Q1 2026 Republic Services Inc Earnings Call

May 7, 2026

Kim: Good afternoon, and welcome to the Republic Services Q1 2026 Investor Conference Call. Republic Services is traded on the New York Stock Exchange under the symbol RSG. I would now like to turn the conference over to Aaron Evans, Vice President, Investor Relations.

Operator: [IVR?AVR] Good afternoon, and welcome to the Republic Services Q1 2026 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 enlisted only mode. Should you need assistance, please signal a conference specialist by pressing star key, followed by zero. After today's presentation, I would now like to turn the conference over to Aaron Evans, Vice President, Investor Relations.

Speaker #2: All participants in today's call will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Speaker #2: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone.

Speaker #2: To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Aaron Evans, Vice President of Investor Relations.

Speaker #2: Good afternoon. I would like to welcome everyone to Republic Services First Quarter 2026 conference call. Jon Ark, our CEO, and Brian DelGhiaccio, our CFO, are on the call today to discuss our performance.

Aaron Evans: Good afternoon. I would like to welcome everyone to Republic Services Q1 2026 Conference Call. Jon Vander Ark, our CEO, and Brian DelGhiaccio, our CFO, are on the call today to discuss our performance. I'd like to remind everyone that some information discussed 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. 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 7 May 2026. Please note that this call is the property of Republic Services, Inc.

Speaker #2: I'd like to remind everyone that some information discussed on today's call contains forward-looking statements, including forward-looking financial information, which involved risks and uncertainties, and may be materially different from actual results.

Speaker #2: Our SEC filings discuss factors that could cause actual results to differ materially from expectations. The material that we discuss today is time-sensitive. If, in the future, you listen to a rebroadcast or recording of this conference call, you should be sensitive to the date of the original call, which is May 7th, 2026.

Speaker #2: Please note that this call is the property of Republic Services, Inc. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of Republic Services is strictly prohibited.

Aaron Evans: Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of Republic Services is strictly prohibited. Our SEC filings, earnings press release, which includes GAAP reconciliation tables and a discussion of business activities, along with a recording of this call, are available on our website at republicservices.com. In addition, Republic's management team routinely participates in investor conferences. 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.

Speaker #2: Our SEC filings, earnings press release, which includes gap reconciliation tables and a discussion of business activities, along with a recording of this call, are available on our website at republicservices.com.

Speaker #2: In addition, Republic's management team routinely participates in investor conferences. When events are scheduled, the dates, times, and presentations are posted on our investor website.

Speaker #2: With that, I'd like to turn the call over to Jon.

Speaker #3: Thanks, Aaron. Good afternoon, everyone, and thank you for joining us. We are pleased with our first quarter results, which position us well to achieve the full-year guidance that we provided in February.

Jon Vander Ark: Thanks, Aaron. Good afternoon, everyone, and thank you for joining us. We are pleased with our Q1 results, which position us well to achieve the full year guidance that we provided in February. We delivered strong earnings growth and expanded margins, all while overcoming lower commodity prices and the impact of higher fuel prices during the quarter. Our results reflect our disciplined pricing execution, effective cost management, and the value created from ongoing investments in the business. During the quarter, we achieved revenue growth of 2.6%, generated adjusted EBITDA growth of 4.3%, expanded adjusted EBITDA margin by 50 basis points, delivered adjusted earnings per share of $1.70, and produced $984 million of adjusted free cash flow. We continue to secure new growth opportunities by leveraging our differentiating capabilities, customer zeal, digital, and sustainability.

Speaker #3: We delivered strong earnings growth and expanded margins, all while overcoming lower commodity prices and the impact of higher fuel prices during the quarter. Our results reflect our disciplined pricing execution, effective cost management, and the value created from ongoing investments in the business.

Speaker #3: During the quarter, we achieved revenue growth of 2.6%. Generated adjusted EBITDA growth of 4.3%. Expanded adjusted EBITDA margin by 50 basis points. Delivered adjusted earnings per share of $1.70.

Speaker #3: And produced $984 million of adjusted free cash flow. We continue to secure new growth opportunities by leveraging our differentiating capabilities, customer zeal, digital, and sustainability.

Speaker #3: With respect to customer zeal, our customer retention rate remained high at 94%. Our net promoter score remained strong, reflecting our team's commitment to delivering exceptional customer value.

Jon Vander Ark: With respect to customer zeal, our customer retention rate remained high at 94%. Our net promoter score remains strong, reflecting our team's commitment to delivering exceptional customer value. Q1 organic revenue growth was driven by solid pricing across the business. Average yield on related revenue was 4.1%, and average yield on total revenue was 3.4%. Organic volume decreased related revenue by 1% or total revenue by 80 basis points. Volume performance improved sequentially, most notably in the landfill, large container, and small container verticals. Importantly, we delivered year-over-year revenue growth in the temporary large container business this quarter for the first time in over 2 years. Combined average yield and volume growth grew 1.2%.

Speaker #3: First quarter organic revenue growth was driven by solid pricing across the business. Average yield on related revenue was 4.1%, and average yield on total revenue was 3.4%.

Speaker #3: Organic volume decreased related revenue by 1% or total revenue by 80 basis points. Volume performance improved sequentially, most notably in the landfill, large container, and small container verticals.

Speaker #3: Importantly, we delivered year-over-year revenue growth in the temporary large container business this quarter for the first time in over two years. Combined average yield and volume growth grew 1.2%.

Speaker #3: Organic revenue in the environmental solutions business decreased total revenue by 1.3% in the first quarter, which was in line with our expectations. More than one-third of this decrease in the environmental solutions business related to an emergency response job in 2025 that did not repeat.

Jon Vander Ark: Organic revenue in the Environmental Solutions business decreased total revenue by 1.3% in Q1, which was in line with our expectations. More than one-third of this decrease in the Environmental Solutions business related to an emergency response job in 2025 that did not repeat. Our Environmental Solutions sales pipeline continues to build with increased activity across multiple end markets. We expect year-over-year revenue growth in this business in H2 of the year. Turning to digital. Our ongoing investments in technology and AI are strengthening how we operate and compete. Over time, these capabilities are expected to drive additional growth, expand margins, and support continued operating leverage. We are actively deploying AI-based predictive technology that supports optimized pricing decisions across markets with varying customer and competitive dynamics. This approach is expected to reinforce price retention and reduce customer attrition over time.

Speaker #3: Our environmental solutions sales pipeline continues to build, with increased activity across multiple end markets. We expect year-over-year revenue growth in this business in the second half of the year.

Speaker #3: Turning to digital. Our ongoing investments in technology and AI are strengthening how we operate and compete. Over time, these capabilities are expected to drive additional growth, expand margins, and support continued operating leverage.

Speaker #3: We are actively deploying AI-based predictive technology that supports optimized pricing decisions across markets, with varying customer and competitive dynamics. This approach is expected to reinforce price retention and reduce customer attrition over time.

Speaker #3: Enhancements to our RISE digital platform are progressing, with initial deployment focused on the large container business. The integration of AI and advanced routing algorithms is expected to improve safety outcomes, strengthen service execution, and increase route efficiency.

Jon Vander Ark: Enhancements to our RISE digital platform are progressing with initial deployment focused on the large container business. The integration of AI and advanced routing algorithms is expected to improve safety outcomes, strengthen service execution, and increase route efficiency. Activation of digital tools in our call centers are enhancing the customer experience and unlocking value in our business by optimizing the 11 million inbound calls we receive each year. We believe that these investments in digital will deliver at least $100 million of annual benefit by 2028. Within sustainability, we continue to believe that our sustainability innovation investments in the plastic circularity and decarbonization position us for growth and long-term value creation. Production volume has increased across our polymer center network as we optimize processing operations. Customer demand for our domestic post-consumer plastic remains strong. We continue to advance renewable natural gas projects with our partners.

Speaker #3: Activation of digital tools in our call centers are enhancing the customer experience and unlocking value in our business by optimizing the $11 million inbound calls we receive each year.

Speaker #3: We believe that these investments in digital will deliver at least $100 million of annual benefit by 2028. Within sustainability, we continue to believe that our sustainability innovation investments in the plastic circularity and decarbonization position us for growth and long-term value creation.

Speaker #3: Production volume has increased across our polymer center network as we optimize processing operations. Customer demand for our domestic post-consumer plastic remains strong. We continue to advance renewable natural gas projects with our partners.

Speaker #3: We brought nine projects online throughout 2025. We expect four additional R&G projects to begin operations in 2026, which would bring our total landfill gas-to-energy portfolio to 82 projects.

Jon Vander Ark: We brought 9 projects online throughout 2025. We expect 4 additional RNG projects to begin operations in 2026, which would bring our total landfill gas to energy portfolio to 82 projects. We continue to execute against our industry-leading commitment to fleet electrification. We had more than 200 electric collection vehicles in operation at the end of Q1. We expect to exit this year with more than 300 EV collection trucks in our fleet to support the continued growth of this differentiated service offering. We recently celebrated with the City of San Pablo, who partnered with us to become the first city in California to operate an all-electric recycling and waste collection fleet. As part of our commitment to sustainability, we strive to be the employer where the best people want to work.

