Q3 2026 Republic Services Inc Earnings Call

October 29, 2026

Operator: Good afternoon, and welcome to the Republic Services Q3 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 in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to John Weeks, Vice President of Investor Relations. Please go ahead.

Speaker #1: Republic Services Third Quarter 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 in listen-only mode.

Speaker #1: For assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

Speaker #1: To ask a question, you may press star, then one on your touchstone phone. To withdraw your question, please press star then two. Please note this event is being recorded.

Speaker #1: I would now like to turn the conference over to Jon Weeks, Vice President of Investor Relations. Please go ahead.

John Weeks: Good afternoon. I would like to welcome everyone to Republic Services' Q3 2026 conference call. Jon Vander Ark, our CEO, and Brian DelGhiaccio, our CFO, are on the call today to discuss our performance. I would like to take a moment to remind everyone that some information we discuss on today's call contains forward-looking statements, including forward-looking financial information, which involve risks and uncertainties and may be materially different from actual results. Our SEC filings discuss factors that could cause actual results to differ materially from expectations. 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 29 October 2026. Please note that this call is the property of Republic Services Inc.

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

Speaker #2: I would like to take a moment to remind everyone that some information we discuss on today's call contains forward-looking statements, including forward-looking financial information, which involve risk 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 October 29th, 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.

John Weeks: 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, our earnings press release, which includes GAAP reconciliation tables and a discussion of business activities, along with a recording of this call, are available on Republic's website at republicservices.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 would like to turn the call over to Jon.

Speaker #2: Our SEC filings are earnings press release, which includes gap reconciliation tables and a discussion of business activities along with a recording of this call, are available on Republic's 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.

Jon Vander Ark: Thanks, John. Good afternoon, everyone, and thank you for joining us. We delivered another strong quarter of results driven by disciplined pricing and improving volume trends while successfully overcoming elevated diesel fuel costs. Positive momentum across the business included profitable growth in environmental solutions, underscores the strength and resilience of our business model and our ability to capitalize on improving macroeconomic trends. Our results reflect our continued focus on pricing ahead of cost inflation and effective cost management, while making strategic investments that strengthen our competitive advantages and position us to deliver sustainable growth and long-term shareholder value. During the quarter, we achieved revenue growth of 8.2%, increased adjusted EBITDA 4.8%, delivered adjusted earnings per share of $1.94, and generated year-to-date adjusted free cash flow of $2.28 billion. With respect to Customer Zeal, our commitment to deliver world-class essential services continues to drive organic growth and strengthen customer satisfaction.

Speaker #3: Thanks, Jon. Good afternoon, everyone, and thank you for joining us. We delivered another strong quarter of results, driven by disciplined pricing and improving volume trends, while successfully overcoming elevated diesel fuel costs.

Speaker #3: Positive momentum across the business included profitable growth in environmental solutions, underscores the strength and resilience of our business model and our ability to capitalize on improving macroeconomic trends.

Speaker #3: Our results reflect our continued focus on pricing ahead of cost inflation and effective cost management, while making strategic investments that strengthen our competitive advantages and position us to deliver sustainable growth and long-term shareholder value.

Speaker #3: During the quarter, we achieved revenue growth of 8.2%, increased adjusted EBITDA 4.8%, delivered adjusted earnings per share of $1.94, and generated year-to-date adjusted free cash flow of $2.28 billion.

Speaker #3: With respect to customer zeal, our commitment to deliver world-class essential services continues to drive organic growth and strengthen customer satisfaction. Customer retention remained high at more than 94%.

Jon Vander Ark: Customer retention remained high at more than 94%. Customers value the quality and breadth of our services, which extends continued loyalty and supports our ability to earn attractive returns for the value of the services we provide. Strong pricing across the business remained the primary driver of organic revenue growth during the Q3. Core price on related revenues was 6.3%, which is relatively consistent with our Q2 performance. Combined with higher fuel recovery fees, the price increase is over 8%. Average yield on related revenues was 3.5% and continued to exceed our internal cost inflation. The sequential moderation in average yield was primarily due to better than expected volumes in our small and large container businesses, which included an increase in service levels. Service increases are profitable and increase route density, but typically have a dilutive impact on average yield.

Speaker #3: Customers value the quality and breadth of our services, which extends continued loyalty and supports our ability to earn attractive returns for the value of the services we provide.

Speaker #3: Strong pricing across the business remained the primary driver of organic revenue growth during the third quarter. Core price and related revenues was $6.3%, which was relatively consistent with our second quarter performance.

Speaker #3: Combined with higher fuel recovery fees, the price increase was over 8%. Average yield and related revenues was $3.5% and continued to exceed our internal cost inflation.

Speaker #3: The sequential moderation and average yield was primarily due to better-than-expected volumes in our small and large container businesses, which included an increase in service levels.

Speaker #3: Service increases are profitable and increase route density, but typically have a dilutive impact on average yield. Organic volume decreased 70 basis points on related revenue and was positive 20 basis points after adjusting for one-time landfill event volumes received in the prior year.

Jon Vander Ark: Organic volume decreased 70 basis points on related revenue and were positive 20 basis points after adjusting for one-time landfill event volumes received in the prior year. Importantly, volume in both small and large container businesses increased 50 basis points. This marks the first time in more than three years that both businesses generated positive volume growth at the same time. Organic revenue in the Environmental Solutions business increased 21% compared to the prior year and contributed 2.1% to total company revenue growth in the Q3. Revenue growth in this business was driven by a few large emergency response jobs. Revenue grew in this segment by approximately 9% excluding these jobs. We continue to see strong demand for our Environmental Solutions customers and expect positive revenue growth to continue through the rest of the year and into 2027. Turning to digital.

Speaker #3: Importantly, volume at both small and large container businesses increased 50 basis points. This marks the first time in more than three years that both businesses generated positive volume growth at the same time.

Speaker #3: Organic revenue in the environmental solutions business increased 21% compared to the prior year, and contributed $2.1% to total company revenue growth in the third quarter.

Speaker #3: Revenue growth in this business was driven by a few large emergency response jobs, revenue grew in this segment by approximately 9% excluding these jobs.

Speaker #3: We continue to see strong demand for our environmental solutions customers, and expect positive revenue growth to continue through the rest of the year and into 2027.

Speaker #2: Turning to digital, we continue to advance our technology and AI initiatives to improve pricing effectiveness, extend customer retention, and increase labor productivity. AI-enabled pricing technology is now deployed across the business, providing enhanced insights to support pricing decisions that reflect service requirements, and market conditions.

Jon Vander Ark: We continue to advance our technology and AI initiatives to improve pricing effectiveness, extend customer retention, and increase labor productivity. AI-enabled pricing technology is now deployed across the business, providing enhanced insights to support pricing decisions that reflect service requirements and market conditions. These enhanced capabilities are designed to better reflect customer needs and support long-term revenue retention. We continue to pilot our new AI-enhanced routing platform to improve service execution, gain route efficiencies, and reduce disposal costs. This new technology combines AI capabilities with advanced routing algorithms to optimize every aspect of our routing logistics. Full-scale deployment is expected to begin early next year. With respect to our call centers, digital tools are transforming how we manage 11 million inbound calls each year. We believe that over time, more than half of these calls can be eliminated or handled through a lower cost channel.

Speaker #2: These enhanced capabilities are designed to better reflect customer needs and support long-term revenue retention. We continue to pilot our new AI-enhanced routing platform to improve service execution, gain route efficiencies, and reduce disposal costs.

Speaker #2: This new technology combines AI capabilities with advanced routing algorithms to optimize every aspect of our routing logistics. Full-scale deployment is expected to begin early next year.

Speaker #2: And with respect to our call centers, digital tools are transforming how we manage 11 million inbound calls each year. We believe that, over time, more than half of these calls can be eliminated or handled through a lower-cost channel.

Jon Vander Ark: This enables faster resolution and a more seamless customer experience. Moving on to sustainability. Construction of our third Polymer Center in Allentown, Pennsylvania, remains on track, with commissioning planned for early next year. Our renewable natural gas projects with our partners continue to make progress. We are on track to complete two additional RNG projects by year-end, which would bring the total project additions for the year to four. We continue to electrify our fleet. During the quarter, we launched Florida's first fully electric residential recycling and waste collection fleet in the City of Coconut Creek. We ended the Q3 with more than 280 electric collection vehicles in operation across our business. We remain on track to finish the year with more than 300 EV trucks as we continue to grow this differentiated offering. We strive to be the employer where the best people want to work.

