two projects came on line during the third quarter, bringing the total completed this year. The four projects. We expect four additional LNG projects to be completed during the fourth quarter.

John: We continue to advance our commitment to fleet electrification.

Jon van der Ark: We continue to advance our commitment to fleet electrification. We currently have 28 electric collection vehicles in operation and expect to have more than 50 EVs in our fleet by the end of the year. We have 18 facilities with commercial scale EV charging infrastructure.

John: We currently have 28 electric collection vehicles in operation and expect to have more than 50 E visa or fleet by the end of the year.

John: We now have 18 facilities with commercial scale EV charging infrastructure.

John: As part of our approach to sustainability, we are committed to being an employer of choice in the markets we serve.

Jon van der Ark: As part of our approach to sustainability, we are committed to being an employer of choice in the markets we serve. Our third quarter employee turnover rate improved more than 100 basis points compared to the prior year. And we are proud to be certified as a great place to work for the eighth consecutive year.

John: Our third quarter employee turnover rate improved more than 100 basis points compared to the prior year.

And we are proud to be certified as a great place to work for the eighth consecutive year.

John: With respect to capital allocation.

Jon van der Ark: With respect to capital allocation Year-to-date, we have invested $104 million in strategic acquisitions. Our acquisition pipeline remains supportive of continued activity in both recycling and waste and environmental solutions. We currently have more than $200 million of transactions that are expected to close by the end of the year.

John: Year to date, we have invested $104 million in strategic acquisitions.

John: Our acquisition pipeline remains supportive of continued activity in both the recycling and waste and environmental solutions.

John: We currently have more than $200 million of transactions that are expected to close by the end of the year.

Jon van der Ark: Here today, we returned $834 million to shareholders, which includes $330 million of share repurchases.

John: Year to date, we returned $834 million to shareholders, which includes $330 million of share repurchases.

John: I will now turn the call over to Brian who will provide details on the quarter. Thanks, Jon poor price on total revenue was six 2%.

Brian DelGhiaccio: I'll now turn the call over to Brian who will provide details on the quarter. Thanks, John. Core price on total revenue was 6.2%. Core price on related revenue was 7.4% which included open market pricing of 9.1% and restricted pricing of 4.8%. The components of core price on related revenue included, small container of 10.3%, large container of 6.9% and residential of 7.2%. Average yield on total revenue was 4.6%, and average yield on related revenue was 5.5%. As expected, average yields stepped down sequentially as we began to anniversary the impact of new fees implemented last year. The fees relate to overfilled containers and recycling contamination and were enabled by our digital platform.

Speaker Change: Core price unrelated revenue was seven 4%, which included open market pricing of nine 1% and restricted pricing of four 8%.

Brian: The components of core price unrelated revenue included small container of 10, 3%.

Brian: Large container of six 9% and residential up seven 2%.

Brian: Average yield on total revenue was four 6% and average yield unrelated revenue was five 5%.

Brian: As expected average yield stepped down sequentially as we began to anniversary the impact of new fees implemented last year.

Brian: The fees relate to overbuild containers and recycling recycling contamination and were enabled by our digital platform.

Brian DelGhiaccio: Third quarter volume on total revenue decreased 1.2% and volume on related revenue decreased 1.5%. Volume results included a decrease in large container of 3.6%. primarily due to continued softness in construction-related activities. and a decrease in residential of 2.9 percent, primarily due to municipal contracts lost in 2023, an anniversary in the fourth quarter of this year. During the quarter, small container volume decreased 40 bases. while Landfill MSW increased 30 bases.

Brian: Third quarter volume on total revenue decreased one 2% and volume unrelated revenue decreased one 5%.

Brian: Volume results included a decrease in large container up three 6% primarily due to continued softness in construction related activity.

The decrease in residential of two 9% primarily due to municipal contracts lost in 2023 that anniversary in the fourth quarter of this year.

Brian: During the quarter small container volume decreased 40 basis points, while landfill MSW increased 30 basis points.

Brian: Moving on to recycling.

Brian DelGhiaccio: Moving on to Recycling. Commodity prices were $177 per ton during the third quarter, this compared to $112 per ton in the prior year. Recycling, processing, and commodity sales increased revenue by 70 basis points during the quarter. Commodity prices are currently $160 per ton, reflecting a recent decline in the price for recovered cardboard, or OCC.

Brian: Commodity prices were $177 per ton during the third quarter. This.

Brian: This compared to $112 per ton in the prior year.

Brian: Recycling processing and commodity sales increased revenue by 70 basis points during the quarter.

Brian: Commodity prices are currently $160 per ton, reflecting a recent decline in the price for recovered cardboard or OCC.

Brian: Total company adjusted EBITDA margin expanded 210 basis points to 32%.

Brian DelGhiaccio: Total company adjusted EBITDA margin expanded 210 basis points to 32%. Margin performance during the quarter included margin expansion in the underlying business of 120 basis. A 40 basis point increase from net fuel. a 30 basis point increase from recycled commodity price. and a 50 basis point benefit from an insurance recovery related to a prior year. This was partially offset by a 30 basis point decrease from acquisitions completed in the prior year.

Brian: Margin performance during the quarter included margin expansion in the underlying business of 120 basis points or 40 basis point increase from net fuel.

Brian: 30 basis point increase from recycled commodity prices.

Brian: And a 50 basis point benefit from an insurance recovery related to a prior year claim.

This was partially offset by a 30 basis point decrease from acquisitions completed in the prior year.

Brian: Now turning to our environmental solutions business.

Brian DelGhiaccio: Now turning to our environmental solutions. Third quarter environmental solutions revenue increased $60 million compared to the prior year driven by the rollover contribution from prior year acquisition. adjusted EBITDA margin in the environmental solutions business, expanded 290 basis points to 25.5% in the third quarter. Environmental Solutions EBITDA margin was 22.6% in the prior year. Environmental solutions margin included a positive 110 basis points from an adjustment to an allowance for bad debts established in a prior year. Excluding this benefit, environmental solutions margin would have been 24.4%.

Brian: Third quarter environmental solutions revenue increased $60 million compared to the prior year driven by the rollover contribution from prior year acquisitions.

Brian: Adjusted EBITDA margin in the environmental solutions business expanded 290 basis points to 25, 5% in the third quarter.

Brian: Environmental solutions EBITDA margin was 22, 6% in the prior year.

Brian: Environmental solutions margin included a positive 110 basis points from an adjustment to an allowance for bad debts established in the prior year.

Brian: Excluding this benefit environmental solutions margin would've been 24, 4%.

Brian DelGhiaccio: Year-to-date adjusted free cash flow was $1.74 billion. The decrease from the prior year is primarily due to the timing of capital expenditures. Year-to-date net capital expenditures of $1.19 billion represents an increase of $256 million, or 27% compared to the prior year. Capital spending is more ratable in 2024, whereas 2023 was heavily weighted to the fourth quarter. Prior year capital expenditures were impacted by vendor-related delays in truck and equipment delivery.

Brian: Year to date adjusted free cash flow was $1 $74 billion.

Brian: The decrease from the prior year is primarily due to the timing of capital expenditures.

Brian: Year to date net capital expenditures of $1 $109 billion represents an increase of $256 million or 27% compared to the prior year.

Brian: Capital spending is more ratable in 2024, whereas 2023 was heavily weighted to the fourth quarter.

Brian: Prior year capital expenditures were impacted by vendor related delays and truck and equipment deliveries.

Brian DelGhiaccio: Total debt was $12.6 billion, and total liquidity was $2.6 billion. Our leverage ratio at the end of the quarter was approximately 2.6 times. With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 21.6% during the quarter. This favorable tax rate, driven primarily by the timing of equity investments in renewable energy, contributed $0.09 of EPS benefit during the quarter.

Brian: Total debt was $12 $6 billion in total liquidity was $2 6 billion our leverage ratio at the end of the quarter was approximately two six times.

Brian: With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 21, 6% during the quarter.

Brian: This favorable tax rate driven primarily by the timing of equity investments in renewable energy contributed nine cents of EPS benefit during the quarter.

Jon van der Ark: I will now turn the call back over to Jon. Thanks, Brian. With respect to 2024, we believe we are trending toward the low end of our full-year revenue guidance due to continued softness and cyclical volume. That said, we expect to more than overcome this revenue headwind and achieve the high end of our full year adjusted EBITDA guide. As a result, we expect EBITDA margin to outperform our expectations.

Speaker Change: I will now turn the call back over to John.

John: Thanks, Brian with respect to 'twenty 'twenty four we believe we are trending toward the low end of our full year revenue guidance due to continued softness in cyclical volumes.

John: That said, we expect to more than overcome this revenue headwind and achieve the high end of our full year adjusted EBITDA guidance as a result, we expect EBITDA margin to outperform our expectations.

John: Looking forward to 2025, we expect continued growth across the business supported by pricing ahead of underlying costs.