Speaker #3: We continue to execute against our industry-leading commitment to fleet electrification. We had more than 200 electric collection vehicles in operation at the end of the first quarter.

Speaker #3: We expect to exit this year with more than 300 EV collection trucks in our fleet to support the continued growth of this differentiated service offering.

Speaker #3: We recently celebrated with the City of San Pablo who partnered with us to become the first city in California to operate an all-electric recycling and waste collection fleet.

Speaker #3: As part of our commitment to sustainability, we strive to be the employer where the best people want to work. Our employee engagement score consistently exceeds national benchmarks, and we continue to experience record low turnover rates.

Jon Vander Ark: Our employee engagement score consistently exceeds national benchmarks, and we continue to experience record low turnover rates. Our comprehensive sustainability performance continues to be widely recognized as Republic Services was named to Fortune's World's Most Admired Companies list, and Ethisphere's World's Most Ethical Companies list. Regarding capital allocation, we've invested more than $700 million in value-creating acquisitions to date, which includes $433 million of investment in Q1. Our acquisition pipeline remains supportive of continued activity in both the recycling and waste and environmental solutions businesses. We expect to exceed at $1 billion of acquisition investment this year. As part of our balanced approach to capital allocation, we returned $507 million to shareholders in the quarter, including $314 million of share repurchases.

Speaker #3: Our comprehensive sustainability performance continues to be widely recognized, as our public services were named to Fortune's World's Most Admired Companies list and Ethisphere's World's Most Ethical Companies list.

Speaker #3: Regarding capital allocation, we have invested more than $700 million in value-creating acquisitions to date, which includes $433 million in investment in the first quarter.

Speaker #3: Our acquisition pipeline remains supportive of continued activity in both the recycling and waste and environmental solutions businesses. We expect to exceed at $1 billion of acquisition investment this year.

Speaker #3: As part of our balanced approach to capital allocation, we returned $507 million to shareholders in the quarter, including $314 million to share repurchases. I will now turn the call over to Brian, who will provide additional details on the quarter.

Jon Vander Ark: I will now turn the call over to Brian, who will provide additional details on the quarter.

Speaker #4: Thanks, John. Core price on total revenue was 5.7%. Core price on related revenue was 6.8%, which included open market pricing of 8.4% and restricted pricing of 4.4%.

Brian DelGhiaccio: Thanks, Jon. Core price on total revenue was 5.7%. Core price on related revenue was 6.8%, which included open market pricing of 8.4% and restricted pricing of 4.4%. The components of core price on related revenue included small container of 8.2%, large container of 7.1%, and residential of 6.5%. Average yield on total revenue was 3.4%, and average yield on related revenue was 4.1%. Q1 volume decreased total revenue by 80 basis points and related revenue by 1%. Volume results on related revenue included a decrease in large container of 2.5%. This represents a sequential improvement of 130 basis points compared to our Q4 performance.

Speaker #4: The components of core price on related revenue included small container of 8.2%, large container of 7.1%, and residential of 6.5%. Average yield on total revenue was 3.4%, and average yield on related revenue was 4.1%.

Speaker #4: First quarter volume decreased total revenue by 80 basis points, and related revenue by 1%. Volume results on related revenue included a decrease in large container of 2.5%.

Speaker #4: This represents a sequential improvement of 130 basis points compared to our fourth quarter performance. Volume results also included a decrease in residential of 5.2%.

Brian DelGhiaccio: Volume results also included a decrease in residential of 5.2%. The sequential change in residential volume was primarily due to known contract losses, which was contemplated in our full-year guidance. Landfill volumes improved during the quarter as MSW volumes increased 1.4% and special waste revenue increased 9.9%. We estimate severe weather negatively impacted volume performance by approximately $30 million during the quarter, which was reflected in our full-year revenue guidance provided in February. Moving on to recycling. Commodity prices were $120 per ton during Q1. This compared to $155 per ton in the prior year. Recycling processing and commodity sales were flat compared to the prior year. Increased volumes at our polymer centers offset the revenue impact of lower recycled commodity prices.

Speaker #4: The sequential change in residential volume was primarily due to known contract losses which was contemplated in our full-year guidance. Landfill volumes improved during the quarter, as MSW volumes increased 1.4% and special waste revenue increased 9.9%.

Speaker #4: We estimate severe weather negatively impacted volume performance by approximately $30 million during the quarter. Which was reflected in our full-year revenue guidance provided in February.

Speaker #4: Moving on to recycling. Commodity prices were $120 per ton during the first quarter. This compared to $155 per ton in the prior year. Recycling processing and commodity sales were flat compared to the prior year.

Speaker #4: Increased volumes at our polymer centers offset the revenue impact of lower recycled commodity prices. Current commodity prices are approximately $125 per ton. Total company adjusted EBITDA margin expanded 50 basis points to 32.1%.

Brian DelGhiaccio: Current commodity prices are approximately $125 per ton. Total company adjusted EBITDA margin expanded 50 basis points to 32.1%. Margin performance during the quarter included margin expansion in the underlying business of 90 basis points and a net benefit of 20 basis points from non-recurring items, primarily due to a favorable legal settlement. This was partially offset by a 20 basis point decrease from net fuel, a 20 basis point decrease from recycled commodity prices, and a 20 basis point decrease from acquisitions. The sharp increase in diesel prices in March negatively impacted EBITDA performance by $8 million in Q1. Our fuel recovery fee tends to lag changes in fuel expense by approximately 1 month. We expect fuel recovery fees to offset higher fuel costs beginning in Q2.

Speaker #4: Margin performance during the quarter included margin expansion in the underlying business of 90 basis points, and a net benefit of 20 basis points from non-recurring items primarily due to a favorable legal settlement.

Speaker #4: This was partially offset by a 20 basis point decrease from net fuel, a 20 basis point decrease from recycled commodity prices, and a 20 basis point decrease from acquisitions.

Speaker #4: The sharp increase in diesel prices in March negatively impacted EBITDA performance by $8 million in the first quarter. Our fuel recovery fee tends to lag changes in fuel expense by approximately one month.

Speaker #4: We expect fuel recovery fees to offset higher fuel costs beginning in the second quarter. With respect to environmental solutions, first quarter revenue decreased $44 million compared to the prior year, approximately $15 million of this decrease related to an emergency response job in 2025 that did not repeat.

Brian DelGhiaccio: With respect to environmental solutions, Q1 revenue decreased $44 million compared to the prior year. Approximately $15 million of this decrease related to an emergency response job in 2025 that did not repeat. Adjusted EBITDA margin in the environmental solutions business was 19.2%. Adjusted free cash flow of $984 million, an increase of more than 35% compared to the prior year. This increase was driven by EBITDA growth in the business and the timing of working capital and CapEx. Year-to-date CapEx of $249 million represents 12% of our projected full-year spend. Total debt was $14 billion, and total liquidity was $1.8 billion. Our leverage ratio at the end of the quarter was approximately 2.6 times.

Speaker #4: Adjusted EBITDA margin in the environmental solutions business was 19.2%. Adjusted free cash flow of $984 million and increase of more than 35% compared to the prior year.

Speaker #4: This increase was driven by EBITDA growth in the business and the timing of working capital and capital expenditures. Year-to-date capital expenditures of $249 million represents 12% of our projected full-year spend.

Speaker #4: Total debt was $14 billion, and total liquidity was $1.8 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 and renewable energy resulted in an equivalent tax impact of 24.9% during the first quarter.

Brian DelGhiaccio: With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 24.9% during Q1. With that, operator, I would like to open the call to questions.

Speaker #4: With that operator, I would like to open the call to questions.

Speaker #1: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchdown phone. In the interest of time, we ask that you limit yourself to one question and one follow-up question today.

Kim: We will now begin the question and answer session. In the interest of time, we ask that you limit yourself to one question and one follow-up question today. Our first question comes from Noah Kaye.

Operator: We will now begin the question and answer session. In the interest of time, we ask that you limit yourself to one question and one follow-up question today. Our first question comes from Noah Kaye.

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

Speaker #1: Our first question comes from Noah Kaye.

Speaker #5: Yep. Good afternoon. Thanks for taking the question. Hope you all are well. Y'all can you hear me?

Noah Kaye: Yep. Good afternoon. Thanks for taking the quest--. Hope you all are well. You all can hear me?

Speaker #4: Yep.

Jon Vander Ark: Yep.

Speaker #5: Okay. Great. Thank you. So AI and digital productivity definitely a strong theme for the sector and for you. This quarter, you called out you expect $100 million, I think, of annual benefits from investments by 2028.

Noah Kaye: Okay, great. Thank you. You know, so AI and digital productivity, definitely a strong theme for the sector and for you this quarter. You called out you expect $100 million, I think, of annual benefits from investments by 2028. I guess first, can you sort of benchmark where that benefit might be penciling out for 2026 and how to think about it flowing, you know, in a couple of years? Maybe just to unpack a little bit, you know, the buckets of benefit that you're getting here.

Speaker #5: I guess first, can you sort of benchmark where that benefit might be penciling out for '26 and how to think about it flowing in a couple of years?

Speaker #5: And then maybe just to unpack a little bit the buckets of benefit that you're getting here.