Speaker #2: This enables faster resolution and a more seamless customer experience. Moving on to sustainability, construction of our third polymer center in Allentown, Pennsylvania, remains on track, with commissioning planned for early next year.

Speaker #2: Our renewable natural gas projects with our partners continue to make progress. We are on track to complete two additional R&G projects by year-end, which would bring the total project additions for the year to four.

Speaker #2: We continue to electrify our fleet. During the quarter, we launched Florida's first fully electric residential recycling and waste collection fleet in the city of Coconut Creek.

Speaker #2: We ended the third quarter with more than 280 electric collection vehicles in operation across our business. We remain on track to finish the year with more than 300 EV trucks as we continue to grow this differentiated offering.

Speaker #2: We strive to be the employer with the best people want to work, employee engagement remains high, and turnover is at a record low. We were recently named one of 3BL's 100 best corporate citizens and earned great place to work certification for the 10th consecutive year.

Jon Vander Ark: Employee engagement remains high and turnover is at a record low. We were recently named one of 3BL's 100 Best Corporate Citizens and earned Great Place to Work certification for the tenth consecutive year. With respect to capital allocation, we invested $1.1 billion in value-creating acquisitions so far this year. We expect to finish 2026 with at least $1.2 billion in acquisition investments. Looking ahead, our acquisition pipeline remains active across both recycling and waste and environmental solutions. Year to date, we returned $1.43 billion to shareholders, including $884 million of share repurchases and $577 million of dividends. I will now turn the call over to Brian, who will provide more details on the quarter.

Speaker #2: With respect to capital allocation, we invested $1.1 billion in value-creating acquisitions so far this year. We expect to finish 2026 with at least $1.2 billion in acquisition investments.

Speaker #3: Looking ahead, our acquisition pipeline remains active across both recycling and waste, and environmental solutions. Year to date, we returned $1.43 billion to shareholders, including $884 million of share repurchases and $577 million of dividends.

Speaker #3: I will now turn the call over to Brian, who will provide more details on the quarter.

Brian DelGhiaccio: Thanks, John. Core price on total revenue was 5.3%. Core price on related revenue was 6.3%, which included open market pricing of 7.6% and restricted pricing of 4.1%. The components of core price on related revenue included small container of 8%, large container of 7%, and residential of 5.8%. Average yield on total revenue was 2.9%, and average yield on related revenue was 3.5%. The 50 basis point sequential decline in yield on related revenue was primarily driven by increased unit growth in our small and large container businesses. Fuel recovery fees increased total revenue by 1.8%, which offset higher fuel expense and related surcharges. Q3 volume decreased total revenue by 60 basis points and related revenue by 70 basis points. The decline was driven by a 90 basis point headwind from event-driven landfill volumes received in the prior year.

Speaker #4: Thanks, John. Core price on total revenue was $5.3%. Core price on related revenue was $6.3%, which included open market pricing of $7.6% and restricted pricing of $4.1%.

Speaker #4: The components of core price on related revenue included small container of 8%, large container of 7%, and residential of 5.8%. Average yield on total revenue was 2.9%, and average yield on related revenue was 3.5%.

Speaker #4: The 50 basis points sequential decline in yield on related revenue was primarily driven by increased unit growth in our small and large container businesses.

Speaker #4: Fuel recovery fees increased total revenue by 1.8%, which offset higher fuel expense and related surcharges. Third quarter volume decreased total revenue by 60 basis points and related revenue by 70 basis points.

Speaker #4: The decline was driven by a 90 basis point headwind from event-driven landfill volumes received in the prior year. The rest of the business increased 20 basis points on a year-over-year basis.

Brian DelGhiaccio: The rest of the business increased 20 basis points on a year-over-year basis. The details of volume performance during the quarter included a 50 basis point increase in small container volume, driven by net new business and increased service levels by our same store customers, a 50 basis point increase in large container volume, primarily due to increased service levels, and a 6.4% increase in special waste revenue. This was more than offset by residential volume, which declined 4.3%, primarily due to certain municipal contract losses and reduction in construction and demolition landfill volume, which related to the previously mentioned event work in the prior year. Moving on to recycling. Commodity prices were $142 per ton during the Q3, compared with $126 per ton in the prior year. Recycling processing and commodity sales increased $15 million during the quarter, driven by higher Polymer Center volumes and recycled commodity prices.

Speaker #4: The details of volume performance during the quarter included a 50 basis point increase in small container volume, driven by net new business and increased service levels by our same-store customers; a 50 basis point increase in large container volume, primarily due to increased service levels; and a 6.4% increase in special waste revenue.

Speaker #4: This was more than offset by residential volume, which declined 4.3%, primarily due to certain municipal contract losses, and a reduction in construction and demolition landfill volume, which related to the previously mentioned event work in the prior year.

Speaker #4: Moving on to recycling, commodity prices were $142 per ton during the third quarter, compared with $126 per ton in the prior year. Recycling processing and commodity sales increased 15 million dollars during the quarter, driven by higher polymer center volumes and recycled commodity prices.

Brian DelGhiaccio: With respect to environmental solutions, Q3 revenue increased $96 million compared to the prior year. Environmental Solutions revenue increased 21% compared to same-store revenue in the prior year and contributed 2.1% to total company revenue growth. Adjusted EBITDA margin in the Environmental Solutions business was 25.4%, which represented 440 basis points of margin expansion compared to the prior year. Total company adjusted EBITDA margin was 31.8%. Margin performance during the quarter included a 50 basis point decrease from net fuel, a 40 basis point decrease from landfill event volumes received in the prior year, and a 60 basis point decrease from elevated healthcare costs. This was comprised of 20 basis points from a prior year rebate that did not repeat and 40 basis points from above average large claims activity. Healthcare claims activity returned to more normal levels in the month of October.

Speaker #4: With respect to environmental solutions, third quarter revenue increased 96 million dollars compared to the prior year. Environmental solutions revenue increased 21% compared to same-store revenue in the prior year, and contributed $2.1% to total company revenue growth.

Speaker #4: Adjusted EBITDA margin in the environmental solutions business was 25.4%, which represented 440 basis points of margin expansion compared to the prior year. Total company adjusted EBITDA margin was 31.8%.

Speaker #4: Margin performance during the quarter included a 50 basis point decrease from net fuel, a 40 basis point decrease from landfill event volumes received in the prior year, and a 60 basis point decrease from elevated healthcare costs.

Speaker #4: This was comprised of 20 basis points from a prior-year rebate that did not repeat, and 40 basis points from above-average large claims activity.

Speaker #4: Healthcare claims activity returned to more normal levels in the month of October. The rest of the business expanded margin by 50 basis points, which was in line with our expectations.

Brian DelGhiaccio: The rest of the business expanded margin by 50 basis points, which was in line with our expectations. Year-to-date adjusted free cash flow was $2.28 billion, driven primarily by EBITDA growth in the business. Total debt was approximately $14.2 billion, and total liquidity was $2.3 billion. We ended the quarter with a leverage ratio of approximately 2.6 times. With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 21.7% during the quarter. For the full year, we expect an equivalent tax impact of approximately 24%. I will now turn the call back over to Jon.

Speaker #4: Year to date, adjusted free cash flow was 2.28 billion dollars, driven primarily by EBITDA growth in the business. Total debt was approximately $14.2 billion dollars, and total liquidity was $2.3 billion dollars.

Speaker #4: We ended the quarter with a leverage ratio of approximately 2.6 times. With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 21.7% during the quarter, for the full year we expect an equivalent tax impact of approximately 24%.

Speaker #4: I will now turn the call back over to John.

Jon Vander Ark: Thanks, Brian. Based on results to date and our outlook for the remainder of the year, we updated our full year 2026 financial guidance as follows. Revenue is now expected to be in the range of $17.425 billion to $17.475 billion. Adjusted EBITDA is now expected to be in the range of $5.5 billion to $5.575 billion. Adjusted free cash flow is expected to be in the range of $2.565 billion to $2.585 billion. Most of the revenue increase is due to higher fuel recovery fees related to elevated diesel fuel costs. As a reminder, our fuel recovery program is designed to offset the cash impact of changing diesel costs and is dilutive to margin when fuel costs are increasing. As we look to the year ahead, we remain confident in our ability to execute in a dynamic market and are encouraged by the momentum building across the business.