Jon van der Ark: Looking forward to 2025. We expect continued growth across the business supported by pricing ahead of underlying costs. Cross-selling our complete set of products and services. Capitalizing on Value Creating Acquisition We also expect financial contribution from the investments made in sustainability innovation, including plastic circularity and renewable natural gas projects. We believe that the fundamentals of our business remain strong and supportive of continued growth in revenue, EBITDA, and free cash flow, along with margin expansion in the underlying business. Over the long term, we believe our business can consistently deliver mid-single-digit revenue growth and grow EBITDA, EPS, and free cash flow faster than revenue.

John: Cross selling our complete set of products and services.

John: And capitalizing on value creating acquisition opportunities.

John: We also expect financial contribution from the investments made in sustainability innovation, including plastics, circularity and renewable natural gas projects.

John: We believe that the fundamentals of our business remains strong and supportive of continued growth in revenue EBITDA and free cash flow along with margin expansion in the underlying business.

John: Over the long term, we believe our business can consistently deliver mid single digit revenue growth and grow EBITDA EPS and free cash flow faster than revenue. Our initial perspective on full year 2025 is consistent with its long term growth algorithm.

Jon van der Ark: Our initial perspective on full year 2025 is consistent with this long-term growth algorithm.

Jon van der Ark: We plan to provide detailed 2025 guidance on our earnings call in February.

John: We plan to provide detailed 2025 guidance on our earnings call in February with that operator, I would like to open the call to questions.

Operator: With that, operator, I would like to open the call to questions. Thirdly, we will now begin the question and answer session. To ask a question, you may press star, then 1 on a touch-tone phone.

Speaker Change: Certainly we will now begin the question and answer session to ask a question you May Press Star then one on a touchtone phone.

Operator: 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 key.

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 you are using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: And our first question today comes from Jerry Revich with Goldman Sachs. Please go ahead.

Jerry Revich: And our first question today comes from Jerry Revich with Goldman Sachs. Please go ahead. Yes, hi. Good afternoon and good evening, everyone. Nice quarter.

Jerry Revich: Yes, hi, good afternoon, and good evening, everyone nice quarter.

Jerry Revich: Hey, Brian I'm wondering if you could just expand if there are in any other.

Jerry Revich: Brian, I'm wondering if you could just expand if there were any other...

Jerry Revich: No one time type items in the quarter really impressive.

Brian DelGhiaccio: Please see the Q&A box for questions. any other embedded tailwinds in the third I'll be on that item that you spoke about in mind. Yeah, thanks, Jerry. Yeah, taking a look at the third quarter, we called out the two big pieces that you would sit there and say, you know, were somewhat, you know, large and unusual for the quarter. So, the insurance recovery, which had an impact of a positive 50 basis points to the quarter itself. We called out the bad debt as well. So, it was 110 basis points to environmental solutions, about 10 basis point contribution to the enterprise taken as a whole.

Jerry Revich: Margin performance and you know as I look at the fourth quarter guidance looks like you're guiding to margins to step down a couple of points more than normal seasonality for Q versus <unk> and I'm wondering is that just conservatism or are there any other embedded tailwind in the third quarter beyond that.

Jerry Revich: Item that you spoke about environmental services.

Speaker Change: Yeah. Thanks Terry.

Speaker Change: Yeah, I'm, taking a look at the third quarter, we called out the two the two big pieces that you would sit there and say, we're somewhat large and unusual for the quarter. So the insurance recovery, which had an impact of a positive 50 basis points.

Speaker Change: The quarter itself, we called out the bad debt as well. So it was 110 basis points to environmental solutions about 10 basis point contribution to the enterprise taken as a whole so 60 basis points, we would say ex that the RASK I called out the pieces about what fuel and commodity prices were doing but the underlying business you saw the strength of that 120.

Brian DelGhiaccio: So, 60 basis points, we would say, X that. The rest, I mean, I called out the pieces about what fuel and commodity prices were doing, but the underlying business, you saw the strength of that 120 bit.

Speaker Change: 220 bps.

Speaker Change: Really impressive performance and then.

Brian DelGhiaccio: And then, you know, if I can shift gears and ask you to talk about, on the Polymer center rollout, can you just expand on the performance so far, how has the production ramp played out versus the initial plan, and any updates to the timelines that you folks previously We're really happy in terms of the pricing we're getting. We're beating our proforma on that. Certainly happy on the volume ramp in terms of how that equipment is building. We got off to a little later start than we would have liked for things all unrelated to the equipment.

Jerry Revich: If I can shift gears.

Speaker Change: Can I ask you to talk about on the polymer center rollout can you just expand on the performance. So far how has the production ramp played.

Jerry Revich: Played out versus the initial plan and any updates to the timelines that you folks previously shared.

Sure Yeah. So we're really happy in terms of the pricing, we're getting we're beating our pro forma on that certainly happy on the volume ramp in terms of how that equipment is building, we got off to a little later start than we would've liked for things all unrelated to the equipment, so permitting or the facility getting electricity and just getting all the <unk>.

Brian DelGhiaccio: So, permitting of the facility, getting electricity in, just getting all the things around the construction and the building envelope. You know, if those things take time, maybe we were a little aggressive in our timeline to begin with. So, a little delayed from the start there, but the underlying assumptions, other than a delayed start, we still feel very confident in. And, you know, Indy is hitting its marks, including the construction timeline there, so we feel... really good about that.

Jerry Revich: Things around the construction and the building envelope.

Jerry Revich: You know those things take time, maybe we were a little aggressive in our timeline to begin with.

Jerry Revich: So little delayed from the start there about the underlying assumptions other than a delayed start we still feel very confident in and we you know India is hitting its marks including the construction time on there so we feel.

Jerry Revich: Really good about that listen we think we're producing some of the cleanest flake in the world and so that's what the market needs. It's good for circularity, and certainly going to be good for our shareholders as well.

Brian DelGhiaccio: Listen, we think we're producing some of the cleanest flake in the world. And so that's what the market needs. It's good for circularity and certainly going to be good for our shareholders as well.

Jerry Revich: I.

Trevor Romeo: I appreciate it. Your next question today comes from Trevor Romeo with William Blair. Please go ahead. Good afternoon. Thanks so much for taking the questions.

Speaker Change: Great. Thank you.

Speaker Change: And your next question today comes from Trevor Romeo with William Blair. Please go ahead.

Trevor Romeo: Hi, good afternoon. Thanks, so much for taking the questions I had one kind of on the on pricing thinking about open market versus restricted.

Trevor Romeo: I had one kind of on pricing, thinking about open market versus restricted. I think the last several quarters, your open market core price has been 400 basis points or more above restricted. Is that kind of a good spread for us to still think about going forward, even if some of the inflation indices kind of continue to ramp down?

Trevor Romeo: I think the last several quarters. Your open market core price has been 400 basis points or more above restricted is that kind of a good spread for us to still think about going forward. Even if some of the inflation indices kind of continue to ramp down and then in your shift away from CPI to more of those open market an alternative indices, how much further room do you.

Brian DelGhiaccio: And then in your shift away from CPI to more of those open market and alternative indices, how much further room do you think you have to continue that shift at this point? Yeah, when you take a look at the spread, and we certainly talked about the fact that we thought we were in an elevated pricing environment, you know, in part due to the fact that there was the backdrop of elevated inflation. And we said that throughout this year, that would step down sequentially. And as we look forward into 2025, we would expect that to step down as well.

Trevor Romeo: Thank you have to continue that shift at this point.

Speaker Change: Yeah, when you take a look at the spread and we certainly talked about the fact that we thought we were in an elevated pricing environment in part due to the fact that there was the backdrop of elevated inflation and when he said that throughout this year that would step down sequentially and as we look forward into 2025, we would expect that to step down as.

Speaker Change: Well now if you take a look back historically open market pricing has tended to run above that which you can achieve on the restricted portion of the business I would say right now that spread is probably a little bit more than what I would think about through the cycle, but all that said, we would expect a price in excess of our cost inflation consistent with what we've done.

Brian DelGhiaccio: Now, if you take a look back historically, open market pricing has tend to run above that which you can achieve on the restricted portion of the business. I would say right now that spread is probably a little bit more than what I would think about through the cycle. But all that said, we would expect a price in excess of our cost. Transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: Over the last couple of years and drive margin expansion in the business.

Speaker Change: Got it. Thank you and then in terms of moving away from the ER and to see our rotating away from CPI.

Trevor Romeo: Got it, thank you. And then in terms of moving away from the industry or rotating away from CPI, you know, we continue to make incremental progress on that. So a couple of big contracts moving to water, sewer, trash, and it's really some moving to fixed and above, and it's really the portfolio that we think positions us well across the cycle. And we're about 61% of those contracts that were historically pegged to headline CPI that have moved to something that we would consider favorable. Got it. Okay. Thank you both. That's helpful.

Speaker Change: We continue to make incremental progress on that so a couple of big contracts moving to water sewer trash and it's really it's some moving to fixed and above and it's really the portfolio that we think we think positions us well across the cycle and we're about 61% of those contracts that were historically pegged to headline CPI that have.

Speaker Change: Move to something that we would consider favorable.

Speaker Change: Got it okay. Thank you both that's helpful and then just quickly.

