Q1 2025 Republic Services Inc Earnings Call
Good Afternoon, and welcome to the Republic Services First Quarter 2025 Investor Conference Call. Republic Services is traded on the New York Stock Exchange under the symbol RSG.
All participants on this taze call will be in all of this in only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero
After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchstone phone. To withdraw your question, please press star then two.
Please note that this event is being recorded. Thank you very much.
Speaker Change: I would now like to turn the conference over to Aaron Evans, Vice President of Investor Relations. Please go ahead
Speaker Change: Good afternoon. I would like to welcome everyone to Republic Services' first quarter 2025 conference call. John Van Der Arck, our CEO and Brian DelGhiaccio, our CFO are on the call today to discuss our performance.
Speaker Change: Our SEC filings discuss factors that could cause actual results to differ materially from expectations
Speaker Change: 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 April 24th, 2025 Bye.
Speaker Change: 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.
Speaker Change: Our SEC filings, our earnings press release, which includes gap reconciliation tables and a discussion of business activities, along with the recording of this call, are available on the Republic's website at republicservices.com
In addition, Republic's management team routinely participates in investor conferences
Jon: When events are scheduled, the dates, times, and presentations are posted on our investor website. With that, I'd like to turn the call over to Jon.
Jon: Thanks Aaron. Good afternoon everyone and thank you for joining us.
Jon: We are pleased with our first quarter results, which demonstrated our ability to price ahead of inflation and effectively manage costs.
Jon: We produce strong earnings growth and expanded margins, well-overcoming top-line headwinds from challenging winter weather and continue softness and reciprocal volumes
During the quarter, we achieved revenue growth of 4% [inaudible]
Generated Adjusted Ebita Growth of 9%
Expanded adjusted even a margin by 140 basis points. [inaudible]
delivered adjusted earnings per share of $1.58
and produced $727 million of adjusted free cash flow. [inaudible]
regarding customer's yield. [inaudible]
Jon: Our focus on delivering world-class, essential services continues to support organic growth and enhanced customer loyalty
Our customer attention rate remains strong at more than 94% .
Jon: We continue to see favorable trends in our net promoted score due to the value of our offerings and quality of our service delivery
Jon: First quarter organic revenue growth was driven by solid pricing across the business.
Jon: Average yield on total revenue was 4.5%, and average yield on a related revenue was 5.4%.
Organic value, my total revenue declined 1.2% in the quarter [inaudible]
Jon: Volume losses were concentrated to shedding underperforming contracts in a residential business. [inaudible]
and continued softness and construction and certain manufacturing and markets. [inaudible]
Turning to our expanding digital capabilities.
Jon: We continue to advance the implementation of digital tools to improve the experience for both customers and employees.
Jon: Development and deployment of mpower are fleet and equipment management system is progressing.
Jon: Empower's design to increase maintenance, technician productivity, and enhance warranty recovery.
Jon: Today, we have implemented Empower at nearly 40% of our fatilities [inaudible]
Moving on to sustainability.
Jon: We believe that our sustainability innovation investments in plastic circularity and decarbonization position us for growth and long term value creation.
Jon: Development of our Polymer Centers and Blue Polymers Joint Adventure Facilities continues to move forward.
Jon: In March, we hosted the Grand Opening of our Indianapolis Polymer Center.
Product quality testing is progressing well.
Jon: We expect to begin ramping commercial production volume in June with earnings contribution beginning in the second half of this year.
Jon: This operation is co-located with a blue polymer's production facility that is expected to be completed in the coming months
Jon: Construction on the Blue Polymer's production facility in Buckeye, Arizona continues to progress.
This facility will complement our Las Vegas Polymer Center.
We expect the completion of this facility early next year.
Jon: The Renewable Natural Gas Projects were developing with our partners are advancing.
Jon: One project came online during the first quarter, and two projects came online in April .
Jon: We still expect a total of seven RNG projects to commence operations in 2025.
We continue to advance our commitment to fleet electrification.
Jon: We had AD Electric Collection vehicles in operation at the end of the first quarter. [inaudible]
Jon: We've said it's expected to have more than 150 EVs in our fleet by the end of this year.
We now have 27 facilities with commercial scale EV charging infrastructure.
Jon: We expect to have more than 30 facilities with charging capabilities by the end of 2025.
