Republic reports more than $3.8B in Q3 revenue

Republic Services reports 6 percent revenue growth and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of 9 percent during the third quarter.

“We produced revenue growth both organically and through acquisitions while generating healthy margin expansion across our business,” Republic Services CEO Jon Vander Ark said during the company’s third quarter earnings call. “We are proud of the results we delivered during the third quarter. Healthy contribution from our pricing strategy more than offset recycled commodity headwinds and cost inflation, which continues to moderate.”

RELATED: Republic reports strong EBITDA for Q2

The Phoenix-based environmental services company has maintained pricing just ahead of inflation, Chief Financial Officer Brian DelGhiaccio said.

“We continue to price new and existing business ahead of cost inflation to drive margin expansion in the underlying business,” he added.

The adjusted EBITDA margin for the company expanded 70 basis points to 29.9 percent.

Total revenue was up during the third quarter, as well, according to the company’s third quarter 10Q filing. The company reports $3.825 billion in revenue for the third quarter, up from $3.597 billion for the second quarter. Year-to-date revenue for 2023 is $11.1 billion compared with about $9.9 billion through three quarters in 2022.

DelGhiaccio told investors that recycled commodities are still down from last year but are beginning to show signs of recovery.

“Commodity prices were $112 per ton during the quarter,” he said. “This compares to $162 per ton in the prior year. Recycling processing and commodity sales decreased revenue by 20 basis points during the quarter. We continue to see a steady recovery in fiber markets, and plastics pricing has improved from recent lows.”

While recycling commodities were down, other areas showed increased revenue, including small container collections (an increase of 50 basis points) and landfill operations (an increase of 3.5 percent).

“Landfill was primarily driven by an 8.2-percent increase in special waste revenue,” DelGhiaccio said.

He said a slowdown in construction led to decreases in large container revenue (down 1.7 percent) and landfill construction and demolition volume, which was down 6.2 percent for the third quarter.

"Our revenue growth was broad-based, including healthy pricing, positive organic volume growth and above-average contribution from acquisitions, which resulted in adjusted EBITDA growth of 9 percent and 70 basis points of margin expansion,” Vander Ark says. “The investments we are making in sustainability growth initiatives remain on track, with expected financial contribution beginning in 2024."

Some of those investments include the company’s planned polymer centers and renewable natural gas (RNG) facilities.

“Development of our polymer centers remains on track,” he says. “Construction of our Las Vegas Polymer Center is substantially complete, and we expect full-scale operations to begin in November.”

A second polymer center is on track to open in late 2024 in Indianapolis where it will be co-located with a Blue Polymers production facility.

The company will continue to steadily develop RNG facilities, added Vander Ark.

“Five projects were online by the end of the third quarter, and we expect eight additional projects to be completed in 2024,” he said.

The company also plans to continue to invest in electric vehicles (EVs), Vander Ark said. By the end of this year, he said the company plans to have a dozen EVs on the road and to add another 60 in 2024.

“We now have six facilities with commercial EV charging infrastructure [and] more than 40 additional sites in various stages of development,” he said.

The acquisition outlook

Vander Ark said Republic spent $947 million on acquisitions through the third quarter.

“All transactions were in the recycling and waste space,” he added. “The M&A environment remains active with opportunities in both the recycling and waste space and environmental solutions businesses. We remain confident that we will exceed $1 billion of investment for the year.”

He also said that “the pipeline for acquisitions is strong, both in recycling and waste and environmental solutions” because of the pressure on smaller firms to maintain employees and invest in trucks and other technology.

“The cost pressure, which has started to abate for the smaller players, is on the labor side,” Vander Ark said. “So, they’re starting to get less pressure there as we’ve seen turnover come down and labor availability go up. It’s still elevated vs. the historical norm, but it’s gotten easier relative to a year ago.

“The supply chain hasn’t, and that’s certainly becoming constrained. Anybody who was a spot buyer of vehicles is really in a challenged [position] certainly through the end of next year and probably in 2025 or 2026. … We certainly see that as an advantage.”