Trevor Romeo: And then just quickly, I'm wondering if we could talk about labor availability a bit. I think based on the BLS data, wage inflation in your industry is kind of mid-single digits. Curious if that's still what you're seeing as well. And then just kind of as the overall labor market has maybe cooled a bit the past few months, have you seen any changes in labor availability? And we mentioned turnover down 100 basis points year over year. We continue to trend in a really positive direction there. Labor cost inflation is, you know, four and a half ish percent.

Speaker Change: Wondering if you could talk about labor availability a bit I think based on the BLS data wage inflation in your industry is kind of mid single digits I'm curious, if that's still what youre seeing as well.

Speaker Change: And then just kind of as the overall labor market has made it cool a bit the past few months have you seen any changes in labor availability.

Speaker Change: Yeah, we mentioned turnover down 100 basis points year over year, we continue to trend in a really positive direction. There labor cost inflation as you know four and a half ish percent, we're hanging out right there and getting that cake is largely baked because we start we give our people a wage increase at the end of February.

Brian DelGhiaccio: We're hanging out right there and getting that cake is largely baked because we start we give our people a wage increase at the end of February. On that front, we expect that to step down marginally as we move into next year based on where the current numbers are pointing. And then, yes, labor bill is improving.

Speaker Change: On that front, and we expect that to step down marginally as we move into next year based on where the current numbers are pointing.

Speaker Change: And then yes labor real is improving there are still categories like technicians, which had been historically tough in this industry and they are getting tougher and that's why we vertically integrated into technical education and their own Tech Institute and are growing our own and having a lot of success fielding entry level techs out of that center.

Brian DelGhiaccio: There's still categories like technicians, which have been, you know, historically tough in this industry and they are getting tougher. And that's why we vertically integrated in a technical education and sort of our own tech institute and are growing our own and having a lot of success fielding entry level techs out of that.

Speaker Change: Okay. Thanks, so much appreciate the color.

Trevor Romeo: Okay, thanks so much, appreciate the call.

Speaker Change: And your next question today comes from Toni Kaplan with Morgan Stanley. Please go ahead.

Toni Kaplan: And your next question today comes from Toni Kaplan with Morgan Stanley. Please go ahead. Thank you so much. I was hoping to ask for some additional color on the core price deceleration this quarter. I know you mentioned the anniversary of the new fees from last year. Obviously, that was expected. Anything else that you would point to in the quarter to call out that was notable in terms of the price environment and how we should be thinking about it, you know, as we progress through the year?

Toni Kaplan: Thank you so much I was hoping to ask for some additional color on the core price deceleration. This quarter I know you mentioned the anniversarying of the new fees from last year, obviously that was expected and anything else that you would point to in the quarter.

Speaker Change: Call out that was notable in terms of the price environment and how we should be thinking about it you know as we progress through the year.

Speaker Change: Yes, if you take a look at the sequential step down from Q2 to Q4 also point out that the restricted portion of our business went from five six to 4.9, so and that's just on the price increase perspective. So again, that's just reflective of the indices themselves and again and as expected right.

Brian DelGhiaccio: Yeah, if you take a look at the sequential step down from Q2 to Q4, also point out that the restricted portion of our business went from 5.6 to 4.9. So, and that's just on the price increase perspective. So again, that's just reflective of the indices themselves. And again, as expected, right, we knew that it would step down sequentially, as I mentioned previously, so is our cost inflation. And as long as we can maintain that spread, that's how we drive margin expansion in the business.

Speaker Change: New that it would step down sequentially, but as I mentioned previously so as our cost inflation and as long as we can maintain that spread that's how we drive margin expansion in the business.

Speaker Change: Great and I did want to ask about volume as well I know you mentioned that special waste on the construction softness should we continue to expect those trends to continue in the upcoming quarters.

Brian DelGhiaccio: Great. And I did want to ask about volume as well. I know you mentioned that. Special Waste and Construction Softness. Should we continue to expect those trends to continue? the upcoming quarters, you know, and, and, you know, anything else to call out on the volume.

Speaker Change: And you know anything else to call out on the volume side. Okay helpful. Thanks.

Speaker Change: Yeah look I think across the industry in the last 12 to 18 months, we're in a flat to slightly negative demand environment from a unit standpoint, so probably hasn't been talked about are well understood on that front and its a cyclical portions driving that it's also true a little bit in the industrial side of the business. We're in large container permanent.

Brian DelGhiaccio: Yeah, look, I think across the industry in the last 12 to 18 months, we're in a, you know, flat, a slightly negative demand environment from a unit standpoint. So probably hasn't been talked about or well understood on that front. And it's the cyclical portions driving that. It's also true a little bit in the industrial side of the business to where a large container permanent, right, we're gaining customers. So we're gaining share there. But we're seeing activity has continued to be relatively soft at individual customers on that.

Speaker Change: We're gaining customers. So we're gaining share there, but we're seeing activity that has continued to be relatively soft that individual customers on that front.

Brian DelGhiaccio: On the construction side, you know, whether this happens in 3 to 6 months or it happens in 9 to 12 months, I'm optimistic on that side of the business for both commercial and residential. Interest rates coming down certainly helps with that. You've got both sides of the aisle talking about housing policy. We've underbuilt single-family homes in the United States in the last 15 years, and so there's a lot of pent-up demand on that front.

Oh it was on the construction side, whether this happens in three to six months or it happens in nine to 12 months I'm optimistic on that.

Speaker Change: That side of the business for both commercial and residential.

Speaker Change: Interest rates coming down certainly helps with that you've got both sides of the aisle talking about housing policy. We've under built single family homes, United States in the last 15 years and so there's a lot of pent up demand on that front and then we're starting to see some really interesting signs here on special waste and the industrial activity and there is always a little bit of pause.

Brian DelGhiaccio: And then we're starting to see some really interesting signs here on special waste and industrial activity. And there's always a little bit of paralysis in an election year. And we're starting to see a pipeline that's been actually quite strong all year, but jobs haven't moved. And those jobs are starting to move here in the fourth quarter.

Speaker Change: Alex's in an election year, and we're starting to see a pipeline that's been actually quite strong all year, but jobs haven't moved and those jobs are starting to move here in the fourth quarter. So.

Brian DelGhiaccio: So we're pretty optimistic for the remainder of the year and certainly in the 2025.

Speaker Change: We're pretty optimistic for the remainder of the year and certainly into 2025.

Speaker Change: Super Thank you.

Operator: Super.

Speaker Change: And your next question today comes from Kevin Chiang with CIBC. Please go ahead.

Kevin Chiang: And your next question today comes from Kevin Chiang with CIBC. Please go ahead. Hi, thanks for taking my question. Good afternoon and congrats on some good results. I think on the Q2 call, you mentioned, just on M&A here, you had mentioned, I think, about a $300 million pipeline that we're in advanced stages. It looks like you've booked about $200 million in Q3 here.

Speaker Change: Hi, Thanks for taking my question good afternoon, Congrats on some good results.

Speaker Change: I think on the Q2 call you mentioned just on M&A here, you had mentioned I think about a $300 million pipeline that are in advanced stages. It looks like you've booked about 200 million in.

Speaker Change: In Q3, just wondering if we think about that.

Kevin Chiang: Just wondering, as we think of that incremental $100 million, is that something you think you can close by year-end, or is there an update to that pipeline as you kind of work through that pipeline? Maybe a broader backdrop, coming off three really great years of M&A, our commitment to M&A has certainly not dwindled, and our Our outlook and our optimism going forward hasn't changed. There's always some ebb and flow. So we closed a couple of really big deals in Q4 last year. First half got off to a little bit of a slower start this year.

Speaker Change: That incremental $100 million, if that's something you are thinking.

Speaker Change: Close by yearend or is there an update to that pipeline as well.

Speaker Change: Did you kind of walk through that pipeline.

Speaker Change: Maybe broader backdrop coming off three really great years of M&A, our commitment to M&A is certainly not dwindle that are.

Speaker Change: Our outlook and our optimism going forward Hasnt changed Theres always some ebb and flow. So we closed a couple of really big deals in Q4 of last year our.

Speaker Change: First half got off to a little bit of a slower start this year, but can you put together what we've already done this year and what we expect to close in the fourth quarter were more like three.

Brian DelGhiaccio: If you put together what we've already done this year and what we expect to close in the fourth quarter, we're more like $300 million. What we gave you an indicator of closer to $500 million at the start of the year. You know, a lot of those deals are starting to build here. And so I expect us to have a really good first half next year on that front. So that gives you a sense of kind of the movement on that front.

Speaker Change: 301 million, while we gave you an indicator of well closer to $500 million at start of the year.

Speaker Change: A lot of and a lot of those deals are starting to build here and so I expect us to have a really good first half next year on that front. So that gives you a sense of kind of the movement on that front, but our and our outlook and our.

Brian DelGhiaccio: But our in our outlook and our. Our enthusiasm for M&A remains strong and we expect that to be a meaningful contributor next year.

Speaker Change: Enthusiasm for M&A remains strong and we expect that to be a meaningful contributor next year.

Speaker Change: Well, that's that's helpful and.

Kevin Chiang: Now that's helpful. And just my second question here, I think about a month ago, you could place an order for about 100 EVs. And I think you're targeting, I think half of new purchases in 2028 will be electric vehicles.