Jon: As part of our approach to sustainability, we continually strive to be the employer where the best people want to work [inaudible]
Jon: Our employee engagements score continues to improve, and our turnover rate continues to trend lower compared to the prior year [inaudible]
Jon: Our comprehensive sustainability performance continues to be widely recognized as Republic Services was named to Barren's 100 Most Sustainable Companies list.
Jon: Fortune's most innovative companies list, and ethospheres world's most ethical companies list.
with respect to Capitol location. Thank you.
Jon: This includes the acquisition of Shamrock Environmental, a leader in industrial waste and wastewater treatment services [inaudible]
Jon: This acquisition further strengthens our capabilities to provide high demand services to our customers
Jon: Our acquisition pipeline remains supportive of continued activity in both the recycling and waste and environmental solutions businesses businesses.
Jon: We continue to see opportunity for more than a billion dollars of investment in value creating acquisitions in 2025.
Jon: As part of our balance approach to capital allocation, we return $226 million to shareholders in the quarter, including $45 million to share your purchases
Jon: I will now turn the call over to Bryan, who will provide more details on the quarter. Thanks, Jon. Core price on total revenue was 6.1%.
Brian DelGhiaccio: Core price on related revenue with 7.3%, which included open market pricing of 9% and restricted pricing of 4.6%.
Jon: The components of core price on related revenue include a small container of 9.1%, large container of 7.9%, and residential of 6.5%.
Jon: Average yield on total revenue was 4.5%, an average yield on related revenue was 5.4%.
Jon: First quarter volume performance on total revenue decreased 1.2% and volume unrelated revenue decreased 1.5%.
Jon: Volume results on related revenue included a decrease in large container of 3.3%, primarily due to continued softness and construction related activity in certain manufacturing and markets, and a 2.9% decrease in residential due to shedding underperforming contracts
Jon: We estimate that severe weather negatively impacted volume performance by $25 to $30 million during the quarter.
The weather impact was isolated to January and February.
Moving on to recycling [inaudible]
Jon: This compared to $153 per tonne in the prior year. Recycling processing and commodity sales increased revenue by 30 basis points during the quarter. This was primarily driven by increased volumes at the Las Vegas Polymer Center and reopening a recycling center on the West Coast.
Current commodity prices are approximately $160 per tonne [inaudible]
Jon: This was partially offset by a 10 basis point decrease from acquisitions
with respect to environmental solutions.
Jon: First quarter revenue increased $25 million compared to the prior year driven by both organic growth in the business and the contribution from recent acquisitions.
Jon: Adjusted free cashflow with $727 million in increase of 36% compared to the prior year.
Jon: This increase was driven by EBITDA growth in the business and the timing of working capital.
Jon: Total death was $13.4 billion and total liquidity was $2.6 billion.
Jon: Our leverage ratio at the end of the quarter was approximately 2.6 times [inaudible]
Jon: Yesterday, Moody's upgraded our credit rating to A3. The upgrade recognizes the stability of our revenue base, strong EBITDA margin profile and robust free cash flow generation
Jon: With respect to taxes, our combined tax rate and impact from equity investments and renewable energy resulted in an equivalent tax impact of 26.5% during the quarter
Jon: With that, Operator, I would like to open the call to questions.
Speaker Change: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchstone thumb. Thank you very much.
Speaker Change: 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 two. If you are using a speaker phone, please pick up your handset before pressing the keys. [inaudible]
Speaker Change: And your first question today will come from Sabahat Khan with RBC Capital Markets. Please go ahead.
Sabahat Khan: Great, thanks and good afternoon. Maybe if we could just start by commenting on maybe what you're seeing out there and maybe more cyclical parts of the overall business, any change in trends through the quarter and Q1 and anything that might have evolved into Q2. Thank you.
Sabahat Khan: Sure, yeah, as we've mentioned, you know, the cyclical bellings have been down and that's really been true for the last three years. We're going to be in a nickel.
Sabahat Khan: Negative Demand Environment, really led by construction and manufacturing. It's a little difficult to tell when you mix in the weather what's happening, certainly January , February , we're softer on that front.
Sabahat Khan: You know, more flatness throughout the rest of the year, just given where the 10-year interest rate is, we've got to get mortgage rates down. I think manufacturing is more of a way to see, obviously there's a lot of uncertainty right now with tariffs.
Sabahat Khan: To accept that we get a trade policy clarified, I think there could certainly be some pent up demand, but for now it's more of a waiting seat [inaudible]
Sabahat Khan: Great, and then maybe just continuing for that around that as my follow-up, maybe just comment on, you know, outlook on 2025, the guidance metrics, any changes in the puts and takes on the top line or the margin guidance provided at the last quarter. Thank you.
