Republic Services(RSG) - 2024 Q3 - Quarterly Results

Executive Summary Third Quarter 2024 Performance Overview Republic Services reported strong third-quarter 2024 results, driven by strategic execution, pricing ahead of cost inflation, and effective cost management. | Metric | Q3 2024 | Q3 2023 | YoY Change | Notes | | :-------------------------------- | :------ | :------ | :--------- | :---- | | Total Revenue Growth | 6.5% | - | - | | Reported Net Income | $565.7 million | $480.2 million | +17.8% | | Reported EPS | $1.80 | $1.52 | +18.4% | | Adjusted Net Income | $568.3 million | $488.3 million | +16.4% | | Adjusted EPS | $1.81 | $1.54 | +17.5% | | Net Income Margin | 13.9% | 12.6% | +130 bps | | Adjusted EBITDA Margin | 32.0% | 29.9% | +210 bps | - The CEO, Jon Vander Ark, attributed the strong performance to executing strategic priorities, pricing ahead of cost inflation, and effective cost management, leading to double-digit growth in adjusted EBITDA and EPS[2] Key Financial Highlights (Q3 & Year-to-Date) The company's third quarter and year-to-date performance demonstrated robust organic growth, effective pricing strategies, and significant cash generation, alongside strategic investments and shareholder returns. | Metric | Q3 2024 | YTD 2024 | | :----------------------------------- | :------ | :------- | | Total Revenue Growth | 6.5% | 7.7% | | Organic Growth | 4.2% | 4.6% | | Growth from Acquisitions | 2.3% | 3.1% | | Core Price on Total Revenue | 6.2% | 6.6% | | Core Price on Related Business Revenue | 7.4% | 8.0% | | Average Yield on Total Revenue | 4.6% | 5.4% | | Volume Impact on Total Revenue | (1.2)% | (1.0)% | | Average Recycled Commodity Price per Ton | $177 | - | | Cash Flow from Operations (YTD) | - | $2.91 billion | | Adjusted Free Cash Flow (YTD) | - | $1.74 billion | | Cash Invested in Acquisitions (YTD) | - | $104.4 million | | Cash Returned to Shareholders (YTD) | - | $834.3 million | | Share Repurchases (YTD) | - | $329.5 million | | Dividends Paid (YTD) | - | $504.8 million | - The company completed and commenced operations on two renewable natural gas projects during the quarter, highlighting sustainability efforts[6] Company Outlook & Strategic Initiatives Republic Services expects its full-year 2024 revenue to be at the lower end of its guidance range, while anticipating achieving the higher end of its adjusted EBITDA guidance range, reflecting confidence in profitability and operational efficiency. - The Company expects revenue to be near the low end of its full-year 2024 guidance range[7] - The Company expects to achieve the high end of its full-year 2024 adjusted EBITDA guidance range[7] Quarterly Dividend Declaration Republic Services declared a regular quarterly dividend of $0.58 per share, payable in January 2025 to shareholders of record in early January 2025. | Dividend per Share | Record Date | Payment Date | | :----------------- | :---------- | :----------- | | $0.58 | January 2, 2025 | January 15, 2025 | Company Information About Republic Services Republic Services, Inc. is a leading environmental services company offering a comprehensive suite of products and services, including recycling, solid waste, special waste, hazardous waste, and field services. - Republic Services, Inc. is a leader in the environmental services industry, providing recycling, solid waste, special waste, hazardous waste, and field services[11] - The company is committed to advancing circularity and supporting decarbonization to create a more sustainable world[11] Non-GAAP Measures Introduction This section introduces and defines various non-GAAP financial measures, such as adjusted diluted earnings per share, adjusted net income, EBITDA, adjusted EBITDA, and adjusted free cash flow, which are used to provide additional insights into the company's operational performance. - The document describes non-GAAP measures including adjusted diluted earnings per share, adjusted net