Republic Services Reports Robust Results in Q2 Resulting in Further Full-Year Financial Guidance Revision

Stefanie Valentic, Editorial Director

July 30, 2021

5 Min Read
Republic Services

Republic Services (NYSE: RSG) reported a substantial Q2 performance, citing its commitment to prioritize customer service and generate value for shareholders.

CEO Jon Vander Ark commented the company continues to drive growth through "building customer loyalty through a maniacal focus on the customer, which we call 'Customer Zeal', leveraging digital tools to improve the experience for our customers and employees, which we believe drives growth and generate operational efficiencies and prioritizing sustainability by offering environmentally responsible solutions to our customers, while protecting the planet."

During the quarter, Republic achieved adjusted earnings per share of $1.09, an 36% increase year over year (YOY). Adjusted free cash flow was $1 billion, a 36% increase from Q2 2020.

The company's focus on strategic priorities continue to create value for its shareholders. Vander Ark reported $567 million in acquisitions in 2021, with an expectation to reach "well over" $600 million by year end in both its solid waste and environmental solutions segments.

Quarterly dividends increased to $0.46 per share from $0.425 following successful approval from the company's board of directors. To date, Republic has returned $363 million to its shareholders in the form of dividends and share repurchases since the beginning of 2021. Vander Ark commented that it is the 17th consecutive year dividends have increased.

"The strength of the underlying business is irrefutable, and we continue to see the proof points that our strategy is working," he said.

Customer retention in both small and large container businesses are at 94%, a trend that has remained at historically-high levels. 

Vander Ark placed a spotlight on the company's efforts to move to digital solutions. On the heel of an update of its Rise platform, Republic Services distributed tablets to 47% of its small and large container fleet. Vander Ark expected the process to be complete by the end of the year, with the next phase of tablets to roll out to the residential fleet in 2022.

The tablets enable automated customer notifications, which provides customers real-time information about their service, he commented.

Sustainability is viewed as a "platform for growth." Vander Ark referenced the release of the company's 2020 Sustainability Report which placed a spotlight on Republic's four-tiered efforts to make a positive impact on the environment.

Republic Services also saw the highest level of core price in open market in the company's history, reported CFO and EVP Brian DelGhiaccio.

Q2 core price was 5.2% and average yield was 2.6%, a 30 basis point increase from Q1 2021. The components of core price included small container of 7.9%, large container a 5.3%, and residential at 5%, well in-line with company expectations.

Second quarter volume increased 8.1% compared to the prior year, which also exceeded expectations, DelGhaccio said.  

"While we expected second quarter to be the highest reported volume for the year, the 8.1% growth exceeded our expectations," he said. "The components of volume included an increase in small container of 8.6%, an increase in large container of 13.7% and an increase in landfill of 12.6%. For reference, second quarter volumes in our small and large container businesses were down less than 1%."

DelGhaccio reported that municipal solid waste and construction and demolition landfill volumes were above the pre-pandemic baseline.

Commodity prices increased to $170 per ton in Q2 2021, up from $101 in Q2 2020. Recycling processing and commodity sales contributed 100 basis points to internal growth during the second quarter, DelGhaccio said.

Republic's environmental solutions business was "essentially flat" YOY.

Adjusted EBITDA margin for Q2 was 30.6%, a growth of 110 basis points from the prior year.

DelGhaccio continued, "the margin expansion is a direct result of pricing in excess of our cost inflation, realizing operating leverage as volumes return and continued effective cost management."

Selling, general and administrative (SG & A) expenses were 10.7% of revenue which was flat with the prior year. This included higher levels of incentive compensation due to projected financial outperformance, he commented.

Year-to-date adjusted free cash flow was $1 billion, an increase of $276 million or 38% YOY. 

"The drivers of growth included EBITDA growth in the business, a positive contribution from one and a half-day improvement in DSO and the timing of capital expenditures," he said.

As a result of continued strength in Q2, Republic Services expects to exceed the full-year guidance that was upwardly revised in Q1 2021. 

Adjusted EPS is now expected to be in a range of $4 to $4.05, and adjusted free cash flow is now expected to be in a range of $1.45 billion to $1.475 billion.

DelGhaccio said that "this represents an increase of over 6% from the midpoint of the prior guidance."

Q2 2021 Financial Highlights:

  • Earnings per share (EPS) was $1.03 per share. Adjusted EPS, a non-GAAP measure, was $1.09 per share, a 36% increase YOY.

  • Year-to-date cash provided by operating activities was $1.5 billion, an increase of 11% versus the prior year.

  • Adjusted free cash flow, a non-GAAP measure, was $1.0 billion, an increase of 38% increase YOY.

  • Year-to-date cash invested in acquisitions was $567 million, or $521 million net of divestitures.

  • Core price increased revenue by 5.2%. Core price consisted of 6.5% in the open market and 3.0%  in the restricted portion of the business.

  • Revenue growth from average yield was 2.6% with a volume increase of 8.1%.

  • Adjusted EBITDA margin, a non-GAAP measure, was 30.6%of revenue, an increase of 110 basis points YOY.

  • Average recycled commodity price per ton sold during the second quarter was $170, an increase of $37 per ton from Q1 2021 and $69 per ton from Q2 2020.

  • Interest expense decreased $13 million due to refinancing activities completed last year, and the leverage ratio was 2.9 times.

  •  Adjusted effective tax rate was 21.6% and an equivalent tax impact of 23.7%. 

About the Author(s)

Stefanie Valentic

Editorial Director, Waste360

Stefanie Valentic is the editorial director of Waste360. She can be reached at [email protected].


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