Republic Services Aktie

Good afternoon, and welcome to the Republic Services First Quarter 2026 Investor Conference Call. Republic Services is traded on the New York Stock Exchange under the symbol RSG. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Aaron Evans, Vice President of Investor Relations.

Good afternoon. I would like to welcome everyone to Republic Services First Quarter 2026 Conference Call. John Vander Ark, our CEO; and Brian DelGhiaccio, our CFO, are on the call today to discuss our performance. I'd like to remind everyone that some information discussed on today's call contains forward-looking statements, including forward-looking financial information, which involve risks and uncertainties and may be materially different from actual results. .

Our SEC filings discuss factors that could cause actual results to differ materially from expectations. The material that we discuss today is time sensitive. If in the future, you listen to a rebroadcast or recording of this conference call, you should be sensitive to the date of the original call, which is May 7, 2026.

Please note that this call is the property of Republic Services, Inc. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Republic Services is strictly prohibited.

Our SEC filings, earnings press release, which includes GAAP reconciliation tables and a discussion of business activities, along with a recording of this call, are available on our website at republicservices.com.

In addition, Republic's management team routinely participates in investor conferences. When events are scheduled, the dates, times and presentations are posted on our investor website. With that, I'd like to turn the call over to Jon.

Thanks, Aaron. Good afternoon, everyone, and thank you for joining us. We are pleased with our first quarter results, which position us well to achieve the full year guidance that we provided in February. We delivered strong earnings growth and expanded margins, all are overcoming lower commodity prices and the impact of higher fuel prices during the quarter.

Our results reflect our disciplined pricing execution, effective cost management and the value created from ongoing investments in the business. During the quarter, we achieved revenue growth of 2.6%, generated adjusted EBITDA growth of 4.3% and expanded adjusted EBITDA margin by 50 basis points, delivered adjusted earnings per share of $1.70 and produced $984 million of adjusted free cash flow.

We continue to figure this new growth opportunities by leveraging our differentiating capabilities, customer deal, digital and sustainability. With respect to customer deal, our customer retention rate remained high at 94%. Our Net Promoter Score remains strong, reflecting our team's commitment to delivering exceptional customer value.

First quarter organic revenue growth was driven by solid pricing across the business. Average yields and related revenue was 4.1% and average yield on total revenue was 3.4%. Organic volume decreased related revenue by 1% or total revenue by 80 basis points. Volume performance improved sequentially, most notably in the landfill, large container and small container verticals.

Importantly, we delivered year-over-year revenue growth in the temporary large container business this quarter for the first time in over 2 years. Combined average yield and volume growth grew 1.2%. Organic revenue in the Environmental Solutions business decreased total revenue by 1.3% in the first quarter, which was in line with our expectations.

More than 1/3 of this decrease in the Environmental Solutions business related to an emergency response job in 2025 that did not repeat. Our Environmental Solutions sales pipeline continues to build with increased activity across multiple end markets. We expect year-over-year revenue growth in this business in the second half of the year.

Turning to digital. Our ongoing investments in technology and AI are strengthening how we operate and compete. Over time, these capabilities are expected to drive additional growth, expand margins and support continued operating leverage. We are actively deploying AI-based predictive technology that supports optimized pricing decisions across markets with varying customer and competitive dynamics.

This approach is expected to reinforce price retention and reduce customer attrition over time. Enhancements to our RISE digital platform are progressing with initial deployment focused on the large container business. The integration of AI and advanced routing algorithms is expected to improve safety outcomes, strengthen service execution and increased route efficiency.

Activation of digital tools in our call centers are enhancing the customer experience and unlocking value in our business by optimizing the 11 million inbound calls we receive each year. We believe that these investments in digital will deliver at least $100 million of annual benefit by 2028.

Within sustainability, we continue to believe that our sustainability innovation investments in the plastic circularity and decarbonization position us for growth and long-term value creation. Production volume has increased across our polymer center network as we optimize processing operations. [indiscernible] demand for our domestic post-consumer plastic remains strong.

We continue to advance renewable natural gas projects with our partners. We brought 9 projects online throughout 2025. We expect 4 additional RNG projects to begin operations in 2026 which would bring our total landfill gas to energy portfolio to 82 projects. We continue to execute against our industry-leading commitment to fleet electrification.

We had more than 200 electric collection vehicles in operation at the end of the first quarter. We expect to exit this year with more than 300 EV collection trucks in our fleet to support the continued growth of this differentiated service offering.

We recently celebrated with the city of San Pablo who partnered with us to become the first city in California to operate an all-electric recycling and waste collection fleet. As part of our commitment to sustainability, we strive to be the employer where the best people want to work.

Our employee engagement score consistently exceeds national benchmarks, and we continue to experience record low turnover rates. Our comprehensive sustainability performance continues to be widely recognized as our public services was named The Fortune's World's Most Admired Companies list and [ Ethisphere's ] World's Most Ethical Companies list.

Regarding capital allocation, we have invested more than $700 million in value-creating acquisitions to date, which includes $433 million of investment in the first quarter. Our acquisition pipeline remains supportive of continued activity in both the recycling and waste and Environmental Solutions businesses. We expect to exceed $1 billion of acquisition investment this year.

As part of our balanced approach to capital allocation, we returned $507 million to shareholders in the quarter, including $314 million of share repurchases. I will now turn the call over to Brian, who will provide additional details on the quarter.

Thanks, Jon. Core price on total revenue was 5.7%. Core price on related revenue was 6.8%, which included open market pricing of 8.4% and restricted pricing of 4.4%. The components of core price on related revenue included small container of 8.2% large container of 7.1% and residential of 6.5%.

Average yield on total revenue was 3.4% and average yield on related revenue was 4.1%. First quarter volume decreased total revenue by 80 basis points and related revenue by 1%. Volume results on related revenue included a decrease in large container of 2.5%. This represents a sequential improvement of 130 basis points compared to our fourth quarter performance.

Volume results also included a decrease in residential of 5.2%. The sequential change in residential volume was primarily due to known contract losses, which was contemplated in our full year guidance. Landfill volumes improved during the quarter as MSW volumes increased 1.4% and special waste revenue increased 9.9%.

We estimate severe weather negatively impacted volume performance by approximately $30 million during the quarter which was reflected in our full year revenue guidance provided in February.

Moving on to recycling. Commodity prices were $120 per ton during the first quarter. This compared to $155 per ton in the prior year. Recycling processing and commodity sales were flat compared to the prior year. Increased volume at our polymer centers offset the revenue impact of lower recycled commodity prices.

Current commodity prices are approximately $125 per ton. Total company adjusted EBITDA margin expanded 50 basis points to 32.1%. Margin performance during the quarter included margin expansion in the underlying business up 90 basis points and a net benefit of 20 basis points from nonrecurring items, primarily due to a favorable legal settlement.

This was partially offset by a 20 basis point decrease from net fuel, a 20 basis point decrease from recycled commodity prices and a 20 basis point decrease from acquisitions. The sharp increase in diesel prices in March negatively impacted EBITDA performance by $8 million in the first quarter.

Our fuel recovery fee tends to lag changes in fuel expense by approximately 1 month. We expect fuel recovery fees to offset higher fuel costs beginning in the second quarter. With respect to Environmental Solutions. First quarter revenue decreased $44 million compared to the prior year. Approximately $15 million of this decrease related to an emergency response job in 2025 that did not repeat.

Adjusted EBITDA margin in the Environmental Solutions business was 19.2%. Adjusted free cash flow of $984 million, an increase of more than 35% compared to the prior year. This increase was driven by EBITDA growth in the business and the timing of working capital and capital expenditures.

Year-to-date capital expenditures of $249 million represents 12% of our projected full year spent. Total debt was $14 billion, and total liquidity was $1.8 billion. Our leverage ratio at the end of the quarter was approximately 2.6x. With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 24.9% during the first quarter.

With that, operator, I would like to open the call to questions.

[Operator Instructions] Our first question comes from Noah Kaye.

Okay. Great. So AI and digital productivity, definitely a strong theme for the sector and for you this quarter, you called out you expect $100 million, I think, of annual benefits from investments by 2028. I guess first, can you sort of benchmark where that benefit might be penciling out for '26? And how to think about it flowing in a couple of years? And then maybe just to unpack a little bit, these are the buckets of benefit that you're getting here.

Yes. We mentioned on the latter part of your question, we mentioned 3 areas of the benefit, routing, the RISE pricing and the customer service. And I would list those in terms of the priority of the impact or the scale of the impact over time. Pricing will come first, and we'll see some benefit in 2026, and that will build over '27, '28. We're going to see very little, probably no benefit of that in 2026 on RISE just because we're doing all the work, and that will scale.

You'll start to see that benefit come in '27 and then that will really scale in 28 and that, again, will be the largest impact. And then on the customer service, I think you'll see ratable improvement across the 3 years. Right now, that's the smallest of the categories I mentioned. And those aren't the only 3. I mean, we're looking at AI in every area of the business.

Back office legal HR, all kinds of places. These are the 3 where we see the most immediate benefit to scale, but it will have profound impact across the business.

That's very helpful, Jon. Maybe we could talk a little bit about the price/cost performance this quarter. To get 90 bps underlying margin expansion when you had the headwinds from fuel -- from a weather rather and some of the cost pressures it's impressive.

Maybe you can talk a little bit about what you've seen so far on price retention. Was that better than you expected? Did you maybe get a little bit better operating leverage off of cost savings initiatives. Just help us understand the quarter and how you see it trending as we look at margin profile for the next couple of quarters?

Yes. I lead with costs. Our cost performance has been really strong for a number of years now. Inflation has come down, but we've done a lot of self-help there. The underlying rise benefits. You're seeing that through labor productivity. You're seeing npower and our maintenance cost be very strong on that. And we're doing a good job of balancing pricing, again, primarily playing a long game. We want to understand even in a volume challenged environment to retain customers over time.

And so we've had to find our place in different markets, both to retain and to compete for new work just given the challenging macro and the team is doing a great job of finding that right mix to still get that underlying margin expansion.

Our next question comes from Brian Burgmeier with Citi.

Brian, can you maybe just provide some details on how you're thinking about 2Q. I just want to be mindful of the wildfire comps, the fuel impacts, M&A integration, but then conversely, you'd have some seasonal step-up recycled commodities are doing a little better.

I mean, we were thinking margins would still probably be down kind of slightly year-on-year, but any details you can add on that would be helpful.

Yes, that's still what we're expecting for the second quarter. I would say from -- starting with -- from a margin perspective, somewhat flat to slightly down on a year-over-year basis, largely due to some of the project-related landfill volumes that you mentioned. That's the biggest driver of that. ex that, we would have anticipated margin expansion. So margin expansion in the underlying business, excluding the impact of those volumes. .

Overall, it's obviously going to have an impact on the top line as well, when you think that's going to have a negative impact on volume performance which is exactly what we thought when we entered the year negative in both Q2 and Q3, flipping to positive then in the fourth quarter.

So largely the same as what we thought when we provided the guidance in February. And again, nothing's really changed based on our performance in the first quarter.

Got it. Got it. That's really helpful. One just quick follow-on for me, and I'll turn it over. Just a kind of point of clarification. So are you expecting or forecasting any impact to EBITDA in 2Q from fuel? And then can you just help us frame maybe the margin impact as you pursue the surcharges and pricing associated with that.

Yes. As I mentioned in the prepared remarks, we tend to lag from a fuel recovery fee perspective, the increased cost of fuel expense. So as prices have been rising, right, we've been chasing that month-on-month.

Now we expect that fuel recovery fee to start kicking in, in the second quarter. Our overall objective is to sit there and recover the cash impact, the full cash impact of those rising fuel prices. There's both direct impacts as well as indirect.