Speaker #2: Thanks, Brian. Based on results to date and our outlook for the remainder of the year, we have updated our full-year 2026 financial guidance as follows.

Speaker #2: Revenue is now expected to be in the range of $17.425 billion to $17.475 billion. Adjusted EBITDA is now expected to be in the range of $5.5 billion to $5.575 billion.

Speaker #2: And adjusted free cash flow is expected to be in the range of $2.565 billion to $2.585 billion. Most of the revenue increase is due to higher fuel recovery fees related to elevated diesel fuel costs.

Speaker #2: As a reminder, our fuel recovery program is designed to offset the cash impact of changing diesel costs and is dilutive to margin when fuel costs are increasing.

Speaker #2: As we look to the year ahead, we remain confident in our ability to execute in a dynamic market and are encouraged by the momentum building across the business.

Jon Vander Ark: We are still in the middle of our planning process, and our initial perspective regarding 2027 is that our long-term growth algorithm is intact. This calls for consistently delivering mid-single-digit revenue growth while growing EBITDA, EPS, and free cash flow even faster than revenue. This is designed to drive 30 to 50 basis points of annual EBITDA margin expansion. Our perspective is supported by continued disciplined pricing, improving volume trends, and the momentum building in our Environmental Solutions business. Benefits from investments in digital capabilities and sustainability innovation should further support profitable growth and continued value creation. We plan to provide 2027 guidance on our earnings call in February. With that, operator, I would like to open the call to questions.

Speaker #2: We are still in the middle of our planning process, and our initial perspective regarding 2027 is that our long-term growth algorithm is intact. This calls for consistently delivering mid-single-digit revenue growth while growing EBITDA, EPS, and free cash flow even faster than revenue.

Speaker #2: This is designed to drive 30 to 50 basis points of annual EBITDA margin expansion. Our perspective is supported by continued disciplined pricing, improving volume trends, and the momentum building in our Environmental Solutions business.

Speaker #2: Benefits from investments in digital capabilities and sustainability innovation should further support profitable growth and continued value creation. We plan to provide 2027 guidance on our earnings call in February.

Speaker #2: With that operator, I would like to open the call to questions.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. In the interest of time, we ask that you limit yourself to one question and one follow-up question today. If your question has been answered and you would like to withdraw your request, you may do so by pressing star then 2. If you are using a speakerphone, please pick up your handset before pressing the keys. Your first question today comes from Sabahat Khan with RBC Capital Markets. Please go ahead.

Speaker #1: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchstone phone.

Speaker #1: In the interest of time, we ask that you limit yourself to one question and one follow-up question today. If your question has been answered and you would like to withdraw your request, you may do so by pressing star, then 2.

Speaker #1: If you're using a speakerphone, please pick up your handset before pressing the keys. Your first question today comes from Sabahat Khan with RBC Capital Markets.

Speaker #1: Please go ahead.

Sabahat Khan: Great. Thanks, and good afternoon. I am hoping you provide a little bit more color on the ES segment and the evolution there. I think last quarter you alluded to sort of the incrementals getting better and some upside momentum through H2. Maybe just talk about what materialized through Q3 in that silo on the top line and the margin progression and sort of what is embedded for Q4. Thanks.

Speaker #4: Great. Thanks, and good afternoon. I'm hoping you can provide a little bit more color on the ES segment and the evolution there. I think last quarter, you alluded to sort of the incrementals getting better and some upside momentum through H2.

Speaker #4: Maybe just talk about what materialized through Q3 in that silo on the top line and the margin progression, and sort of what's embedded for Q4.

Speaker #4: Thanks.

Jon Vander Ark: I think we talked about at the outset of the year that the H1 was going to be tougher, and we saw an inflection point and momentum into the H2 of the year, and that is what we are seeing. We were calling that shot because the sales pipeline was building, and we saw a number of jobs that were confirmed but had not started yet, and we saw a lot of that momentum in Q3. Obviously, there were a couple of big ER jobs that helped create an outsized outcome, but I think we mentioned you strip that away, we are still up 9%.

Speaker #3: Yeah, I think we talked about at the outset of the year that the first half was going to be tougher, and we saw an inflection point in momentum into the second half of the year, and that's what we're seeing.

Speaker #3: And we're calling that shot because the sales pipeline was building, and we saw a number of jobs that were confirmed but hadn't started yet, and we saw a lot of that momentum in Q3.

Speaker #3: Obviously, there were a couple of big jobs that helped create an outsized outcome, but I think we mentioned that if you strip that away, we were still up 9%.

Brian DelGhiaccio: A very broad-based growth geographically and across verticals. I think that is a function of the underlying industrial economy continuing to improve, and then I think our team executing at a high level.

Speaker #3: And so, a very broad-based growth geographically and across verticals. So I think that's a function of the underlying industrial economy continuing to improve, and then I think our team is executing at a high level.

Sabahat Khan: Great. I just want to follow up the commentary around volumes getting a little bit better. Not asking for guidance on 2027, but as you think about the mid-single digits, do you expect at least year-over-year volume trends just sort of across your platform based on what you are seeing that to be a bit more positive sequentially? Just maybe if you can break out some of the puts and takes you are seeing on the volume front across your business. Thank you.

Speaker #4: Great. And then just for a follow-up, the commentary around volumes getting a little bit better, not asking for guidance on '27, but as you think about the mid-single digits, do you expect at least the year-over-year volume trends just sort of across your platform based on what you're seeing that to be a bit more positive sequentially?

Speaker #4: Just maybe if you can break out some of the puts and takes you're seeing on the volume front across your business. Thank you.

Jon Vander Ark: Yeah. I think the recycling and waste industry is coming out of a four-year period of really negative growth, and environmental solutions is coming out of an 18-month period where I think it was kind of in an air pocket in volume. I think both markets are now trending in a good direction. I think recycling and waste will tip to positive growth in 2027 across the industry, and we will certainly try to match that or do a little better than that performance. Environmental Solutions will be on a nice growth trajectory, and again, we will try to match market or do a little bit better than that from a volume standpoint.

Speaker #3: Yeah, I think the industry we're cycling waste is coming out of a four-year period of really negative growth. And Environmental Solutions is coming out of an 18-month period where I think it kind of hit an air pocket in volume.

Speaker #3: I think both markets are now trending in a good direction. I think we're cycling in waste will tip to positive growth in 2020, '07 across the industry, and we'll certainly try to match that or do a little better than that performance.

Speaker #3: And environmental solutions will be on a nice growth trajectory. And again, we'll try to match market or do a little bit better than that from a volume standpoint.

Sabahat Khan: Thank you.

Speaker #4: Thank you.

Operator: The next question comes from Bryan Burgmeier with Citi. Please go ahead.

Speaker #1: The next question comes from Brian Bergmeier with Citi. Please go ahead.

Bryan Burgmeier: Hey, good afternoon. Thanks for taking the question. Maybe just on the updated EBITDA outlook for 2026. Just curious if you could help us bridge that a little bit. I guess, you are going to have a little bit of help from commodities, a little bit of M&A. Not sure if ES beat in the quarter versus your model or if it was in line. Just any detail on the improved outlook there.

Speaker #5: Hey, good afternoon. Thanks for taking the question. Maybe just on the updated EBITDA outlook for 2026, just curious if you could help us bridge that a little bit.

Speaker #5: I guess you're going to have a little bit of help from commodities, a little bit of M&A. Not sure if ESB in the quarter versus your model, or if it was in line.

Speaker #5: Just any detail on the improved outlook there.

Brian DelGhiaccio: Yeah. I will give you both pieces. When you take a look at our guide that we updated in July compared to the guide that we just recently updated. So at the midpoint, revenue is up about $200 million on the revenue, and $150 of that or so is related to fuel fees, $50 million is related to environmental solutions. Most of that has already occurred with those handful of large emergency response jobs that we called out. With respect to the EBITDA, we are expecting some contribution from fuel fees, call it in the $10 million zip code, in part just because we saw the big spike in fuel costs in the month of September that moved from the mid $5 a gallon up to $6.50 or so in September.