Sabahat Khan: Yeah, maybe just as a matter of principle going forward. If we don't formally update our guidance, we are implicitly and explicitly reaffirming our guidance on that front. So.
Sabahat Khan: Again, it's always cyclical, our seasonality in the business is important because you've got to see
Sabahat Khan: How Demand Comes in the second and the third quarter, which are our strongest quarters, and we've seen a nice pickup on that front, so we will update you more on the following quarter based on what we see coming in here in April , Mangio. Thank you.
Thanks very much
Brian Bergmaier: And your next question today will come from Bryan Burgmeier with City. Please go ahead.
Good afternoon. Thanks for taking the question.
Brian Bergmaier: I was just wondering if you could maybe talk through some of the puts and takes in margin expansion for solid waste in the first quarter. You know, it's quite a bit better than our forecast and just curious how it kind of compared to your expectations. Maybe what went better than you expected. Good.
Brian Bergmaier: Brian , it was a good court, obviously, with the level of margin expansion. We talked about this that we're still reaching back to relatively higher pricing, and there is this spread between that and the cost inflation which we're realizing more on a real time basis, so most of that is just driven by price and excess of our cost inflation. That's had a little bit of this was arithmetic as well. [inaudible]
Brian Bergmaier: So again, when we saw some of the softness and things like construction activity, which is good work, but it tends to be a little bit below our corporate average
Brian Bergmaier: But we saw some pretty strong special waste volumes in the quarters. Well, that changed next.
Speaker Change: Got it, got it, thanks for that, and just maybe broadly, just kind of curious on your appetite for further M&A, you know, I guess on one hand leverages still pretty [inaudible]
Speaker Change: Low, but then on the other hand, the macro outlook is quite uncertain. You know, you've already done quite a few deals, year to date. So yeah, just further views on that. Thank you. I'll turn it over.
Speaker Change: The end of the prepare will actually mention that our pipeline is strong, and listen, Wola
Speaker Change: We're active in the space, both in recycling and waste and across environmental solutions. It's got to meet two screens. One, it's got to meet our strategic screener. We the national owner of this is at a good fit for our business and then our financial screen as well. We're going to look for double digit, you know, unlearned cash on cash returns. [inaudible]
Speaker Change: And most of the things that fit those screens then have some level of permanence associated with them, either permits an infrastructure or density and small and large container permanent routing. So things that stand the test of time. So we're not going to buy a completely cyclical business. For example, that's just not a good fit for us. [inaudible]
Speaker Change: And so, and we're buying these things forever, right? We're not, you know, being opportunistic and saying we're going to buy it and sell it. We're going to keep it forever. So we'll take that through Seckel Mindset and I think you'll see us be active the rest of the year.
Tyler Brown: And your next question today will come from Tyler Brown with Raymond James. Please go ahead.
Hey, good afternoon, guys.
Good afternoon.
Hey John , so...
Tyler Brown: I think you've owned U.S. Ecology for a while, but I guess technically you haven't owned it through a cycle, but...
Speaker Change: Big picture, you know, what are the KPIs that you're kind of looking at to assess the end market health for that business? And is that business still about three quarters recurring revenue and about one quarter project or event work?
Yeah, we'll start at the end, broadly speaking, yes, no, I think
Speaker Change: Talk, putting those two things in discrete categories is a little less clear. For example, you may have a contract with a large industrial player to do something like emergency response. Well, there's going to be some variability year-to-year in that contract and those are technically events. But overall, across years, it's a pretty stable stream on that front, but that 75, 25.
Speaker Change: for your purposes, I think if a fair marker on that front, but we look at the same thing other people do. We look at, you know,
Speaker Change: PMI from a manufacturing output standpoint, you know, we look at, you know, industrial activity or permitting, right, for more some type of event based work on that front, and again, you look at all those things and they've been...
Speaker Change: to just historic softness, those markets are not disasters either, they've just been soft for the last two or three years.
Tyler Brown: And remember, Tyler, there's a lot of overlap between our recycling and waste business and the environmental solutions business, so we see it on both sides, same customer, just a different waste stream.
Tyler Brown: Yeah, exactly. Okay, that's helpful. And then, Jon, can you just talk a little bit more about the Shamrock deal? Can you just talk about what it brings to the table? What exactly they do? Maybe is it levered the PFAS? Just how it fits in that environmental service mosaic? Yeah.