income, EBITDA, adjusted EBITDA, adjusted EBITDA margin, and adjusted free cash flow[10] - These non-GAAP measures are not determined in accordance with U.S. GAAP and may not be comparable to similarly titled measures from other companies[27] Financial Statements Unaudited Consolidated Balance Sheets As of September 30, 2024, Republic Services reported a slight increase in total assets compared to December 31, 2023, primarily driven by growth in property and equipment and goodwill, while total liabilities saw a decrease due to reduced current maturities of long-term debt. | Metric (in millions) | Sep 30, 2024 | Dec 31, 2023 | | :------------------- | :----------- | :----------- | | Total Assets | $31,814.2 | $31,410.1 | | Total Liabilities | $19,183.0 | $19,038.3 | | Total Stockholders' Equity | $11,230.2 | $10,543.5 | | Current Assets | $2,348.4 | $2,381.0 | | Current Liabilities | $3,641.5 | $4,228.3 | | Long-term Debt, net | $12,047.4 | $11,887.1 | Unaudited Consolidated Statements of Income Republic Services demonstrated strong financial performance in Q3 and YTD 2024, with significant increases in revenue, operating income, and net income compared to the prior year, leading to higher basic and diluted earnings per share. | Metric (in millions, except per share) | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :------------------------------------- | :------ | :------ | :------- | :------- | | Revenue | $4,076.2 | $3,825.9 | $11,986.0 | $11,132.9 | | Operating Income | $845.9 | $727.8 | $2,392.6 | $2,079.2 | | Net Income attributable to Republic Services, Inc. | $565.7 | $480.2 | $1,531.0 | $1,291.4 | | Basic Earnings Per Share | $1.80 | $1.52 | $4.86 | $4.08 | | Diluted Earnings Per Share | $1.80 | $1.52 | $4.86 | $4.07 | | Cash Dividends per Common Share | $0.580 | $0.535 | $1.650 | $1.525 | Unaudited Consolidated Statements of Cash Flows For the nine months ended September 30, 2024, Republic Services generated increased cash from operating activities, while cash used in investing activities decreased, and cash used in financing activities significantly increased, primarily due to higher payments of credit facilities and notes payable. | Metric (in millions) | YTD 2024 | YTD 2023 | | :------------------------------------ | :------- | :------- | | Cash provided by operating activities | $2,914.0 | $2,719.3 | | Cash used in investing activities | $(1,748.5) | $(2,100.8) | | Cash used in financing activities | $(1,188.1) | $(579.2) | | Net (Decrease) Increase in Cash | $(21.5) | $39.5 | | Cash, cash equivalents, restricted cash at end of period | $206.0 | $253.8 | Revenue Analysis Revenue by Line of Business Collection services remain the largest revenue contributor for Republic Services, showing growth in all segments for both the third quarter and year-to-date 2024. | Line of Business (in millions) | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :----------------------------- | :------ | :------ | :------- | :------- | | Total Collection | $2,741.8 | $2,618.0 | $8,127.4 | $7,618.0 | | Transfer, net | $211.6 | $206.7 | $602.6 | $577.2 | | Landfill, net | $452.8 | $435.3 | $1,297.4 | $1,259.8 | | Environmental solutions, net | $464.7 | $404.8 | $1,360.6 | $1,211.4 | | Recycling processing and commodity sales | $107.6 | $77.7 | $310.6 | $226.6 | | Total revenue | $4,076.2 | $3,825.9 | $11,986.0 | $11,132.9 | Revenue Components and Growth Drivers Total revenue growth for Q3 2024 was 6.5%, primarily driven by average yield and acquisitions, while volume had a negative impact. | Component (% of total revenue) | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :----------------------------- | :------ | :------ | :------- | :------- | | Average yield | 4.6% | 5.8% | 5.4% | 6.1% | | Fuel recovery fees | (0.2)% | (1.1)% | (0.2)% | (0.2)% | | Total price | 4.4% | 4.7% | 5.2% | 5.9% | | Volume | (1.2)% | 0.1% | (1.0)% | 0.7% | | Recycling processing and commodity sales | 0.7% | (0.2)% | 