Speaker #4: Yeah. We mentioned on the latter part of your question, we mentioned three areas on the benefit: routing, the rise pricing, and then customer service.

Jon Vander Ark: Yeah, we mentioned on the latter part of your question, we mentioned 3 areas of the benefit: routing, the RISE pricing, and then customer service, and I would list those in terms of the priority of the impact, or the scale of the impact over time. Pricing will come first, and we'll see some benefit in 2026, and that'll build over 2027 and 2028. We're gonna see very little, probably no benefit of that in 2026 on RISE just because we're doing all the work, and that will scale. You'll start to see that benefit come in 2027, and then that will really scale in 2028, and that will, again, be the largest impact. Then on the customer service, I think you'll see ratable improvement across the 3 years. Right now, that's the smallest of the 3 categories or categories I mentioned.

Speaker #4: And I would list those in terms of the priority of the impact, or the scale of the impact over time. Pricing will come first, and we'll see some benefit in 2026, and that'll build over '27, '28.

Speaker #4: We're going to see very little, probably no benefit of that in 2026 on rise, just because we're doing all the work. And that will scale.

Speaker #4: You'll start to see that benefit come in '27, and then that will really scale in '28, and that, again, will be the largest impact.

Speaker #4: And then on the customer service, I think you'll see radical improvement across the three years. Right now, that's the smallest of the three categories I mentioned.

Speaker #4: And those aren't the only three. I mean, we're looking at AI in every area of the business: back office, legal, HR, all kinds of places.

Jon Vander Ark: Those aren't the only three. I mean, we're looking at AI in every area of the business: back office, legal, HR, and all kinds of places. These are the three where we see the most immediate benefit to scale, but it will have profound impact across the business.

Speaker #4: These are the three where we see the most immediate benefit to scale but it will have profound impact across the business.

Speaker #5: That's very helpful, John. Maybe we could talk a little bit about the price-cost performance this quarter. To get 90 bips underlying margin expansion when you had the headwinds from weather, rather, and some of the cost pressures, it's impressive.

Noah Kaye: That's very helpful, Jon. Maybe we could talk a little bit about the price cost performance this quarter. To get 90 basis points underlying margin expansion when you had the headwinds from weather rather, and, you know, some of the cost pressures, it's impressive. Maybe you can talk a little bit about, you know, what you've seen so far on price retention. Was that better than you expected? Did you maybe get a little bit better operating leverage off of, you know, cost savings initiatives? Just help us understand, you know, the quarter and, you know, how you see it trending as we look at margin profile for the next couple of quarters.

Speaker #5: Maybe you can talk a little bit about what you've seen so far on price retention. Was that better than you expected? Did you maybe get a little bit better operating leverage off of cost savings initiatives?

Speaker #5: Just help us understand the quarter and how you see it trending as we look at margin profile for the next couple of quarters.

Speaker #4: Yeah. I'd lead with cost. Our cost performance has been really strong for a number of years now. Inflation has come down, but we've done a lot of self-help there.

Jon Vander Ark: Yeah, I'd lead with cost. Our cost performance has been really strong for a number of years now. Inflation has come down, but we've done a lot of self-help there with the underlying RISE benefits. You're seeing that through labor productivity. You're seeing MPower and our maintenance costs be very, very strong on that. We're doing a good job of balancing pricing, again, primarily playing a long game. We want to understand, even in a volume-challenged environment, to retain customers over time. We've had to find our place in different markets, both to retain and to compete for new work, just given the challenging macro. The team's doing a great job of finding that right mix to still get better underlying margin expansion.

Speaker #4: The underlying rise benefits, you're seeing that through labor productivity. You're seeing Empower and our maintenance costs be very strong on that. And we're doing a good job of balancing pricing.

Speaker #4: Again, primarily playing a long game. We want to understand even at a volume challenged environment to retain customers over time. And so we've had to find our place in different markets, both to retain and to compete for new work, just given the challenging macro and the teams doing a great job of finding that right mix to still get that underlying margin expansion.

Speaker #1: Our next question comes from Brian Bergmeyer with Citi.

Kim: Our next question comes from Bryan Burgmeier with Citi.

Operator: Our next question comes from Bryan Burgmeier with Citi.

Speaker #5: Hi. Good afternoon. Thanks for taking the question. Brian, can you maybe just provide some details on how you're thinking about Q2? I just want to be mindful of the wildfire comps, the fuel impacts, M&A integration, but then conversely, you'd have some seasonal step-up, recycled commodities are doing a little better.

Bryan Burgmeier: Hi, good afternoon. Thanks for taking the question. Brian, can you maybe just provide some details on how you're thinking about, you know, Q2? I just want to be mindful, you know, of the wildfire comps, you know, the fuel impacts, M&A integration. Conversely, you'd have some seasonal step-up, recycled commodities are doing a little better. I mean, we were thinking margins, you know, would still probably be down kind of slightly year-on-year, any details you can add on that would be helpful.

Speaker #5: I mean, we were thinking margins would still probably be down, kind of slightly year on year, but any details you can add on that would be helpful.

Speaker #4: Yeah. That's still what we're expecting for the second quarter. I would say starting with from a margin perspective, somewhat flat to slightly down on a year-over-year basis.

Brian DelGhiaccio: Yeah, that's still, you know, what we're expecting for Q2. I would say starting with from a margin perspective, somewhat flat to slightly down on a year-over-year basis, largely due to some of the project-related landfill volumes that you mentioned. That's the biggest driver of that. Ex that, we would have, you know, anticipated margin expansion. Margin expansion in the underlying business, excluding the impact of those volumes. Overall, it's obviously gonna have an impact on the top line as well when you think that's gonna have a negative impact on volume performance, which is exactly what we thought when we entered the year, negative in both Q2 and Q3, flipping to positive then in Q4.

Speaker #4: Largely due to some of the project-related landfill volumes that you mentioned. That's the biggest driver of that. Ex that, we would have anticipated margin expansion.

Speaker #4: So margin expansion in the underlying business, excluding the impact of those volumes. Overall, it's obviously going to have an impact on the top line as well when you think that's going to have a negative impact on volume performance.

Speaker #4: Which is exactly what we thought when we entered the year. Negative in both Q2 and Q3, flipping to positive then in the fourth quarter.

Speaker #4: So largely the same as what we thought when we provided the guidance in February. And again, nothing's really changed. Based on our performance in the first quarter.

Brian DelGhiaccio: Largely the same as what we thought, when we provided the guidance in February. Again, you know, nothing's really changed, you know, based on our performance in Q1.

Speaker #5: Got it. Got it. Thanks for that detail. That's really helpful. One just quick follow-on for me, and I'll turn it over. Just to kind of point a clarification, so are you expecting or forecasting any impact to EBITDA in Q2 from fuel and then can you just help us frame maybe the margin impact as you pursue the surcharges and pricing associated with that?

Bryan Burgmeier: Got it. Got it. Thanks for that detail. That's really helpful. One just quick follow-on for me, and I'll turn it over. Just a kind of point of clarification. Are you expecting or forecasting any impact to EBITDA in Q2 from fuel? You know, can you just help us frame maybe the margin impact as you know, pursue the surcharges and, you know, pricing associated with that? Thanks a lot.

Speaker #5: Thanks a lot.

Speaker #4: Yeah. As I mentioned in the prepared remarks, we tend to lag from a fuel recovery fee perspective. The increased cost of fuel expense. So as prices have been rising, right, we've been chasing that month on month.

Brian DelGhiaccio: Yeah. As I mentioned in the prepared remarks, we tend to lag from a fuel recovery fee perspective, the increased cost of fuel expense. As prices have been rising, right, we've been chasing that month-on-month. Now we expect that fuel recovery fee to start kicking in in Q2. Our overall objective is to sit there and recover the cash impact, the full cash impact of those rising fuel prices. There's both direct impacts as well as indirect. The sensitivity that we provide in our disclosures is more of a direct type concept. There are gonna be other impacts, like potentially increased transportation expenses. There's increased CapEx as well that goes along with that. Again, if we achieve that recovery from a holistic or comprehensive cash perspective, that is the overall objective.

Speaker #4: Now, we expect that fuel recovery fee to start kicking in in the second quarter. Our overall objective is to sit there and recover the cash impact the full cash impact of those rising fuel prices.

Speaker #4: There's both direct impacts as well as indirect. So the sensitivity that we provide in our disclosures is more of a direct type concept. There are going to be other impacts like potentially increased transportation expenses.

Speaker #4: There's increased CapEx as well that goes along with that. So again, if we achieve that recovery from a holistic or comprehensive cash perspective, that is the overall objective.

Kim: Our next question comes from Adam Bubes with Goldman Sachs.

Operator: Our next question comes from Adam Bubes with Goldman Sachs.

Speaker #1: Our next question comes from Adam Bubase with Goldman Sachs.

Speaker #5: Hi. Just had a first one on the volume line. I think you called out weather as a 30 million headwind in the quarter, and then you were lapping maybe 12 million of event-related volume.

Adam Bubes: Hi, just had a first one on the volume line. I think you called out weather as a $30 million headwind in the quarter, and then you were lapping maybe $12 million of event-related volumes. If I have it right, I think it implies, you know, volumes are tracking flattish year-over-year, underlying volumes. How'd that compare with your initial expectations? Can you just talk about, you know, what you're seeing in volumes in March and April and expected cadence throughout the year?