Yeah, good question.
Tyler Brown: So they have commercial water treatment facilities and we've had some of those through the U.S. Ecology deal so in that business. The primary reason we got into it is we had a lot, they were a big or we are a big customer of theirs. [inaudible]
Tyler Brown: We have a lot of industrial water on our back because when we go to serve our...
Tyler Brown: Most complex customers, they have a lot of different needs and different waste streams, water being one of those And so we knew the assets incredibly well on that front, great infrastructure base also fills out some dots on the map for us in terms of field services Thank you very much.
Brian: Okay, yeah, that's very interesting, very helpful. My last one here, real quick, Brian . [inaudible]
Speaker Change: M&A for Revenue. Is that kind of number still intact? I think I just want to make it clear that your guidance had already contemplated this heavy spending Q1, is that right? Yes, that's right.
Yeah, that's fair, it's right, it's still a round of points. [inaudible]
Speaker Change: Okay, and that is correct at our guidance because we had already closed the majority of the transactions by the time that we were providing the guidance. We had included the revenue from those closed transactions in the guidance itself.
Yeah, perfect, very clear. Thank you guys.
Bye.
Speaker Change: And your next question today will come from Toni Kaplan with Morgan Stanley . Please go ahead.
Tony Kaplan: Thanks so much. Wanted to ask on the margins, so I'd again just really strong quarter there seemed driven by praise cost spread and you mentioned the mix
Tony Kaplan: What do you think gets a little bit worse? I know there's a little bit of arithmetic as you mentioned, but is there anything that sort of gets worse or is it conservatism just given maybe some uncertainty with regard to you know lighter volumes etc.
Tony Kaplan: Well, we think that the spread between the two, the price-cost spread, we had said all along that we still anticipate pricing ahead of our cost inflation, but that spread is going to somewhat modulate over time.
Tony Kaplan: As you also move throughout 24, you can see the cadence that we have there, you start getting into tougher comps [inaudible]
Tony Kaplan: So again, you saw a big sequential uptick from Q1 into Q2, then again up into Q3, and again, Q4 being 80 basis points higher than where we were in the first quarter. You know, this year we still expect that natural seasonal progression, but a little bit flatter if you will with respect to the absolute throughout the year.
Speaker Change: to Rebecca. And then just on the volume side, you mentioned the Rezzy Shedding. Should that continue through the next few quarters, or when does that lap, and it was not related to prior M&A, or, you know, I guess, what are the big drivers there? Thanks.
Speaker Change: Yeah, but maybe last for a few quarters here, and part of that is, you know, intentional shedding from M&A deals. And again, we've thought of this a lot. When we do a deal, we know there's certain part of that revenue. We're not going to retain and we don't pay for it in the deal. And that's going to come out of the system typically six, 12, 18 months later. We're always going to honor those contracts, but we know they're elected to renew. And then some of that is off putting upward pressure on price. The municipal boom. [inaudible]
Speaker Change: Vertical in this market is the one that has returns that need to go up. Lots of capital, lots of investment in terms of people in the front line.
Speaker Change: And we're going to look for customers that are willing to pay for the value that we deliver over time And many, many customers do those that don't will continue to take our investments in our even resources and financial resources and place them in our other parts of the market
Thank you. Thank you. Thank you.
Thank you
Speaker Change: Your next question today will come from Jerry Revich with Coleman Sachs. Please go ahead.
for how
Speaker Change: Yes, hi. Good afternoon, everyone. I just want to ask on your pricing and retention rates, both really impressive numbers.
Speaker Change: Pricing was, I think, you know, half a point ahead of most expectations. Can you just talk about what you're seeing in the business that it's driving such attractive retention rates while pricing is at high levels as well? That really stood out in the results and the sustainability into the second quarter based on what you're saying. Thanks.
Speaker Change: Jerry, we continue to see improvements in overall service delivery which is leading to overall better NPS and when you have that backdrop and the customer can realize the value of the service you're providing, much more receptive to the price increase and staying with you longer.
Speaker Change: And, you know, again, that's why we see all of these things that we do are so interconnected as far as making sure that we're meeting the promises that we make to our customers each day and we're seeing the benefits and you're seeing it manifest itself in higher levels of pricing and ultimately dropping to the bottom line. [inaudible]
Speaker Change: Super. And then, you know, on Palmer Center, there's discussions about potentially increasing plastics use by your customers from aluminum. Can you just talk about, I don't know if it's too early or not, let's talk about where pricing could ultimately go.
and the transition towards recycled plastic from aluminum.