Speaker #3: Yeah, I'll give you both pieces when you take a look at our guide that we updated in July, compared to the guide that we just recently updated.

Speaker #3: So, at the midpoint, revenue is up about $200 million. Of that revenue, about $150 million is related to fuel fees.

Speaker #3: 50 million is related to environmental solutions, most of that has already occurred with those handful of large emergency response jobs that we called out.

Speaker #3: With respect to the EBITDA, we're expecting some contribution from fuel fees, call it in the 10 million dollar zip code. In part, just because we saw the big spike in fuel costs in the month of September.

Speaker #3: They moved from the kind of mid $5 a gallon up to $6.50 or so, in September. So we expect our fuel recovery fee to catch up early in the fourth quarter.

Brian DelGhiaccio: We expect our fuel recovery fee to catch up early in Q4, and about $15 million of the contribution from that $50 million on environmental solutions will positively impact EBITDA. That is how you go from the previous guidance to approximately $25 million of incremental EBITDA at the midpoint.

Speaker #3: And about $15 million of the contribution from that $50 million on environmental solutions will positively impact EBITDA. And that's how you go from the previous guidance to approximately $25 million of incremental EBITDA at the midpoint.

Bryan Burgmeier: Got it. Really appreciate that detail. Then one follow-up for me, just going back to ES. I suppose it will always be a bit of a lumpy business, just given the nature of the work. I am just curious if you could try to frame what you think is maybe a sustainable level of margins. We have covered a lot of ground this year from high teens to mid-20s and just, yeah, curious about how you think about the sustainability of the 3Q performance and a sustainable margin level. Thanks. I will turn it over.

Speaker #5: Got it. Got it. Really appreciate that detail. And then one follow-up for me, just going back to ES, I suppose it'll always be a bit of a lumpy business, just given the nature of the work.

Speaker #5: But I'm just curious if you could try to frame what you think is maybe a sustainable level of margins, we've covered a lot of ground this year from high teens to mid-20s and just, yeah, curious about how you think about the sustainability of the three Q performance and sustainable margin level.

Speaker #5: Thanks. I'll turn it over.

Jon Vander Ark: Yeah, we talked about expanding the business 30 to 50 basis points, so we will try to kind of match that or beat that margin expansion within ES. We think there is a lot of upside over the long term in that margin. I would tell you that if you measured exactly by the quarter, you might not get the exact results you want. I think you have got to look at the trend across years, and when you measure that trend, it is to the upper or the right. I think given the nature of this business, assets that are impossible to permit, the waste that moves long distances gets priced by the pound or the yard versus the ton. I think there is a lot of opportunity to price for the value we deliver over time, and I think you are going to see steady progress on that in the years to come.

Speaker #3: Yeah, we talked about expanding the business 30 to 50 basis points, so we'll try to kind of match that or beat that margin expansion within ES.

Speaker #3: We think there's a lot of upside over the long term in that margin. I would tell you that if you measured exactly by the quarter, right, you might not get the exact results you want.

Speaker #3: I think you've got to look at the trend across years, and when you measure that trend, it's to the upper the right. I think given the nature of this business, assets that are impossible to permit, the waste that moves long distances, gets priced by the pound or the yard versus the ton, I think there's a lot of opportunity to price for the value we deliver over time.

Speaker #3: And I think you're going to see steady progress on that in the years to come.

Operator: The next question comes from Noah Kaye with Oppenheimer. Please go ahead.

Speaker #1: The next question comes from Noah Kay with Oppenheimer. Please go ahead.

Noah Kaye: Hey, thanks for taking the questions, guys. Getting some questions on the yield dynamics you called out as it relates to volume. Can you maybe just give us a little bit more of an explanation. Because it sounds like you are picking up new business, you are seeing volume growth, your same store price is good, but there is just some business coming on at sort of a lower starting price. So any more nuance to it than that, or is this something that we should be expecting in coming quarters if we continue to see volumes improve?

Speaker #4: Hey, thanks for taking the questions, guys. Getting some questions on the yield dynamics you called out as relates to volume. Can you maybe just give us a little bit more of an explanation?

Speaker #4: Because it sounds like you're picking up new business. You're seeing volume growth. You're same store price is good, but there's just some business coming on at sort of a lower starting price.

Speaker #4: So any more nuance to it than that, or is this something that we should be expecting in coming quarters if we continue to see volumes improve?

Jon Vander Ark: Yeah. I would say that when the business expands, that is either through service increases at existing customers or taking on new customers. You are almost always going to take on those units that are profitable, but they are below the average rate. That is the nature of our subscription-based business and the recurring revenue elements of the business. And so that arithmetically puts downward pressure on yield. But it is profitable business, and so normally you would see margin expansion. I think this, we got caught in a little unique circumstance this quarter with a comp in the landfills with a spike in diesel price, which that increase hurts us. We are fine at the level, but the increase hurts us. And then some one-time healthcare costs that Brian mentioned that have already receded and come back down in October. Outside of that, you see margin expansion.

Speaker #3: Yeah, I'd say that when the business expands, that's either through service increases at existing customers or taking on new customers. You are almost always going to take on those units that are profitable, but they're below the average rate.

Speaker #3: That's the nature of our subscription-based business and the recurring revenue. Elements of the business. And so that arithmetically puts downward pressure on yield. But it's profitable business, and so normally you'd see margin expansion.

Speaker #3: I think we got caught in a little unique circumstance this quarter, with a comp on the landfills and a spiking diesel price, which—that increase hurts us.

Speaker #3: We're fine at the level, but the increase hurts us. And then some one-time healthcare costs that Brian mentioned that have already receded and come back down in October.

Speaker #3: Outside of that, you see margin expansion. So we'd expect that yield number going forward to probably trend slightly up, but certainly the margin expansion to flow through because those units certainly contribute to our profitable when they come into the system.

Jon Vander Ark: We would expect that yield number going forward to probably trend slightly up, but certainly the margin expansion to flow through because those units certainly contribute, are profitable, and they come into the system.

Noah Kaye: Yeah, makes sense. All things considered, for the business your size, whatever it is, $18 million to $20 million higher is not a massive number, but the healthcare costs.

Speaker #4: Yeah. Makes sense. And look, I mean, all things considered, for the business your size, whatever it is, 18 to 20 million higher is not a massive number, but the healthcare costs spike.

Noah Kaye: What was noticeable enough for you to call it out? I guess, are there any other elements that maybe you call out as unusual for the balance of the year? You mentioned the rebate. I know that there have been some true-ups in the industry around risk management accruals. Just anything we should be thinking about for Q4?

Speaker #4: What is noticeable enough for you to call it out? I guess are there any other elements that maybe you call out as unusual for the balance of the year?

Speaker #4: You mentioned as the rebate I know that there have been some true-ups in the industry around risk management accruals. Does anything we should be thinking about for four Q?

Brian DelGhiaccio: Nothing significant when you take a look at our prior period results. It was fairly straightforward, and that is what we are anticipating for this Q4, and that is what is included in the guide.

Speaker #3: Nothing significant when you take a look at our prior period results. It was fairly straightforward, and that's what we're anticipating for this fourth quarter.

Speaker #3: And that's what's included in the guide.

Noah Kaye: Great. Thank you, guys.

Speaker #4: Great. Thank you, guys.

Operator: The next question comes from Toni Kaplan with Morgan Stanley. Please go ahead.

Speaker #1: The next question comes from Tony Kaplan with Morgan Stanley. Please go ahead.

Yehuda Silverman: Hi, this is Yehuda Silverman on for Toni Kaplan. Just a quick one on end market health. I think I heard you mention earlier in the call that combined price and higher fuel recovery fee was over 8%. Just curious if you could discuss the customer receptivity to pricing and how that has evolved, particularly in an environment with teams at this elevated fuel price and broader inflationary pressure might be here for a bit longer.

Speaker #6: Hi, this is Yehuda Silverman on for Tony Kaplan. Just a quick one on the end market health. I think I heard you mention earlier in the call that combined price and higher fuel recovery fee was about over 8%.

Speaker #6: Just curious if you could discuss the customer receptivity to pricing and how that's evolved, particularly in an environment with teams that this elevated fuel price and broader inflationary pressure might be here for a bit longer.