Speaker #5: So if I have it right, I think it implies volumes are tracking flattish year over year, underlying volumes. How'd that compare with your initial expectations and can you just talk about what you're seeing in volumes in March and April and expected cadence throughout the year?

Speaker #4: Yeah. I think we're starting to see some underlying momentum. And I wouldn't put a word of caution on that given the macro uncertainty we're facing around two wars and oil prices and all the other things that you guys see and read.

Jon Vander Ark: Yeah, I think we're starting to see some underlying momentum, I wouldn't put a word of caution on that given the macro uncertainty we're facing around 2 wars and oil prices and all the other things that you guys see and read. I'd say some green shoots are starting to emerge in terms of the underlying demand signal. Special waste has been particularly strong, we're seeing some momentum month over month in Q1. We're going to look for that to build. Again, at what rate that builds, we'll talk more about in Q2. I'd say versus the 3 months ago, I'd say we're slightly more positive on where the macro is looking.

Speaker #4: But I'd say some green shoots are starting to emerge in terms of the underlying demand signal, special waste has been particularly strong. And we're seeing some momentum month over month in the first quarter.

Speaker #4: And so we're going to look for that to build. And again, at what rate that builds, we'll talk more about in the next quarter.

Speaker #4: But I'd say versus the three months ago, I'd say we're slightly more positive on where the macro is looking.

Speaker #5: And then I think the spread between core price and yield was a little wider this quarter at 2.7 versus, I think, 2% last year.

Adam Bubes: I think the spread between core price and yield was a little wider this quarter at 2.7 versus, I think, 2% last year. Is that just a mix impact, or what's driving that? Can you talk about how you think about that spread going forward as you continue to leverage AI to implement more surgical pricing tools?

Speaker #5: Is that just a mixed impact, or what's driving that? And can you talk about how you think about that spread going forward as you continue to leverage AI to implement more surgical pricing tools?

Speaker #4: Yeah. It predominantly is mixed. You're spot on there. And in part, I would say it's driven by the relatively better performance we're seeing in the temporary large container business, which is predominantly construction-related activities.

Jon Vander Ark: Yeah. It predominantly is mix. You're spot on there. You know, in part, I would say it's driven by the relatively better performance we're seeing in the temporary large container business, which is predominantly construction-related activity. Sequentially, the volume performance improved 500 basis points. That's where you tend to see that impact because we don't capture price on a temporary unit. You'll see it in that churn mix and other, which is the difference between the core price and the average yield. The good news is that as those units return, right, you're getting, you know, that incremental volume, but it's what it ultimately leads to. It's that permanent unit of service. It's the, you know, temporary units leading to that household formation, which ultimately leads to that small business formation, which is extraordinarily important to us.

Brian DelGhiaccio: Yeah. It predominantly is mix. You're spot on there. You know, in part, I would say it's driven by the relatively better performance we're seeing in the temporary large container business, which is predominantly construction-related activity. Sequentially, the volume performance improved 500 basis points. That's where you tend to see that impact because we don't capture price on a temporary unit. You'll see it in that churn mix and other, which is the difference between the core price and the average yield. The good news is that as those units return, right, you're getting, you know, that incremental volume, but it's what it ultimately leads to. It's that permanent unit of service. It's the, you know, temporary units leading to that household formation, which ultimately leads to that small business formation, which is extraordinarily important to us.

Speaker #4: So sequentially, the volume performance improved 500 basis points. And so that's where you tend to see that impact because we don't capture price on a temporary unit.

Speaker #4: You'll see it in that churn mix and other. Which is the difference between the core price and the average yield. The good news is that as those units return, right, you're getting that incremental volume, but it's what it ultimately leads to.

Speaker #4: It's that permanent unit of service. It's the temporary units leading to that household formation, which ultimately leads to that small business formation, which is extraordinarily important to us.

Speaker #1: Our next question comes from Kevin Chang with CIBC. Kevin?

Kim: Our next question comes from Kevin Chiang with CIBC. Kevin?

Operator: Our next question comes from Kevin Chiang with CIBC. Kevin?

Speaker #4: Kevin, you may be on mute.

Toni Kaplan: Kevin, you may be on mute.

Jon Vander Ark: Kevin, you may be on mute.

Speaker #6: You are right. I'm on mute. Thanks for that. I apologize if I missed this. You called out the 12 million dollar or 15 million dollar headwind in ES.

Kevin Chiang: You are right. I'm on mute. Thanks for that. Apologize if I missed this. You called out the $12 million, or $15 million headwind in ES, in terms of a year-over-year comp. Did weather impact ES as well? Maybe if I think of sequential margin performance, if it, if it did, you know, would we expect to see a more outsized margin cadence from Q1 into Q2 within ES, just given it dipped below 20% in the first quarter here?

Speaker #6: In terms of a year-over-year comp, but did weather impact ES as well? And maybe if I think of sequential margin performance, if it did, would we expect to see a more outsized margin cadence from Q1 into Q2 within ES, just given it dipped below 20% in the first quarter here?

Speaker #4: Yeah. I'd say weather was a factor. I wouldn't say it was the dominant factor, more the year-over-year comp we talked about. But weather was a certainly a factor.

Jon Vander Ark: Yeah. I'd say weather was a factor. I wouldn't say it was the dominant factor, more the year-over-year comp we talked about.

Jon Vander Ark: Yeah. I'd say weather was a factor. I wouldn't say it was the dominant factor, more the year-over-year comp we talked about. Weather was certainly a factor. I think we talked about this last quarter. I think the first couple quarters here, we're in, you know, finding the bottom, which we have, and we're building off of that.

Kevin Chiang: Okay.

Jon Vander Ark: Weather was certainly a factor. I think we talked about this last quarter. I think the first couple quarters here, we're in, you know, finding the bottom, which we have, and we're building off of that.

Speaker #4: And I think we talked about this last quarter. I think the first couple of quarters here, we're in finding the bottom, which we have, and we're building off of that.

Speaker #4: We have a tough comp in Q2 as well. You'll see in the back half, kind of momentum both in the top line and margin expansion into the business.

Jon Vander Ark: You know, we have a tough comp in Q2 as well. You'll see in H2 kinda momentum both from the top line and margin expansion into the business. We feel really good about what momentum that team has. I think we talked about probably missing the market a bit as volume declined, right? We were still pretty aggressive on price. I think we found our footing there.

Speaker #4: But we feel really good about what momentum that team has I think we talked about probably missing the market a bit as volume declined, right?

Speaker #4: We were still pretty aggressive on price. And I think we found our footing there in a price-volume standpoint. And that can be a little longer sales cycle.

Jon Vander Ark: on a price volume standpoint. That can be a little longer sales cycle, a lot of the great activities we see won't show up into the P&L until H2.

Speaker #4: So a lot of the great activities we see won't show up into the P&L until the second half.

Speaker #6: Well, that's great color. And just my second question, just wondering, just given we're Virgin Plastic pricing is, just does that impact the economics of the polymer centers or the blue polymer JV?

Kevin Chiang: Well, that's great color. just my second question, just wondering just given where virgin plastic pricing is, just does that impact the economics of the polymer centers or the Blue Polymers JV?

Speaker #4: Yeah. A lot of moving pieces right now on plastics. We've had some pre-Iran war, certainly some global challenges with a glut of virgin PET out of Asia, flooding the US market, some of which is coming in as RPET and working with our industry stakeholders and the government to address that issue.

Jon Vander Ark: A lot of moving pieces right now on plastics. We've had some pre-Iran War, certainly some global challenges with a glut of virgin PET out of Asia flooding the U.S. market, some of which is coming in as rPET, and working with our industry stakeholders and the government to address that issue. The war itself has been helpful in that because we're starting to see that production go down as they've had to ration oil supply and get it to primary use versus secondary use like plastics. The net impact is we're seeing our spreads increase, both in the polymer centers and the Blue Polymers JV, and feel really good about the demand profile there and the momentum we have in that business.

Speaker #4: The war itself has been helpful in that because we're starting to see those that production go down as they've had to ration oil supply and get it to primary use versus secondary use like plastics.

Speaker #4: And so the net impact is we're seeing our spreads increase, both in the polymer centers and the blue polymer JV. And feel really good about the demand profile there and the momentum we have in that business.

Speaker #1: Our next question comes from Jerry Revich with Wells Fargo.

Kim: Our next question comes from Jerry Revich with Wells Fargo.

Operator: Our next question comes from Jerry Revich with Wells Fargo.

Jerry Revich: Yes, hi. Good afternoon. I'm wondering if we could talk about the electric collection of vehicles. As you folks are ramping up towards 300, can you just talk about where you're deploying them, what the unit profitability looks like compared to conventional trucks on an all-in basis? As we look at what proportion of your footprint could you ultimately see EVs operating in, how meaningful part of the fleet could it be in terms of where there's actual availability of power and economics? Thanks.