0.5% | (0.8)% | | Total internal growth | 4.2% | 4.6% | 4.6% | 6.2% | | Acquisitions / divestitures, net | 2.3% | 1.7% | 3.1% | 5.3% | | Total | 6.5% | 6.3% | 7.7% | 11.5% | | Core price | 6.2% | 7.0% | 6.6% | 7.5% | Related-Business Revenue Metrics Core price and average yield on related-business revenue remained strong in Q3 and YTD 2024, though slightly lower than the prior year, while volume continued to show a slight decrease. | Metric (% of Related Business Revenue) | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :------------------------------------- | :------ | :------ | :------- | :------- | | Core price | 7.4% | 8.6% | 8.0% | 8.9% | | Average yield | 5.5% | 7.2% | 6.5% | 7.2% | | Volume | (1.5)% | 0.1% | (1.2)% | 0.8% | - Core price is defined as price increases to customers and fees, excluding fuel recovery fees, net of price decreases to retain customers[21] Yield and Volume by Service Type Collection services experienced positive yield growth across all segments in Q3 2024, but generally saw negative volume impacts. | Service Type | Q3 2024 Yield | Q3 2024 Volume | Q3 2023 Yield | Q3 2023 Volume | | :-------------------------- | :------------ | :------------- | :------------ | :------------- | | Collection: | | | | | | Residential | 5.4% | (2.9)% | 6.6% | (1.5)% | | Small-container | 7.5% | (0.4)% | 9.4% | 0.5% | | Large-container | 5.3% | (3.6)% | 8.4% | (1.7)% | | Landfill: | | | | | | Municipal solid waste | 5.1% | 0.3% | 5.9% | 0.6% | | Construction and demolition waste | 4.5% | 2.7% | 8.2% | (6.2)% | | Special waste | —% | (1.8)% | —% | 8.2% | Expense Analysis Cost of Operations Total cost of operations increased in Q3 and YTD 2024 compared to the prior year, primarily driven by higher labor and related benefits, maintenance and repairs, and landfill operating costs. | Component (in millions) | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :---------------------- | :------ | :------ | :------- | :------- | | Labor and related benefits | $813.7 | $744.1 | $2,412.3 | $2,233.0 | | Transfer and disposal costs | $280.2 | $268.7 | $832.3 | $788.6 | | Maintenance and repairs | $379.8 | $357.6 | $1,105.6 | $1,036.1 | | Transportation and subcontract costs | $303.8 | $304.9 | $884.4 | $881.5 | | Fuel | $113.4 | $136.7 | $360.4 | $406.3 | | Total cost of operations | $2,366.9 | $2,284.3 | $7,032.7 | $6,678.0 | Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses increased slightly in Q3 and YTD 2024, mainly due to higher salaries, while the provision for doubtful accounts decreased significantly in Q3 2024. | Component (in millions) | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :---------------------- | :------ | :------ | :------- | :------- | | Salaries | $278.5 | $254.2 | $834.1 | $770.6 | | Provision for doubtful accounts | $0.0 | $18.9 | $19.9 | $38.6 | | Other | $127.5 | $122.8 | $373.6 | $343.8 | | Total selling, general and administrative expenses | $406.0 | $402.1 | $1,227.6 | $1,177.3 | Non-GAAP Financial Measures & Reconciliations Adjusted EBITDA and Margin Republic Services achieved significant growth in Adjusted EBITDA and expanded its Adjusted EBITDA margin in both Q3 and YTD 2024, reflecting improved operational efficiency and profitability. | Metric (in millions) | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :------------------- | :------ | :------ | :------- | :------- | | EBITDA | $1,218.8 | $1,137.5 | $3,588.5 | $3,251.8 | | EBITDA Margin | 29.9% | 29.7% | 29.9% | 29.2% | | Adjusted EBITDA | $1,303.3 | $1,145.7 | $3,725.7 | $3,301.9 | | Adjusted EBITDA Margin | 32.0% | 29.9% | 31.1% | 29.7% | - Adjusted EBITDA margin increased by 210 basis points in Q3 2024 compared to the prior year[5] Adjusted EBITDA and Margin by Business Type Both Recycling & Waste and Environmental Solutions business types showed increased Adjusted EBITDA and expanded Adjusted EBITDA margins in Q3 and YTD 2024, with Recycling & Waste maintaining a