Jon Vander Ark: Well, we certainly look at what the bill the customer is going to receive, and affordability is a very popular term right now. We are mindful of that. This is where our tools really help us to understand the lifetime value of that customer. We want to run the business forever, not maximize any type of in-year pricing or in-year return on that. So I would say on the margin, that probably caused us to back off slightly on pricing, which we would have otherwise priced. But in terms of the core price and what you are seeing in the metrics, really positive in terms of receptivity. Again, I think the benefit of our tools is we are getting that price right and that customer is staying with us.

Speaker #3: Yeah, we certainly look at what the bill of the customer is going to receive. And affordability is a very popular term right now. We're mindful of that.

Speaker #3: This is where our tools really help us to understand the lifetime value of that customer, and we want to run the business forever—not maximize any type of in-year pricing or in-year return on that.

Speaker #3: So I'd say on the margin, that probably cost caused us to back off slightly on pricing, which we would have otherwise priced. But in terms of the core price and what you're seeing in the metrics, really positive in terms of receptivity again, I think the benefit of our tools is we're getting that price right and that customer is staying with us.

Yehuda Silverman: Got it. Just one quick one on the cost side, that labor and related benefit increased year-over-year a bit. Is that where the healthcare one time came in there or some of the costs you saw step up?

Speaker #6: Got it. And just one quick one on the cost side. Labor and related benefits increased year over year a bit. Is that where the healthcare one-time came in, or were some of the costs you saw a step up?

Brian DelGhiaccio: Yeah. That's where most of it would be, is in that labor category.

Speaker #3: Yeah, that's where most of it would be is in that labor category.

Yehuda Silverman: Great. Thank you.

Speaker #6: Great. Thank you.

Operator: The next question comes from Jerry Revich with Wells Fargo. Please go ahead.

Speaker #1: The next question comes from Jerry Revich. With Wells Fargo, please go ahead.

Jerry Revich: Yes. Hi, good afternoon and good evening, everyone. I want to ask on the AI part of the conversation. In your prepared remarks, you folks spoke about some interesting pricing tools and opportunity to reduce the phone operator costs. Can we just talk about over what period of time do you think we will see a meaningful impact on numbers? How long will some of these initiatives take to play out, and can you just size for us, if we are talking about phone service, how meaningful of a bucket is that as we think about the margin upside?

Speaker #5: Yes, hi. Good afternoon and good evening, everyone. I want to ask on the AI part of the conversation and your prepared remarks. You folks spoke about some interesting pricing tools and opportunity to reduce the phone operator costs.

Speaker #5: Can we just talk about over what period of time you think we'll see a meaningful impact on numbers? How long will some of these initiatives take to play out?

Speaker #5: And can you just size for us, if we're talking about phone service, how meaningful of a bucket is that as we think about the margin upside?

Jon Vander Ark: Yeah. Pricing, we are already seeing right now when you are seeing that in the numbers and the impact, especially in the fuel related environment. Customer service, you are starting to see just small bits of that, but most of that impact will come in next year. On the routing, which is the biggest opportunity, most will be rollout next year. So you will see some impact toward the back end of next year, but that will really be a 2028 story in terms of getting the full benefit of that. I think we mentioned $100 million run rate EBITDA by the end of 2028, and we still feel like we are on track for that number.

Speaker #3: Yeah, pricing, we're already seeing right now when you're seeing that in the numbers and the impact, especially in the fuel-related environment. Customer service, you're starting to see just small bits of that, but most of that impact will come in next year.

Speaker #3: And then on the routing, which is the biggest opportunity, most of the will be rollout next year. So you'll see some impact toward the back end of next year, but that will really be a 2028 story in terms of getting the full benefit of that.

Speaker #3: I think we mentioned 100 million run rate EBITDA by the end of 2028, and we still feel like we're on track for that number.

Jerry Revich: Okay, great. For 2027 in about 3 months, but putting the pieces together, we have got good momentum on ES for the first time in 18 months. If we are thinking about good core margin improvement in the base business on top of it could be in total a year of outsized margin expansion 2027 versus 2026. Brian DelGhiaccio, anything that we need to keep in mind given that setup? Obviously, we will talk more detail in 3 months, but would love to get your initial thoughts on the high level opportunity.

Jerry Revich: Okay, great. For 2027 in about three months, but putting the pieces together, we have got good momentum on ES for the first time in 18 months. If we are thinking about good core margin improvement in the base business on top of it could be in total a year of outsized margin expansion 2027 versus 2026. Brian DelGhiaccio, anything that we need to keep in mind given that setup? Obviously, we will talk more detail in three months, but would love to get your initial thoughts on the high level opportunity.

Speaker #5: Okay, great. And then more about 27 in about three months, but putting the pieces together, we've got good momentum on ES for the first time in 18 months.

Speaker #5: And if we're thinking about good core margin improvement in the base business on top of it, it could be in total a year of outsized margin expansion 27, 20 versus 26.

Speaker #5: Brian, anything that we need to keep in mind given that setup and obviously we'll talk more detail in three months, but we'd love to get your initial thoughts on the high-level opportunity.

Brian DelGhiaccio: Yeah, remember, we did not provide guidance, but we did talk about our long-term growth algorithm, and we feel that 2027 is laying into the construct of what we talk about that long-term growth algorithm, which calls for 30 to 50 basis points of margin expansion.

Speaker #3: Yeah, remember, I mean, we didn't provide guidance, but we did talk about our long-term growth algorithm. And we feel that 27 is laying into the construct of what we talk about that long-term growth algorithm, which calls for 30 to 50 basis points of margin expansion.

Operator: The next question comes from Adam Bubes with Goldman Sachs. Please go ahead.

Speaker #1: The next question comes from Adam Bubes with Goldman Sachs. Please go ahead.

Adam Bubes: Hi. Thanks for taking the question. Organic growth ex-E&P related volumes in ES was 9%. Can you just help us understand the drivers of the strength there? How much is volume versus price? Which business lines are you seeing the strongest growth?

Speaker #2: Hi, thanks for taking the question. I think organic growth X event-related volumes in ES was 9%. Can you just help us understand the drivers of the strength there?

Speaker #2: How much is volume versus price? Which business lines are you seeing the strongest growth?

Brian DelGhiaccio: Yeah. You bounce across both more volume and price, but certainly got our fair share on price. I think what you are seeing is just all the factors driving the industrial economy. PMI now has been over 50 for a number of months. You are starting to see the reshoring activity. Obviously, a big build-out in all parts of the technology sector and semiconductors and data centers and everything else, and all of those things are contributing to our performance. To Jon's point, it was broad based. We saw increases at our hazardous waste landfills. We saw increase in E&P volumes. We saw it in our TSDFs and our Field and Industrial Services. So it was a very broad based increase.

Speaker #3: Yeah, you bounce across both more volume and price, but certainly got our fair share on price. I think what you're seeing is just all the factors driving the industrial economy, PMI now has been over 50 for a number of months.

Speaker #3: You're starting to see the reshoring activity. Obviously, a big build-out in all parts of the technology sector. And semiconductors and data centers and everything else.

Speaker #3: And all of those things are contributing to our performance.

Speaker #4: Yeah, and to John's point, it was broad-based. We saw increases at our hazardous waste landfills, we saw increases in E&P volumes, we saw it in our TSDFs, and in our field and industrial services.

Speaker #4: It was very broad-based increase.

Adam Bubes: On the residential side, I think you cited some municipal contract losses. Were those new in Q3, or was that already in the base? I think last quarter on the call, you might have talked about potential to get closer to a down 2% number sometime in 2027. Does that still hold or should we think about this as incremental shedding?

Speaker #2: And then on the residential side, I think you cited some municipal contract losses. Were those new in 3Q or was that already in the base?

Speaker #2: And then I think last quarter on the call, you might have talked about the potential to get closer to a down 2% number sometime in 2027.

Speaker #2: Does that still hold or should we think about this as incremental shedding?

Brian DelGhiaccio: No, all these were actions that are decisions that were taken last year that we are living with the effect through the course of this year, and that we will certainly move up in our trend, and I think that roughly 2% is probably about where we will end up landing next year.

Speaker #3: No, all these were actions that are decisions that were taken last year, that we're living with the effect through the course of this year.