Speaker Change: What's that opportunity to look like for you folks? How much higher could price and go when you folks do ramp up across the facilities?
Speaker Change: Yeah, it's certainly a tailwind, versus a headwind, and why we got in the space is we understood that the market and demand was there for a cycle PT and the supply was constrained and that still proves to be true. Thank you.
Speaker Change: On that front, because we're understanding price to cut discovery and where that market moves, and as the market moves up, we'll be able to capture that print.
Speaker Change: And so, Jon, are you willing to share just the order of magnitude, how much you hire could be versus the initial contracts?
Jon: No, we'll wait and see. Everyone will see what the marketing bulbs and develops on that front, but I think the upward trend is undeniable.
Thank you.
Speaker Change: And your next question today will come from Noah Kaye with Oppenheimer and Co. Please go ahead.
Thanks for taking the questions.
Speaker Change: I'm not sure if it was a record, but it certainly felt like your script to start off the call was maybe the tightest and most concise I can remember, so thanks for giving us more time to ask questions. I guess I wanted to...
Speaker Change: Start with ES, picking up on Tyler's line of questioning. It looked like it was about...
Speaker Change: maybe 70 bits of so organic growth within the figment. Was that all price?
Speaker Change: What happened with volumes? I mean, obviously, whether it was called as an impact some project delays and maybe you can kind of go from there to talk about what you expect, you know, kind of moving here into 2Q.
Speaker Change: What we saw there, we kind of mentioned a combination of a little bit of a project mix, but also weather.
Speaker Change: And the reason we're mentioning that and the isolation of January and February is the results were very different in those two months than what we saw in March March is more of what we would have expected or again we saw good organic growth in March and expansion and when you think about that business
Speaker Change: It carries a little bit of a higher fixed cost base than what you tend to see in the recycling and waste business and so when you have those days when you're down it's a little bit tougher to overcome [inaudible]
Speaker Change: So again, we are, you know, again, optimistic about what we saw in March and based on some of the early, you know, results of what we're seeing in April that it really was more of a weather issue as well as we mentioned. There were some project items where, again, when you take a look at the mix, we had a little bit more on the field services.
Speaker Change: And again, when you bring some of that in, which is good work, but at a relatively lower margin than the post-collection side, you can see a little bit of the impact that you saw in Margin [inaudible]
Yeah, yeah, makes sense so we can see it pick up back to good organic growth.
Speaker Change: I suppose some of that is kind of related to the workday, but maybe you can just sort of parse out fuel, you know, like for like what that was as a benefit to margins of the quarter.
Speaker Change: So, again, the 140 basis points of margin, most of which being in the underlying business, that 110 basis points that I mentioned is just going to be again, that price and excess of cost inflation. So it's coming from all of these line items that somewhat across the board, once you actually normalize for the impact of net fuel. The workday itself was 40 basis points of the 140.
Speaker Change: Yep. Yep. Okay, this is very clear. Thanks. Last one I just got to ask, you know, your comment is the pipeline strong. The one billion of M&A spend for the year just given the one Q activity feels like.
Speaker Change: Like a low bar. At this point, any reason to, you know, anticipate that it couldn't meaningfully see that sounds like the pipeline is strong and the activity levels in the sector are very good. It's a bit so.
It's your bias towards the 1 billion.
Yeah, I like our chances to beat it. [inaudible]
Alright, we'll stay tuned, thanks so much.
Speaker Change: And your next question today will come from Tammy Zakaria with JP Morgan, please go ahead.
Tammy Zakaria: Hi, good afternoon. Thanks for taking my questions. My first question is on the environmental solutions, EBDA Margin, I think it was down year over year. Are you able to isolate how much of that was due to, I think you mentioned weather and project timing. And so related to that, are you expecting that segments EBDA Margin to...
Eventually, the up year over year in 2025.
Tammy Zakaria: Yes, to answer your last question first, yes. From a quarter to quarter, there's going to be some mix that moves that margin around and the nature of the work because some of that work for example field services. Yes.
Tammy Zakaria: Could be very, very low capital work, so that might have downward pressure on the margin but that's still value creating work.