Speaker Change: My second question here about a month ago, you place an order for about a 100 <unk>.

Speaker Change: And I think theyre targeting.

Speaker Change: Half of new purchases in 2028 will be will be electric vehicle.

Speaker Change: And vehicles.

Jon van der Ark: I guess when we hear other commercial fleet operators, there seems to be a growing pushback on. on adopting this technology, whether the argument is that technology is not ready yet or infrastructure is not ready yet. Just as you think of your EV strategy in that 2028 timeline, I guess how you see the OEN Their ability to keep pace, I guess, with the targets you have, I guess looking out kind of four years from now. Yeah, definitely there'll be people that move faster and people that move slower. I mean, we've learned from all kinds of experience here that EV isn't just a truck, it's a system.

Speaker Change: I guess, when we hear other commercial fleet operators, there seems to be a growing pushback on.

Speaker Change: Well on the I guess adopting this technology and what are the arguments of technology is not ready yet or infrastructure is not ready yet.

Speaker Change: Do you think your strategy about 2028 timeline.

Speaker Change: I guess, how you see the OEM.

Speaker Change: The ability to keep pace I guess, what the targets you have I guess looking out kind of four four years from now.

Yeah definitely there will be people that moved faster than people that moves slower I mean, we've learned from all kinds of experiences that E. V isn't just a truck in the system. So you need to understand how to put in the infrastructure.

Jon van der Ark: So you need to understand, you know, how to put in the infrastructure and get after that early, you need to understand the incentive environment on that front, because that certainly accelerates adoption and shortens the payback period. And we've had teams working on that for three years. And, listen, the unlock is somebody building a truly studs-up EV vehicle. No one's ever done that in our space before until Oshkosh with their McNeilus vehicle. And that's a game-changer because that allows you to get enough battery power on the vehicle that you can run a full day without sacrificing payload.

Speaker Change: And get after that early need understand the incentive environment on that front, because that's certainly accelerates adoption and shortens the payback period and we've had teams working on that for three years.

Speaker Change: And it's in the unlock as somebody building a truly studs up EV vehicle no one's ever done that in our space before until Oshkosh, where they don't make meals a vehicle and that's a game changer because that allows you to get enough battery power on the vehicle that you can run a full day without sacrificing payload and that was always the does.

Jon van der Ark: And that was always the design parameter we had, which is we're not going to sacrifice productivity to do that. So we're thrilled with the product that we have running. I think there'll be other OEMs, hopefully, that get there.

I'm parameter, we had which is we're not going to sacrifice productivity to do that.

Speaker Change: We're thrilled with the product that we have running I think there'll be other Oems hopefully they get there.

Jon van der Ark: This is, it sends people to move, but there's certainly going to be winners and losers in the short-to-medium term in terms of pace of adoption.

Speaker Change: And so this is an sense people too to move but there is certainly going to be winners and losers in the short to medium term in terms of the pace of adoption.

Speaker Change: Thanks for taking my questions.

Connor Gupta: Thanks for taking my question. And your next question today comes from Connor Gupta with Scotia Capital. Please go ahead. Thanks and good afternoon everyone.

Speaker Change: And your next question today comes from <unk> Gupta with Scotia Capital. Please go ahead.

Speaker Change: Thanks, and good afternoon, everyone.

Connor Gupta: I just wanted to maybe catch up on the housekeeping item first on the M&A side, did you talk about the rollover effect in 2025 based on what you have closed today? Oh, the rollover impact. Yeah. So we would expect, you know, right now to see relatively negligible to 25 growth, you know, it's 10 to 20. Okay, and obviously there's probably upside if you were to outgrow some of the acquisitions you're talking about in Q4. That is correct because that only includes that which is actually closed through the third quarter. There would be rollover impact of anything that closes in the fourth quarter.

Speaker Change: Just wanted to maybe catch up on the housekeeping items first on the M&A side did you talk about the rollover effect in 2025 based on multiyear deals today.

Speaker Change: Oh, the rollover impact, yes, so we would expect.

Speaker Change: Right now to see relatively negligible to twenty-five growth you know, it's 10 to 20 basis points at this point.

Speaker Change: Okay, and obviously, there is probably upside to fuel some of the acquisitions Youre talking about Q4, maybe then.

Speaker Change: Correct because that only includes that which is actually closed through the third quarter, there would be rollover impacted anything that closes in the fourth quarter.

Speaker Change: Makes sense. Thank you.

Connor Gupta: Makes sense.

Connor Gupta: Thank you. And then my question is on the margin side. So if I look at the trend this year so far, the margins have sequentially expanded as you talked to some of the kind of nuances on Q3 for sure, but then Q4 the margin kind of drops on an implied basis.

Speaker Change: And then my question is on the margin side. So if I look at the trend this year so far.

Speaker Change: Margins have sequentially expanded and you talk to some of the kind of nuances in Q2 for sure. But then Q4 the margin kind of drops on an implied basis.

Brian DelGhiaccio: Heading into 25, I'm just thinking like what are some of the puts and takes you're thinking about margin as some of the circularity projects are ramping up maybe, and then some of these headwinds might fade away next year.

Speaker Change: Heading into 'twenty five I'm, just thinking like what are some of the puts and takes are you thinking about the margin as you know some of you said commodity.

Speaker Change: So ramping up maybe and then some of these headwinds might create early next year.

Brian DelGhiaccio: What's the best sort of proxy for thinking about margin expansion? Yeah, we're certainly not giving 2025 guidance, but an outlook that we've talked about in the prepared remarks and we mention often to investors is that we want to go revenue mid-single digits and then grow EBITDA margin or EBITDA slightly faster than that, which implies EBITDA margin expansion and free cash flows slightly faster than that. And EBITDA margin across the cycle, kind of think 30 to 50 basis points. Obviously, this year is going to be stronger than that, but we would certainly go into next year kind of in that zip code in terms of our expectations of how we're going to expand margin in the business.

Speaker Change: Let's see what's the best set of.

Speaker Change: Proxy for thinking about margin expansion next year.

Speaker Change: Yeah, we're certainly not giving 2025 guidance, but an outlook that we've talked about in the prepared remarks, and we mention often to investors is that we wanted to grow revenue mid single digits, and then grow EBIT margin or EBIT slightly faster than that which implies EBITDA margin expansion and free cash flow those are slightly faster than that.

Speaker Change: EBIT margin across the cycle kind of think 30 to 50 basis points. Obviously this year is gonna be.

Speaker Change: Stronger than that but we would certainly go into next year kind of in that ZIP code in terms of our expectations of how we're going to expand margin in the business.

Speaker Change: Okay, that's great color I appreciate it thank you.

Connor Gupta: Okay, that's great.

Connor Gupta: I appreciate your time.

David Manthey: Thank you. And your next question today comes from David Manthey with Barrett. Please go ahead.

Speaker Change: And your next question today comes from David Manthey with Baird. Please go ahead.

David Manthey: Thank you and good afternoon, everyone.

David Manthey: Thank you. Good afternoon, everyone. It's less than three years since the EECOL acquisition, and I believe you said that the EBITDA in environmental solutions is about 24 percent. Going back to 2021, EECOL's standalone targets were like 17, and I think 40 million of synergies probably picks you up 300 or 400 basis points. Is the delta there, the remainder, is that just improved pricing, or is there any kind of acquisition mixed benefit in that improvement as well? Any help you can give us there? Yeah, and all above, it's in every lever. So starting out with on the revenue side, it's customer met.

David Manthey: Well, it's less than three years since the <unk> acquisition and I believe you said that the EBITDA and environmental solutions was about 24%.

David Manthey: Going back to 2021.

Speaker Change: He called Standalone targets were like 17, and I think $40 million of.

Speaker Change: Synergies probably picks you up 300 or 400 basis points is the delta there the remainder or is that just improved pricing or is there any kind of acquisition mix benefit in that improvement as well any any help you can give us there.

Speaker Change: Yeah, No I'll box, it's listen every lever so starting out with on the revenue side, it's customer mix.

Jon van der Ark: So we're going through verticals and understanding willingness to pay and where we have pricing power and what the more profitable verticals are and less profitable verticals. So you've seen some customer churn in that space this year as we've certainly pushed price because our services are valuable and found lots of willingness to pay and a few people that want to experience lower quality for a period of time up front. And then just the pricing of top line pricing, very tactical account level pricing, kind of looking at every lever there, still more upside, certainly there going forward as we put in the systems and technology to give our team members better tools on that front.

Speaker Change: So we're going through verticals and understanding willingness to pay and where we have pricing power and what's the more profitable verticals are in less profitable vertical so you've seen some.

Speaker Change: Customer churn in that space. This year as we certainly pushed price because they are services are valuable and found lots of willingness to pay and a few people that wanted to experience lower quality for a period of time upfront and then just the pricing of the topline pricing very tactical account level pricing kind of looking at every lever there.

Speaker Change: There still more upside certainly they're going forward as we put in.

Speaker Change: The systems and technology to give our team members better tools on that front.

Jon van der Ark: And then, you know, good cost management, cost discipline, right, better labor utilization as we get bigger, especially on the field services side of the business, you're able to deploy labor in different markets and therefore get better utilization rates on that labor. So really proud of the team and the work we've done there.