Speaker #7: Yes, hi. Good afternoon. I'm wondering if we could talk about the electric collection of vehicles as you folks are ramping up towards 300. Can you just talk about where you're deploying them, what the unit profitability looks like compared to conventional trucks on an all-in basis, and as we look at what proportion of your footprint could you ultimately see EVs operating in, how meaningful part of the fleet could it be in terms of where there's actual availability of power and economics?

Speaker #7: Thanks.

Speaker #4: Yeah. We feel good about the deployment and the rollout. We've had really good partners in that space. And it's concentrated in markets that you would expect that have local and state environments that are supportive, right?

Jon Vander Ark: Yeah. We feel good about the deployment and the rollout. We've had really good partners in that space, and they've just concentrated in markets that you would expect that have local and state environments that are supportive, right? Places, municipalities that are willing to pay, states that might have incentives to support that because it is a different OpEx, CapEx trade-off. The truck is gonna be more expensive but then cheaper to operate. We're beating our assumptions in the pro forma on that so far. Again, still, we'll, you know, learn more every year that we drive those trucks, but feel good about the operational performance. You're gonna see us deploy. Now, we did lose a little bit in terms of federal incentive with the administration change, that's probably slowed the rollout modestly.

Speaker #4: Places, municipalities that are willing to pay, states that might have incentives to support that because it is a different OPEX/CAPEX trade-off. The truck is going to be more expensive, but then cheaper to operate.

Speaker #4: We're beating our assumptions in the pro forma on that so far. Again, still, we'll learn more every year that we drive those trucks, but feel good about the operational performance.

Speaker #4: And you're going to see us deploy. Now, we did lose a little bit in terms of federal incentive with the administration change. And so that's probably slowed the rollout modestly.

Speaker #4: But in residential, this has continued to be where we're focused on buying the trucks and we're moving to small container next. I don't think large containers and the cars in the short term, but this will end up being a meaningful portion of our buy here as we approach the end of the decade.

Jon Vander Ark: You know, in residential, this is continuing to be where we're focused on buying the trucks. We're moving to small container next. I don't think large containers and the cars in the short term. This will end up being a meaningful portion of our buy here as we approach the end of the decade.

Speaker #7: Yeah. Super. And then can I ask an R&G thank you for the update on the facility counts. Can you talk about the operating performance on the facilities?

Jerry Revich: Yeah. Super. Then can I ask on RNG, thank you for the update on the facility counts. Can you talk about the operating performance on the facilities? Are you expecting an equity income contribution this year? What's the profitability cadences they ramp up? If you could comment on expected royalty contributions this year versus plan, I would appreciate it.

Speaker #7: Are you expecting equity income contribution this year? What's the profitability cadence as they ramp up? And if you could comment on expected royalty it.

Speaker #4: Yeah, Jerry. The total contribution that we're expecting from the R&G portfolio is $10 million of incremental revenue, $10 million of EBITDA this year. Which is consistent with what we thought in the beginning of the year as well.

Jon Vander Ark: Yeah, Jerry. The total contribution that we're expecting from the RNG portfolio is $10 million of incremental revenue, $10 million of EBITDA this year. Which is consistent with what we thought in the beginning of the year as well. That is going to, you know, ramp up as we move forward. It kind of is, you know, $10 million in 2027, $15 million in 2028, $15 million in 2029, and ultimately $20 million by 2020. That's how that ramps up to that $100 million of incremental revenue by the end of the decade.

Brian DelGhiaccio: Yeah, Jerry. The total contribution that we're expecting from the RNG portfolio is $10 million of incremental revenue, $10 million of EBITDA this year. Which is consistent with what we thought in the beginning of the year as well. That is going to, you know, ramp up as we move forward. It kind of is, you know, $10 million in 2027, $15 million in 2028, $15 million in 2029, and ultimately $20 million by 2020. That's how that ramps up to that $100 million of incremental revenue by the end of the decade.

Speaker #4: That is going to ramp up as we move forward to kind of as a $10 million in '27, $15 million in '28, $15 million in '29, and ultimately $20 million by 2020.

Speaker #4: So that's how that ramps up to that $100 million of incremental revenue. By the end of the decade.

Speaker #1: Our next question comes from Trevor Romeo with William Blair.

Kim: Our next question comes from Trevor Romeo with William Blair.

Operator: Our next question comes from Trevor Romeo with William Blair.

Speaker #4: Hi, good afternoon. Thank you for taking the questions. A couple of quick ones here. First one, I wanted to ask on your organics processing business.

Trevor Romeo: Hi, good afternoon. Thank you for for taking the questions. I couple quick ones here. First one, I wanted to ask on your organics processing business. I think there was some press lately around a couple of new facilities you opened up in California and Colorado recently. Maybe would love if you could speak to kinda how you're thinking about investing in the organics business, what you're seeing from a regulatory perspective, and maybe the overall growth opportunity there.

Speaker #4: I think there was some press lately around a couple of new facilities you opened up in California and Colorado recently. So maybe we'd love if you could speak to kind of how you're thinking about investing in the organics business, what you're seeing from a regulatory perspective, and maybe the overall growth opportunity there.

Speaker #5: That ends up being very regional or state-specific. So where there's support, either from a state regulation or a community willingness to pay, we are collection side and then the processing.

Jon Vander Ark: That ends up being very regional or state specific. Where there's support, either from a state regulation or a community willingness to pay, we are, you know, investors and operators both on the collection side and then the processing on the back end. You know, the price of that technology needs to come down on the processing side overall to make that more scalable. Longer term, it's gonna be a growth driver. You know, 25% of what goes to our landfill is organic in some capacity that ultimately could come out and be processed a different way. We continue to pursue opportunities, and again, as the regulatory environment evolves, you'll see that business scale.

Speaker #5: On the back end, the price of that technology needs to come down on the processing side overall to make that more scalable. But longer term, it's going to be a growth driver.

Speaker #5: 25% of what goes into our landfill is organic in some capacity that ultimately could come out and be processed a different way. So we continue to pursue opportunities.

Speaker #5: And again, as a regulatory environment evolves, you'll see that business scale.

Speaker #4: Okay. Thank you for that. And then maybe just going back to ES, I think you talked about the sales pipeline building. So I was just wondering if you could give maybe an update on their cross-selling initiatives there.

Trevor Romeo: Okay. Thank you for that. And then maybe just going back to ES. I think you talked about the sales pipeline building. Just wondering if you could give maybe an update on your cross-selling initiatives there. It's something maybe you talked about more a few years ago. Just what are you seeing in terms of customer demand for kind of the broader set of solutions across your two segments and how you're executing on that opportunity?

Speaker #4: Something maybe you talked about more a few years ago, but just what are you seeing in terms of customer demand for kind of the broader set of solutions across your two segments, and how you're executing on that opportunity?

Speaker #5: Yeah. Our most profitable customers want an integrated offering. And we're uniquely positioned given that we can offer them odd suite of services: recycling, waste, special waste, and then all the various services that are underneath environmental solutions.

Jon Vander Ark: Yeah. Our most profitable customers want an integrated offering, and we're uniquely positioned given that we can offer them a suite of services, recycling, waste, special waste, and then all the various services that are underneath environmental solutions. To unlock the opportunity further, we're really working on some of the IT and sales opportunities to get the information in the right hands of the sellers so that in a local market with customers, we can unlock exactly what we offer, including things as tactical as a single contract, a single bill, ways to make it really easy for our customers to do business with us, and we're making great progress on that. You'll see that build over the next 18 to 24 months as some of those initiatives get fully deployed.

Speaker #5: To unlock the opportunity further, we're really working on some of the IT and sales opportunities to get the information in the right hands of the sellers so that in a local market with customers, we can unlock exactly what we offer including things as tactical as a single contract, a single bill, ways to make it really easy for a customer to do business with us.

Speaker #5: And we're making great progress on that, but you'll see that build over the next 18 to 24 months as some of those initiatives get fully deployed.

Speaker #1: Our next question comes from Seth Weber with BNP Paribas.

Kim: Our next question comes from Seth Weber with BNP Paribas.

Operator: Our next question comes from Seth Weber with BNP Paribas.

Seth Weber: Great. Thank you and good afternoon. Wondering if you could just give us your updated thoughts on, you know, the cadence for the shedding of, and the residential contracts, just, you know, how we should think about that potentially moderating through the balance of the year? Thank you.

Speaker #4: Great. Thank you. And good afternoon. I'm wondering if you could just give us your updated thoughts on the cadence for the shedding and the residential contracts, just how we should think about that potentially moderating through the balance of the year.

Speaker #4: Thank you.

Speaker #5: Yeah. I think you'll see it pretty consistent across the year. The big driver there in residential was three larger contracts that we lost. And regrettable in the sense that we'd love to have those contracts and serve those communities at the right price and cost.

Jon Vander Ark: Yeah. I think you'll see it pretty consistent across the year. The big driver there in residential was three larger contracts that we lost, and regrettable in the sense that we'd love to have those contracts and serve those communities at the right price and cost, but we're gonna be very returns focused as we deploy capital and have our people do work in communities. We need to get a fair price for the work that we do. Still seeing more challenges in that vertical than we are in the other verticals in the market of people willing to do work for very, very low returns. You'll see those numbers pretty consistent across the year. Slight improvement in the H2, then I think a different outlook in 2027.