So the sensitivity that we provide in our disclosures is more of a direct type concept. There are going to be other impacts like potentially increased transportation expenses. There's increased CapEx as well that goes along with that. So again, if we achieve that recovery from a holistic or comprehensive cash perspective, that is the overall objective.

SPEAKER01

Next question comes from Adam Bubes with Goldman Sachs.

I just had a first one on the volume line. I think you called out weather as a $30 million headwind in the quarter and then you were lapping maybe $12 million of event-related volumes.

If I have it right, I think it implies volumes are tracking flattish year-over-year underlying volumes. How did that compare with your initial expectations? And can you just talk about what you're seeing in volumes in March and April and expected cadence throughout the year?

I think we're starting to see some underlying momentum, and I wouldn't put over to caution on that given the macro uncertainty we're facing around to ores and oil prices and all the other things that you guys see and read.

But I'd say some green shoots are starting to emerge in terms of the underlying demand signal. Special waste has been particularly strong, and we're seeing some momentum month over month in the first quarter. And so we're going to look for that to build. And again, at what rate that builds, we'll talk more about in the next quarter. But I'd say, versus the 3 months ago, I'd say we're slightly more positive on where the macro is looking.

And then I think the spread between core price and yield was a little wider this quarter at 2.7 versus I think 2% last year. Is that just a mix impact? Or what's driving that? And can you talk about how you think about that spread going forward as you continue to leverage AI to implement more surgical pricing tools?

Yes, it predominantly is mix. You're spot on there. And in part, I would say it's driven by the relatively better performance we're seeing in the temporary large container business, which is predominantly construction-related activity.

So sequentially, the volume performance improved 500 basis points. And so that's where you tend to see that impact because we don't capture price on a temporary unit. You'll see it in that churn mix and other, which is the difference between the core price and the average yield.

The good news is that as those units return, right, you're getting that incremental volume, but it's what it ultimately leads to. It's that permanent unit of service.

It's the temporary units leading to that household formation, which ultimately leads to that small business formation, which is extraordinarily important to us.

Our next question comes from Kevin Chiang with CIBC. Kevin?

Kevin, you're may be on mute.

You are right. I apologize if I missed this. You called out the $12 million or $15 million headwind in ES in terms of a year-over-year [indiscernible] impact yes as well. And maybe if I think of sequential margin performance, if it did, would we expect to see a more outsized margin cadence from Q1 into Q2 within ES, just given it dipped below 20% in the first quarter here?

Yes. I'd say weather was a factor. I wouldn't say it was the dominant factor more of the year-over-year comp we talked about, the weather was certainly a factor. And I think we talked about this last quarter. I think the first couple of quarters here, we're in finding the bottom, which we have, and we're building off of that.

We have a tough comp in Q2 as well. You'll see in the back half kind of momentum both on the top line and margin expansion into the business. But we feel really good about what momentum that team has. I think we talked about probably missing the market a bit as volume declined, right?

We were still pretty aggressive on price. And I think we found our footing there on a price volume standpoint. And that can be a little longer sales cycle. So a lot of the great activities we see won't show up into the P&L until the second half.

That's great color. And just my second question, just wondering, just given where virgin plastic pricing is, just does that impact the economics of the polymer centers or the blue polymer JV?

Yes, a lot of moving pieces right now on plastics. We've had some pre Iran War certainly some global challenges with a glut of virgin PET out of Asia, flooding the U.S. market, some of which is coming in as our PET and working with our industry stakeholders and the government to address that issue. .

The ore itself has been helpful on that because we're starting to see those -- that production go down as they've had to rational oil supply and get it to primary use versus secondary use like plastics. And so the net impact is we're seeing our spreads increase, both in the polymer centers and the [indiscernible] JV and feel really good about the demand profile there and the momentum we have in that business.

Our next question comes from Jerry Revich with Wells Fargo.

I'm wondering if we could talk about the electric collection vehicles as you folks are ramping up towards 300. Can you just talk about where you're deploying them, what the unit profitability looks like compared to conventional trucks on an all-in basis. And as we look at what proportion of your footprint, could you ultimately see EVs operating in, how meaningful part of the fleet could it be in terms of where there's actual availability of power and economics?

Yes. We feel good about the deployment and the rollout. We've had really good partners in that space. And if it's concentrated in markets that you would expect that have local and state environments that are supportive, right? Places, municipalities that are willing to pay states that might have incentives to support that because it is a different OpEx CapEx trade-off. Truck is going to be more expensive, but then cheaper to operate. We're beating our assumptions in the pro forma on that so far. .

Again, still we'll learn more every year that we drive those trucks, but feel good about the operational performance. And you're going to see is the point we did lose a little bit in terms of federal incentive with the administration change. And so that's probably slowed the rollout modestly. But in residential, this is continuing to be where we're focused on buying the trucks and we're moving a small container next. I don't think large containers in the cards in the short term, but this will end up being a meaningful portion of our buyer as we approach the end of the decade.

Super. And then can I ask on RNG, thank you for the update on the facility counts? Can you talk about the operating performance on the facilities? Are you expecting an equity income contribution this year? What's the profitability cadence as they ramp up? And if you could comment on expected royalty contributions this year versus planned. I would appreciate it.

Yes, Jerry, the total contribution that we're expecting from the RNG portfolio is $10 million of incremental revenue, $10 million of EBITDA this year which is consistent with what we thought in the beginning of the year as well. That is going to ramp up as we move forward. It kind of is $10 million in '27, $15 million, '28, $15 million in '29, and ultimately $20 million by [ 2030. ] So how that ramps up to that $100 million of incremental revenue by the end of the decade.

SPEAKER01

Our next question comes from Trevor Romeo with William Blair.

I had a couple of quick ones here. First one, I wanted to ask on your organic processing business. I think there was some press lately around couple of new facilities you opened up in California and Colorado recently.

So maybe I would love if you could speak to kind of how you're thinking about investing in the organics business, what you're seeing from a regulatory perspective and maybe the overall growth opportunity there?

That ends up being very regional or state specific. So where there's support either from a state regulation or a community willingness to pay, we are investors and operators, both on the collection side and then the processing on the back end.

The price of that technology needs to come down on the processing side overall to make that more scalable. But longer term, it's going to be a growth driver. 25% of what goes through our landfill is organic and some capacity that ultimately could come out and be processed in a different way. So continue to pursue opportunities.

And again, as the regulatory environment evolves, you'll see that business scale.

Okay. And then maybe just going back to ES, I think you talked about the sales pipeline building. So I was just wondering if you could give maybe an update on your cross-selling initiatives there.

It's something maybe you talked about more a few years ago. But just what are you seeing in terms of customer demand for kind of the broader set of solutions across your 2 segments and how you're executing on that opportunity?

Yes. Our most profitable customers want an integrated offering, and we're uniquely positioned given that we can offer them odd suite of services, recycling, waste, special waste and then all the various services that are underneath Environmental Solutions. .

To unlock the opportunity further, we're really working on some of the IT and sales opportunities to get the information in the right hands of the sellers so that in a local customers, we can unlock exactly what we offer, including things as tactical as a single contract, a single bill ways to make it really easy for our customers to do business with us, and we're making great progress on that, but you'll see that build over the next 18 to 24 months as some of those initiatives get fully deployed.

Our next question comes from Seth Weber with BNP Paribas.

Great. Wondering if you could just give us your updated thoughts on the cadence for the shedding and the residential contracts? Just how we should think about that potentially moderating through the balance of the year?

Yes. I think you'll see it pretty consistent across the year. The big driver there in residential was 3 larger contracts that we lost. And regrettable in the sense that we'd love to have those contracts and serve those communities at the right price and cost, but we're going to be very return focused as we deploy capital and have our people do work in communities, we need to get a fair price for the work that we do and still seeing more challenges in that vertical than we are in the other verticals in the market of people willing to do work for very, very low return.

So you'll see those numbers pretty consistent across the year, slight improvement in the second half. And then I think a different outlook in 2027.

Got it. Okay. And then just on your comments around M&A, it sounds like you're now talking about $1 billion plus, which I think is a little bit stronger than what you mentioned last quarter. Is that a function of you feel better about your free cash flow outlook or just more deals kind of presenting themselves to you or just any nuances there as to why you're taking that number up at this point?

Yes. It's just the opportunities of both what we've already closed and what we have in the pipeline, and we're rarely financially constrained. It's always opportunity constrained.

A deal has got to be 2 screens for us. One, it has to have the right financial returns. And then it's got to be the right strategic fit. We've got to be the owner for it and be able to take that asset and do something more productive with it, and we just had a really positive year in terms of kind of what we've already blocked up and closed and then what we see coming forward in the next 6 to 9 months.

Our next question comes from Toni Kaplan with Morgan Stanley.

I wanted to start out on free cash flow, really strong quarter. It sounded like maybe it was because of CapEx timing. You talked about it being roughly 12% of the full year CapEx spend in the first quarter. So I was wondering if there was sort of a reason like why CapEx was lower this quarter and what your what was lower and what you're planning to spend it on for the rest of the year?

Yes. Actually, most of it from a timing perspective is really within working capital. right? You can see that and what it has to do with just the number of AP payments that were made as well as payroll payments.

So that's something that will flip over the balance of the year. So we called out that timing piece. The CapEx, that's not abnormal for us to sit there and spend below 25% of our full year spend in the first quarter.

You can go back over several years, and that's the case but we do expect to spend that full year CapEx that we guided to in the beginning of the year.

Yes. Okay. Got it. And then one other question on M&A. I just wanted to tackle a little bit differently. I guess are there and it was sort of a million to date, I believe.

And so were you trying to strengthen current markets that you're already in, entering new ones? Just trying to understand what opportunities you were able to find and how you're thinking about sort of what targets you're approaching?

Yes and yes. So we look in recycling away both the markets that we're already in to strengthen those, and that's the bread and butter, I'd say what we do acquisition-wise. And then expanding geographies is also an opportunity for us, and those become great platforms for further tuck-in acquisitions over time. and then as well as Environmental Solutions, right, same opportunities there, strengthening markets we're already in and expanding into new markets.

The balance of the spend so far this year of what's already closed and what's signed and going to close has really been 90%-plus recycling and waste. That balance will probably rate just a little throughout the rest of the year, but pretty strong on both ends.

Our next question comes from Tami Zakaria with JPMorgan.

Just a question. The March reading accelerated sequentially. Just wondering if you could remind us how much of your portfolio is indexed should it continue to go higher? And what's the typical lag?

Yes. So the -- of our portfolio of contracts that we call restricted, which have some sort of pricing restriction embedded in the contract itself. Just shy of 20% are directly linked to headline CPI. 35% are linked to some sort of alternative index, water silver trash, garbage trash. .

With the balance, about 45%, some sort of fixed rate that's embedded in the contract itself or a rate review. The lag tends to be months, call it, on average, there's a look back period. And then the implementation period tends to be about 12 months after the fact.

That's very helpful. And I wanted to double click on residential volumes I know you're not speaking to 2027 specifically, but are we -- do you expect residential volumes to turn positive at some point next year?

No, I think the rate of decrease will certainly improve, whether that is flat next year or not probably still decline just given some of the rollover effect of those larger contracts that we lost, some of which started on January 1 and some of which are midyear conventions on that front.

And listen, we're going to continue to put upward pressure on price and be returns focused and get paid for the work we do. And to the extent that Customers are not willing to pay, then we'll put our resources into other verticals and other opportunities.

Our next question comes from Konark Gupta with Scotia Capital.

Just following up on the residential business. I understand the volumes are declining and why. But if we can talk about the underlying business, how is it performing from profitability and return standpoint?