higher margin. | Business Type (in millions) | Q3 2024 Revenue | Q3 2024 Adj. EBITDA | Q3 2024 Adj. EBITDA Margin | Q3 2023 Revenue | Q3 2023 Adj. EBITDA | Q3 2023 Adj. EBITDA Margin | | :-------------------------- | :-------------- | :------------------ | :------------------------- | :-------------- | :------------------ | :------------------------- | | Recycling & Waste | $3,611.5 | $1,185.0 | 32.8% | $3,421.1 | $1,054.3 | 30.8% | | Environmental Solutions | $464.7 | $118.3 | 25.5% | $404.8 | $91.4 | 22.6% | | Total | $4,076.2 | $1,303.3 | 32.0% | $3,825.9 | $1,145.7 | 29.9% | | Business Type (in millions) | YTD 2024 Revenue | YTD 2024 Adj. EBITDA | YTD 2024 Adj. EBITDA Margin | YTD 2023 Revenue | YTD 2023 Adj. EBITDA | YTD 2023 Adj. EBITDA Margin | | :-------------------------- | :--------------- | :------------------- | :-------------------------- | :--------------- | :------------------- | :-------------------------- | | Recycling & Waste | $10,625.4 | $3,408.5 | 32.1% | $9,921.5 | $3,035.0 | 30.6% | | Environmental Solutions | $1,360.6 | $317.2 | 23.3% | $1,211.4 | $266.9 | 22.0% | | Total | $11,986.0 | $3,725.7 | 31.1% | $11,132.9 | $3,301.9 | 29.7% | Adjusted Earnings Per Share Adjusted diluted earnings per share for Republic Services increased in both Q3 and YTD 2024, reflecting the impact of various adjustments to reported net income, such as debt extinguishment, restructuring charges, and pension plan settlements. | Metric | Q3 2024 Reported | Q3 2024 Adjusted | Q3 2023 Reported | Q3 2023 Adjusted | | :-------------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | | Pre-tax Income (in millions) | $646.5 | $650.2 | $606.3 | $617.3 | | Net Income - Republic (in millions) | $565.7 | $568.3 | $480.2 | $488.3 | | Diluted Earnings per Share | $1.80 | $1.81 | $1.52 | $1.54 | | Metric | YTD 2024 Reported | YTD 2024 Adjusted | YTD 2023 Reported | YTD 2023 Adjusted | | :-------------------------------- | :---------------- | :---------------- | :---------------- | :---------------- | | Pre-tax Income (in millions) | $1,899.3 | $1,905.3 | $1,708.6 | $1,758.9 | | Net Income - Republic (in millions) | $1,531.0 | $1,535.4 | $1,291.4 | $1,328.7 | | Diluted Earnings per Share | $4.86 | $4.87 | $4.07 | $4.19 | Adjusted Free Cash Flow Adjusted free cash flow for the nine months ended September 30, 2024, was $1,736.5 million, a decrease from the prior year, primarily due to higher purchases of property and equipment. | Metric (in millions) | YTD 2024 | YTD 2023 | | :------------------------------------ | :------- | :------- | | Cash provided by operating activities | $2,914.0 | $2,719.3 | | Property and equipment received | $(1,199.3) | $(960.1) | | Adjusted free cash flow | $1,736.5 | $1,827.4 | - Adjusted free cash flow provides useful information regarding recurring cash from operating activities after certain expenditures or recoveries and is a key metric for compensation[42] Explanations of Non-GAAP Adjustments This section details the specific items adjusted from GAAP measures to arrive at non-GAAP metrics, including gains/losses on debt extinguishment, restructuring charges, business divestitures, pension plan settlements, and US Ecology acquisition integration costs. (Gain) Loss on Extinguishment of Debt and Other Related Costs - In Q3 and YTD 2024, a $2.4 million loss was recognized due to credit facility amendment and restatement[39] - A net gain of $7.8 million was recorded YTD 2024 from early settlement of cash flow hedges[39] - In YTD 2023, a $0.2 million non-cash loss was incurred on early extinguishment of debt related to term loan repayment[39] Restructuring Charges | Period | Restructuring Charges (in millions) | Primary Reason | | :----- | :---------------------------------- | :------------- | | Q3 2024 | $8.2 | Redesign of asset management, customer, and order management software systems | | YTD 2024 | $19.7 | Redesign of asset management, customer, and order management