Speaker #5: But we're going to be very returns-focused as we deploy capital and have our people do work in communities. We need to get a fair price for the work that we do.

Speaker #5: And still seeing more challenges in that vertical than we are in the other verticals in the market of people willing to do work for very, very low returns.

Speaker #5: So you'll see those numbers pretty consistent across the year. Slight improvement in the second half. And then I think a different outlook in 2027.

Speaker #4: Got it. Okay. Thank you. And then just on your comments around M&A, it sounds like you're now talking about a billion dollars-plus, which I think is a little bit stronger than what you mentioned last quarter.

Seth Weber: Got it. Okay. Thank you. Just on your comment around M&A, it sounds like you're now talking about, you know, a $1 billion plus, which I think is a little bit stronger than what you mentioned last quarter. Is that a function of you feel better about your free cash flow outlook or just more deals kind of presenting themselves to you, or just any nuances there as to why you're taking that number up at this point?

Speaker #4: Is that a function of you feel better about your free cash flow outlook or just more deals kind of presenting themselves to you or just any nuances there as to why you're taking that number up at this point?

Speaker #5: Yeah. It's just the opportunities of both what we've already closed and what we have in the pipeline. And we're rarely financially constrained. It's always opportunity-constrained.

Jon Vander Ark: Yeah. It's just the opportunities of both what we've already closed and what we have in the pipeline. We're rarely financially constrained. It's always opportunity constrained. A deal has got to meet two screens for us. One, it has to have the right financial returns, and then it's got to be the right strategic fit. We've got to be the owner for it and be able to take that asset and do something more productive with it. We've just had a really positive year in terms of, you know, what we've already locked up and closed and then what we see coming forward in the next 6 to 9 months.

Speaker #5: A deal has got to meet two screens for us. One, it has to have the right financial returns. And then it's got to be the right strategic fit.

Speaker #5: We've got to be the owner for it and be able to take that asset and do something more productive with it. And we're just having a really positive year in terms of what we've already locked up and closed.

Speaker #5: And then what we see coming forward in the next 6 to 9 months.

Speaker #1: Our next question comes from Tony Kaplan with Morgan Stanley.

Kim: Our next question comes from Toni Kaplan with Morgan Stanley.

Operator: Our next question comes from Toni Kaplan with Morgan Stanley.

Speaker #6: Thank you. I wanted to start out on free cash flow. Really strong quarter. It sounded like maybe it was because of CapEx timing. You talked about it being roughly 12% of the full year CapEx spend in the first quarter.

Toni Kaplan: Thank you. I wanted to start out on free cash flow. Really strong quarter. It sounded like maybe it was because of CapEx timing. You talked about it being roughly 12% of the full year CapEx spend in Q1. I was wondering if there was sort of a reason why CapEx was lower this quarter and you know, what was lower and what you're planning to spend it on for the rest of the year.

Speaker #6: So I was wondering if there was sort of a reason why CapEx was lower this quarter and what your what was lower and what you're planning to spend it on for the rest of the year.

Speaker #4: Yeah. Actually, most of it from a timing perspective is really within working capital. Right? You can see that and much of it has to do with just the number of AP payments that were made as well as payroll payments.

Jon Vander Ark: Yeah. Actually, most of it from a timing perspective is really within working capital, right?

Brian DelGhiaccio: Yeah. Actually, most of it from a timing perspective is really within working capital, right?

Brian DelGhiaccio: Okay.

Brian DelGhiaccio: You can see that much of it has to do with just the number of AP, you know, payments that were made as well as payroll payments. That's something that'll flip over the balance of the year, so we called out that timing piece. The CapEx, that's not abnormal for us to sit there and spend below 25% of our full year spend in Q1. You can go back over several years, that's the case. We do expect to spend that full year CapEx that we guided to in the beginning of the year.

Speaker #4: So that's something that'll flip over the balance of the year. So we called out that timing piece. The CapEx, that's not abnormal for us to sit there and spend below 25% of our full-year spend in the first quarter.

Speaker #4: You can go back over several years and that's the case. But we do expect to spend that full-year CapEx that we guided to in the beginning of the year.

Speaker #6: Yeah. Okay. Got it. And then one other question on M&A. I just wanted to tackle it a little bit differently. I guess, are there and it was sort of a $700 million to date, I believe.

Toni Kaplan: Okay. Got it. Then, one other question on M&A. I just wanted to attack a little bit differently. I guess are there. It was sort of a, you know, $700 million to date, I believe. You know, were you trying to strengthen current markets that you're already in, entering new ones? Just trying to understand what opportunities you were able to find and how you're thinking about sort of what targets you're approaching. Thanks.

Speaker #6: And so were you trying to strengthen current markets that you're already in, entering new ones, just trying to understand what opportunities you were able to find and how you're thinking about sort of what targets you're approaching?

Speaker #6: Thanks.

Speaker #5: Yes. And yes. So we look in recycling and waste, both the markets that we're already in to strengthen those. And that's the bread and butter, I'd say, what we do acquisition-wise.

Jon Vander Ark: Yes and yes. We look in recycling and waste, both the markets that we're already in to strengthen those, and that's the bread and butter, I'd say, what we do acquisition-wise. Expanding geographies is also an opportunity for us, and those become great platforms for further tuck-in acquisitions over time. As well as environmental solutions, right. Same opportunities there. Strengthening markets we're already in and expanding into new markets. The balance of the spend so far this year of what's already closed and what's signed and going to close has really been 90% plus recycling and waste. That balance will probably rotate just a little throughout the rest of the year, but pretty strong on both ends.

Speaker #5: And then expanding geographies is also an opportunity for us. And those become great platforms for further tuck-in acquisitions over time. And then as well as environmental solutions, right?

Speaker #5: Same opportunities there. Strengthening markets we're already in and expanding into new markets. The balance of the spend so far this year of what's already closed and what's signed and going to close is really been 90% plus recycling and waste.

Speaker #5: That balance will probably rotate just a little throughout the rest of the year, but pretty strong on both ends.

Speaker #1: Our next question comes from Tammy Zakaria with JPMorgan.

Kim: Our next question comes from Tami Zakaria with JP Morgan.

Operator: Our next question comes from Tami Zakaria with JP Morgan.

Speaker #7: Hi. Good morning, sorry. Good afternoon or evening. Thanks for the time. So question on CPI. The March reading accelerated sequentially. Just wondering if you could remind us how much of your portfolio is indexed to the the CPI should it continue to go higher and what's the typical lag?

Tami Zakaria: Hi. Good morning. Sorry, good afternoon or evening. Thanks for the time. Question on CPI. The March reading accelerated sequentially. Just wondering if you could remind us how much of your portfolio is indexed to the CPI should it continue to go higher, and what's the typical lag?

Speaker #4: Yeah. So the of our portfolio of contracts that we call restricted, which have some sort of pricing restriction embedded in the contract itself, just shy of 20% are directly linked to headline CPI.

Jon Vander Ark: Yeah. Of our portfolio of contracts that we call restricted, which have some sort of pricing restriction embedded in the contract itself, just shy of 20% are directly linked to headline CPI. 35% are linked to some sort of alternative index, you know, water, sewer, trash, garbage trash. With the balance, about 45%, some sort of fixed rate that's embedded in the contract itself or a rate review. The lag tends to be, you know, 12 months, call it, on average. There's a look-back period, and then the implementation period tends to be about 12 months after the fact.

Brian DelGhiaccio: Yeah. Of our portfolio of contracts that we call restricted, which have some sort of pricing restriction embedded in the contract itself, just shy of 20% are directly linked to headline CPI. 35% are linked to some sort of alternative index, you know, water, sewer, trash, garbage trash. With the balance, about 45%, some sort of fixed rate that's embedded in the contract itself or a rate review. The lag tends to be, you know, 12 months, call it, on average. There's a look-back period, and then the implementation period tends to be about 12 months after the fact.

Speaker #4: 35% are linked to some sort of alternative index, water, sewer, trash, garbage, trash. With the balance, about 45%, some sort of fixed rate that's embedded in the contract itself or a rate review.

Speaker #4: The lag tends to be 12 months, call it, on average. There's a look-back period. And then the implementation period tends to be about 12 months after the fact.

Speaker #7: That's very helpful. And I wanted to double-click on residential not speaking to 2027 specifically, but are we do you expect residential volumes to turn positive at some point next year?

Tami Zakaria: That's very helpful. Wanted to double-click on residential volumes. I know you're not speaking to 2027 specifically. Do you expect residential volumes to turn positive at some point next year?

Speaker #5: Oh, no. I think the rate of decrease will certainly improve. Whether that is flat next year or not, probably still declines. Just given some of the rollover effect.

Jon Vander Ark: Oh, no. I think the rate of decrease will certainly improve. Whether that is flat next year or not, probably still declines, just given some of the rollover effect of those larger contracts that we lost, some of which started on 1 January and some of which are midyear conventions on that front. Listen, we're going to continue to put upward pressure on price and be returns-focused and get paid for the work we do. To the extent that customers are not willing to pay, then we'll put our resources into other verticals and other opportunities.