Yes. No, profitability in that business is improving. And again, I think for a couple of reasons. One, when you have a contract that's underperforming and you look to get it to an acceptable level of return and if you don't retain that because someone is willing to take that relatively lower price, you're going to improve your overall performance.

Coupled with the fact that you look at the remainder of the portfolio and you look at the level of price, that we've had in the residential system itself very strong and well in excess of our cost inflation. So the combination of the 2 have driven margin expansion in that business.

And when we bid these residential contracts, we never bid them to lose money. We bid them with the assumptions of profitability, but then things change over the course of a 5-year term of the contract, which is maybe we didn't have a good pricing escalator in the contract and our cost inflated faster.

Maybe our assumptions in terms of number of trucks we needed to cover the community wasn't quite right. It turned out to be a little more expensive to deliver or operate that truck. So we're being very disciplined across each one of those contracts to make sure that we are returns-driven and pricing that accordingly when the contract comes up.

And if I can follow up on the employee turnover side of things. Are you seeing any implications what were direct or indirect from the regulations that are going through in the U.S. right now. I mean I understand the drivers may not be CDL necessarily, but some of them, but do you see any impact of the shortage of drivers that's going on in the industry?

Yes. Our drivers do have CDLs and I'd say that impact has been de minimis. There's been a few individual cases. But overall, as we set the turn over a record 2 years in a row, and we may break it again for a third year.

The team is doing a great job of finding talented technicians and drivers and customer service agents and all of our other frontline colleagues and retaining those colleagues at increasingly high rate.

Our next question comes from Shlomo Rosenbaum with Stifel.

You mentioned that you're starting to see some green sheets in the solid waste business. And I'm wondering if you're seeing similar type of green shoots in the ES business as well. Are you seeing maybe some of the turnarounds happen a little bit faster. What signs are you seeing over there in that business?

Yes. I'd certainly say it's improving, maybe not improving quite as quickly as we're seeing on the special waste side of the business in the recycling and waste business, and you've got some moving pieces.

So listen, as oil prices spiking and people are kind of trying to blow out demand, right? That's delaying some of the other line project work, which can't be delayed forever but can be suspended for 3 to 6 months. So there's puts and takes there, but the trend line is definitely up, and we'll see what kind of momentum we built here in the second quarter.

Okay. And then -- what was driving the volumes down in the CMT business? Is -- was there a tough comp issue over there with some of the stuff that you were talking about? Or it just kind of stood out over there?

Yes. It was more of a comp issue. So in the prior year, we had some hurricane cleanup efforts in the Southeast.

Our next question comes from Tobey Sommer with Truist.

Okay. Great. I just wanted to ask a question about volume in Environmental Services. How do you expect the cadence of that to change throughout the balance of the year?

Well, there we don't report on a specific volume metric just because -- there's so many different products and service lines there that it'd be really, really tough with a mix standpoint.

But as I mentioned earlier, right, we see momentum really building in the second half of the year. I think you'll see incremental progress quarter-to-quarter, right? The year-over-year comp is tougher in the second quarter, but the second half, you'll definitely see the volume picture build.

And with respect to your acquisition program, are you seeing opportunities on the ES side as readily as you are on the municipal solid wayside?

Plenty of opportunities I'd say there's a little more momentum right now in recycling and waste not because of activity on our side, but just timing of market.

We know that these things ebb and flow, lots of opportunities we have in the recycling waste side. We've had discussions with sellers for over a decade. And it's really timing and event-driven on their side that drives the sale. Environmental Solutions, obviously, we don't have the relationship profile that is that long, but still some of the same things we maintain significant dialogue for every acquisition we closed that we probably had 7 fall out of the system at some point in the pipeline.

So we're very discriminating in terms of what we actually buy, but the activity that level there is very strong as well.

Our next question comes from Stephanie Moore with Jefferies.

Great. I wanted to circle back on some of the commentary that you provided on your RISE digital platform. I think some of your -- some of your peers have talked about leveraging technology for more dynamic pricing discussions.

And I wanted to see if that's an area that you guys have tackled as of late. And at the same time, I think you've talked in the past about some opportunity with AI and goal-based routing. So I wanted to get an update there as well.

Yes. both sides. So pricing today, we're using dozens of variables through AI to build bespoke prices to existing customers when we send them our annual price increase. And so we're trying to get that as [indiscernible] as possible to give them a price that maximizes both what they'll pay and incent them to stay over a long period of time.

And that is a game of inches in terms of dialing that in but small basis points across individual customers adds up quickly across the system and feel really encouraged. And that will just continue to get better and better over time.

It kind of builds in a more linear fashion where the routing, there's a lot of upfront work, particularly around data and data accuracy and data management that you need to have in place so that when you start routing dynamic building dynamic growth through AI and then routing dynamically through the day, you get it right.

And what we won't do is sacrifice customer service to pursue short-term gains. We're going to get it right with the customer first. and then drive all of the operational efficiency through the system while improving customer service.

And that's why you'll start to see some of that benefit in the second half of next year, but that's really 2028 when we think we scale.

Our next question comes from David Manthey with Baird.

How much of the Environmental Solutions weakness is that self-inflicted pricing that you mentioned as opposed to end market softness? And if some of it is market related, what exposures by service or customer type leads you to your view of an improvement in the second half of '26 just so we can sort of track that.

Answer the last part of your question, we see the sales pipeline and just understand the activities, both on our side and then work that is contracted and slated to begin.

Some of those are longer-term things that happen over the course of many months, and some of those could be shorter, but we know the start date happens later in the second quarter or into the third quarter on that front. The split between what is market and what is our own activity is hard to identify, I'd say, certainly, it was more self-inflicted in the second half of last year.

And I'd say as we increase and go forward, it's we're more market driven, which is we think we got market pricing very dialed in here. We're not going to get it perfect every time, but much improved on that dimension.

And some of this is things like ER, which is hard to predict. We've just had a soft kind of 18 to 24 months on emergency response other than a single job. And going forward, we would expect that to resume to normal levels, but we'll see where that progresses.

And then there's -- it's a mixed picture on the underlying verticals. I mentioned petrochemical at being a little slower or we're seeing some of the biotech being a little slower or some of the other verticals are moving a little quicker.

And given that you have visibility on these projects as they're coming down, we should assume these are what, turnarounds, remediation, hazardous CMD, how should we think about what types of work that is?

Yes. It's a full mix. It can be both recurring things, where we won the opportunity to take all of the integrated waste out of a plant, a plant produces recycling, solid waste, special waste and hazardous liquids, [indiscernible] we can handle all of that. or it could be events, where we know we're projected to do a big remediation and opportunity. And again, that could produce special waste and hazardous way solids, and that event could be as short as 2 weeks or it could last as long as 8 or 9 months.

At this time, there appear to be no further questions. Mr. Vander Ark, I'll turn the call back over to you for closing remarks.

Thank you, Kim. I want to thank the Republic Services team for the great start to the year. Their continued focus on safety, sustainability and exceeding customer expectations, positions us for success and another year of strong results. Have a good evening and be safe.

Ladies and gentlemen, this concludes the conference call. Thank you for attending. You may now disconnect.

Good afternoon, and welcome to the Republic Services Fourth Quarter and Full Year 2025 Investor Conference Call. Republic Services is traded on the New York Stock Exchange under the symbol RSG. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Aaron Evans, Vice President of Investor Relations. Please go ahead.

Good afternoon. I would like to welcome everyone to Republic Services Fourth Quarter and Full Year 2025 Conference Call. Jon Vander Ark, our CEO; and Brian DelGhiaccio, our CFO, are on the call today to discuss our performance.

I'd like to remind everyone that some information discussed on today's call contains forward-looking statements. including forward-looking financial information, which involve risks and uncertainties and may be materially different from actual results. Our SEC filings discuss factors that could cause actual results to differ materially from expectations. The material that we discuss today is time sensitive. If in the future, you listen to a rebroadcast or recording of this conference call, you should be sensitive to the date of the original call, which is February 17, 2026.

Please note that this call is property of Republic Services, Inc. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Republic Services is strictly prohibited. Our SEC filings, earnings press release, which includes GAAP reconciliation tables and a discussion of business activities, along with a recording of this call, are available on our website at republicservices.com. In addition, Republic's management team routinely participates in investor conferences. When events are scheduled, the dates, times and presentations are posted on our investor website.

With that, I'd like to turn the call over to Jon.

Thanks, Aaron. Good afternoon, everyone, and thank you for joining us. The Republic team delivered another strong year performance, reflecting the resilience of our business model and the power of our differentiating capabilities. We maintained high levels of customer loyalty by consistently delivering premium products and services while effectively managing costs across the business, all while navigating a dynamic macroeconomic backdrop.

Our solid earnings growth and meaningful margin expansion reflect our strategy in action and the dedication of our team to create long-term value for our customers and shareholders. During 2025, we achieved revenue growth of 3.5%, generated adjusted EBITDA growth of nearly 7%, expanded adjusted EBITDA margin by 90 basis points delivered adjusted earnings per share of $7.02, produced $2.43 billion of adjusted free cash flow and increased adjusted free cash flow conversion by 200 basis points to 45.8%. We remain well positioned to secure new growth opportunities by delivering our differentiated capabilities, customer zeal, digital and sustainability.

With respect to customer deal, our customer retention rate remained strong at 94%. Our Net Promoter Score continued to improve throughout 2025. This reflects our team's commitment to delivering exceptional customer value. Fourth quarter organic revenue growth was driven by solid pricing across the business. Average yield on total revenue was 3.7% and average yield on related revenue was 4.5%. Organic volume declined during the quarter, reducing total revenue by 1% and related revenue by 1.2%. Volume declines were concentrated to construction and manufacturing end markets as well as a continued shedding of underperforming residential business. Organic revenue in the Environmental Solutions business decreased total revenue by 2% in the fourth quarter. More than half of this decrease in the Environmental Solutions business related to an emergency response job in 2024 that did not repeat.

Turning to digital. We continue to make investments in new technologies and AI-enabled tools that strengthen our competitive position and create measurable value. These capabilities extend across our organization and are expected to unlock incremental growth, enhance profitability and drive sustained operating leverage. For example, we are deploying advanced analytics to optimize pricing based on specific attributes and local market dynamics. Over time, we expect this will strengthen price retention and reduce customer churn. We are upgrading our RISE digital platform beginning with our large container business. By applying AI and algorithmic-based routing, we see meaningful opportunities to improve safety, enhance service delivery and increased route level productivity benefits that translate directly into cost efficiency and a better customer experience.

Additionally, our digital tools are helping us optimize nearly all 11 million customer calls we receive each year. In fact, in 2025 alone, we delivered more than 70 million proactive service notifications addressing our most common customer inquiries, such as holiday service schedules and weather-related delays. Within sustainability, we made great progress during the year in the development of our polymer center network and Blue Polymers joint venture facilities. In July, we commenced commercial production at our Indianapolis Polymer Center. This facility is co-located with a blue polymers production facility. Commercial production began in the Indianapolis Blue Polymers facility during the fourth quarter. We continue to advance renewable natural gas projects with our partners. The projects came online during the fourth quarter. In total, we commenced operations at 9 RNG projects in 2025. We expect 4 more RNG projects to be in operations in 2026.

We continue to execute against our industry-leading commitment to fleet electrification. We had more than 180 electric collection vehicles and operations supported by 32 commercial scale EV charging facilities at the end of 2025. We expect to add another 150 EV collection trucks for our fleet this year to support the continued growth of this differentiated service offering. As part of our commitment to sustainability, we strive to be the employer where the best people want to work. In 2025, our employee engagement score, which consistently exceeds national benchmarks improved to 87 and our turnover rate was our best performance on record.