software systems | | Q3 2023 | $6.3 | - | | YTD 2023 | $27.3 | $9.5M for early lease termination; $17.8M for software system redesign | (Gain) Loss on Business Divestitures and Impairments, Net - In Q3 2024, a net loss of $0.5 million was recorded on business divestitures and impairments[40] - For YTD 2024, a net gain of $0.9 million was recorded[40] - In Q3 and YTD 2023, a net gain of $1.5 million was recorded on business divestitures and impairments[40] Settlements and Withdrawals on Pension Plans - In Q3 and YTD 2024, a non-cash gain of $7.4 million was recognized from the settlement of a defined benefit pension plan, involving lump-sum payments and transfer of obligations to a third-party insurer[41] - The company expects to settle all remaining pension obligations by the end of 2024[41] US Ecology Acquisition Integration and Deal Costs | Period | Acquisition Integration and Deal Costs (in millions) | | :----- | :------------------------------------------------- | | Q3 2023 | $6.2 | | YTD 2023 | $24.3 | - These costs were incurred in connection with the acquisition of US Ecology, which closed on May 2, 2022, with integration substantially complete by December 31, 2023[41] Supplemental Financial Data Property and Equipment Reconciliation For the nine months ended September 30, 2024, property and equipment received during the period amounted to $1,199.3 million, after adjusting for timing differences in payments. | Metric (in millions) | YTD 2024 | YTD 2023 | | :---------------------------------------------------------------- | :------- | :------- | | Purchases of property and equipment per cash flows | $1,357.4 | $1,083.2 | | Adjustments for property and equipment received in a different period | $(158.1) | $(123.1) | | Property and equipment received during the period | $1,199.3 | $960.1 | Accounts Receivable Accounts receivable increased slightly as of September 30, 2024, compared to December 31, 2023, while days sales outstanding (DSO) improved, indicating more efficient collection. | Metric (in millions) | Sep 30, 2024 | Dec 31, 2023 | | :------------------- | :----------- | :----------- | | Accounts receivable, net | $1,847.5 | $1,768.4 | | Allowance for doubtful accounts | $75.2 | $83.2 | | Days sales outstanding (DSO) | 41.2 | 42.0 | | DSO net of deferred revenue | 30.4 | 30.9 | Cash Dividends Republic Services paid a cash dividend of $168.0 million in July 2024 and recorded a payable of $181.7 million for a dividend paid in October 2024. - In July 2024, a cash dividend of $168.0 million was paid to shareholders[46] - As of September 30, 2024, a quarterly dividend payable of $181.7 million was recorded, which was paid on October 15, 2024[46] Share Repurchase Program During Q3 2024, Republic Services repurchased 0.8 million shares for $161.9 million, with a significant remaining authorization of $2.7 billion under its October 2023 repurchase program. | Metric | Q3 2024 | | :------------------------------------ | :------ | | Shares repurchased (in millions) | 0.8 | | Cost of repurchases (in millions) | $161.9 | | Weighted average cost per share | $194.42 | | Remaining authorized purchase capacity | $2.7 billion | Forward-Looking Statements Information Regarding Forward-Looking Statements This section serves as a cautionary statement, indicating that the press release contains forward-looking information subject to risks and uncertainties that could cause actual results to differ materially from expectations. - The press release contains forward-looking statements covered by the Private Securities Litigation Reform Act of 1995[48] - These statements are based on current beliefs and expectations but are subject to risks and uncertainties that could cause actual results to differ materially[48] - Factors that could cause differences include the global economy, interest rates, integration of acquisitions, sustainability initiatives, acts of war, and dependence on long-term contracts[48]