And then you know good cost management cost discipline, better labor utilization as we get bigger, especially on the field services side of the business, you're able to deploy labor in different markets, and therefore get better utilization rates on that labor. So.

Speaker Change: I'm really proud of the team and the work we've done there. We said we thought we could get to 25% of the midterm target and there's some ebb and flow across quarters of course, but we've made faster progress than I think we originally anticipated and have high aspirations for that business to grow both the units and margin going forward.

Jon van der Ark: We said we thought we could get to 25% of the midterm target and there's some ebb and flow across quarters, of course, but we've made faster progress than I think we originally anticipated and have high aspirations for that business to grow both units and margin going forward.

Speaker Change: Yeah I appreciate it thanks very much.

David Manthey: Yep, I appreciate it. Thanks very much.

Speaker Change: And your next question today comes from Tobey Sommer with <unk> Securities. Please go ahead.

Tobey Sommer: And your next question today comes from Tobey Sommer with Chua Securities. Please go ahead. Thanks. Following up on the environmental services in the U.S.

So just following up on the <unk>.

Speaker Change: Rental services in the U S oncology business.

Tobey Sommer: ecology business, what's your, is your changes in your view on the long term margins that you think you can approach over, over sort of many years in that business? And I'd love to get your perspective on the disposal market digesting incremental capacity. I think there's an incinerator coming online. Yeah, about 25% free cash flow converges with the recycling and waste business across the cycle, just given the lower capital intensity of that business. Over time, the longer term, we don't see a constraint of why even a margin in that business couldn't be very similar to the recycling waste business, just given the nature of the products, right?

Speaker Change: Hmm.

What's your is your changes in your view on the long term margins that you think you can approach over many years in that business and I'd love to get your perspective on the disposal market digesting incremental capacity I think there's an incinerator coming online.

Yeah.

Speaker Change: Yeah about 25% free cash flow converges with the recycling and waste business across the cycle, just given the lower capital intensity of that business.

Speaker Change: Over time the longer term, we don't see a constraint of why EBITDA margin in that business couldn't be very similar to the recycling.

Speaker Change: Our waste business, just given the nature of the.

Speaker Change: Products right. These are very technical complicated waste streams.

Jon van der Ark: These are very technical, complicated waste streams, limited number of outlets, requires a lot of environmental compliance to handle those appropriately on that front, and so we think that's very valuable service, and we're going to continue to price for that over time.

The limited number of outlets requires a lot of environmental compliance to handle those appropriately on that front and so we think that's very valuable service and we're going to continue to price for that over time in terms of new incineration coming online. It's welcomed the industry has been in short supply for a long period of time and we.

Jon van der Ark: In terms of new incineration coming online, it's welcomed. The industry has been short-supplied for a long period of time, and we don't see that as a challenge or a constraint. We see that as an opportunity because there's pent-up demand that that new capacity will be able to fulfill.

We don't see that as a challenge or constraint, we see that as an opportunity because there's pent up demand that that new capacity will be able to fulfill.

Speaker Change: Thank you.

Tobey Sommer: Thank you. In terms of the pace of M&A, it's been a little bit slower than I had anticipated year-to-date. I was wondering if you could speak to that, as well as the margin profile of the targets generally. I'm wondering, to the extent supply chain, fleet, wage growth, technology, and other factors have actually sort of pressured the margins of the targets that you're looking at. Yeah, I mentioned the ebb and flow pace of M&A. Again, it's not, we're going to stay disciplined. I think, in fact, we just looked at this, we're eight to one, right? For every eight opportunities that we look at, eventually, we close one of those, because we're going to be very disciplined.

Speaker Change: In terms of the pace of M&A, it's been a little bit.

Speaker Change: Slower than I had anticipated year to date I was wondering if you could speak to that as well as the margin profile of the targets generally I'm wondering to the extent supply chain fleet wage growth technology and other factors.

Speaker Change: What sort of pressured the margins of the targets that you're looking at.

Speaker Change: Yeah, I've mentioned, the ebb and flow of pace of M&A again, it's not that we're going to stay disciplined I think are not in fact, we just looked at this one eight to one for every eight opportunities that we look at eventually we close one of those because we're going to be very disciplined first is going to have to meet our strategic hurdle is are we the natural owners.

Jon van der Ark: First, it's going to have to meet our strategic hurdle. Are we the natural owners for this? Or is it a fit? A, and then B, does it meet our financial stream on that? And so we're looking for cash on cash returns, double digit, you know, post synergy on that. So we're going to remain very disciplined. And again, there's ebb and flow, lots of conversations, sometimes those things break quickly. And sometimes they take a little longer, right? And that's the period we're in right now.

Speaker Change: For this or is it a fit a and then b does it meet our financial stream on that and so we're looking for cash on cash returns double digit.

Speaker Change: You know post synergy on that so we're going to remain very disciplined.

Speaker Change: And getting there is ebb and flow of lots of conversation, sometimes those things break quickly and sometimes they take a little longer right in that front and that's the period. We're in right now but are getting our enthusiasm has not changed in terms of the margin profile.

Jon van der Ark: But again, our enthusiasm has not changed. In terms of the margin profile, It's less about what it has today and more about what it can become, because oftentimes in these businesses, you know, we're going to park the trucks, right, we're going to recapitalize the fleet, we are going to layer in to our IT system, right, some of those drivers will come over, some won't, because we layer it right into our density. And so we can take routes out of the system and do the same amount of work.

Speaker Change: It's less about what it has today and more about what it can become because often times in these businesses.

Speaker Change: We're going to park the trucks right. We're gonna recapitalize the fleet, we are going to layer in.

Speaker Change: So some of those drivers will come over some won't because we layer right into our density and so we can take routes out of the system and do the same amount of work and that's why we drive so much value in these deals.

Tobey Sommer: And that's why we drive so much value in these Thank you very much.

Speaker Change: Thank you very much.

Speaker Change: And your next question today comes from Tyler Brown with Raymond James. Please go ahead.

Brian Butler: And your next question today comes from Tyler Brown with Raymond James. Please go ahead. Hey, good afternoon, guys. Hey, I got a couple questions here. So first, I want to kind of come back to the implied Q4 guide. But if I use the high end, it implies that Q4 is around $1.2 billion, which I think is down high single digits from Q3, which is just worse than normal seasonality. And I get that you've got the 60 basis points from bad debt and insurance, but it still feels a little conservative, or am I missing something? I would say the opening remarks, we talked about, you know, low end of the revenue guide, high end of the even margin guide.

Speaker Change: Hey, good afternoon guys.

Speaker Change: They don't tell us Hey, I got them I got a couple of questions here. So first I want to kind of come back to the implied Q4 guide, but if I use the high end. It implies that Q4 is around $1 2 billion, which I think is down high single digits from Q3, which is just what's the normal seasonality and I get that.

Speaker Change: Got the 60 basis points from bad debt in the insurance, but it feels it still feels a little conservative or am I missing something.

Speaker Change: I would say that the opening remarks, we talked about low end of the revenue guide high end of the EBIT margin guide.

Brian Butler: That's, we're getting towards the end of the year, we're focusing our plans on 2025 on that front. We don't put a lot of time and attention and energy in getting decimal level accurate, right, on updating the guide. We gave you the markers for how to feel really good about where we're going to end up Q4 into 2025.

Speaker Change: That's we're getting towards the end of the year, we're focusing our plans on 2025 on that front, we don't put a lot of time and attention and energy in getting decibel level accurate right on updating the guide we gave you the barkers for added feeling really good about where we're going to end up Q4 and into 2025.

Brian Butler: Okay, that's fair. And then just to be kind of clear on the implied volume guidance in Q4, is there any benefit from hurricane cleanup efforts in there? There may be a little bit, again, we don't...

Speaker Change: Okay. That's fair and then just to be clear on the implied volume guidance. In Q4 is there any benefit from hurricane cleanup efforts in there.

Speaker Change: There may be a little bit again, we don't.

Speaker Change: You know plan on that certainly sometimes you get actually a quite a nice lift coming out of the sometimes you get a little lesson here do you think about our primary focus is first taking care of our people some of them have been deeply impacted especially in a lean and so we're going to.

Brian Butler: Please see the complete disclaimer at https://sites.google.com.au get them back on their feet. And when they're back on their feet, they can get back to work on that front. And then on the back end, you know, oftentimes we end up making, making some money that helps pay for that more.

Speaker Change: Get them back on their feet and when their back on their feet. They can get back to work on that front and then on the backend and oftentimes what we ended up making making some money.

Speaker Change: It helps pay for that and more but if that comes that's just icing on the cake.

Brian Butler: But if that comes, that's just I see And then I want to kind of come at 25 a little bit different, because I think there's actually quite a bit going on next year. There's actually a number of moving pieces, discrete pieces, if I'm not mistaken, because I think you have polymer, blue polymer plants coming online, you mentioned that. I think your RISE platform still has some incremental benefits that you should get. I think you have maybe $40 million of savings to go there. I think Empower comes on. That's going to be a modest benefit. You should have at least some benefit from R&G.