Regarding capital allocation. In 2025, we invested $1.1 billion in value-creating acquisitions and returned $1.6 billion to shareholders, including $854 million of share repurchases. Our results clearly demonstrate our ability to create sustainable long-term value even while managing through a dynamic market environment. We expect to deliver another year of profitable growth in 2026. More specifically, we expect full range revenue in a range of $17.05 billion to $17.15 billion. Adjusted EBITDA is expected to be in the range of $5.475 billion to $5.525 billion. We expect to deliver adjusted earnings per share in a range of $7.20 to $7.28. And we expect to generate adjusted free cash flow in a range of $2.52 -- $2.52 billion to $2.56 billion. Our acquisition pipeline remains strong and supportive of continued activity in both recycling and waste and environmental solutions. We expect to invest approximately $1 billion in value-creating acquisitions in 2026.

We are already off to a strong start this year with over $400 million of investment in acquisitions to date. Our guidance includes the financial contributions from these acquisitions. At the midpoint, our outlook for 2026 represents revenue growth of 3.1%, adjusted EBITDA growth of 3.6%, adjusted earnings per share growth of 3.1% and adjusted free cash flow growth of 4.4%. As we have highlighted previously, our 2025 results benefited from landfill volumes related to wildfire and hurricane cleanup efforts. Absent difficult prior year comparisons created by these nonrecurring projects, the midpoint of our 2026 guidance would indicate nearly a 4% top line growth, more than 5% growth in adjusted EBITDA, 50 basis points of EBITDA margin expansion, approximately 6% growth in adjusted earnings per share and 7% growth in adjusted free cash flow. This level of performance aligns with our long-term growth algorithm, even as we continue to operate in an uncertain macroeconomic backdrop.

I will now turn the call over to Brian, who will provide additional details on the quarter and the year.

Thanks, Jon. Core price on total revenue was 5.8% in the fourth quarter. Core price on related revenue was 7.1%, which included open market pricing of 8.7% and restricted pricing of 4.6%. The components of core price on related revenue included small container of 8.8%, large container of 7.4% and residential of 6.7%. Average yield on total revenue was 3.7% and average yield on related revenue was 4.5%. In 2026, we expect average yield on related revenue in a range of 4% to 4.5%, which equates to average yield on total revenue in a range of 3.2% to 3.7%.

Fourth quarter volume decreased total revenue by 1% and decreased related revenue by 1.2%. Volume results on related revenue included a decrease in large container of 3.8%, primarily related to continued softness in construction-related activity and manufacturing end markets and a decrease in residential of 3% due to shedding underperforming contracts. In 2026, we expect organic volume will decrease total revenue by approximately 1%. Keep in mind that landfill volumes from wildfire and hurricane cleanup efforts in 2025 creates a 60 basis point headwind to organic volume growth in 2026.

Moving on to recycling. Commodity prices were $112 per ton during the fourth quarter. This compared to $153 per ton in the prior year. Recycling processing and commodity sales were flat compared to the prior year. Increased volumes at our polymer centers and reopening a recycling center on the West Coast, offset the revenue impact of lower recycled commodity prices. Full year 2025 commodity prices were $135 per ton. This compared to $164 per ton in the prior year. Current commodity prices are approximately $115 per ton, which is the baseline used in our 2026 guidance. Fourth quarter total company adjusted EBITDA margin expanded 30 basis points to 31.3%. Margin performance during the quarter included margin expansion in the underlying business of 80 basis points, which was partially offset by a 10 basis point decrease from net fuel, a 20 basis point decrease from recycled commodity prices and a 20 basis point decrease from acquisitions.

Our full year total company adjusted EBITDA margin was 32%, which represents margin expansion of 90 basis points compared to the prior year. This improvement was driven by margin expansion in the underlying business. The 30 basis point increase to margin from wildfire and hurricane landfill volumes was completely offset by the impact of net fuel, recycled commodity prices and acquisitions. With respect to Environmental Solutions. Fourth quarter revenue decreased $60 million compared to the prior year. Approximately $50 million of this decrease related to an emergency response project in 2024 that did not repeat. Adjusted EBITDA margin in the Environmental Solutions business was 20.1% in the fourth quarter. This level of performance was relatively consistent with our third quarter results.

Total company depreciation, amortization and accretion was 11.6% of revenue in 2025 and is expected to be approximately 11.6% of revenue in 2026. Full year 2025 adjusted free cash flow was $2.43 billion, an increase of more than 11% compared to the prior year. This was driven by EBITDA growth in the business and cash tax benefits resulting from recently enacted federal tax law. Total debt at the end of the year was $13.7 billion, and total liquidity was $2 billion. Our leverage ratio at the end of the year was approximately 2.6x. Based on current interest rates, we expect net interest expense in a range of $575 million to $585 million in 2026.

With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 16.2% during the fourth quarter and 21.9% for the full year. The favorable tax rate in the fourth quarter was driven by the timing of tax credits related to equity investments in renewable energy. We expect an equivalent tax impact of approximately 24% in 2026, made up of an adjusted effective tax rate of 19% and approximately $190 million of noncash charges from equity investments and renewable energy.

With that, operator, I would like to open the call to questions.

[Operator Instructions] The first question is from Tyler Brown with Raymond James.

Jon, I appreciate the comments on the M&A pipeline, but I'm just curious if you can talk a little bit about what you purchased with the $400 million year-to-date and then what types of assets are in the other $600 million? And then Brian, I assume the $400 million in acquisitions is in the guide, but the $600 million is not, I'm assuming that's the way it will be. And then just can you provide what the acquisition contribution will be in '26 implied in the guide? Sorry, I know that was a lot.

Yes, no problem. Yes. We typically don't comment on individual deals, but it was public. So we bought a company called Hams on the West side of Kansas City. Great disposal infrastructure, great opportunity for us to use that as a basis for further growth. So that was the anchor tenant of the $400 million. And of the $600 million in additional that we hit directionally we don't know -- again, we know some of the things that are likely in there. We don't know exactly what's in there because we haven't closed any of that stuff. So we'll update you on future quarters, but feel really good about that mix. it's predominantly recycling and waste, but we've got a number of attractive ES opportunities that we're looking at as well. And I'll let Del talk about the mechanics of the contribution.

Yes. Tyler, you're correct. So we've included the contribution from that, which is already closed, which includes the $400 million. And then we're other deals besides just Hamm that we closed. With respect to the contribution to rollover together with those deals, it's adding 70 basis points to 2026 growth.

Okay. Perfect. And then, Brian, if we can talk a little bit about margins because I think the margin guide is, call it, 32.2% based on the midpoint, which I think is 20 basis points up. But there's quite a bit going on. So can we talk about at the core level because we have commodities, we've got the landfill comps, we've got M&A.? And then I don't want to get really near-term focus, but can you help us shape Q1 and Q2? Because I surmise, again, there's a lot going on. The majority of the landfill comp will be earlier in the year. So will margins actually move backwards in the first half. But again, sorry, I know there's a lot there.

Yes. Let me just start with the components because you're right, there are quite a few moving pieces. So 20 basis points at the midpoint there, call it, 60 to 70 basis points of that expansion in the underlying business. With what we've guided to from $115 per ton commodity prices would be a 10 basis point drag on margin. Acquisitions, another 10 basis points of drag. And then to your point on those higher-margin landfill volumes, that's a 30 basis point drag on margin. So add all that up, that's the 20 basis points at the midpoint, but quite strong when you look at the underlying business in that 60 to 70 basis point ZIP code. .

When you think about the timing, so what I would just say and more of this is having to do with what happened in the prior year. So think slightly positive in Q1, Q2 and Q3, flat to slightly negative just because we're comping those landfill volumes during those 2 quarters and then most of the margin expansion happening in the fourth quarter.

The next question is from Jerry Revich with Wells Fargo.

I'm wondering if we could just talk about the polymer center performance. So nice to hear about the projects being on budget. Can you, Jon, please provide us an update on how you're thinking about future polymer projects? What's the demand curve look like and overall performance as you folks ramp?

Yes. We're happy with the progress on Las Vegas. Again, we talked about that having some learning curve in terms of the start-up, and that's moving up the curve very nicely. Indianapolis learned from a lot of that benefit and then Allentown steel is up in the air and our third polymer center. There certainly could be a fourth polymer center over time. As you know, right now, plastics is pretty challenged broadly. What has been nice is the spread between the bale we're taking on the front end and the PET we're selling on the back end, has been really stable in part because we're producing a very premium product that's meeting our customers' needs on that front.

So we're going to see how that market evolves. I don't think we'll announce any upward polymer center in the very near term, I think that is more likely than not over time. Just testing again, how the market evolves. There's some macro factors, obviously, with China on both virgin and recycled PET that are putting downward pressure on pricing that I'm hoping those trends are arrested here in the next 12 to 18 months, and I think we'll see some upward pressure on plastics.

And Jerry, to your question just on performance. When you think about next year, we're expecting about a $30 million revenue uplift from the polymer centers and with about $10 million of incremental EBITDA.

Super. And can I ask separately on the RNG side, not to hear about the projects. coming online. Can you just provide an update on performance from a royalty standpoint and operating efficiency, we're hearing in the industry projects are generally having a harder time getting to the targeted profitability numbers? I'm wondering how your projects are tracking in that regard, both from a royalty standpoint as well as equity income, if you don't mind sharing?

Yes. There was certainly a delay, which kind of pushed everything a little bit to the right. But now as you heard in our prepared remarks, 9 projects coming online. In 2025, we expect another 4 in 2026. So now that we're seeing those projects coming online, we're seeing the financial contribution that we would expect from those projects. So next year, again, just the way the timing works when you think about incremental revenue and EBITDA about $10 million each of both incremental revenue and EBITDA from those projects, with that accelerating that as we move '27 and beyond towards the end of the decade.

It's good to hear that the profitability is as planned as you're ramping.

The next question is from Noah Kaye with Oppenheimer & Company.

I want to ask about the organic growth outlook broadly, both the volume components and the yield component I know apples-to-apples is always a little bit tricky in this space. But it does look like a relatively conservative initial outlook just comparing to some of the peers. Is there anything that you would call out either on sort of the yield side or what you're seeing in the environment on volumes we needed to take a relatively more conservative tack?

Yes, I'd say from a macro economy standpoint, I think the macro economy characterized as stable. Now moving pieces underneath that, manufacturing construction had been weaker, which is leading to -- we're into 3 years approaching 4 years of negative demand and recycling of waste. So that's been a challenging volume environment. I think in the context of that the pricing environment has been broadly fairly positive. Now there are spots where you see people are on national accounts or some landfill maybe getting a little aggressive on volume. But on balance, I think the industry has performed well over an extended period of really challenging demand. .

And in terms of our own outlook, we're going to be pretty conservative until we see some momentum. Now there are some positive signs around special waste and certainly in January, the west side of the country will outperform the east side, some of that is weather. So we're cautiously optimistic in terms of the early signs. But in terms of a guide, we're going to wait until we get through the normal seasonality that we see into Q2 before we would take a more optimistic approach to the guidance.

Yes. I guess the follow-up to that, and that makes sense is just 40 bps underlying volume decline, right, in the midpoint when you back up the landfill volumes. Maybe just help us understand how much of that is kind of further controlled shedding in resi versus anything else? And just if you're seeing in general, your commercial service increases outpacing decreases.

Yes. I mean, to your point, we do expect residential to be negative in each of the quarters and for the full year in 2026, okay? So that is certainly a headwind when you think about that 40 bps that you talked about excluding the landfill volumes, whereas we do expect some better performance with respect to volume in the other lines of business. And so again, when you just take the average of those, that's where you get to that negative 40 basis points for the year.

