The long-anticipated acquisition of Santek Waste Disposal was completed on May 5, Republic Services announced at its Q1 earnings call.
The transaction of the Tennessee-based company was first announced in March 2020, but a round of divestitures needed to be completed before the purchase was solidified.
CEO Don Slager provided financial results for the last time, as Republic President Jon Vander Ark prepares to take over beginning June 25, 2021.
"I am more than proud of what this team has accomplished over the last decade," Slager said. "And I'm extremely confident and how we are positioned to go forward from here. Now I could give you a long list of accomplishments, and important milestones that we have achieved, and frankly surpassed, I can go on and on about the foundation we have built."
He touted the company's team and culture, saying that its people are at the core of the company's success.
"The stability of our business, the power of the portfolio, the capability and dedication of our people were all once again defined, improving the resiliency and predictability of our operating model and the strength of our culture. And the spirit of our people shined brightly," he said.
Slager concluded with highlighting Vander Ark, saying he has a "clear vision for the road ahead."
"He also has the strong character, and relentless focus to do the hard work that ultimately delivers the victory, which means my roller Republic is included in my purpose here is complete," Slager said. "Jon and his team are well on their way to write a wonderful and rewarding new chapter of the Republic story."
Vander Ark continued with presenting the Q1 financial results, saying that the pricing environment aided Republic in delivering double-digit earnings growth and margin expansion. Total core price was 4.3% and average yield was 2.3%.
Although volume decreased 80 basis points in Q1, this is still an improvement of 100 basis points from Q4 2020. Vander Ark said he expects volume to turn positive in Q2. He then provided details about the Santek acquisition.
"We continue to drive profitable growth and believe that investing in acquisitions with attractive returns is the best use of free cash flow to increase long term shareholder value," he said. "Earlier today, we closed the acquisition of Santek. We welcome these new employees to the Republic team. And we look forward to integrating these high quality assets into our business."
Vander Ark reported the company is on track to invest $600 million in acquisitions in 2021.
CFO Brian DelGhiaccio shared a deeper look at Q1 results.
Adjusted EBITDA margin was 30.7%, an increase 270 basis points year over year. This included anunderlying margin expansion of 210 basis points, a 20 basis point benefit from net fuel and recycled commodity prices and a 40 basis point benefit from one last work day, DelGhiaccio said.
Adjusted free cash flow for the quarter was $464 million, an increase of $178 million compared to Q1 2020.
"This increase is the result of EBITDA growth, positive contribution from working capital and the timing of capital expenditures," he said.
Republic raised its full-year adjusted diluted EPS guidance to $3.74 to $3.79 and its full-year adjusted free cash flow guidance to $1.35 billion to $1.4 billion.
- First quarter EPS was $0.93 per share, and adjusted EPS, a non-GAAP measure, was $0.93 per share, an increase of 24% YOY.
- Adjusted free cash flow, a non-GAAP measure, was $464.2 million, an increase of 62% versus the prior year.
- The company expanded adjusted EBITDA margin, a non-GAAP measure, 270 basis points to 30.7%.
- Core price increased revenue by 4.3%. Core price consisted of 5.2 percent in the open market and 2.8 percent in the restricted portion of the business.
- Revenue growth from average yield was 2.3% and volume performance improved sequentially to (0.8)%.
- The company's average recycled commodity price per ton sold during the first quarter was $133. This represents a sequential increase from the fourth quarter of $23 per ton and an increase of $57 per ton versus the prior year.