Phoenix-based Republic Services Inc. reported $2.6 billion in revenues for the second quarter of 2019, a 3.5 percent increase from the year prior. This growth was mainly driven by strong pricing across the company’s collection, disposal and recycling processing businesses.
Additionally, Republic reported net income of $251.5 million, or $0.78 per diluted share, for Q2 2019, versus $234.9 million, or $0.71 per diluted share, for the comparable 2018 period.
“We are very pleased with our second quarter results. Our ability to price in excess of cost inflation and drive operating leverage enabled us to grow earnings 8 percent and expand adjusted EBITDA margin by 50 basis points,” said Donald W. Slager, chief executive officer of Republic Services, in a statement. “During the quarter, we invested $129 million in acquisitions, further strengthening our market position, and now expect to invest a total of $550 million for the full year. Given the underlying strength of our business and the progress we're making in de-risking the recycling business model, we are reaffirming our 2019 adjusted EPS and free cash flow guidance despite additional headwinds from lower recycled commodity prices.”
Republic, which has been focusing on creating an environment that attracts and retains the brightest in the industry, also built upon its “people-first culture.”
“In recent years, our efforts to create an environment that attracts and retains the best talent have been recognized by reputable third parties such as Barron's, EpiSphere and Glassdoor. Most recently, Republic Services was named to Forbes’ List of Best Employers for Women. I'd like to thank our team for their relentless efforts to create a more inclusive culture and an environment in which all individuals feel welcomed and valued,” said Slager during a call with investors.
“As our business grows so does our potential to drive change and positively impact the environment and society overall. We know we can do more, and we are raising the bar through our latest long-term sustainability goals, which we announced last week,” added Slager. “Through the pursuit and achievement of these goals, we will further enhance the foundation of our business and continue to create long-term value for our employees, our customers, communities and shareholders.”
Here are some other highlights from the company’s earnings:
- Adjusted net income for the three months ended June 30, 2019, was $254.1 million, or $0.79 per diluted share, versus $239.6 million, or $0.73 per diluted share, for the comparable 2018 period.
- Adjusted EBITDA was $726 million, and adjusted EBITDA margin was 27.9 percent of revenue. Adjusted EBITDA margin increased 50 basis points over the prior year.
- Cash provided by operating activities was $582 million, and adjusted free cash flow was $272 million.
- Core price was 4.6 percent, and average yield was 2.8 percent.
- Residential collection contributed $570.1 million in revenue, up from $560.6 million in 2018. Small-container revenue increased from $764.5 million in 2018 to $792.0 million in 2019. And large-container revenue increased from $556.3 million in 2018 to $573.9 million in 2019.
- Transfer revenue increased from $320.8 million to $343.7 million year over year.
- Landfill revenues increased from $580.6 million to $608.9 million year over year.
- Republic invested $129 million in acquisitions during Q2 2019. The company now expects to invest $550 million in acquisitions for the full year. During a call with investors, Slager stated: “We've got plenty of dry powder to do good deals at the right price. When it comes down to buying good, consistent, reliable cash flow at the right multiple, we'll do that in exchange of buying in the shares. So, that's always been our model. But we don’t overpay, and we don’t overspend. If you take a look at what's happening under the hood with our ROI [return on investment], we're driving in the right direction, so you can see that these investments are paying off in the long run.”
- Commenting on mergers and acquisitions and labor, Republic Services President Jon Vander Ark said: “We've invested in resources, and we have become a preferred buyer. I would say we've got a higher number of referrals to buy companies than we ever have because that's where our employee engagement comes back. We treat the employees that we acquire with dignity and respect, and they understand this is a great place to work. Owners care about money, but they don't care just about the money. They also care about legacy, and our people are going to take care of the businesses they built. We've proven ourselves to be very good stewards of the business they're selling to us.”
- Average yield in the collection business was 3.3 percent, which included 3.7 percent yield in the small container business, 3.3 percent yield in the large container business and 2.7 percent yield in the residential business.
- Volumes decreased 0.6 percent in Republic’s large container business. Volumes in the small container business decreased 1.0 percent, and volumes in the residential collection business decreased 1.9 percent.
- Landfill volumes increased 5.8 percent. Construction and demolition volumes increased 3.3 percent, special waste volumes increased 9.8 percent and municipal solid waste volumes increased 4.5 percent.
- In the second quarter, Republic’s average recycled commodity price per ton decreased 14 percent to $78, down from $91 per ton in the prior year. This resulted in an approximately $8 million, or $0.02 headwind, compared to the year prior. “During the second quarter, commodity markets continued to be challenged,” added Slager on a call with investors. “We overcame these headwinds by focusing our efforts on things we can control, in particular, transitioning to a more durable, economically sustainable recycling business model. … Because of the team's relentless efforts, we overcame this headwind and increased recycling revenue 6 percent versus the prior year.”
- When asked about the company’s recently released 2030 sustainability goals, Vander Ark said, “On the safety piece, I think technology is going to be a huge play for us. Cameras are the most immediate venture on that front. But if you think longer term and you compare commercial vehicles to passenger cars, we are at the very early stages of a lot of technology that's already available in passenger cars and pushing very hard for our vendors to build that into equipment going forward. They all have that as their product roadmaps, and things like active safety lane assist will help us become safer.”
- Republic continued to convert CPI-based contracts to more favorable pricing mechanisms for the annual price adjustment. The company now has approximately $715 million in annual revenue, or 29 percent of its CPI-based book of business, tied to either a waste-related index or a fixed-rate increase of 3 percent or greater.
- The company was named to Forbes' Best Employers for Women 2019 list, which is based on an independent survey of 60,000 U.S. employees.