Now remember, there is some timing things that you have to take into consideration. So because of rollover as well as the in-year impact, we would expect to start the year negative, right? So we're guiding to that negative 1% for the year. We would expect to be negative in Q1 a little bit more than that 1%. Same thing for the second and third quarter just because you're comping those landfill volumes in Q2 and 3 and then to be somewhat flattish by the time that we exit the year.

That's great color. And that plays finally into my last question around ES. Just -- we obviously had the tough comp here from the ER revenues in 4Q. I know we've got a little bit left, right, $15 million or so in 1Q, so that makes a tough comp. But just help us understand what have you assumed for that business in terms of total growth in '26? And how would you see that shaping?

Yes. So for the year, we're relatively flat as far as growth. And to your point, some of that starting negative in the first half of the year because of some of those tougher comps and then growth in the second half of the year. And on balance, call it, relatively flat on a full year basis.

And Noah, on broad across both businesses, we're going to pursue volume for sure and pricing. But when forced to choose, we are going to take price, right? We need to get a return on the work that we do, and we're going to continue to put upward pressure on pricing in both of those businesses over time. And so that's -- some of the implication of that would again be in national accounts, being residential, being landfill. We're going to take that disciplined approach and again, broadly happy with how we perform in the context of a pretty tough macro environment over the last couple of years.

Next question is from Bryan Burgmeier with Citi.

I think you said you're looking for about 60 to 70 basis points of underlying margin expansion this year. Wondering if maybe just from a high level, you could touch on your sort of inflation expectations across some of the major buckets, labor, maintenance, repair, that would be pretty helpful.

Yes. Overall, we're expecting an inflationary environment around 3.5%. So again, when you think about that yield on related revenue of 4% to 4.5%, you're getting that 50 to 100 basis points of price in excess of cost inflation. And by bucket, I would sit there and say they're relatively close to the average. Some might be a little bit above, some a little bit but below, but on average, call it, in that 3.5% range.

Okay. Got it. Got it. That's really helpful. And then maybe just following up on Noah's question, hopefully not too redundant. It's just getting you a sense of ES kind of progressing from 4Q into the first half. I think you talked about kind of rebuilding the pipeline and maybe some sequential improvement from like August to October obviously, the macro is not our friend right now, but just kind of trying to gauge that sequential recovery maybe into '26.

Yes, I feel really good about the team's actions and discipline. Keep in mind, a lot of this can be a longer sales cycle business, whether it's recurring revenues or event-based work because of the compliance nature of the business. So jobs that we are working on now are winning now may not show up until Q3, Q4, even into Q1 of next year, which plays into what Del talked about the first half having a pretty conservative posture and see more momentum in the second half of the business.

And keep in mind, emergency response has always been part of the business. It was historically low emergency response here last year, right? We've seen little yet, but those things can emerge, and those are always nice tailwinds to the business. Again, they typically happen in not huge chunk, but in chunks, but last year across the industry, it was just a very low year. So we get a little momentum there, and we could certainly run past the guide.

Next question is from Kevin Chiang with CIBC.

Maybe if I could just follow on is there. Look, you still held the margins pretty well, low 20% despite some of the revenue pressures you mentioned. Just as we think of that revenue recovering, just how do you think about incremental margins? Do they come back maybe a little bit better than you expected? It seems like you're holding costs pretty nicely here in some of this tougher macro.

Yes, I'd say that will be strong, so we're holding costs and we're holding -- we've done a good job of costs, but we're also holding people Again, we have to have -- be ready to serve our customers. And so our labor utilization is lower than we would expect over the last couple of quarters. And we've done some fine-tuning in places. But have certainly not optimized for the short term because we know there will be momentum and growth coming back in the business. And so I think you will see very attractive margins on the increment as we continue to grow in the second half of next year or this year, really.

That's helpful. And then just you spoke of some of the opportunities you're seeing on the technology side, on the RISE platform using AI, total cost of operation is below 58% for '25. Just wondering, as you think about the -- I guess, the longer term and you're utilizing this technology, maybe where you think that can go from a cost efficiency perspective?

Yes. We'll do a little more work here and give you specific numbers, but these are going to be -- over time, this is going to be cost improvements measured in 9 figures for sure. I mean there is a lot of efficiency that we can drive through and 1 minute across our system a year of routing our efficiency on our routing side is worth $4 million to $5 million. So you can see how that can accrue as you get optimized traffic patterns and optimize disposal optimization on our routes, and there's a lot of variables today. We do a very good job with the set of tools we have today.

AI is a game changer of taking a lot of complexity and designing routes in a more efficient fashion. You'll see some of this on the back office side, and we talked about call centers in the prepared remarks and just being able to service customers digitally in the way they want, getting them an answer and saving the cost of having people answering the phone. And then pricing is going to be a third big lever for us, which is getting very surgical in how we price. Again, we do a great job today with a current set of tools. But as we're now deploying AI, we're getting far more scientific and really understanding customer lifetime value as we price these customers to get a great price today, but also a price that incents them to stay with us for a long period of time.

The next question is from Adam Bubes with Goldman Sachs.

Just wondering if you could parse out the high level organic growth performance and environmental solutions across the different business lines because there's a lot going on under the hood and understand the $50 million impact from lapping the nonrecurring emergency response project, but hoping to get some color on how the landfill business is performing there, industrial services. You also have E&P. So just trying to get the moving pieces right?

Yes, Adam. So all 3 of those things you mentioned were down on a year-over-year basis. What I would tell you is the concentration to the landfill and the E&P volumes being down is where you're seeing that fall through at a very high decremental margin. So that's what's having the largest impact on margin performance. So -- but all 3 of those businesses being down on a year-over-year basis, but as Jon mentioned, we're well positioned that as those units return into the system, we'll capture those units, and we'll capture that at a similar margin that they're falling out that you're seeing in our performance right now.

And then one more on landfill gas. I think you mentioned $10 million incremental EBITDA in 2026. But can you just mark-to-market us on where we are on your realization of the $100 million run rate EBITDA for landfill gas? Is that still the right number to think about? And how you think about timing and the base that we're at today?

Yes, by the time we get done with 2026, we'd be at about $40 million of that $120 million that we expect an incremental EBITDA contribution. If you recall, right, the EBITDA exceeds the revenue contribution because of our equity pickup in those projects where we have a joint venture. So full run rate revenue, $100 million, $120 million of EBITDA.

The next question is from Trevor Romeo with William Blair.

I just had a couple of quick ones, I think, on the ES business. One is just your PFAS remediation business. I love if you could maybe talk about what kind of revenue you're expecting for that business maybe this year and the forward outlook based on what you're hearing from both the regulatory side and the customer demand side, just over the long-term opportunity there?

Yes. Till this year, we'll probably be in the $50 million to $75 million range, really good ongoing recurring projects with customers where we're going site to site to remediate some of their PFAS. And then in terms of regulatory environment, we're believers that this is going to be a big growth opportunity over time. I think it's going to develop more slowly than it would have under a different administration, and we're working through the regulations, and we're on both sides of this, obviously. It's a big opportunity for us on the environmental solutions side and a growth opportunity for us on the landfill side in recycling and waste also could be a headwind depending on the regulatory framework and the recycling and waste side, and we feel, I'd say, incrementally positive there in terms of regular regulations that make sense and that we're not going to be penalized as a passive receiver.

And then maybe just sticking with another sort of long-term potential opportunity for the ES business, I guess, reshoring as well as maybe infrastructure funding and things like that as a medium-term, long-term tailwind. What are customers saying about that? How meaningful do you think any of those benefits could be at this point?

Yes. I think there'll be very real. You think about the cheap energy supply we have here and you think about the policy of reshoring manufacturing, I think what we've seen in the very short term is as tariffs have gotten in place and uncertainty around tree policy. There's been a paralysis in terms of investments. People are waiting for the rules to shake out in terms of making bigger capital decisions about where to locate production and their broader supply chains. We're very optimistic that the rules will get settled here over a period of time and that there will be a tailwind from a demand standpoint. Whether that happens here in the next 3 months or that takes a little bit longer, I think that's TBD. But we remain very optimistic about that as a demand driver for ES and then our -- also the manufacturing portion of our recycling and waste business as well.

Next question is from Toni Kaplan with Morgan Stanley.

This is Yehuda Silverman on for Tony. Just had a quick question about the landfill focus within the M&A strategy, sort of recent acquisitions in Kansas and then late in 2025 in Montana, like the industry has been sort of trending towards like a net landfill closure compared to openings or a more pressed landfill airspace over expected over the next couple of decades. Can you talk to us a little bit about how the environment has been to get landfill expansions improved or opening of new landfills? And has that shifted the M&A strategy towards perhaps acquiring maybe more landfill assets?

We've always been interested in acquiring post-collection infrastructure, recycling centers, landfills, transfer stations, and they're hard to come by. But when we see those opportunities, we'll certainly compete for those. And then in terms of landfill expansion, I think it's 2 very different stories. Citing a brand-new landfill extremely challenging and difficult, not impossible, but very challenging -- expanding current landfills is very geography-dependent. But on balance, we feel very comfortable around our capacity on air space that we have across our network of 200-plus landfills. And part of that will be over the coming decades, you're going to see more waste moved by rail. We've got 30-plus years of experience moving waste by rail, and that will be a bigger part of the equation, but we'll feel really good about our capacity to operate in that environment.

Got it. And then just a quick follow-up on price/cost spread. I just wanted to hear some of the levers that have been made on the cost side to make it a bit more manageable as pricing continues to moderately step down.

What is just the macro inflation. I think what people sometimes lose the story, the read of our price increasing is coming down from the peak of inflation. 2022, but our cost is also coming down. The wage increase, the price we pay for parts, the price we pay to expand landfills, improve recycling centers, all of those expenses are also coming down. So we are maintaining the spread between that price and cost, and that is the predominant driver.

Now there's other things we do around productivity like RISE, we've talked about and the efficiencies with AI and other things we do to drive our underlying cost structure and afford us the opportunity to invest in new things like the polymer centers electrification. So we've compressed certain parts of our cost structure, right? And we've expanded other ones, which we view as investment in future growth opportunities.

The next question is from Seth Weber with BNP Paribas.

Just a quick one on the ES space. Can you just talk about how the Shamrock integration is going I mean, do you need to pick up an industrial activity to really get that thing -- to get that moving? Or can you just talk to how the early progress has gone with that the integration?

Yes. The iteration progress is going well. We're really happy about that business. A reminder, we bought that because we were already in the business. We were taking industrial water and liquids from our customers, and Shamrock was one of our suppliers. We were also using them for some leachate as well. So we were familiar with that. We had a lot of that material in our back. So we like to be vertically integrated or really had a lot of respect for Shamrock and what they built. And we'll see future growth opportunities in that space, right? They're predominantly a Southeast-based company, so we'll look for other opportunities because we see the same value creation opportunity in other regions.

Got it. And then just the first quarter volume outlook, does that -- are you haircutting that for weather? Like, have you seen a big impact related to the winter storms. I think you referenced the East Coast was relatively rough. Is that kind of baked into your guidance at this plant?

It is baked into the guidance. Yes, we have seen a pretty significant impact from that. So -- just in the month of January alone, we're estimating about a $25 million impact from weather in the first week of February experienced weather as well. So that could be a $30 million, $35 million number in the first quarter, but that is embedded in the guide itself. But to your point, from a timing perspective, then Q1 volume will look less because of that, that will be incorporated into our Q1 performance.

The next question is from David Manthey with Baird.