Speaker Change: Okay, and then I wanted to kind of come at 25, a little bit different because I think there's actually quite a bit going on next year. There's no. It's actually a number of moving pieces discrete pieces, if I'm not mistaken because I think you have polymer polymer plants coming online you mentioned that I think you're right platforms still have some incremental benefits.

Speaker Change: You should get I think maybe $40 million in savings to go there I think in power comes on that's going to be modest benefit you should have at least some benefit from orange <unk>. So Brian I don't know if you can but can you kind of maybe bucket all of that together, but how much do you think those incremental.

Brian DelGhiaccio: So, Brian, I don't know if you can, but can you kind of maybe bucket all that together? But how much do those incremental drivers help 25? Is it $50 million, $100 million, just any broad buckets would be very helpful if you can. Yeah, let's take those. Let's just talk about sustainability innovation, which would include the R&G portfolio, polymer center and blue polymers, right. So next year, if you think about what we're expecting from an incremental, so this would be 25 over 24. It's about $75 million of revenue and 30 to $35 million worth And so again, coming in at a nice, you know, incremental accretive margin to the portfolio, primarily driven by the RNG side of As you mentioned, we do expect some benefits from Empower, but remember, we're going to deploy that in a phased approach.

Speaker Change: Incremental drivers help 25 is it 50 million 100 million just any any broad buckets would be very helpful. If you can.

Speaker Change: Yeah, let's take that it was like well, let's just talk about sustainability innovation, which would include the R&D portfolio polymer center and Blue polymers right. So next year. If you think about what we're expecting from an incrementals. So this would be 25 over 24, it's about $75 million of revenue and 30% to $35 million worth of EBITDA.

Speaker Change: Yes, so again coming in at a nice.

Speaker Change: Incremental accretive margin to the portfolio, primarily driven by the R&D side of that.

Speaker Change: As you mentioned, we do expect some benefits from empower but remember we're going to deploy that in a phased approach and we just started the initial our business units that are getting that that system. So that will be deployed throughout the year.

Brian DelGhiaccio: And we just started the initial business units that are getting that system. So that will be deployed throughout the year. And as we exit 25, we would expect to be fully deployed. So we called out $20 million of benefit at run rate. So you can kind of think about half of that or so, you know, being realized in 25 with the other half then in 26. And, you know, to your question on the RISE platform, and some of the fees that we're generating, you know, we talked about from a fee perspective, that we've realized, you know, over $60 million of those fees, but that's already in the run rate.

Speaker Change: As we exit 'twenty five we would expect to be fully deployed so we called out $20 million of benefit at run rates. So you kind of think about half of that or so being realized and twenty-five with the other half in two.

Speaker Change: <unk> 26, and you know to your question on the rise platform and some of the fees that we're generating and we talked about from a fee perspective that we've realized over $60 million of those fees, but that's already in the run rate right. So we've had that throughout the year and we're starting to comp that in Q3 of this year.

Brian DelGhiaccio: Right. So we've had that throughout the year, and we're starting to comp that in Q3 of this year. From a productivity perspective, you can think we've got about $25 million more to go, you can think about half of that coming in 25, half in Okay, okay, perfect. So there's some in 25 and 26.

Speaker Change: From a productivity perspective, you can think we've got about $25 million more to go you can think about half of that coming in 'twenty five half in 'twenty six okay.

Speaker Change: Okay. Okay perfect. So there was some 25 26 now the other thing is will there be based on what we know today and I'll turn it in.

Brian DelGhiaccio: Now, the other thing is, will there be, based on what we know today, an alternative tax credit sunset headwind? You're talking about the CNG tax credit? Correct, correct. Yeah, yeah, we are not assuming that in 25, and we just follow the law. And so, you know, again, right now that's set to expire, so that is not included in our projection for 25. And that's about, for us, that runs about $15 million. Sorry, 1-5. 1-5. Yeah. Okay. Perfect.

Speaker Change: Tax credit Sunset headwind.

Speaker Change: Youre talking about the the CMG a tax credit.

Speaker Change: Correct, Yes, yes, we are not assuming that in 'twenty five and we just follow the law and so.

Speaker Change: Again right now that's set to expire so that is not included in our projection for 25, and that's about from us that runs about $2 million.

Speaker Change: One five.

Speaker Change: One five yep.

Brian Butler: All right. Thank you, guys.

Speaker Change: Okay perfect Alright, Thank you guys.

Sure.

Speaker Change: And your next question today comes from Brian Butler with Stifel. Please go ahead.

Brian Butler: And your next question today comes from Brian Butler with Stiefel. Please go ahead. Good afternoon. Thanks for taking the question.

Brian Butler: Afternoon, Thanks for taking the question.

Brian Butler: Just first one, can we talk maybe about where internal inflation has been running, you know, as compared to, you know, the CPI headline, kind of what was that trending in the third quarter and how does that look in the fourth quarter and then, I guess, 2025, if you have any color? Yeah, good story, right? You're seeing that inflation come down. So I mentioned labor about four and a half percent, and that's a pretty good indication of the overall cost of inflation. There's some puts and takes in other categories. Maintenance has been a real highlight in terms of that category.

Brian Butler: Just first one can we can we talk maybe about where internal inflation than running as compared to the CPI had mind kind of what was that trending in the third quarter and how does that look into the fourth quarter and then I guess 2025 and do you have any color.

Speaker Change: Yeah. Good story right you are seeing that our inflation come down so I mentioned labor about four 5% and that's pretty good indication of the overall cost inflation theres some puts and takes in all the categories.

Speaker Change: Well maintenance has been a real highlight in terms of that category certainly was running hot the last couple of years and that's improved from lots of different reasons, one we're getting truck deliveries. So.

Brian DelGhiaccio: It certainly has run hot the last couple of years, and that's improved for lots of different reasons. One, we're getting truck deliveries, so putting out or parking older trucks and taking on new trucks with less maintenance intensity. And then also, turnover continues to decline. We're doing more work internally versus outsourcing it to third parties, and that's a cheaper labor rate. Parts inflation is certainly modulated as well, so all those pieces are helping on that side. And we expect that to continue to improve modestly into 2025, so continued deceleration.

Speaker Change: The putting out to our parking older trucks in taking on new trucks with less maintenance intensity.

Speaker Change: And then also our turnover continues to decline we're doing more work internally versus outsourcing it to third parties and that's a cheaper labor rate parts inflation, certainly modulator as well. So all of those pieces are helping on that side and we expect that content or that continued to improve modestly in the 2025. So continued deceleration.

Speaker Change: Okay, Great and then when you went through the buckets kind of on what rolls into 'twenty five or for sustainability E power right. How should we think about the capital spending that's attached to that versus what was spent in 2024.

Brian DelGhiaccio: Okay, great.

Brian DelGhiaccio: And then when you went through the buckets kind of on what rolls into 25 for for sustainability e-power rides, how should we think about the capital spending that's attached to that versus what was spent in 2024? relatively consistent if you think because remember when you think about what we're doing when we're investing in RNG, when we're making those investments, that's in a JV structure. So that comes through more like an acquisition than it does capex. But when you think about, you know, Polymer Center, and when you think about what we're going to do from an EV perspective, we would expect those to be, you know, on par with what we did this year, slightly, slightly higher, but nothing of note to change the CapEx as a percent of revenue.

Speaker Change: Relatively consistent everything because remember when you think about what we're doing when we're investing in RMG when we're making those investments that's in a JV structure. So that comes through more like an acquisition then it does capex.

Speaker Change: But when you think about you know polymer center and when you think about what we're going to do from an EV perspective, we would expect those to be on par. What we did this year slightly slightly higher but nothing of note to change the capex as a percent of revenue.

Speaker Change: Okay, great. Thank you.

Brian DelGhiaccio: Okay, great. Thank you.

Speaker Change: And your next question today comes from Noah Kaye with Oppenheimer. Please go ahead.

Noah Kaye: And your next question today comes from Noah Kaye with Oppenheimer. Please go ahead. Hey, thanks, folks. I think we did last quarter, you know, 32% EBITDA margins could be achievable over time. And well, here you are. So well done.

Speaker Change: Hey, thanks folks.

Speaker Change: I think we said last quarter a.

32% EBITDA margins could be achievable over time, and why you are so well done.

Noah Kaye: I want to ask about environmental solutions. I think in the prepared remarks you mentioned, it was largely due to acquisitions that there was revenue growth. Can you just tell us a little bit about the organic trends in the quarter, maybe how you see the pipeline for ES shaping up? Yeah, there's certainly been growth. There's also been some churn, which I mentioned, right, and we are going to continue to test the bounds of customer willingness to pay. We believe you have to do that as a leader in the marketplace and when the services are highly valued.

I wanted to ask about environmental solutions I think in the prepared remarks, you mentioned that was largely due to acquisitions that those revenue growth can you just.

Speaker Change: Both are at about the organic trends in the quarter.

Speaker Change: How you see the pipeline for shaping up.

Speaker Change: Yeah, there's certainly a bit of growth. There has also been some churn, which I've mentioned right. We are going to continue to.

Speaker Change: Yes, the bounds of customer willingness to pay we believe you have to do that as a leader in the marketplace and when the services are highly valued and we also know that customers come back around they experience with a different provider and.