Tammy Zakaria: over time, and so I would encourage you to look at the trends across years, not quarters on environmental solutions, and I think what you've seen over our three years of getting into this business scale was really nice margin expansion, and I think we'll consistently
Tammy Zakaria: Deliver on that trend. I'll be at a floor pace in the first three years, but we'll continue to expand margins. The quarter to quarter, I don't think it's going to be a great signal. [inaudible]
Thank you. Thank you. Thank you.
Speaker Change: God, that's super helpful. And then one question on the guide, I appreciate you mentioned, you're going to probably talk about it after the second quarter, but in your current guide, the volume grows of slatish at the midpoint.
Tammy Zakaria: Did that range of volume outcome embed any recessionary scenario or any incremental slowdown in the broader economy for the year?
Tammy Zakaria: No, they didn't anticipate a hockey stick rebound either, but an anticipated kind of slow and steady recovery manufacturing construction. And as I mentioned right, we haven't certainly didn't see that January , February , March and the start of April looks more promising on that front. And that's why we'll update you more after the next quarter.
Great, thank you [inaudible]
Speaker Change: Your next question today will come from Kevin Chiang with D-I-B-C. Let's go ahead.
Speaker Change: Good afternoon. Maybe I can ask, but we asked margin question [inaudible]
Speaker Change: a little bit better than me, so it sounds like it has some weather issues in P1, just wondering if
Speaker Change: You think you've kind of tracked with the upper end of that, just as some of that, that work normalizes in April and hopefully May and June , versus what you saw in January February ? All right.
Speaker Change: Yeah, Kevin, just real quick. We've talked about taking a through cycle mindset with the environmental solutions business and with what we're doing the opportunities there. We said we saw margin expansion in the 75 to 100 basis points per year in contrast to the recycling waste business in kind of the 30 to 50.
Speaker Change: So again, there was a little bit of this weather impact early in the first quarter but we still think there's that trajectory as we move forward and so I think you can think about that for the year as well as for the next several years just because again it's a little bit more opportunity in that business recycling waste being a little bit mature and we still see that that opportunity going forward. [inaudible]
That's awful. I don't know.
Speaker Change: Terrace, I'll have a significant impact on your business, but just wondering as you think of your own.
Speaker Change: The Capital Plan for this year, maybe even to 2026, just, are you able to communicate into how some of the capital comes through to-
Speaker Change: to maybe avoid the risk of terror, or I guess a planned outlay as we get through the next three-quarters year, I guess relatively intact from what you would have thought, you know, four to six months ago for 2025. And maybe as you kind of early thoughts into 2026.
Speaker Change: Yeah, 2025, it'll have minimal impact, right, it won't be zero, but we're going to plan to mitigate that and...
Speaker Change: Other initiatives and then I think 26 is TBD right we are working really really hard including things like
Speaker Change: asking our suppliers to spell out or specify any tariff-related surcharges on that front.
Speaker Change: Because this will be an environment where it would be easy to try to pass through price increases that end up sticking if we have a different
Speaker Change: Trade Policy, and, you know, come 30 days or 60 days or three months. So...
Speaker Change: We're working really hard on that front. I think it's too early to tell. There are some minor things we're doing about moving things around the supply chain. The more things are landed here on that front to minimize the tariff impact, but we'll have better visibility in the next three months.
Perfect, thank you very much.
Speaker Change: And your next question today will come from Trevor Romeo with William Blair. Please go ahead.
Speaker Change: Good afternoon, thanks for taking the questions. One quick one, the fact of volumes just noticed that the MSW and the bonds were down, I think 4% in the quarter, just wondering if there was anything
Speaker Change: You know, specific or maybe lumpy cars, a driver there, and what's your view on, you know, MSV, MSV volumes to come back going forward.
Speaker Change: Yeah, look, that's where you're certainly going to see some weather, right? You know, impact on that front. So again, that's what we think most of that was, you know, for the first quarter. Want to point out at the same time that the yield in that business was 6.8%. So total MSW as a line of business increased over 3% from an organic growth perspective. That's it.
Speaker Change: But we think that that volume comes back as we look forward into the future quarters to the future.
Speaker Change: Great, thank you for that. And then just wanted to follow up on them.
Speaker Change: You know, I guess I appreciate the commentary on the Polymer Center so far, but maybe on your more traditional recycling facilities was just wondering if you could talk about the idea.