Speaker #5: Of those larger contracts that we lost, some of which started on January 1st and some of which are mid-year conventions on that front. And listen, we're going to continue to put upward pressure on price and be returns-focused and get paid for the work we do and to the extent that customers are not willing to pay, then we'll put our resources into other verticals and other opportunities.

Speaker #1: Our next question comes from Konark Gupta with Scotia Capital.

Kim: Our next question comes from Konark Gupta with Scotia Capital.

Operator: Our next question comes from Konark Gupta with Scotia Capital.

Speaker #4: Thanks, Sarah. Just following up on the residential business, I understand the volumes are declining. Why? But if you can talk about the underlying business, how does it perform from profitability and return standpoint?

Konark Gupta: Thanks. Just following up on the residential business. I understand the volumes are declining and why, but if you can talk about the underlying business, how is it performing from profitability and return standpoint?

Speaker #2: Yeah. No, profitability in that business is improving. And again, I think for a couple of reasons. One, when you have a contract that's underperforming and you look to get it to an acceptable level of return, and if you don't retain that because someone is willing to take that, that relatively lower price, you're going to improve your overall performance.

Jon Vander Ark: Yeah. No, profitability in that business is improving. I think for a couple reasons. One, you know, when you have a contract that's underperforming and you look to get it to an acceptable level of return, and if you don't retain that because someone is willing to take that at that relatively lower price, you're gonna improve your overall performance. Coupled with the fact that you look at the remainder of the portfolio and you look at the level of price that we've had in the residential system itself, very strong and well in excess of our cost inflation. The combination of the two have driven margin expansion in that business. When we bid these residential contracts, we never bid them to lose money.

Brian DelGhiaccio: Yeah. No, profitability in that business is improving. I think for a couple reasons. One, you know, when you have a contract that's underperforming and you look to get it to an acceptable level of return, and if you don't retain that because someone is willing to take that at that relatively lower price, you're gonna improve your overall performance. Coupled with the fact that you look at the remainder of the portfolio and you look at the level of price that we've had in the residential system itself, very strong and well in excess of our cost inflation. The combination of the two have driven margin expansion in that business.

Speaker #2: Coupled with the fact that you look at the remainder of the portfolio, and you look at the level of price that we've had in the residential system itself—very strong and well in excess of our cost inflation.

Speaker #2: So the combination of the two have driven margin expansion in that business.

Speaker #5: And when we bid these residential contracts, we never bid them to lose money. We bid them with the assumption of profitability, but then things change over the course of a five-year term of the contract. Maybe we didn't have a good pricing escalator in the contract, and our costs inflated faster.

Jon Vander Ark: When we bid these residential contracts, we never bid them to lose money. We bid them with the assumptions of profitability, but then things change over the course of a 5-year term of the contract, which is maybe we didn't have a good pricing escalator on the contract, and our costs inflated faster. Maybe our assumptions in terms of number of trucks we needed to cover the community wasn't quite right and turned out to be a little more expensive to deliver or operate that truck. We're being very disciplined across each one of those contracts to make sure that we are returns-driven and pricing that accordingly when the contract comes up.

Jon Vander Ark: We bid them with the assumptions of profitability, but then things change over the course of a 5-year term of the contract, which is maybe we didn't have a good pricing escalator on the contract, and our costs inflated faster. Maybe our assumptions in terms of number of trucks we needed to cover the community wasn't quite right and turned out to be a little more expensive to deliver or operate that truck. We're being very disciplined across each one of those contracts to make sure that we are returns-driven and pricing that accordingly when the contract comes up.

Speaker #5: Maybe our assumptions in terms of number of trucks we needed to cover the community wasn't quite right and it turned out to be a little more expensive.

Speaker #5: To deliver or operate that truck. So we're being very disciplined across each one of those contracts to make sure that we are returns-driven. And pricing that accordingly when the contract comes up.

Speaker #4: Thanks. And if I can follow up on the employee turnover side of things, are you seeing any implications whatsoever, direct or indirect, from the CDL regulations that are going through in the U.S. right now?

Konark Gupta: Thanks. If we can follow up on the employee turnover side of things. Are you seeing any implications whatsoever, direct or indirect, from the CDL regulations that are going through in the US right now? I mean, I understand your drivers may not be CDL necessarily, but some of them. Do you see any impact of the shortage of drivers that's going on in the industry?

Speaker #4: I mean, I understand you drivers may not be CDL necessarily, but some of them. But do you see any impact of the shortage of drivers that's going on in the industry?

Speaker #5: Yeah. Our drivers do have CDLs. And I'd say the impact has been de minimis. There's been a few individual cases, but overall, we set the turnover record two years in a row and we may break it again for a third year.

Jon Vander Ark: Yeah, our drivers do have CDLs. I'd say the impact has been de minimis. There's been a few individual cases, but overall, as we set the turnover record 2 years in a row, we may break it again for a 3rd year. The team's doing a great job of finding talented technicians and drivers and customer service agents and all of our other frontline colleagues and retaining those colleagues at an increasingly high rate.

Speaker #5: The team's doing a great job of finding talented technicians, drivers, customer service agents, and all of our other frontline colleagues—and retaining those colleagues at that increasingly high rate.

Speaker #1: Our next question comes from Shlomo Rosenbaum with Stifel.

Kim: Our next question comes from Shlomo Rosenbaum with Stifel.

Operator: Our next question comes from Shlomo Rosenbaum with Stifel.

Speaker #4: Hi. Thank you very much for taking my questions. You mentioned that you're starting to see some green shoots in the solid waste business. And I'm wondering if you're seeing similar type of green shoots in the ES business as well.

Shlomo Rosenbaum: Hi. Thank you very much for taking my questions. You mentioned that you're starting to see some green shoots, you know, in the solid waste business, and I'm wondering if you're seeing similar type of green shoots in the ES business as well. Are you seeing, you know, maybe some of the turnarounds happen a little bit faster? You know, what signs are you seeing over there in that business?

Speaker #4: Are you seeing maybe some of the turnarounds happen a little bit faster? What signs are you seeing over there in that business?

Speaker #5: Yeah. I'd certainly say it's improving. Maybe not improving quite as quickly as we're seeing on the special waste or the side of the business in the recycling and waste business.

Jon Vander Ark: Yeah, I'd certainly say it's improving, maybe not improving quite as quickly as we're seeing on the special waste or side of the business in the recycling and waste business. You know, you got some moving pieces. Listen, as oil prices spiking and people are kind of trying to blow out demand, right? That's delaying some of the underlying project work, which can't be delayed forever, but can be suspended for 3 to 6 months. There's puts and takes there, but the trend line is definitely up, and we'll see what kind of momentum we build here in Q2.

Speaker #5: And you've got some moving pieces. So listen, as oil prices spiking and people are kind of trying to blow out demand, right, that's delaying some of the underlying project work, which can't be delayed forever.

Speaker #5: But can be suspended for three to six months. So there's puts and takes there, but the trend line is definitely up. And we'll see what kind of momentum we build here in the second quarter.

Speaker #4: Okay. Thank you. And then what was driving the volumes down in the CND business? Was there a tough comp issue over there with some of the stuff that you were talking about, or it just kind of stood out over there?

Shlomo Rosenbaum: Okay. Thank you. What was driving the volumes down in the C&D business? Was there a tough comp issue over there with, you know, some of the stuff that you were talking about, or it just kind of stood out over there?

Speaker #2: Yeah. It was more of a comp issue. So in the prior year, we had some hurricane cleanup efforts in the southeast.

Jon Vander Ark: Yeah. It was more of a comp issue. In the prior year, we had some hurricane cleanup efforts in the Southeast.

Brian DelGhiaccio: Yeah. It was more of a comp issue. In the prior year, we had some hurricane cleanup efforts in the Southeast.

Speaker #1: Our next question comes from Toby Summer with Truist. Toby, is your line muted?

Kim: Our next question comes from Tobey Sommer with Truist.

Operator: Our next question comes from Tobey Sommer with Truist.

Tobey Sommer: Thank you.

Tobey Sommer: Tobey, is your line muted?

Operator: Tobey, is your line muted?

Tobey Sommer: No. Can you hear me?

Speaker #5: No. Can you hear me?

Speaker #4: Yeah.

Jon Vander Ark: Yeah. Yeah, we can hear you.

Speaker #2: Yeah. We can hear you.

Speaker #5: Okay. Great. I just wanted to ask a question about volume in environmental services. How do you expect the cadence of that to change throughout the balance of the year?

Tobey Sommer: Okay, great. I just wanted to ask a question about volume in environmental services. How do you expect the cadence of that to change throughout the balance of the year?

Speaker #4: Well, there, we don't report on a specific volume metric just because there's so many different product and service lines there that it'd be really, really tough with a mixed standpoint.

Jon Vander Ark: Well, there, we don't report on a specific volume metric just because there's so many different product and service lines there that it'd be really, really tough with a mix standpoint. As I mentioned earlier, right? We see momentum really building in H2 of the year, right? I think you'll see incremental progress quarter-to-quarter, right? The year-over-year comp is tougher in Q2, but H2, you'll definitely see the volume picture build.

Speaker #4: But as I mentioned earlier, right, we see momentum really building in the second half of the year, right? I think you'll see incremental progress quarter to quarter, right?