Jon van der Ark: And we also know that customers come back around. They experience with a different provider and with high quality service where we're engaged with them from a safety standpoint, sustainability standpoint, digital standpoint, that has value. Ultimately, those customers oftentimes come back on that front. So little flat, you know, more flat this year from a volume standpoint than we would have hoped. The pricing obviously exceeded our expectations and when forced to choose, I'll take that trade off all day.

Speaker Change: With high quality service, where we're engaged with them from a safety standpoint sustainability standpoint, digital standpoint that that has value and ultimately those customers oftentimes come back on that front. So little fly more flat this year from a volume standpoint than we would've hoped that pricing, obviously exceeded our expectations and when forced to choose I'll take that.

Speaker Change: Paid off all day now I pushed the team that we want to grow of both units and price and we'll have a plan to do that in 2025.

Jon van der Ark: Now, I push the team that we want to grow both units and price, and we'll have a plan to do that in 2025. And to that point, you talked about maybe some faster pace of margin expansion, a reasonable thing about for ES versus overall, you know, you talked about the 30 BIPs for the overall business, you know, sort of like 100 BIPs, kind of the right, you know, level on an annual basis to be thinking about the segment. Yeah, I think we've talked to about 80 to 100 basis points kind of across the cycle. And some years that'll go faster and some years maybe slower.

Speaker Change: And to that point you talked about.

Maybe some faster pace of margin expansion that reasonable to think about for <unk> versus overall, you talked about the 30 bps for the overall business.

You know, it's sort of like 100 bps right.

Speaker Change: You know level on an annual basis to be thinking about that segment.

Speaker Change: Yeah, I think we've talked to about 80 to 100 basis points kind of across the cycle and some years that will go faster and some years may be slower, but if you look at the trend I think that's a ratable pace, where we can take margins.

Noah Kaye: But if you look at the trend, I think that's a ratable pace where we can take margin. Okay, very helpful.

Speaker Change: Okay, that's very helpful.

Noah Kaye: Yeah, I'll leave it there. Thanks very much.

Speaker Change: Yes, I'll leave it there thanks very much.

Speaker Change: Okay.

Speaker Change: And your next question today comes from <unk> Khan with RBC capital markets. Please go ahead.

Sabahat Khan: And your next question today comes from Sabahat Khan with RBC Capital Markets. Please go ahead. Great. Just to follow up on that last question there, just in terms of the discussions you're having with your customers as, you know, the absolute level of headline inflation is moderating, just their willingness to sort of... Give that spread over the cost base and are you finding it easier harder than it was maybe a year ago? And it's sort of the directional rate cuts and things like that helping at all. Thanks I would say broadly, if we're in a world of 2.5%, 3%, 3.5%, 4% inflation, that's a pretty good spot for us to be.

Speaker Change: Hey, Greg just a follow up on that last question. There just in terms of the discussions youre, having with your customers as well.

Speaker Change: The absolute level of headline inflation is moderating just a willingness to sort of.

Speaker Change: Give that spread over the cost base and are you finding it easier or harder than it was maybe a year ago, and it's sort of a directional rate cuts and things like that helping at all thanks.

Speaker Change: I would say broadly if we're in a world of you know two and a half three three and a half.

Speaker Change: 4% inflation, that's a pretty good spot for us to be.

Jon van der Ark: We've seen what really high inflation looks like, and that was certainly sustainable or workable for a period of time, over time that's very unworkable because of what the Fed will do and they'll end up crashing the economy to bring that down. We've lived in a period of incredibly low inflation, and that's really hard because we're going to give our people a wage increase every year, because we know that their real costs are going to go up on that front.

Speaker Change: We've seen what really high inflation looks like and that was certainly sustainable are workable for a period of time over time, that's very unworkable because of what the fed will do in El do end up crashing the economy to bring that down we've lived in a period of incredibly low inflation and that's really hard because we're gonna give our people a wage increase.

Speaker Change: Every year, because we know that there are real costs are going to go up on that front, so living and again that you know.

Jon van der Ark: So living in, again, that 3, 3.5% zone is a really good spot for us to be.

Kind of three 3.5% zone is a really good spot for us to be.

Speaker Change: Okay, Great and then just on the volume front, maybe you can just give some perspective on it.

Brian DelGhiaccio: Great, and then just on the volume front, maybe we can just give some perspective on, you know, I think as these rates get cut, I think you're indicating you want pricing and you have volume growth next year, ideally. Maybe just some perspective on your, you know, what you're seeing on the economic activity, the cyclical units, and then secondly, you know, where you are on the volume churn front, if there's any more of that still to come in 25, thanks. Yeah, I think I mentioned in the past that from a turnstile standpoint, every time we do M&A, there's always going to be some work that we're going to turn out of the portfolio, there's going to be some municipal contracts, we know that we are going to upgrade or replace in terms of pricing.

Speaker Change: I think as these rates get cut I think you're indicating you want pricing and unit volume growth next year ideally.

Maybe just some perspective on your what Youre seeing on the economic activity. The cyclical units and then secondly, where you are on the volume churn front. If there is any more of that still to come in 'twenty five.

Speaker Change: Okay.

Speaker Change: Yeah, I think I've mentioned in the past that from a churn standpoint every time, we do M&A, there's always going to be some work that we're going to turn out of the portfolio, there's going to be some municipal contracts. We know that we are going to upgrade or replace in terms of pricing and we know that there's likely some broker work.

Brian DelGhiaccio: And we know that there's likely some broker work that, you know, we don't treat those as customers, we treat people who generate Recycling and Waste. So that's going to get turned out of the portfolio. We're seeing some of that this year, for sure, on that front. And the cyclical volume, listen, the construction's down. Our large container tent business is certainly down year over year. You know, 10 percent from a unit standpoint, quarter over quarter. And so that's just a reflection of what's happening, the underlying construction activity. And I think what the really good news is, is given, again, this broader demand environment, which is when you put all the pieces together, right, you know, something South of flat, right, you're seeing really good pricing behavior and conduct and performance.

That we don't treat those as customers, we treat people who generate.

Speaker Change: Recycling and waste as customers. So that's gonna get turned out of the portfolio. We're seeing some of that this year for sure on that front and the cyclical volume listen Construction's down in our temp.

Speaker Change: I was getting a temp business is certainly down year over year, you know 10% from.

Speaker Change: When a unit standpoint quarter over quarter and so that's just a reflection of what's happening in the underlying construction activity and I think what the really good news is is given again this broader demand environment, which is when you put all the pieces together right.

Speaker Change: <unk>.

Speaker Change: South of flat right, you're seeing really good pricing behavior and conduct and performance and I think if you take a look 20 years back you just would not have seen that you would've seen people chasing units to try to keep trucks utilized and what we're doing and others, apparently our parking vehicles and understanding that right your people need to.

Brian DelGhiaccio: And I think if you, you know, take a look 20 years back, you just would not have seen that you would have seen people chasing units to try to keep trucks utilized. And what we're doing and others apparently are parking vehicles and understanding that, right, your people need to have a wage increase every year, and it's important to go out and price. And so I think you're seeing a market that's behaving rationally. And that's really beneficial. And as we see, again, really good growth indicators on the horizon, whether that's three months, six months, nine months, but we're pretty optimistic on that front, a little bit of volume will be a really good place to be.

Speaker Change: Have a wage increase every year and it's important to go out and price and so I think youre seeing a market that's behaving rationally and that's really beneficial and as we see you know again really good growth indicators on the horizon, whether that's three months six months nine months, but we're pretty optimistic on that front, a little bit of volume will be a really good place to be.

Brian DelGhiaccio: You know, some of the contract losses as well, as John mentioned, right, you know, some of this is just comping out some losses that happened earlier in the year. So, for example, residential, we were down 2.9% year-over-year in the third quarter. Most of that is going to anniversary as we exit the year. So it's not that we're necessarily expecting any sort of robust growth in residential. It's just the absence of a headwind that we've been experiencing all year long.

Speaker Change: Some of the contract losses as well as John mentioned right. Some of this is just comping out some losses that happened earlier in the year. So for example, residential we were down two 9% year over year in the third quarter. Most of that is going to anniversary as we exit the year. So it's not that we're necessarily expecting any sort of robust growth in <unk>.

Speaker Change: <unk> just the absence of the headwind that we've been experiencing all year long.

Speaker Change: Great. Thanks, very much for the color.

Brian DelGhiaccio: Great. Thanks very much for the color.

Speaker Change: And your next question today comes from Faiza <unk> with Deutsche Bank. Please go ahead.

Faiza Alwy: And your next question today comes from Faiza Alwy with Deutsche Bank.

Faiza Alwy: Please go ahead. Yes, hi, thank you. I wanted to go back to the 3Q versus 4Q margin trend. And, you know, it seems like I get the 60 basis points of, you know, potentially one-time benefit. But is it just taking a step back? Is it just commodity prices that are, you know, coming down in the fourth quarter that reflects the change in, you know, year-over-year margins? Or was there something in the prior year comp to be aware of? Or is there any other factor? Yeah, I would say, look, as you as you look at last year, you know, from a prior year comp perspective, historically, you've seen margins step down from Q3 to Q4.