Speaker Change: You know, the upgrade opportunity there across your footprint, I think you had the one in Anaheim that just reopened this month [inaudible]
Speaker Change: You know, I'm wondering if you talked about how much further opportunity you see there to increase efficiency and take some labor benefits. Thank you.
Speaker Change: Sure, yeah, most of what we do there is there's just a continual movement [inaudible]
across 75 cluster cycling centers
Speaker Change: to upgrade capital, certainly to maintain it, but every time we do that, you put in more automation, and it takes out some labor on that front. So, and I was unique because it was a complete retool and rebuilt and there's advantages of that because you can get everything designed perfectly, but we're constantly going through the fleet in the system too. Thank you.
Speaker Change: First of all, we're trying to create a better product. That is all where the investment goes. Inevitably that takes out some jobs along with it.
Thank you.
Alright, thank you very much [inaudible]
Thank you. Bye.
Speaker Change: And your next question today will come from Stephanie Moore with Jeffries, please go ahead Thank you very much.
Hi, good afternoon, thank you.
Stephanie Moore: I was hoping you could talk a bit about your polymer centers, maybe if you talk about how the ones that are open are performing, maybe hitting the certain kind of rate, or efficiency rates, or output that you've been targeting, so any update there. And then also, just given the change of administration, potential for deregulation, anything that could cause an impact as you see now in terms of some of your R&G plants coming live. Thank you.
Sure, yeah, so Palmer Center has been again.
Stephanie Moore: Exciting in the sense that they've met our assumptions on inbound volume. We have most of our backs, so that's easy. We do take some third party volume and we could certainly take more if we needed to. Very exciting of the demand standpoint in terms of customers willing to buy them multiple facilities out if they could and hitting our price points.
Stephanie Moore: And then from an operating standpoint, absolutely in terms of can we produce the product?
dialed in to the specific specs of customers.
Product Quality Learnings, and other lessons on that front. And then administration change, listen.
Stephanie Moore: that the predominant regulatory structure in this industry is state. And so that's what we spend the vast majority of our energy. There could be some puts and takes on the federal level around tax incentives.
Stephanie Moore: or other types of incentives. You know, Ren's a good example where we had landfill gas energy in the first Trump administration. We're having this administration, Ren's prices are hanging right in there.
Stephanie Moore: Could they be a little higher in a different administration? Probably on that front, but broadly speaking, those projects are still hitting their financial mark. And Stephanie, you remember when we announced the investments in both RNG and Fleet Electrification, that was prior to the Inflation Reduction Act. [inaudible] I'm sorry, I'm sorry, I'm sorry, I'm sorry, I'm sorry
Stephan: So those credits came out after we actually made that decision to invest so they were going to be added if they were going to take a good return and even make a better return. So we obviously want those credits to stay in place but it would not have changed our decision or the return that we anticipated when we made those investments if they were to be repealed.
Stephan: Got it, and actually just to follow up there to Jon, I guess, your point, you know, what would cause you to consider bringing in, you know, external or outside volumes into those polymer centers? All right.
Stephan: We do, the plan is to take more and more. Thanks.
Stephan: Building up, do you think about a 12 month build to get to full run rate capacity on that front? And then we'll get to it after we have our four facilities completed. Then I think we'll get to a decision point. Do we need a fifth facility or not on that front?
Great, appreciate the time.
Speaker Change: And your next question today will come from Tobey Sommer with the truest. Please go ahead.
Toby Sonner: Thank you. On the M&A opportunity in front of you, any shuffling of the motivations of the sellers, anything changing in their motivation to sell at this time?
Speaker Change: Not really given what I talked about earlier that these are high quality assets, these are great operators, they've run the business for decades on that front so they know what they have
Speaker Change: That being said, broader uncertainty is probably helpful for us on the margin in terms of M&A, which is uncertainty makes people think about taking chips on the table and gassing out on decades of investment, but that's not a big driver for our pipeline.
Speaker Change: Thank you. And then you just curious if you're with all that's going on in DC with Doge, proposed budget changes, mostly cuts and prospective regulatory changes. Anything you're observing and evolving customer behaviors that you call out?
Not that I can think of at this point. [inaudible]
Speaker Change: Okay, didn't think so, but I appreciate the response. Thank you
Speaker Change: And your next question today will come from Toni Bancroft with Cabelli Funds. Please go ahead. Thanks, thank you for taking my call gentlemen. Obviously you've done a wonderful job, this environment you're in, this industry is very well set up.