Speaker #3: And that we will certainly move up in our trend. And I think that roughly 2% is probably about where we'll end up landing next year.

Adam Bubes: Thanks so much.

Speaker #2: Thanks so much.

Operator: The next question comes from Trevor Romeo with William Blair. Please go ahead.

Speaker #1: The next question comes from Trevor Romeo. With William Blair, please go ahead.

Trevor Romeo: Hi. Good afternoon. Thank you for taking the questions. Just a couple more from me on ES, just because it was nice to see the improvement there. One, I appreciate the comments about the long-term growth algorithm in 2027, and I know you do not want to be getting into detailed guidance, but just thinking, you are already organically ex-E&P growing 9%, got an easier comp in the H1 next year, and you have got the manufacturing backdrop improving and all of the other secular factors there. So, how are you thinking about the potential for 2027 for ES to just be an above-average growth year and what needs to happen for it to get there?

Speaker #7: Hi, good afternoon. Thank you for taking the questions. Just a couple more for me on ES, just because it was nice to see the improvement there.

Speaker #7: I mean, one, I appreciate the comments about the sort of long-term growth algorithm in 27. And I know you don't want to be getting into detailed guidance, but just thinking you're already kind of organically X events growing 9%, kind of an easier comp in the first half next year.

Speaker #7: And you've got the manufacturing backed up improving and all kind of the other secular factors there. So I mean, how are you thinking about the potential for 27 for ES to just be kind of an above-average growth here and kind of what needs to happen for it to get there?

Jon Vander Ark: We will continue to build the pipeline and have high aspirations for our team. I think we give you the broad markers of how the business does. Keep in mind, we are still in the sub 15% of the overall business. When we give you the overall markers for how we are going to do next year, you could still have outsized performance in ES and could fit within the envelope that Brian talked about.

Speaker #3: Yeah, we'll continue to build the pipeline and have high aspirations for our team I think would give you the long kind of the broad markers of how the business does.

Speaker #3: Keep in mind, we're still in the sub-15% of the overall business. When we give you the overall markers for how we're going to do next year, you could still have outsized performance in ES and it could fit within the envelope that Brian talked about.

Trevor Romeo: Okay. I appreciate that, Jon. Just a quick follow-up on ES as well. On the ER projects overall, I guess, how has this year been trending relative to a normal year? I know pricing on the ER work is something you have talked about maybe the past several quarters. Do you feel like that has gotten back to an equilibrium at this point now that you are winning more jobs?

Speaker #7: Okay, I appreciate that, John. And just quick follow-up on ES as well. I mean, in the projects overall, I guess, how has this year kind of been trending relative to a normal year?

Speaker #7: And then I know pricing on the work is something you've talked about, maybe the past several quarters. Do you feel like that's kind of gotten back to an equilibrium at this point now that you're kind of winning more jobs?

Jon Vander Ark: Yeah, I think we are getting better and smarter every day. We do thousands of ER jobs every year. Most of them are very small. It is the outsized jobs that can drive the economics. Really, the last 18 to 24 months prior to this quarter, it has been the dearth of those larger jobs. Typically, you see one, two, or three of these bigger jobs every year. We had a couple of them this quarter. The team did a great job, and we leveraged the full capabilities of our offering. It was not just the Environmental Solutions field services team and post-collection group, but it was also our recycling and waste landfills that played a pretty big part in providing the right solutions for our customers.

Speaker #3: Yeah, I think we're getting better and smarter every day. We do thousands of jobs every year, most of them are very small. It's the outsized jobs that can kind of drive the economics.

Speaker #3: And really the last 18 to 24 months prior to this quarter, it's been the dearth of those larger jobs. And so typically you see one, two or three of these bigger jobs every year.

Speaker #3: We had a couple of them this quarter. Team did a great job and we leveraged the full capabilities of our offering. So it wasn't just the environmental solutions, field services team and post-collection group, but it was also our recycling and waste landfills that played a pretty big part in providing the right solutions for our customers.

Trevor Romeo: All right. Good stuff. Thank you.

Speaker #7: All right, good stuff. Thank you.

Operator: The next question comes from Tami Zakaria from JP Morgan. Please go ahead.

Operator: The next question comes from Tami Zakaria from J.P. Morgan. Please go ahead.

Speaker #1: The next question comes from Tommy Zachariah from JP Morgan. Please go ahead.

Tami Zakaria: Hey, good afternoon. Thank you so much. I wanted to understand the mid-single-digit growth algo that you have for the long term a little bit better. So you've been able to achieve that despite residential construction and housing formation being very weak the last few years. So if and when that begins to recover, how should we think about a lift to that mid-single-digit percent number? Or what kind of improvement have you seen did you see in the past when prior res upcycles began?

Speaker #8: Hey, good afternoon. Thank you so much. I wanted to understand the mid-single-digit growth algorithm that you have for the long term a little bit better.

Speaker #8: So you've been able to achieve that despite residential construction and housing formation being very weak the last few years. So if and when that begins to recover, how should we think about a lift to that mid-single-digit percent number or what kind of improvement have you seen?

Speaker #8: Did you see in the past when prior res-yup cycles began?

Jon Vander Ark: Yeah. I'm very optimistic about the US housing market over time. I'm very pessimistic about it in the short to medium term. I think we're going to need to get the ten-year down and the interest rate down to unlock both people to move and investment in a new housing construction, which the country badly needs. It will have a nice, steady, positive tailwind to the industry, and it will start in large container temp because that will be the work we do. We'll add then some residential units, and then the knock-on effect is adding some small container units around that as you see business formation happen around households. That'll be a steady upsweep. It's not points and points of growth to the top line, but there'll be certainly some basis points of tailwind, and those will be profitable units we'll add to the system.

Speaker #3: Yeah, I'm very optimistic about the U.S. housing market over time. I'm very pessimistic about it in the short to medium term. I think we're going to need to get the 10-year down and the interest rate down to unlock both people to move and investment in new housing construction, which the country badly needs.

Speaker #3: It will have a nice steady positive tailwind to the industry. And we'll start large container temp because that will be the work we do.

Speaker #3: We'll add, then, some residential units, and the knock-on effect is adding some small container units around that as you see business formation happen around households.

Speaker #3: So that'll be a steady upswing. It's not points and points of growth to the top line, but there'll be certainly some basis points of tailwind and those will be profitable units we'll add to the system.

Brian DelGhiaccio: Yeah, if you want to sensitize it, direct construction-related activity is about 6% to 7% of our total revenue base.

Speaker #4: Yeah, if you want to sensitize it, direct construction-related activity is about 6 to 7% of our total revenue base.

Tami Zakaria: Understood. That's all from me. Thank you.

Speaker #8: Understood. That's all from me. Thank you.

Operator: Next question comes from Seth Weber from BNP Paribas. Please go ahead.

Speaker #1: Next question comes from Seth Weber. From BNP Paribas, please go ahead.

Seth Weber: Hey, guys. Good evening. A couple more on ES. The 9%, excluding the emergency business, do you feel like that's a catch-up of just stuff that has been delayed, or do you feel like you're taking market share here? Thank you.

Speaker #7: Hey guys, good evening. I just a couple more on E, just the 9% excluding the emergency business. Do you feel like that's a catch-up of just stuff that has been delayed or do you feel like you're taking market share here?

Speaker #7: Thank you.

Jon Vander Ark: I think I would encourage you to not overinterpret a given quarter.

Speaker #3: I think I would encourage you do not over-interpret a given quarter, right? In this business, there's always puts and takes on event job where recycling and waste given the predominantly recurring revenue nature of that business, right?

Seth Weber: Right.

Jon Vander Ark: In this business, there is always puts and takes on event job, recycling and waste, given the predominantly recurring revenue nature of that business.

Seth Weber: Right.

Jon Vander Ark: Very repeatable, predictable, and you can start to spot trends easier in that business. I think we are seeing a re-ignition of growth in the sector, and we are certainly getting our fair share, and we feel probably more than our fair share right now. That could change over the quarter, but again, over the cycle, we will look to get growth slightly ahead of market and certainly lead with price and then take volume behind that. I think we are very encouraged by the efforts the team has made in that business.

