Republic Services Posts Strong Earnings Growth

That fueled net income of $187.8 million for 2017 first quarter, versus $156.7 million, for the comparable 2016 period.

David Bodamer, Executive Director, Content & User Engagement

April 28, 2017

4 Min Read
Republic Services Posts Strong Earnings Growth

Phoenix-based Republic Services Inc. posted $2.39 billion in revenues for its first quarter, a 6.4 percent increase from $2.25 billion in the first quarter of 2016. That fueled net income of $187.8 million for 2017 first quarter, versus $156.7 million, for the comparable 2016 period.

" We continue to realize the benefits of executing our strategy of profitable growth through differentiation, which is designed to profitably grow our business, generate consistent earnings and free cash flow growth and improve return on invested capital," Republic Services President and CEO Donald W. Slager said in a conference call with investors and analysts.

Here are some other highlights from the company’s earnings:

  • Adjusted net income for the three months ended March 31, 2017, was $187.3 million versus $167.3 million a year ago.

  • Total internal growth reached 6.2 percent. Revenue growth from average yield was 2.3 percent and volumes increased 1.0 percent. Average yield was 2.0 percent in 2016 while volume was up 2.5 percent a year ago. Recycled commodities were up 2.1 percent compared to a 0.1 percent decrease in the first quarter of 2016. Fuel recovery fees and energy services each contributed 0.4 percent.

  • Average yield in the collection business was 2.9 percent, which included 3.8 percent yield in the small container business, 2.8 percent yield in the large container business and 1.8 percent yield in residential.

  • Volumes increased 1.8 percent in Republic’s large container business. Volumes decreased 70 basis points in the small container business, which included a 130-basis-point impact from intentionally shedding certain work performed on behalf of brokers.

  • “On the small container business specifically, that's just a strategic decision that we've made to not continue to do business with brokers and that broker volume to us that loss is non-regrettable,” Republic Senior Vice President and Chief Accounting Officer Charles Serianni said during the call with investors. “Our perspective is that brokers don't add any real value to customers. Customers should be doing business with us directly.”

  • Residential collection contributed $564.3 million in revenue, 23.6 percent of the company’s total. That was up from $551.2 million in 2016. Small-container revenue increased from $707.8 million in 2016 to $733.6 million in 2017. And large-container revenue increased from $469.2 million in 2016 to $495.3 million in 2017.

  • Transfer revenue increased from $268.2 million to $282.2 million year over year. With intercompany activity removed, the numbers were $103.7 million in 2016 and $110.6 million in 2017.

  • Landfill revenues increased from $489.4 million to $504.7 million. Less intercompany activity, landfill revenues stood at $272.3 million in 2017 vs. $261.7 million a year ago.

  • Landfill volumes increased 2.8 percent. That included C&D of 17.1 percent and special waste of 1.1 percent. MSW volumes were flat.

  • Revenues from sales of recycled commodities rose considerably from $86.8 million in the first quarter of 2016 to $133.9 million in the first quarter of 2017. Excluding glass and organics, average commodity prices for Republic increased 61 percent to $162 per ton in the first quarter from $101 per ton in the prior year. The current average commodity price is approximately $155 per ton.

  • Core price increased revenues by 4.1 percent, which consisted of 5.5 percent in the open market and 1.9 percent in the restricted portion of its business. That was up from 3.4 percent in the first quarter of 2016. The core price number was the firm’s highest level in more than five years.

  • Republic continued to convert contracts from CPI to a more favorable pricing mechanism for the annual price adjustment. It now has approximately $425 million in annual revenue that is tied to a waste-related index or a fixed-rate increase of 3 percent or greater.

  • Republic advanced its fleet-based initiatives designed to improve productivity and lower costs. Currently:

    • 18 percent of the fleet operates on compressed natural gas, up from 16 percent in the prior year.

    • 75 percent of the residential fleet is automated, up from 73 percent in the prior year.

    • 96 percent of the fleet is certified under Republic's standardized maintenance program, up from 81 percent in the prior year. The company expects its entire fleet to be certified under the program by the end of the second quarter of 2017.

  • Republic invested $55 million in tuck-in acquisitions. Acquisitions contributed 0.2 percent of growth. Total growth amounted to 6.4 percent compared with 3.6 percent in the first quarter of 2016.

  • Republic reported adjusted free cash flow of $240.2 million compared to $159.9 million in the first quarter of 2016.

About the Author(s)

David Bodamer

Executive Director, Content & User Engagement, Waste360

David Bodamer is Executive Director of Content & User Engagement for Waste360 and NREI. Bodamer joined Waste360 in January 2014. He has been with NREI since September 2011 and has been covering the commercial real estate sector since 1999 for Retail Traffic, Commercial Property News and Shopping Centers Today. He also previously worked for Civil Engineering magazine. His writings on real estate have also appeared in REP. and the Wall Street Journal’s online real estate news site. He has won multiple awards from the National Association of Real Estate Editors and is a past finalist for a Jesse H. Neal Award. 

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