First question on the emergency response. I think in addition to the lack of jobs that are out there. I think you said last year that you thought maybe there was a gap between the jobs you thought you should win in those that you were winning -- could you just talk about that situation? And have you addressed the main sources of the growth gap as you see it?

Yes, I don't think that was just versus response. I think that was true for all event-based working even recurring work. I think we're just getting the price volume equation right. We put a lot of upward pressure on price and deservedly so because we want to get paid for the value we deliver. At the same time, the market had moved in terms of the volume situation and people are getting more aggressive on price. So the team had to adjust. I think the team has done a great job of that. We feel really good about the pipeline, as I mentioned earlier, there's a longer sales cycle business. And so we'll see the fruits of that labor surface more in the second half of next year -- of this year and then certainly into next year.

Okay. And then from a cost standpoint, I guess the maintenance and repair expenses have been trending well based on refreshing the fleet. But I was also wondering on transportation and subcontractor costs. They basically flatlined over the past 3 years. I was just wondering if you could outline what's been the cause of that?

Yes. I think some of that's just -- when you think about renegotiating some of those contracts, I think our procurement department has done a really good job of renegotiating those at favorable rates. Some of that -- there was a reset a couple of years back coming off the pandemic where you did see a pretty big increase, and now we've modulated into more normal year-over-year increases.

The next question is from Stephanie Moore with Jefferies.

Great. I wanted to go back on maybe what you're seeing from an underlying environment. I mean I think we all saw some of the industrial data point, notably ISM manufacturing PMI kind of inflecting to expansionary for the first time in January for some time. I think the hope is maybe that's a leading indicator for a bit of a recovery here. So curious if you saw or more so maybe had some conversations with any of your customers that would suggest that that we're maybe warming up a little bit on that side of the business. So any insight there would be helpful.

I think there's certainly positive signs. I mentioned the west half of the U.S., you're starting to see certainly pick up in economic activity. That said, there's no signs where people are still waiting, and they're still on the sideline waiting for stability of policy around capital investment. We're seeing still -- we're winning in terms of share on the manufacturing side, but that output in terms of units per facility is still pretty flat. So we're waiting some upside there.

Same thing with construction. Now construction given the seasonality of it, we're not going to get a great read for that for another 3 to 4 months. Based on the macro picture of the United States needing more housing, you certainly feel good about that and some movement on interest rates, all of that would be a positive sign. Whether that unlocks growth yet. We've been waiting a while and cautiously optimistic we could see some momentum there as well.

Got it. That's super clear. And then I apologize if you said this, but did you give what your underlying kind of inflation expectations were for 2026?

Yes, it's approximately 3.5%.

The next question is from Shlomo Rosenbaum with Stifel.

I wanted to talk a little bit about what's going on in the C&D with the yield spiking up like 6.5%, the largest we've seen in a couple of years now. And what are you seeing in the service intervals, small container versus large container quarter-over-quarter? And then kind of contrasting that with the volume being down so much, was that the comp last year on some of the emergency stuff. Maybe you can talk about that, please.

Yes. The -- let's start with the volume on the C&D. Some of that's just comping some onetime event jobs that we had in the prior year. I would say when you take a look at that 6.5% and mind you, this is off of a really small base. So small numbers can actually look a little bit larger than they are, but it's probably a little bit more mix related than anything else. If you look at the trend of what we've seen on C&D yield in that circa 4% range, I think that's probably a pretty good indication of where we've been and where we would expect to be here over the next several quarters.

Okay. And service intervals?

Yes, service intervals, if you take a look at that, they've continued to outpace service decreases on that front, there's a little bit of seasonality that we typically see coming into the fourth quarter, but the trend for the full year as we've seen more service level increases than decreases.

Okay. And then just following what was -- can you talk about the contribution also from the polymer centers in '25? And what you -- is assumed in the outlook. You talked a little bit about RNG, but if you was polymer centers, I must have missed that.

Yes Polymer Center in '25 added about $45 million worth of revenue and about $10 million of incremental EBITDA.

Okay. And expectation for '26?

Would be $30 million of incremental revenue and $10 million of incremental EBITDA.

The next question is from Tobey Sommer with Truist Securities.

Curious what you're seeing in terms of the health care vertical, hospitals kind of health care activity seems to be running relatively hot? And just curious to the extent you've got visibility in that industry that you could share with us, that would be helpful.

Yes. We compete there on the margin. We don't have a dedicated medical waste business, a small one in Las Vegas. And outside of that, we're out of that space. We certainly service hospitals and other health care providers with recycling and waste and that's been a nice growth driver as we've seen the broader health care spend go up over time, but not a meaningful growth driver for us.

Okay. If we look at the spread in margin expansion that you're able to see even kind of put the pricing and revenue volume to one side and really focus on the expense side. To what extent do you think you've got opportunities to invest more in tech, extract some savings and efficiencies through AI and other means to like restrain your level of expense growth even further and contribute to a greater spread expansion?

Yes. I mentioned earlier, right? We're spending a lot of money on technology because we see the return clearly. Some of that is AI. Some of that is just modernizing our existing systems and updating that. And I mentioned we think there's 9 figures of opportunity over time on productivity and how we route. We see real opportunities on pricing, both on the cost side, but that will be another growth driver. And then every element of our support, including how we answer calls, how we process orders and invoices, everywhere on the chain, we're challenging how work gets done and AI is going to be a very powerful tool that is going to show up in terms of compressing our inflation over time.

At this time, there appear to be no further questions. Mr. Vander Ark, I'll turn the call back over to you for closing remarks.

Thank you Gary. I want to thank the Republic Services team for their great work in 2025. Their focus on safety, sustainability and exceeding customer expectations led to another year of great results and positions us well for continued success. Have a good evening and be safe.

Ladies and gentlemen, this concludes the conference call. Thank you for attending. You may now disconnect.

Good afternoon, and welcome to the Republic Services Third Quarter 2025 Investor Conference Call. Republic Services is traded on the New York Stock Exchange under the symbol RSG. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mr. Aaron Evans, Vice President of Investor Relations. Please go ahead, sir.

Good afternoon. I would like to welcome everyone to Republic Services Third Quarter 2025 Conference Call. Jon Vander Ark, our CEO; and Brian DelGhiaccio, our CFO, are on the call today to discuss our performance.

I would like to take a moment to remind everyone that some information we discuss on today's call contains forward-looking statements, including forward-looking financial information, which involve risks and uncertainties and may be materially different from actual results. Our SEC filings discuss factors that could cause actual results to differ materially from expectations. The material that we discuss today is time sensitive. If in the future, you listen to a rebroadcast or recording of this conference call, you should be sensitive to the date of the original call, which is October 30, 2025.

Please note that this call is property of Republic Services, Inc. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Republic Services is strictly prohibited.

Our SEC filings, our earnings press release, which includes GAAP reconciliation tables and a discussion of business activities, along with the recording of this call, are available on Republic's website at republicservices.com. In addition, Republic's management team routinely participates in investor conferences. When events are scheduled, the dates, times and presentations are posted on our investor website.

With that, I'd like to turn the call over to Jon.

Thanks, Aaron. Good afternoon, everyone, and thank you for joining us. We delivered strong third quarter results, which highlight the consistency of our business model, disciplined operational execution and power of our portfolio. Even with persistent headwinds in construction and manufacturing end markets, we generated solid earnings growth and margin expansion. Continued investment in our differentiated capabilities positions us well to drive sustainable growth and enhance long-term shareholder value.

During the quarter, we achieved revenue growth of 3.3%, generated adjusted EBITDA growth of 6.1%, expanded adjusted EBITDA margin by 80 basis points, delivered adjusted earnings per share of $1.90 and produced $2.19 billion of adjusted free cash flow on a year-to-date basis.

Our commitment to delivering world-class service continues to support organic growth by reinforcing our position as a trusted partner for our 13 million customers. Our customer retention rate remained strong at 94%.

We saw continued improvement in our Net Promoter Score. This reflects our team's commitment to delivering products and services that customers value.

Organic revenue growth during the third quarter was driven by strong pricing across the business. Average yield on total revenue was 4% and average yield on related revenue was 4.9%. Organic volume decreased total revenue by 30 basis points and related revenue by 40 basis points in the quarter.

Volume performance included outsized C&D and special waste landfill activity. The increase in C&D tons related to hurricane recovery efforts in the Carolinas. Special waste activity was driven by an increase in event-based volumes across many of our disposal assets primarily located in Sunbelt geographies. These volumes were offset by a decline in the collection business. The decrease in collection volumes related to continued softness in construction and manufacturing end markets and shedding underperforming contracts in the residential business.

Organic revenue decline in the Environmental Solutions business created a 140 basis point headwind to total company revenue this quarter. Environmental Solutions performance was impacted by 3 primary factors: continued softness in manufacturing activity, lower event-driven volumes in our landfills, which includes E&P activity and fewer emergency response jobs. Given the relatively fixed cost structure of these assets and services, the impact on Environmental Solutions' EBITDA and margin was more pronounced.

While the Environmental Solutions business was down both sequentially and year-over-year, demand stabilized exiting the third quarter. Our pipeline for new business is now expanding, and we remain well positioned to capture growth opportunities as market conditions improve.

Importantly, despite these headwinds in Environmental Solutions, we delivered over 6% growth in adjusted EBITDA and expanded adjusted EBITDA margin by 80 basis points at the enterprise level. These results reflect disciplined pricing cost inflation, strong operational execution and effective cost management.

Moving on to sustainability. We are making progress on the development of our Polymer Centers and Blue Polymers joint venture facilities. In July, we commenced commercial production at our Indianapolis Polymer Center. This operation is co-located with a Blue Polymers production facility. We expect commercial production to begin at the Blue Polymers facility late in the fourth quarter.

We are advancing renewable natural gas projects with our partners. One project came online during the third quarter. We have commenced operation at 6 RNG projects this year. We expect a total of 7 RNG projects to commence operations in 2025.

We continue to advance our commitment to fleet electrification. We had 137 collection vehicles in operation at the end of the third quarter. We expect to have more than 150 EVs in our fleet by the end of the year. We currently have 32 facilities with commercial scale EV charging infrastructure. This infrastructure investment will support continued growth of this differentiated service offering.

As part of our approach to sustainability, we strive to be the employer where the best people want to work. We continue to have high employee engagement scores, and our turnover rate continues to trend lower compared to the prior year.

With respect to capital allocation, we have invested more than $1 billion in strategic acquisitions on a year-to-date basis. Our acquisition pipeline remains supportive of continued activity in both the recycling and waste and Environmental Solutions businesses.

Year-to-date, we have returned $1.13 billion to shareholders through dividends and share repurchases.

I will now turn the call over to Brian, who will provide additional details on the quarter.

Thanks, John. Core price on total revenue was 5.9%. Core price on related revenue was 7.2%, which included open market pricing of 8.6% and restricted pricing of 4.8%. The components of core price on related revenue included small container of 9.2%, large container of 7.1% and residential of 6.8%.

Average yield on total revenue was 4% and average yield on related revenue was 4.9%. Third quarter volume decreased total revenue by 30 basis points and decreased related revenue by 40 basis points. Volume results on related revenue included a 45% increase in landfill construction and demolition or C&D volume, driven by $35 million of hurricane cleanup activity in the Carolinas and an 18% increase in landfill special waste revenue, driven by volume growth across many of our disposal assets.

Year-to-date, we recorded approximately $100 million of event-driven revenue associated with hurricane and wildfire cleanups. We estimate these volumes will result in a full year adjusted EBITDA margin benefit of 30 basis points.

Large container volumes declined 3.9%, primarily due to continued softness in construction-related activity in most manufacturing end markets and residential volume declined 2.4% due to shedding underperforming contracts.