Speaker #4: The year-over-year comp is tougher in the second quarter, but the second half, you'll definitely see the volume picture build.

Speaker #5: Thank you.

Tobey Sommer: Thank you. With respect to your acquisition program, are you seeing opportunities on the ES side, as readily as you are on the municipal solid waste side?

Speaker #4: And with respect to your acquisition program, are you seeing opportunities on the ES side as readily as you are on the municipal solid waste side?

Speaker #5: Plenty of opportunities. I'd say there's a little more momentum right now in recycling and waste. Not because of activity on our side, but just timing of market.

Jon Vander Ark: Plenty of opportunities. I'd say there's a little more momentum right now in recycling and waste, not because of activity on our side, but just timing of market. I mean, we know that these things ebb and flow. Lots of opportunities we have on the recycling and waste side. We've had discussions with the sellers for over a decade, and it's really timing and event-driven on their side that drives the sale. On Environmental Solutions, obviously, we don't have the relationship profile that is that long, but still some of the same things. We maintain a significant dialogue. For every acquisition we close, that we've probably had seven fall out of the system at some point in the pipeline. We're very discriminating in terms of who we actually buy, but the activity, the level there is very strong as well.

Speaker #5: We know that these things ebb and flow. Lots of opportunities we have in the recycling and waste side. We've had discussions with the sellers for over a decade and it's really timing and event-driven on their side that drives the sale.

Speaker #5: Environmental solutions, obviously, we don't have the relationship profile that is that long, but still some of the same things we maintain a significant dialogue for every acquisition we close, that we've probably had seven fall out of the system at some point in the pipeline.

Speaker #5: So, we're very discriminating in terms of who we actually buy, but the activity level there is very strong as well.

Speaker #1: Our next question comes from Stephanie Moore with Jeffries.

Kim: Our next question comes from Stephanie Moore with Jefferies.

Operator: Our next question comes from Stephanie Moore with Jefferies.

Speaker #6: Great, good afternoon. Thank you. I wanted to ask about your RISE digital platform. I think some of your peers have talked about leveraging technology for more dynamic pricing discussions, and I wanted to see if that's an area that you guys have tackled as of late. At the same time, I think you've talked in the past about some opportunity with AI and algo-based routing.

Stephanie Moore: Great. Good afternoon. Thank you. I wanted to circle back on some of the commentary that you provided on your RISE digital platform. You know, I think some of your peers have talked about leveraging technology for more dynamic pricing discussions, and I wanted to see if that's an area that you guys have tackled as of late. At the same time, I think you've, you know, talked in the past about some opportunity with AI and, you know, algo-based routing. wanted to get an update there as well. Thank you.

Speaker #6: So I wanted to get an update there as well. Thank you.

Speaker #5: Yes, both sides. So, pricing today, we're using dozens of variables through AI to build bespoke prices for existing customers when we send them our annual price increase.

Jon Vander Ark: Yes, on both sides. Pricing today, you know, we're using dozens of variables through AI to build bespoke prices to existing customers when we send them our annual price increase. We're trying to get that as surgical as possible to give them a price that maximizes both what they'll pay and incents them to stay over a long period of time. Again, that is a game of inches in terms of dialing that in, but small basis points across individual customers adds up quickly across the system and feel really encouraged. That will just continue to get better and better over time. It kind of builds in a more linear fashion.

Speaker #5: And so we're trying to get that as surgical as possible to give them a price that maximizes both what they'll pay and incent them to stay over a long period of time.

Speaker #5: And that is a game of inches in terms of dialing that in, but small basis points across individual customers adds up quickly across the system and feel really encouraged.

Speaker #5: And that will just continue to get better and better over time. It kind of builds in a more linear fashion. With the routing, there's a lot of upfront work, particularly around data, data accuracy, and data management that you need to have in place so that when you start routing dynamically—building dynamic routes through AI and then routing dynamically through the day—you get it right.

Jon Vander Ark: Where the routing, there's a lot of upfront work, particularly around data and data accuracy and data management that you need to have in place so that when you start building dynamic routes through AI and then routing dynamically through the day, you get it right. What we won't do is sacrifice customer service to pursue short-term gains. We're gonna get it right with the customer first and then drive all of the operational efficiency through the system while improving customer service. That's why you'll start to see some of that benefit in H2 of next year, but that's really 2028 when we think we scale.

Speaker #5: And what we won't do is sacrifice customer service to pursue short-term gains. We're going to get it right with the customer first, and then drive all of the operational efficiency through the system while improving customer service.

Speaker #5: And that's why you'll start to see some of that benefit in the second half of next year, but that's really 2028 where we think we scale.

Speaker #6: That's it for me, guys. Thank you.

Stephanie Moore: That's it for me, guys. Thank you.

Speaker #1: Our next question comes from David Manthe with Baird.

Kim: Our next question comes from David Manthey with Baird.

Operator: Our next question comes from David Manthey with Baird.

Speaker #4: Thank you. Good afternoon. How much of the Environmental Solutions weakness is that self-inflicted pricing that you mentioned, as opposed to end-market softness? And if some of it is market-related, what exposures by service or customer type lead you to your view of an improvement in the second half of '26—just so we can sort of track that?

David Manthey: Thank you. Good afternoon. How much of the environmental solutions weakness is that self-inflicted pricing that you mentioned as opposed to end market softness? If some of it is market related, what exposures by service or customer type lead you to your view of an improvement in the H2 2026, just so we can sort of track that?

Speaker #5: Yeah. It's an answer to the last part of your question. We see the sales pipeline and just understand the activities, both on our side and then work that is contracted and slated to begin some of those are longer-term things that happen over the course of many months.

Jon Vander Ark: Yeah. To answer the last part of your question, we see the sales pipeline and just understand the activities both on our side and then work that is contracted and slated to begin. You know, some of those are longer term things that happen over the course of many months, and some of those could be shorter, but we know the start date happens, you know, later in Q2 or into Q3 on that front. The split between what is market and what is our own activity is hard to identify. I'd say certainly it was more self-inflicted in H2 of last year. I'd say as we increase and go forward, it's we're more market-driven, which is we think we got market pricing very dialed in here. We're not gonna get it perfect every time, but much improved on that dimension.

Speaker #5: And some of those could be shorter, but we know the start date happens later in the second quarter or into the third quarter on that front.

Speaker #5: The split between what is market and what is our own activity is hard to identify. I'd say certainly it was more self-inflicted in the second half of last year.

Speaker #5: And I'd say as we increasingly go forward, we're more market-driven, which is we think we got market pricing very dialed in here. We're not going to get it perfect every time, but much improved on that dimension.

Jon Vander Ark: Some of this is things like ER, which is hard to predict, right? We've just had a soft kinda 18 to 24 months on emergency response other than a single job. You know, going forward, we would expect that to resume to normal levels, but we'll see where that progresses. It's a mixed picture on the underlying verticals. I mentioned petrochemical might being a little slower, or we're seeing some of the biotech being a little slower, where some of the other verticals are moving a little quicker.

Speaker #5: And some of this is things like which is hard to predict, right? We've just had a soft kind of 18 to 24 months on emergency response, other than a single job.

Speaker #5: And going forward, we would expect that to resume to normal levels, but we'll see where that progresses. And then it's a mixed picture on the underlying verticals.

Speaker #5: I mentioned petrochemical and that being a little slower. What we're seeing some of that biotech being a little slower, where some of the other verticals are moving a little quicker.

David Manthey: Given that you have visibility, on these projects as they're coming down, we should assume these are what? Turnarounds, remediation, hazardous C&D? How should we think about what types of work that is?

Speaker #4: And given that you have visibility on these projects as they're coming down, we should assume these are what turnarounds, remediation, hazardous C&D, how should we think about what types of work that is?

Speaker #5: Yeah, it's a full mix. It can be both recurring things where we've won the opportunity to take all of the integrated waste out of a plant. A plant produces recycling, solid waste, special waste, and hazardous liquids, hazardous industrial water.

Jon Vander Ark: Yeah, it's a full mix. It can be both recurring things where we've won the opportunity to take all of the integrated waste out of a plant. A plant produces recycling, solid waste, special waste, and hazardous liquids, hazardous water. We can handle all of that. Or it could be events where we know we're projected to do a big remediation opportunity. Again, that could produce special waste and hazardous waste solids, and that event could be as short as 2 weeks or could last as long as 8 or 9 months.

Speaker #5: We can handle all of that. Or it could be events where we know we're projected to do a big remediation and opportunity. And again, that could produce special waste and hazardous waste solids, and that event could be as short as two weeks or could last as long as eight or nine months.

Speaker #1: 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.

Kim: 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.

Operator: 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 #5: Thank you, Kim. I want to thank the Republic Services team for the great start to the year. Their continued focus on safety, sustainability, and exceeding customer expectations positions us for success and another year of strong results.

Jon Vander Ark: Thank you, Kim. I wanna thank the Republic Services team for the great start to the year. Their continued focus on safety, sustainability, and exceeding customer expectations positions us for success and another year of strong results. Have a good evening, and be safe.

Speaker #5: Have a good evening and be safe.

Kim: 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.