Republic benefits from higher commodity prices, lower fuel prices in Q3

Republic Services Inc., headquartered in Phoenix, has reported net income of $260 million, or 81 cents per diluted share, for the quarter ended Sept. 30. In the comparable quarter of 2019, the company’s net income was $298.3 million, or 93 cents per diluted share. Excluding certain gains and expenses, on an adjusted basis, net income for the recently completed quarter totaled $319.3 million, or $1 per diluted share, versus $290.3 million, or 90 cents per diluted share, for the comparable 2019 period.

"During the third quarter, we expanded adjusted EBITDA (earnings before interest, taxes, deprecation and amortization) margin 230 basis points and delivered double-digit growth in adjusted earnings and adjusted free cash flow,” Republic CEO Donald W. Slager says in the news release announcing the company’s quarterly financial performance. “We continued to provide quality service to our customers while effectively managing our costs, and we are extremely pleased with our results.

“Given the continued strength of our business and steadfast execution by the entire Republic team, we are raising our 2020 full-year adjusted free cash flow guidance,” Slager continues. “I am proud of our team and the dedication and resiliency they have demonstrated, which has positioned us well for continued profitable growth."

Republic mentions a number of highlights for the quarter:

• Third-quarter earnings per share (EPS) were 81 cents, while adjusted EPS, a non-GAAP (generally accepted accounting principles) measure, totaled $1, an increase of approximately 11 percent over the prior year, according to Republic.
• Year-to-date cash provided by operating activities was $1,909 million, an increase of 6.8 percent versus the prior year. Adjusted free cash flow, a non-GAAP measure, for the same period was $1,109 million, an increase of 13.8 percent versus the prior year. The increase in adjusted free cash flow was primarily because of growth in EBITDA and improvements in working capital, the company says.
• Year-to-date cash flow invested in acquisitions totaled $154 million, or $119 million net of divestitures. Republic says it expects to invest $850 million to $900 million in acquisitions for the full year.
• Third-quarter core price increased revenue by 4.5 percent, which consisted of 5.4 percent in the open market and 3.2 percent in the restricted portion of the business.
• Third-quarter average yield was 2.6 percent.
• Third-quarter adjusted EBITDA, a non-GAAP measure, was $781 million, an increase of $41 million versus the prior year.
• Third-quarter adjusted EBITDA margin was 30.3 percent of revenue and increased 230 basis points over the prior year. This included a 70 basis point benefit from higher recycled commodity prices and lower fuel costs, according to the company.
• Republic says it continued to convert consumer price index- (CPI-) based contracts to more favorable pricing mechanisms for the annual price adjustment. The company adds that it has approximately $855 million in annual revenue, or 34 percent of its approximately $2.5 billion CPI-based book of business, tied to a waste-related index or a fixed-rate increase of 3 percent or greater.
• Its average recycled commodity price per ton sold in the third quarter was $99, or $27 more than in Q3 of 2019.
• Republic also was certified as a Great Place to Work for the fourth consecutive year.

Republic reinstated its full-year 2020 adjusted EPS guidance, saying it expects to generate $3.37 to $3.40 of adjusted EPS for the full year. The company also says it now expects to generate $1.15 billion to $1.20 billion of adjusted free cash flow for the full year, assuming continued gradual improvement in economic activity through the remainder of the year.

Republic’s board of directors approved a $2 billion share repurchase authorization effective Jan. 1, 2021, through Dec. 31, 2023. As of Sept. 30 of this year, the remaining purchase capacity under the prior authorization was $606 million, which continues through Dec. 31.

The company’s board previously declared a regular quarterly dividend of 42.5 cents per share for shareholders of record on Jan. 4, 2021, that will be paid Jan. 15, 2021.