Speaker Change: Yes, hi, thank you.

Speaker Change: I wanted to go back to the three Cuba since for Q margin trend.

Speaker Change: And you know it seems like I get the 60 basis points of potentially one time benefit.

Speaker Change: But is that just taking a step back is it or is it just commodity prices that are coming down in the fourth quarter that reflects.

Speaker Change: The the change and you know you've got really our margins or was there something in the prior year comp to be aware of or is there any any other factor.

Speaker Change: Yeah, I would tell you look as you as you look at last year, you know from our prior year comp perspective, historically, you've seen margin step down from Q3 to Q4 and last year. They were flat right. They were equal to each other so theres certainly a tougher comp, but as John mentioned earlier, we feel really good about our prospects and how we're going to finish up this year and will be.

Brian DelGhiaccio: And last year, they were flat, right? They were equal to each other. So they're certainly a tougher comp.

Brian DelGhiaccio: But as John mentioned earlier, we feel really good about our prospects and how we're going to finish up this year. And we'll be able to sit there and tell you how we finish out the year, you know, in February.

But to sit there and tell you how we finish out the year you know in February.

Speaker Change: Understood and then just a housekeeping question for 25, if you can I'm sorry, just wanted to confirm that theres any level of rollover acquisition that we should be keeping in mind for 425, and then like anything below the line, whether it's interest expense I know you have some notes that are.

Brian DelGhiaccio: And then just a housekeeping question for 25, if you can. First, just want to confirm if there's any level of rollover acquisitions that we should be keeping in mind for 25. And then, like, anything below the line, whether it's interest expense, I know you have some notes that are coming up, or the tax rate, or any of those below-the-line type of things that we should keep in mind. From a rollover perspective, as we said earlier, you know, about 10 to 20 basis points of rollover based on that which is already closed. Obviously, that would increase for any deals that we close in the fourth quarter, right?

Speaker Change: That are coming up or the tax rate or any any of those below the line type of things that we should keep in mind.

Speaker Change #100: Yeah from a rollover perspective, as we said earlier about 10 to 20 basis points of rollover based on that which is already closed obviously that would increase for any deals that we closed in the fourth quarter right. So we again, we can give you some of that flavor when we get back together in February as far as some of the other components I mean, if you can.

Brian DelGhiaccio: So, again, we can give you, you know, some of that flavor when we get back together in February. As far as some of the other components, I mean, if you can take a look at the, you know, the maturities of what's coming due next year, they are at lower rates than, you know, current rates. So, we would expect some, you know, increase in overall interest expense just due to rate on the fixed rate debt, but nothing overly significant.

Take a look at the you know the maturities of what's coming due next year. They are at lower rates than current rates. So we would expect some increase in overall interest expense just due to rate on the fixed rate debt, but nothing overly significant.

Speaker Change #101: Great. Thank you.

Stephanie Moore: Great, thank you. And your next question today comes from Stephanie Moore with Jefferies. Please go ahead. Hi, good afternoon. Thank you. Good afternoon.

Speaker Change #102: And your next question today comes from Stephanie more with Jefferies. Please go ahead.

Stephanie More: Hi, good afternoon, and thank you.

Stephanie More: Afternoon, just to I guess, the follow up to actually Carla's question I appreciate that maybe.

Stephanie Moore: Maybe just to, good afternoon, to follow up to actually Tyler's question, I appreciate the, maybe the quantifying the benefit of some of your digital efforts in the RISE platform, but maybe you could remind us what is left in terms of kind of rolling out some of those systems and capabilities. You know, I know this year was putting a lot of tablets in the cabs and making sure you're capturing some of the overcharge and surcharges. You know, what's next as we think about 2025 as you phase out, I'm sorry, phase in, you know, the next batch of capabilities?

Stephanie More: Quantifying that.

Stephanie More: So that starts with the right platform, but maybe you could remind us what is left in terms of kind of rolling out some of those.

Stephanie More: Systems and capabilities this years, putting on tablets in the cabs and making sure you're capturing some of the overcharge in surcharges.

Stephanie More: Next I would be thinking about 2025 as you phase out phase.

And then.

Stephanie More: The next batch of capability. Thank you.

Jon van der Ark: Thank you. Yeah, I mean, now that you've got the platform in place, really kind of ratcheting up what you do from a route sequencing in order to sit there and optimize those routes, and then ultimately adherence, right, to make sure that the drivers are running the routes as designed. So, you know, again, we put this flavor out there before is that a minute across our system is worth about $5 million annually. So it doesn't take a lot of seconds and minutes to add up to something meaningful. And that's what we think that the next rev of our digital platform And I said more broadly over the last four or five years, you know, we've done a good job of just radically replacing and modernizing all of our systems. without taking some big one-time CapEx event or creating any institutional risk.

Speaker Change #104: Yes, I mean now that you've got the platform in place really kind of ratcheting up what you do from a route sequencing in order to sit there and optimize those routes and then ultimately adherence right to make sure that the drivers are running the routes as designed so you know again, we put this flavor out there before is that a minute across our system is worth about five.

Speaker Change #104: Annually. So it doesn't take a lot of seconds or minutes to add up to something meaningful and that's what we think that the next Rev of our digital platform can yield.

Speaker Change #104: And I'd say more broadly over the last four or five years, we've done a good job of just ratably, replacing and modernizing all of our systems.

Speaker Change #104: Without taking some big one time, capex event or creating any institutional risk and so we've done it with our marketing and sales they've done it with HR, we've done it with procurement we've done it now with <unk>.

Jon van der Ark: And so we've done it with our marketing and sales. We've done it with HR. We've done it with procurement. We've done it now with our assets. We've done it on the operating side of our business. And, you know, we're working on underlying order of cash. And there'll be another wave of benefits there as we think about still a lot of transactional work that we can automate on that front. So those will be opportunities that won't hit necessarily in 25. We'll get some of those, but really into 26 and 27. So it's a great story in that it makes the employee value proposition stronger.

Speaker Change #104: Our assets we've done it on the operating side of our business and you know we're working on underlying order to cash and there'll be another wave of benefits. There as we think about still a lot of transactional work that we can automate on that front. So those will be opportunities that won't hit necessarily in 'twenty five we'll get some of those but really into 'twenty six 'twenty seven so.

Speaker Change #104: It's a great story and then it makes the employee value proposition stronger it provides better customer service and we're gonna be able to operate the business more efficiently.

Jon van der Ark: It provides better customer service. And we're going to be able to operate the business more efficiently. Got it. It makes a lot of sense.

Speaker Change #105: Got it that makes sense.

Jon van der Ark: And then maybe switching gears just to, on the recycling side of your business, you know, not the polymer centers or the like, but when you just think of your traditional MERS, maybe talk about any kind of retrofitting or automation investments or anything that you might have planned or you feel like we might be implemented here in 2025 or the coming years. Yeah, we're doing that every year. Every year we're putting in new optical sorters and taking out manual work and getting more automation. The primary investment we make in our recycling centers is to produce a better product.

Speaker Change #106: And then maybe switching gears just to I never cycling side of your business not the Congress Center has been a life, but let me just think of your traditional nurse, maybe talk about any kind of retrofitting or automation investments or anything that you might have planned or you feel like you might be implemented here in plainsboro five or the coming years.

Speaker Change #107: Yes, we're doing that every year every year, we're putting in new optical sorters and taking out manual work and getting more automation, but the primary investment we make in our recycling centers is to produce a better product.

Jon van der Ark: Now, in order to do that, you put in new capital and you end up taking out some labor, but taking out jobs is never our goal. Our goal is to create the best product we can for the marketplace, which drives more circularity and drives a higher price. per product. And so, and we also then we do M&A, we pick up some new recycling centers, there'll be, you know, a couple over the next few years that we're going to go stubs up because there's markets where we need capacity on that front. But most of our investment is the, you know, continued upgrading of the existing 75 or 70.

Speaker Change #107: In order to do that you put in new capital and you end up taking out some labor, but taking out jobs is never our goal. Our goal is to provide them or to create the best product. We can for the marketplace, which drives more circularity and drives a higher price for product on that front and so and we also then we do we do M&A, we pick up some new.

Our recycling centers they'll be you know a couple over the next few years that we're gonna go studs up because as markets, where we need capacity on that front, but most of our investment is the continued upgrading of the existing 75 or sub Rosa.

Speaker Change #108: Yeah, absolutely well thank you so much.

Jon van der Ark: Yep, absolutely.

Operator: Well, thank you so much. At this time, there appear to be no further questions.

At this time there appear to be no further questions. Mr. Vander Ark I'll turn the call back over to you for closing remarks.

Jon van der Ark: Mr. Vander Ark, I'll turn the call back over to you for closing remarks. Thank you Nick. I want to thank the entire Republic Services team for their commitment to exceeding customer expectations and the continued growth and success of our company.

Speaker Change #109: Thank you Nick I want to thank the entire Republic services team for their commitment to exceeding customer expectations and the continued growth and success of our company have a good evening and be safe.

Operator: Have a good evening and be safe.

Speaker Change #110: 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 #110: [music].