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Republic Services Reports Strong Q2 Despite Pandemic Effects, Reinstates Guidance
August 7, 2020
4 Min Read
Republic Services, Inc. (RSG) announced its second quarter earnings on August 6, reporting net income of $225.5 million versus $251.5 million for the comparable 2019 period. Excluding certain gains and expenses, on an adjusted basis, net income was $258.2 million versus $254.1 million for the comparable 2019 period.
Don W. Slager, chief executive officer, said other highlights include the increased adjusted EBITDA Margin by 170 basis points; the company provided 2020 adjusted free cash flow guidance; increased quarterly dividend by approximately five percent; and Republic Services was named to 3BL Media’s 100 Best Corporate Citizens list for the first time.
The COVID-19 pandemic had a significant impact on the entire country during the full second quarter and Republic Services came through strong with a positive outlook of the future.
"Our second quarter results clearly demonstrate the resiliency of our business and the strength of our cash flow," said Slager. "I am extremely proud of the team's perseverance during these challenging times. Thanks to their hard work and laser focus we provided uninterrupted service to our customers, rapidly adjusted the business as volumes changed and effectively managed our cost structure. We continue to invest in the safety and well-being of our people and achieved our best-ever safety performance in the company's history."
On the company’s earnings call, Slager said “we now have greater clarity on how the pandemic impacts our business and how we can continue to adjust operations and effectively manage spending. As a result, we are reinstating our full year adjusted free cash flow guidance. We expect to generate an adjusted free cash flow of $1.1 billion to $1.175 billion. Our ability to achieve the low end of our reasonable free cash flow guidance demonstrates the tenacity of our team, the flexibility of our operating model and the strength and stability of our free cash flow.”
Second-Quarter and First Half 2020 Highlights:
Second quarter earnings per share (EPS) was $0.71 per share. Adjusted EPS, a non-GAAP measure, was $0.81 per share, an increase of approximately 3 percent over the prior year.
Cash provided by operating activities was $1,334 million, an increase of 17.4 percent versus the prior year. Adjusted free cash flow, a non-GAAP measure, for the same period was $743 million, an increase of 19.7 percent versus the prior year. The increase in adjusted free cash flow was primarily due to improvements in working capital.
Cash flow invested in acquisitions was $124 million, or $95 million net of divestitures. The Company expects to invest $600 to $650 million in acquisitions for the full year.
Second quarter core price increased revenue by 4.7 percent, which consisted of 5.5 percent in the open market and 3.4 percent in the restricted portion of the business.
Second quarter average yield was 2.5 percent.
Second quarter adjusted EBITDA, a non-GAAP measure, was $726 million and essentially flat versus the prior year.
Second quarter adjusted EBITDA margin was 29.6 percent of revenue and increased 170 basis points over the prior year. This included a 110 basis point benefit from higher recycled commodity prices and lower fuel costs and a 130 basis point headwind from $31 million of COVID-related costs.
The Company continued to convert CPI-based contracts to more favorable pricing mechanisms for the annual price adjustment. The Company now has approximately $850 million in annual revenue, or 34 percent of its approximately $2.5 billion CPI-based book of business, tied to a waste-related index or a fixed-rate increase of 3 percent or greater.
The Company's average recycled commodity price per ton sold in the second quarter was $101. This represents a sequential increase from the first quarter of $25 per ton as well as an increase versus the prior year of $23 per ton.
The Company was named to 3BL Media's annual 100 Best Corporate Citizens list, which is based on a ranking of the 1,000 largest U.S. public companies for transparency and performance of 141 environmental, social and governance factors.
“As an essential service provider, we play a critical role in our communities. This starts by providing uninterrupted services regardless of the circumstances and being a responsible and ethical partner in the community,” said Slager.
“We’re very pleased with second quarter performance and we are well positioned as volume continues to recover,” he said. “Once again, I’d like to thank all Republic employees for their ongoing hard work, commitment and dedication to our customers. Each one of our employees embodies the committed to serve spirit.”
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