Moving on to recycling. Commodity prices were $126 per ton during the quarter. This compared to $177 per ton in the prior year. Recycling processing and commodity sales decreased organic revenue growth by 20 basis points. Increased volumes at our Polymer Centers and reopening a recycling center on the West Coast partially offset the impact of lower recycled commodity prices. Current commodity prices are approximately $120 per ton.

Total company adjusted EBITDA margin expanded 80 basis points to 32.8%. Margin performance during the quarter included a 40 basis point increase from previously noted event-driven landfill volumes and margin expansion in the underlying business of 90 basis points. This was partially offset by a 20 basis point decrease from net fuel, a 20 basis point decrease from recycled commodity prices and a 10 basis point decrease from acquisitions.

Adjusted EBITDA margin in the Recycling & Waste business was 34.3%, which was up 150 basis points compared to the prior year.

With respect to Environmental Solutions, third quarter revenue decreased $32 million compared to the prior year, driven by softness in manufacturing end markets, lower event activity and softer E&P volumes in the Gulf. Adjusted EBITDA margin in the Environmental Solutions business was 20.3%.

Year-to-date adjusted free cash flow was $2.19 billion. Our strong performance reflects EBITDA growth in the business and the timing of capital expenditures. Year-to-date capital expenditures of $1.18 billion represents 62% of our projected full year spend.

Total debt was $13.4 billion, and total liquidity was $2.7 billion. Our leverage ratio at the end of the quarter was approximately 2.5x.

With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 21.2% during the quarter.

I will now hand the call back to Jon.

Thanks, Brian. Through the cycle, we believe our business can consistently deliver mid-single-digit revenue growth and grow EBITDA, EPS and free cash flow even faster. This generally produces 30 to 50 basis points of EBITDA margin expansion per year.

This growth assumption is supported by pricing ahead of underlying costs, selling our comprehensive set of products and services and capitalizing on value-creating acquisition opportunities. We also expect financial contribution from investments made in sustainability innovation, including plastic circularity and our renewable natural gas projects.

Our initial perspective, regarding 2026 is the long-term growth algorithm, is intact. As a reminder, we reported approximately $100 million of revenue at an 80% incremental margin related to landfill volumes, except in 2025 that will not repeat in 2026. This should be reflected in year-over-year growth assumptions. We plan to provide full year 2026 guidance on our earnings call in February.

With that, we can now open the call to questions.

[Operator Instructions] And today's first question will come from Tyler Brown with Raymond James.

Jon, I just want to make sure I have it big picture. I appreciate the color right there at the end of the prepared remarks. So the long-term algorithm, mid-single-digit revenue hopefully, EBITDA free cash flow faster than that. So as we go into '26, and I think you kind of alluded to that, is that including the headwinds with the special, with the event-driven volumes? And then we also are going to have a fairly sizable commodity headwind if we snap the line today. So can you just talk a little bit about the puts and takes into '26.

Yes. As you know, we're not giving guidance or '26, but I'll give you some markers in the spirit of your question. Look, the long-term growth algorithm of mid-single-digit growing EBITDA growth or EBITDA faster than revenue and free cash flow faster than EBITDA, we think, holds. We're coming over a tougher comp. So that probably just takes each of those down a click going into '26. And that's predicated on remaining pretty conservative on the macro, but also understanding what our pipeline looks like and how well performing we are in the fundamentals of the business, I think that shapes our perspective into 2026, and that certainly includes overcoming that commodity headwind as well.

Okay. Helpful. And then, Brian, just on the event-driven volumes. I just want to make sure I have it kind of by quarter. Was it something like $10 million of revenue in Q1 and then $55 million in Q2 and $35 million in Q3? Is that roughly right?

Yes. So it's roughly -- it was $12 billion of revenue in Q1, $53 million Q2, $36 million in Q3, total of $100 million.

Okay. Perfect. And then just my last one. You guys have been very realistic around the volume environment. It does look like ES slowed down, it accelerated on the -- to the downside. Just kind of what are you seeing out there in the market? Is that largely related to project work?

And then if I look at the EBITDA flow-through, I think it was almost a 1:1 revenue to EBITDA flow-through. I know has ways landfills have very high flow-through. But was there something else driving that contribution margin?

Yes. I think it's a confluence of events. Like the macro manufacturing continues to be very slow, and we see that in the Recycling & Waste business, too, when large container hauls, again, we're gaining share in that area, but volume is slowing down just because plant output is down in that space. So that's part of it.

We're seeing delayed project-based work, a lot of reoccurring work like turnarounds or tank cleanouts. People are just pushing those. And the good news is those come back, those will get delayed forever. And then good news for the macro society, bad news for us, it's just been a very slow emergency response here across the board. Activities has been pretty low across the board. So all of those things are feeding into it.

Yes. And Tyler, to your question just on the margin, you're right, it is falling through almost at the amount of the revenue decline. That is not just due to the revenue itself, there were some unique costs. We called out last year that we had a bad debt recovery, about $4 million that was somewhat out of period. This year, we had a legal settlement, which added a couple of million dollars worth of cost. So that added $6 million spread between the 2 years, about a 140 basis point impact on margin year-over-year.

The next question will come from Noah Kaye with Oppenheimer & Company.

The open market pricing strength looked good again this quarter. Maybe just update us on how you see price cost spread heading into year-end here and kind of the runway for '26.

Yes, positive. I mean we'll think about cost inflation kind of roughly in line with what you think about CPI. Broadly speaking, there's a few puts and takes underneath that. But at the aggregate, that's fair. And then we'll think about kind of a yield number that's 75, 100 basis points above that.

That's a great place to model from. I guess switching gears, there was one competitor this week that took an impairment charge related to a plastics facility. I know it's different technology. But as you look at what's happened with commodity pricing, how do you think about return expectations for the Polymer Centers?

Yes. We're excited. Listen, these projects typically have challenges on 2 ends. One is the supply end and I'm sure we have an advantage because we get something up the ground 5 million times every day. And the other is on the demand then. And the demand then from both a pricing and a volume standpoint has been very strong. And the spread between the input and the output on this side has been really consistent.

In fairness, it's taken us a little longer on the ramp-up of these projects to get to full capacity and full output. And that's just the normal learning curve of new facilities starting up plants is challenging, but feel really good about our long-term assumptions there and excited to see come up the curve and Alan Town open up next year.

Your next question will come from Sabahat Khan with RBC Capital Markets.

Great. I guess just as you kind of think about 2026 and you called out acquisitions as one of the areas that generally contribute here. How is the pipeline looking relative to kind of this year, obviously a big year this year? Can you just talk about kind of the magnitude or how full that is and then mix across your different silos? Historically, you've talked about just keeping it more balanced, but just how is that looking right now?

Yes, pipeline looks very strong. We expect to finish the year strong and start out next year strong. The exact balance of when things close end of the year or into the first half of next year, we'll see. And then the pipeline behind that, things that would be more likely to close in the second half is still very full. And that will be a balance across both recycling and waste and ES, tilted toward recycling and waste, but we'll look for opportunities on all ends.

Great. And then you provided some benchmarks around 2026. Is it really just going to be on the environmental services side, kind of the magnitude of the event-driven volumes that really swing how that segment performs? Or do you have any sort of visibility on how the next year could evolve relative to this year? Just some high-level perspective on what you're seeing.

Yes. Listen, we'll forecast to grow that business next year even in what we -- again, we'll remain conservative on the macro, and that continuing to be sluggish. The pipeline, again, Brian mentioned, we mentioned in the prepared remarks that the pipeline is building. And listen, most of our challenges here have been macro. But we all -- we talked last quarter, we haven't always gotten quite right in terms of the price volume trade-off, and we've taken a lot of price over the last 3 years in this business, and we will continue to put upward pressure on price. That being said, for some of these opportunities, finding the market and the right balance, we try overshot that as the team is working hard, and that's why the pipeline is building to get that pricing right.

Next question will come from Bryan Burgmeier with Citi.

Yes. I mean just following up on some of the questions on ES. Can you maybe give us a sense of your expectations for the fourth quarter for that business? Should we continue to expect kind of those mid-single-digit declines in the top line or just the pipeline that you're mentioning and building sort of start to come through? And then I guess on a sequential basis, margins kind of stepped down from 3Q to 4Q normally. I'm just not sure if that's generally how you're thinking about it.

Yes. We think we've kind of found the bottom on this thing that we're coming over -- overcoming a pretty tough comp from the fourth quarter of last year. We had a major ER job that came in at pretty high incremental margin on that front. But I think about margin performance that kind of looks in the same ZIP code, and then we build up from that in 2026.

Got it. Got it. And then just one follow-up is you mentioned you acquired a recycling facility in California during the quarter. I think that's a little bit different than your Polymer Centers, is may be more of a reclaimer, I think does that kind of fit between your Polymer Centers and your MRF? I'm just sort of curious what the incremental opportunity is there? And is there more opportunities like that as Republic tries to build out their national kind of plastic cycling network, just overall thoughts on the M&A environment around plastics.

Yes. That ended up being pretty opportunistic and unique. It's connected to the West Coast Polymer Center and gets us plugged into the -- really the bottling value chain there. Over time, we'll look for more M&A in the space. I think in the very near term, you're unlikely to see more opportunities there just because we'll be focused on executing the Polymer Center and getting any fully up the curve, getting Allentown on pace and then the Blue Palmer JVs. And then over time, there'll be an M&A opportunity, but I would think more about '27 and beyond there versus '26.

Your next question will come from Kevin Chiang with CIBC.

Maybe just on some of the labor disruption you had in the second quarter, you -- or maybe the first half of the year, you called out about $56 million in costs. Just wondering if there's any residual impact as we think of Q4 into next year related to credit or any type of revenue adjustments you make as you kind of rebuild goodwill with some of these customers that face that disruption as we think of revenue trends in the next few quarters here?

Yes. Kevin, we think we mostly captured the impact of that, including the revenue credits themselves. So we think at this point, the $56 million that we recorded in the third quarter will be it at this point. So yes, we think we're done.

Oh, perfect. And just on the EV targets, you provide us with the update every quarter here. It does feel like OEMs are deprioritizing the production of their electrification strategy. Just I guess, how do you think that impacts these longer-term targets you have? It feels like you still feel pretty confident that you can get the vehicles you want despite maybe OEMs deprioritizing this propulsion system.

Yes. No, we feel really good about our partners in the space and customer demand for it. And we think it provides really unique benefits of a zero-emission vehicle and cities and communities are excited about it. At the same time, we're going to do it in an economic fashion, right? This isn't just a sustainability investment. This is also a business investment. And so we lost a little bit of incentive here in the federal legislation. And that might slow our pace on the margin. But there's other state and local incentives and there's certainly customers who are willing to pay the most important part of the equation that will allow us to continue. So we're going to continue to march it out in communities where it makes sense.

Your next question will come from Trevor Romeo with William Blair.

I had one kind of follow up on, I guess, the overall kind of manufacturing industrial volume activity as it relates to both solid waste and ES. Just kind of wondering, was the softness in this quarter kind of about what you expected last quarter when you lowered the guidance? Or you talked about demand stabilizing exiting the quarter. Maybe you could just walk us through kind of the monthly trends a little bit more? Or just any more color on that would be great.

Yes. And probably since our last call, in the first couple of months after that, it was certainly more to the negative than our outlook was and we've mentioned, started to stabilize, and we think we found the bottom of rebounding from here. There's a ton of uncertainty out there for manufacturers and trade policy is top of the list. And I think you're just seeing the rebound effect of those tariffs and people prebuilding and prebuying to get ahead of the tariffs. And then we've seen a slowdown in economic activity in a lot of sectors, pretty dramatically in June, July, August and starting to see that pick back up. And so that's really what we're facing in both sides of the business.