Speaker #3: Very repeatable, predictable. And you can start to spot trends easier in that business. I think we're seeing a reignition of growth in the sector and we're certainly getting our fair share and we feel probably more than our fair share right now.

Speaker #3: That could change over the quarter, but again, over the cycle, we'll look to get growth slightly ahead of the market and certainly lead with price, then take volume behind that.

Speaker #3: And I think we're very encouraged by the efforts the team has made in that business.

Seth Weber: Okay. Just as this business turns, would you expect outsized incremental margins in this business for, say, 2027?

Speaker #7: Okay. And then just as this business turns, would you expect outsized incremental margins in this business for, say, 2027?

Brian DelGhiaccio: I think it depends a lot on mix and the nature of that work. In general, yes, you get leverage on your post-collection assets. You get leverage on your labor, so there is some fixed cost nature of that work on the Field and Industrial Services as well. But the nature of that work and the mix of the work could determine it. But on balance, yes.

Speaker #3: I think it depends a lot on mix and the nature of that work. In general, yes, you get leverage on your post-collection assets; you get leverage on your labor.

Speaker #3: So there's some fixed cost nature of that work on the field services as well. But the nature of that work and the mix of the work could determine it.

Speaker #3: But on balance, yes.

Seth Weber: Okay. Thanks, guys. I appreciate it.

Speaker #7: Okay, thanks, guys. I appreciate it.

Operator: The next question comes from Shlomo Rosenbaum with Stifel. Please go ahead.

Speaker #1: The next question comes from Shlomo Rosenbaum with Stifel. Please go ahead.

Shlomo Rosenbaum: Hi. Thank you.

Speaker #6: Hi, thank you. First question, just a little bit about operational landfill costs. I think you're the first company reporting this quarter that has not mentioned that they're going up.

Shlomo Rosenbaum: First question, just a little bit about operational landfill costs. I think you are the first company reporting this quarter that has not mentioned that they are going up. I am just wondering, are you noticing that happening recently? Is there a way to contextualize it if it is? If not, why do you think you are not seeing it versus some of the other ones that are talking about it now?

Speaker #6: And I'm just wondering, are you noticing that happening recently? And is there a way to contextualize it if it is? And if not, why do you think you're not seeing it versus some of the others that are talking about it now?

Jon Vander Ark: Yeah. Some of it depends on weather and rain and the mix of where your landfills are located. Again, in any given quarter or year, you might be slightly more elevated than others on that. Landfills are certainly getting more expensive to operate, but our team's done a really good job of managing those costs, getting in front of it, and most importantly, protecting the health of those landfills across the cycle.

Speaker #3: Yeah, some of it depends on weather and rain and the mix of where your landfills are located. And again, in any given quarter or year, you might be slightly more elevated than others in that.

Speaker #3: Landfills are certainly getting more expensive to operate, but our team's done a really good job of managing those costs, getting in front of it.

Speaker #3: And most importantly, protecting the health of those landfills across the cycle.

Shlomo Rosenbaum: You are not seeing anything regulatory-wise, particularly where your landfills are located, that is making a bigger difference now versus some of the other ones?

Speaker #6: Just seeing anything regulatory-wise, particularly where your landfills are located that's making a bigger difference now versus some of the other ones?

Jon Vander Ark: We are working every day across multiple state capitals, shaping regulation or sometimes working against regulation if we think it is really bad for the customer. Most of the time, shaping regulation to help improve the environment and manage those assets.

Speaker #3: We're working every day across multiple state capitals shaping regulation or sometimes working against regulation if we think it's really bad for the customer. But most of the time shaping regulation.

Speaker #3: To help improve the environment and manage those assets.

Shlomo Rosenbaum: Great. Just to follow up, Brian, can you just talk about the price of diesel that is expected in your Q4 2026 numbers?

Speaker #6: Great. Just to follow up, Brian, can you just talk about the price of diesel that's expected in your forward Q26 numbers?

Brian DelGhiaccio: Yeah. We have seen diesel modulate a little bit. The high point in September was approximately $6.50. As we sit here today, we will call it $6.35. We expect that to taper down a little bit and approach the $6 mark by the time we exit the year.

Speaker #4: Yeah, we've seen diesel modulate a little bit. The high point in September was approximately $6.50. As we sit here today, we're call it $6.35.

Speaker #4: We expect that to taper down a little bit and approach the $6 mark by the time we exit the year.

Shlomo Rosenbaum: Thank you.

Speaker #6: Thank you.

Operator: The next question comes from Stephanie Moore with Jefferies. Please go ahead.

Speaker #1: The next question comes from Stephanie Moore with Jefferies. Please go ahead.

Stephanie Moore: Hi. Good afternoon. Thank you. Okay. So maybe first question, I do want to touch a bit on M&A. Maybe if you could talk about how you are just viewing the M&A environment today, where you are seeing the most attractive opportunities across, obviously, MSW, ES, or anything else. Then, what should we expect maybe your focus to remain? Is it more so tuck-ins? Is there an appetite for maybe a larger, more strategic deal? I would love to hear your thoughts. Thank you.

Speaker #5: Hi, good afternoon. Thank you. Okay, so maybe first question, I do want to touch a bit on M&A. Maybe if you could talk about how you're just viewing the M&A environment today, where you're seeing the most attractive opportunities across obviously MSW, ES, or anything else.

Speaker #5: And then, what should we expect your focus to remain on? Is it more about tuck-ins, or is there an appetite for perhaps a larger, more strategic deal?

Speaker #5: I'd love to hear your thoughts. Thank you.

Jon Vander Ark: The balance of our pipeline is always going to be smaller tuck-ins. We will probably end up doing somewhere around 25 acquisitions this year, most of which will be small tuck-ins. It will be balanced across recycling and waste and ES. Most of it will be recycling and waste, just given the size and the nature of those opportunities. There were certainly some medium-sized deals this year, and there will be some more next year. The pipeline remains very, very strong. In terms of anything larger, we remain and take a perspective on everything. But I would not anticipate something in that stage or that size to happen to be in our wheelhouse here in the short to medium term.

Speaker #3: Yeah, the balance of our pipeline is always going to be smaller tuck-ins. We'll probably end up doing somewhere on 25 acquisitions this year. Most of which will be small tuck-ins.

Speaker #3: It'll be balanced across recycling and waste and ES. Most of it will be recycling and waste, just given the size and the nature of those opportunities.

Speaker #3: There were certainly some medium-sized deals this year and they'll be some more next year. The pipeline remains very, very strong. In terms of anything larger, we remain and take a perspective on everything.

Speaker #3: But I wouldn't anticipate something in that. That stage or that size to be in our wheelhouse here in the short to medium term.

Stephanie Moore: Understood. Just a quick follow-up on the volume piece. Can you just remind us where you are in just the residential shedding journey? When we should expect to see maybe that optimal mix, and then also any color you can give in terms of what this has implied from just a margin standpoint as well. Thanks, guys. Appreciate it.

Speaker #5: Understood. And just a quick follow-up on the volume piece. Can you just remind us where you are in just the residential shedding journey? When we should expect to see maybe that optimal mix?

Speaker #5: And then also any color you can give in terms of what this is implied from just the margin standpoint as well. Thanks, guys. Appreciate it.

Jon Vander Ark: Well, I think there is always going to be some underlying shedding because as we acquire companies, we know part of their portfolio are municipal contracts that we will either upgrade or exit. They just do not meet our returns threshold. So again, across 25 deals, we do not pay for that portion of the deal when we buy those contracts, and we retain some of them, but we know some of them would be unlikely to retain. Then going forward, we do not aspire to shrink that business. We would like to grow that business over time. But we are going to make sure that we get attractive returns on the hard work that our people do. So we are going to continue to look for customers that are willing to pay for a differentiated offering and to get that marketable move over time.

Speaker #3: Well, I think there's always going to be some underlying shedding because as we acquire companies, we know part of their portfolio are municipal contracts that will either upgrade or exit.

Speaker #3: They just don't meet our returns threshold. And so again, across 25 deals, we don't pay for that portion of the deal when we buy those contracts.

Speaker #3: And we retain some of them, but we know some of them will be unlikely to retain. And then going forward, we don't aspire to shrink that business.

Speaker #3: We would like to grow that business over time, but we're going to make sure that we get attractive returns on the hard work that our people do.