Speaker Change: Talk about something potential transformational. Obviously, you know, the U.S. ecology business has been a great, great win for you. And then maybe also, what is it keeping you up at night right now? Obviously, the uncertainty going on looking forward. Maybe you can just talk about, talk about some of those things. [inaudible]
Speaker Change: Yeah, look, we think we've got a lot of growth potential ahead of us. We've got, you know, we're a relatively small share per player, broadly speaking, right? So up 15% recycling away, same thing in...
Speaker Change: Environmental Solutions, and we're just getting started in sustainability innovations, really are a third engine for growth on that. So you'll see us grow there organically, you'll see us grow there through price, and you'll see us grow there through M&A, so we really have a lot of avenues and pathways to growth going forward. Thank you very much, George Bancroft.
Speaker Change: And we benefit from being a recession resilient business. Obviously, we've talked about some of the challenges, but the challenges are very modest compared to the macro context of
Speaker Change: All their businesses are where they're facing 20-30% drops in demand, so we feel fortunate to be in the space on that. Obviously the macro environment does impact our business, right? If the company or the country or the world goes into recession, but we're going to feel some of that and we'll adjust accordingly but...
Speaker Change: We're running the business through the cycle for the long term on that, so you'll see us continue to invest and make value creating both organic and organic investments.
Thanks so much, great job, Jon and team, for sure.
Bye-bye.
Speaker Change: And your next question today will come from Michael Feniger with Bank of America. Please go ahead.
Speaker Change: Bryan, I appreciate you mentioned the look back on the pricing side a few times on the call.
Speaker Change: But I also know you've got to kind of change a lot of the mix of your contracts. Thank you very much. Thank you.
Speaker Change: Just to be kind of clear, you know, you had a really strong start to Q1 when we even look at the open or restricted is are we thinking more of a gradual step down Brian or is there a bigger fall off that we should kind of be anticipating just because you had such a good start to the year trying to kind of think about how that plays out through the year. [inaudible]
Speaker Change: No, I would say it's more gradual. And again, to your point earlier on some of the work that we've done going back
As I said, we've moved about 63% of that portfolio. [inaudible]
Speaker Change: And if you take a look right now on a six month look back, water sewer trash is running close to 5% garbage trash, 4.5 relative to headline CPI in the high tubes, 2.7%. That is certainly given us.
Speaker Change: Again, a nice floor from which we're sitting or able to price, when you take a look at the 4.6% that we saw in restricted pricing. So we would expect that to be more gradual, I would say, as we move sequentially, just because the way that the pricing mechanism works.
itself, but it'll be in and around that range.
Speaker Change: Grant and Bryan just last one. If you touch on this, I apologize, but the Freight Casual conversion was really strong. I know there's always some moving pieces.
Speaker Change: Look, the biggest component of that growth was the EBITDA growth in the business, but as you also can see there was a benefit from working capital just some timing things quite honestly. We had one less payroll period in the quarter itself, so some things that normalize throughout the year. So,
Speaker Change: Really good start to the year, pleased with that outcome but we would sit there and say it was you know on our marks and that's why I mentioned in the prepare remarks that was in line with our expectations. Thank you very much.
Perfect, thank you guys [inaudible]
Speaker Change: And your next question today will come from James Schumm with TD Kaplan, please go ahead.
Hey guys, nice quarter.
James Shum: Just one for me, as I look at your recycling revenues, how much of, what portion of the mix is a fee-based structure versus the other portion which would be commodity price sensitive? [inaudible]
Speaker Change: Was it like half and half or how should I think about that? [inaudible]
Speaker Change: Well, when you take a look just overall, when you take a look at our business, we've got about 60% of our business both on the collection as well as the recycling side, the recycling processing side that's going to be a fee for service.
Speaker Change: and then you've got obviously the sale of the commodities as well. Let's go.
Speaker Change: So when you take a look just the way that the math works, you're looking at about 50-50 mix between the two on just the recycling book of business because most of that's on the recycling processing side which will be the combination of the fee for service as well as the sale of the recycled commodity.
Okay, great, thank you very much, that's all I had
Thanks for watching!
Speaker Change: 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.
Speaker Change: Thank you Nick, as you close up the call, I want to thank the entire Republic Services team for their continued focus on safety, sustainability and service
Speaker Change: Through their efforts, we are positioned for continued success. Have a good evening and be safe.
Speaker Change: The conference has now concluded. Thank you for attending today's conference state. You may now disconnect.