Speaker #3: And so we're going to continue to look for customers that are willing to pay for a differentiated offering, and we get that the market will move over time. But we're forced to choose.

Jon Vander Ark: When forced to choose, we are going to take price over volume.

Speaker #3: We're going to take price over volume.

Brian DelGhiaccio: The margin implications of that, to your question, is if you're shedding lower profitable work within the residential business, but gaining on the more profitable small and large container work, you're going to mix up from a margin perspective.

Speaker #4: And the margin implications of that to your question is if you're shedding, lower profitable work within the residential business, but gaining on the more profitable, small and large container work, you're going to mix up from a margin perspective.

Stephanie Moore: Thank you. Really appreciate it.

Speaker #5: Thank you. Really appreciate it.

Operator: The next question comes from Tobey Sommer with Truist. Please go ahead. Tobey, your line may be muted. We will take the next question from Kevin Chiang with CIBC. Please go ahead.

Speaker #1: The next question comes from Toby Salmer with Truist. Please go ahead. Toby, your line may be muted. We will take the next question from Kevin Chiang with CIBC.

Speaker #1: Please go ahead.

Kevin Chiang: Hi. Thanks for taking my question this afternoon. Maybe just on environmental solutions, again, good results in the quarter. I appreciate, as you called out, mix can play a role here, and maybe just the underlying cyclicality of the business. But I guess when I look further out, it feels like your incremental margin in this business can be 30% to 50%, I guess, depending on mix as that revenue comes through. Is that kind of the right ballpark to think about how that incremental revenue flows through to the bottom line, and then mix is maybe a 20-point variance around that goalpost?

Speaker #7: Hi, thanks for taking my question this afternoon. Maybe just on Environmental Services again, good results in the quarter. I appreciate, as you called out, mix can play a role here.

Speaker #7: And maybe just the underlying cyclicality of the business. But I guess when I look further route, it feels like you're incremental margins in this business can be kind of like 30 to 50%, I guess, depending on mix as that revenue comes through.

Speaker #7: Is that kind of the right ballpark to think about how that incremental revenue flows through to the bottom line, and then maybe mixes, say, a 20-point variance?

Speaker #7: Around that goalpost?

Brian DelGhiaccio: Yeah. To Jon's earlier point, it depends on the type of work that you are getting. Certainly, if you are getting it through your post-collection infrastructure, the TSDFs, the landfills, the E&P work, certainly it can be those levels. Field and Industrial Services, it is going to be accretive to those lines of business, but not to that level. Certainly what we saw in this period, given the large emergency response jobs as well as increases in both the haz waste landfills and E&P, that is why you saw the incrementals that we produced this quarter.

Speaker #4: Yeah, to John's earlier point, it depends on the type of work that you're getting. So certainly if you're getting it through your post-collection infrastructure, the TSDFs, the landfills, the E&P work, certainly it can be those levels.

Speaker #4: Field and industrial services—it's going to be accretive to those lines of business, but not to that level. So certainly what we saw in this period, given the large emergency response jobs, as well as increases in both the hazardous waste landfills and E&P, that's why you saw the incrementals.

Speaker #4: That we produced this quarter.

Kevin Chiang: That is helpful. Just my follow-up question. If I look back the last 5 years or so, I do not think we have seen a quarter where small container, large container, and special waste all put a positive volume. I guess the last time we saw it was coming out of the pandemic. I guess, does this foretell how volume trends in 2027 ex the intentional shedding? Could you have, let us say, positive volumes next year ex some of the purposeful shedding you are pursuing in your resi book?

Speaker #7: That's helpful. And just my follow-up question. If I look back the last five years or so, I don't think we've seen a quarter where small container, large container, and special waste all put a positive volume.

Speaker #7: I guess the last time we saw it was coming out of the pandemic. I guess this is to tell how volume trends in 2027, the intentional shedding.

Speaker #7: Could you have let's say positive volumes next year, X some of the purposeful shedding you're pursuing in your resi book?

Jon Vander Ark: Yeah, I think the market is starting to expand. Again, the market is not taking off. I do not want to oversell it, but the market is absolutely trending up and trending to a positive period. The one caveat in all that is there is a lot of things going on geopolitically and with AI and big investment cycles and other things. So the macro would have to be supportive of that. But if the macro hangs in there, we would absolutely expect to see positive volume next year.

Speaker #3: Yeah, I think the market is starting to expand. And again, the market's not taking off. I don't want to oversell it, but the market is absolutely trending up and trending toward a positive period.

Speaker #3: And the one caveat in all that is there's a lot of things going on geopolitically and with AI and big investment cycles and other things.

Speaker #3: So the macro would have to be supportive of that. But if the macro hangs in there, we would absolutely expect to see positive volume next year.

Kevin Chiang: Thank you.

Speaker #7: Thank you. Thank you for.

Operator: The next question comes from Tobey Sommer with Truist. Please go ahead.

Speaker #1: The next question comes from Toby Salmer with Truist. Please go ahead.

Tobey Sommer: Sorry about that. Trick or treating came early this year. I wanted to ask a question about, if you look over the horizon, sort of around the corner, we have had a couple of 2, 3 years where landfill and natural gas provided a little bit of new opportunity and spice for profit and revenue and cash flow growth. What do you see over the next 3, 7, 8 years that might provide another spicy period with a minor but interesting catalyst to spur those growth rates a little higher?

Speaker #3: Sorry about that. Trick-or-treating came earlier this year. I wanted to ask a question about if you look over the horizon sort of around the corner, we've had a couple of two, three years where landfill natural gas provided a little bit of kind of new opportunity and spice for profit and revenue and cash flow growth.

Speaker #3: What do you see over the next three, seven, eight years that might provide another spicy period with a minor but interesting catalyst to spur those growth rates a little higher?

Jon Vander Ark: We are certainly looking at everything that goes into landfill and challenging all of those tons. Landfills, while they are profitable, they are also a cost, right? You have already collected the money from somebody, and they are a cost to us. So is there something else we could do with that material? Some of that, we get a little bit of diversion out of that, of our sustainability investments around advanced recycling. Most of that is upcycling, but there is some opportunity of taking things and diverting them out of the landfill. The biggest opportunity we are pursuing right now is organic material, which is 20% to 25% of what shows up at a landfill, and we have a lot of those projects today. Are there more different things that we can do with those over time?

Speaker #3: Or certainly looking at everything that goes into the landfill and challenging all of those tons. Landfills, well, they're profitable. They're also a cost, right?

Speaker #3: You've already collected the money from somebody, and they're a cost to us. So, is there something else we could do with that material? And some of that, we get a little bit of diversion out of that, out of our sustainability investments around advanced recycling.

Speaker #3: Most of that is upcycling, but there is some opportunity to take things and divert them out of the landfill. The biggest opportunity we're pursuing right now is organic material, which is 20% to 25% of what shows up in a landfill.

Speaker #3: And we have a lot of those projects today. Are there more different things that we can do with those over time? That's not a kind of near-term one to two-year opportunity, but over three to five years, I think that could provide a start to be an interesting and meaningful revenue stream.

Jon Vander Ark: That is not a near-term 1- to 2-year opportunity, but over 3 to 5 years, I think that could provide a, start to be an interesting and meaningful revenue stream.

Tobey Sommer: Thank you.

Speaker #7: Thank you.

Operator: At this time, there appears to be no further questions. Mr. Vander Ark, I will turn the call back over to you for closing remarks.

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

Jon Vander Ark: Thank you, Chloe. I want to thank the entire Republic Services team for their continued great work and dedication to exceeding our customers' expectations. We have accomplished a lot already this year, and I am confident we will carry this momentum through the end of the year and into 2027 as we continue creating long-term value for our customers, employees, and shareholders. I would also like to say congratulations to Jim Fish on a terrific career at WM, and I wish him the best in retirement. Have a good evening and be safe.

Speaker #3: Thank you, Chloe. I want to thank the entire Republic Services team for their continued great work and dedication to exceeding our customers' expectations. We've accomplished a lot already this year, and I'm confident we will carry this momentum through the end of the year and into 2027 as we continue creating long-term value for our customers and employees and shareholders.

Speaker #3: I would also like to say congratulations to Jim Fish on a terrific career at WM, and I wish him the best in retirement. Have a good evening, and be safe.

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