Got it. And then I guess, on capital allocation, the buyback ramped up quite a bit in Q3. I think all the solid waste stocks have been trading kind of weaker since the quarter closed even. Should we think about buybacks continuing to be maybe a bigger driver with the stock at these levels? Or how are you thinking about that versus other uses of capital in the kind of near term?

Yes, I would say we've always been opportunistic, and we looked at it as a great opportunity to create value for our shareholders. So we were a buyer, and I would expect us to be a buyer going forward.

Your next question will come from Tobey Sommer with Truist.

Jasper Bibb on for Tobey. I just wanted to ask about expense inflation trends. Any early indication on what you're anticipating for price/cost spread in '26, noticed your labor COGS actually declined year-over-year this quarter, so maybe a favorable indicator there.

Yes. mentioned earlier, we think about pricing coming down relative but also cost coming down, but maintaining a price cost spread in the recycling and waste business of 75 to 100 basis points. And have pretty good outlook and confidence of that going into 2026.

Got it. And then maybe following up on ES, have you seen any retention impacts at your customers based on the pricing increases you've taken over the past couple of years?

There's certainly been some churn, and we see that all the time in the Recycling & Waste business, too, as we've improved margin in that space. We've also seen the return of customers and that understanding that low price doesn't always mean the best value upfront. I'd say where we've gotten the price volume equation just slightly off is more of the event-based work.

off is more of the event-based work that we've missed out on some opportunities. So it's not pricing recurring revenue customers out. It's event-based opportunities that we think we're going to be able to be more competitive going forward.

The next question will come from Toni Kaplan with Morgan Stanley.

This is Yehuda Silverman on the line for Toni Kaplan. Just had a quick question about some of the cost uptick, specifically for fuel and landfill operating costs in the quarter. I'm just wondering if this was tied to anything specific or if it's nothing really to focus too much on.

Yes. Look, if you're looking just at a year-over-year basis, yes, some of that, again, it's a combination of both. You've got price, but you also have volume due to acquisitions. So I would say neither of which are going to be anything significant or out of the norm. Because if you look as a percent of revenue, for example, fuel is relatively flat.

Got it. And just had a question on commodities in general. So were the commodity headwinds this quarter worse than expected? And is there any way to sort of hedge or counteract weaker price in commodities?

Well, I mean, commodity prices ticked down, right, throughout the quarter. So when we were exiting Q2, they were in the $140 range -- $135, $140, and you can kind of see for the average for Q3, $126 exiting about $120 right? So they have been stepping down sequentially. That when you think about getting a third-party hedge, it's a pretty thin market, quite honestly. So more of what we've done is we've moved the model to charge the fee-for-service. So for the collection itself of those materials or the processing of the material at one of our third-party facilities, we're charging the fee. And then we split with our customers, the ultimate sale of the commodity. So again, we're earning a good return on the services we're providing. And you accept some level of volatility with the ultimate commodity sale, but that's just inherent to the business.

The next question will come from Rob Wertheimer with Melius Research.

You just touched on this a minute ago, but ex the labor one-offs, labor productivity actually looked pretty good in one of your better quarters. Is there anything to call out there? Or is that normal variability?

Well, no, labor productivity, I would say, if you take a look at labor as a percent of revenue, just in the quarter, we've seen an improvement of 70 basis points, right, on that front. So that's going to be a continuation of the benefits that we're getting from a RISE platform where we're producing productivity benefits within our collection business. But also just as we've said, when you think of the margin expansion, a lot of that is the price in excess of your cost inflation. So with labor being one of your largest cost inputs, the place where you're going to see that the most is labor improving as a percent of revenue.

Totally fair. And then just a small one. You touched on manufacturing and some of the -- we've seen that obviously in the industrial world. Any -- there's a lot of cross currents and construction, any trend line you saw through the quarter, you got interest rate cuts, you've got large projects, you got lots of crosscurrents. So just curious if there's any movement in one direction or the other.

No, not yet. I haven't really seen signs of life. Again, we remain in the longer term, very bullish, medium to longer term on construction. In terms of single-family, multifamily, I feel that there's a lot of pent-up demand in most of the markets across our 1,000 dots on the map in the U.S. and Canada, I think we probably need just a little more time before we start to see that take off.

Your next question will come from David Manthey with Baird.

Back to Environmental Solutions. When you talk about stabilization, just trying to understand definitionally, are you saying that the decline should start lessening here? Or are you talking about absolute revenue sort of flattening sequentially from 3Q to 4Q?

Yes. I would say a little bit of both, right? So again, at the same time, we saw it just from an overall revenue perspective -- and look, one month doesn't make a trend, but September was better than August, and we're starting to see something look similar in October from an overall revenue perspective. And then you think about just the year-over-year that would just naturally lend itself to the year-over-year decline starting to modulate. Now Jon mentioned earlier, 1 of the things you have to remember is last year, right, we had almost $50 million of revenue in the quarter from a single emergency response job, right? So that's something that we have to anniversary. So that's going to create a tough comp and about $15 million of that carried over into Q1. So you don't get that out of the numbers until -- from a year-over-year perspective until we get into Q2 of '26.

Right. Okay. That's great color sequentially. And then looking back to the ECO data back in 2021, has the data changed much in terms of the top verticals in Environmental Solutions. So is it still chemicals, metals and general manufacturing making up, I don't know, 40%, 45% of the total?

It's a very diversified set of end markets, and we don't -- probably don't cut it exactly the same way that the legacy company did. But very strong -- manufacturing will be the largest probably defined chemicals, oil and gas, general continuous slow, general production. But utilities, government, there's a broad mix of end markets that we serve.

Your next question will come from Stephanie Moore with Jefferies.

I wanted to ask maybe a high-level question on the solid waste business. As it relates to pricing, I think you guys as well as the industry continue to execute well on pricing and getting good pricing, obviously, in the open market as well. As you think about the success that you've had in the open market, what would you attribute the major drivers of that be? Do you think it just general rationality? I mean, obviously, inflationary, but we also hear a lot from general customers with price fatigue and inflation fatigue. So I'd love to get your updated thoughts. I mean, is it your ability to capture price because of your technology investments, but I think just can any updated thoughts on that would be helpful.

Yes. I think there's a lot of elements to the equation. I'd say the most important one from a macro level, we're a very, very small percentage of most customers' cost structure. And in a macro sense, I think the industry is underpriced, right? You think about a resident, their bill is less than their Starbucks delivery month. And we're taking a $400,000 truck and driving it, taking it to a recycling center that costs $50 million, $60 million to build or a landfill where we're going to rent you piece of real estate forever and probably produce electricity or gas on the back end of that.

So I think the value proposition across the industry is phenomenal, and we're, again, a very small portion of people's cost structure, so that creates a lot of pricing opportunity. I think if you kind of come down a level and look at our company, we focused really hard on customer mix. Some customers are very price sensitive, and we are underpenetrated in that part of the market, overpenetratedand customers who are willing to pay more for the value and then have a lot of tools and sophistication in terms of how we price customers to make sure that they not only take the price, but they stay forever.

Got it. I appreciate it. And then just one follow-up on the M&A commentary. I appreciate the look into 2026. I wanted to also gauge your appetite and maybe doing a larger deal M&A at this time, whether in solid waste or within ES?

Yes. We will maintain a perspective on everything, all right, as fiduciaries of the business on the front. And I wouldn't say anything is impossible. I'd also say our focus is on small- and medium-sized deals as we look into the rest of 2025, but even in the '26 and '27, and feel like we've got a very strong pipeline both in Recycling & Waste and yes.

The next question will come from Shlomo Rosenbaum with Stifel.

I just want to get straight a little bit about the commentary about things getting better in ES towards the end of the quarter. How much of it is your figuring out the issues with the pricing in specific areas? And how much of it is finding kind of a bottom and starting to improve?

And then I just wanted to ask you a little bit about the pricing just in general. Do you feel like you figure out where you're getting it not exactly on the mark, and is there a thought that we've kind of gotten to the point where we've -- the outsized pricing is kind of behind us? Or is it really just those emergency response type stuff is really the only place where you feel like you've pushed it too far?

Yes, maybe let me start at the end. I think we've taken up margins fairly dramatically since we closed the US Ecology acquisition. So tremendous progress, and that wasn't all priced, but a lot of that was price. And we think there's certainly more room to go. We're facing, obviously, a very challenging demand environment. And so getting that balance right get primarily on event-based work, but it's certainly an opportunity for us and the team.

Part of this is just the this industry itself is at a different stage of evolution and maturity than the Recycling & Waste industry, where we've been in Recycling & Waste a long time in terms of the tools, sophistication, commercial capabilities of our sales team to get that balance just right to try to win the job of maximize price. And we're still climbing the ladder on the environmental solutions side of the business.

And then if you work your way back into what kind of momentum we're seeing, I think we are seeing certainly a stabilization of the overall market, not strength and rapid recovery, but a stabilization. And then you layer on top of that, again, level of speed. We're getting very, very dialed into specific opportunities. And those 2 things together give us a positive outlook.

Okay. And then just overall on the pricing, you said you've taken a lot over there. Would you say you're still in early innings, mid-innings, where do you feel you are in terms of that opportunity ex the area where you're kind of kind of recalibrating right now?

Yes. I'd say longer term, we still think these assets are under price, right? These -- on the post-collection side, these assets are impossible to replicate, right? And we sell things here rather than price by the ton oftentimes by the pound or sometimes by the ounce. And so we think there's plenty of room to go. We've also said this isn't going to be a straight line of progress. There's going to be ebbs and flows on our path. And so in any given quarter, like the one we just saw, there might be a little bit of pullback. And I think if you measure this thing very narrowly quarter-to-quarter, I think you're going to miss the picture. If you measure it year-over-year, I think you're going to get a much better view of where we think progress in this business goes.

Next question will come from William Grippin with Barclays.

Just wanted to come back to the union contract settlement here. Was there any impact, I guess, from the strikes on revenue in the quarter. I know you made the adjustment to EBITDA, but just wondering if there was any impact on the revenue side. And then any sort of outlook in terms of cost inflation in 2016 related to that contract sort of relative to your expectations and your commentary?

Let me take the first part there. So there was an impact on revenue. There was a recognition of about $16 million worth of credits, which reduced the reported revenue. Now when you look at adjusted EBITDA, while we didn't adjust the revenue, we did include those credits in the adjusted EBITDA. So the add back of $56 million includes those $16 million worth of revenue credits in order to drive adjusted EBITDA.

In terms of the longer-term impact on labor, we think the answer is no. We work very hard, brother. Front line people are represented by union contract or not that we're keeping them in line, and we want our people to be amongst the best paid in the local markets in which they operate. But it's very critical for us to make sure that they're not out of market. And when people get out of market, right, it hurts everybody. We lose work, and we ultimately have to let go of drivers and technicians. So getting that number right is important to us, and that's why we took the stand we did this past year on the set of contracts. But going forward, we feel like we're in a very good position to maintain our price cost spread, as we talked about before.

Appreciate that. And then just coming to the ES business. You mentioned in your pipeline, possibly having some opportunities related to M&A for ES. Any additional color you could provide there on what types of assets or services that you might be looking at?

Sure. I certainly look for certain verticals that we're in. We'd like to get in further to life sciences and biopharma and high-tech are certainly attractive to us, and we've got great positions regionally but not in every region. There's 20 field services locations geographically, where we have really strong footprints in Recycling & Waste but don't have a field services location. That creates an immediate cross-sell opportunity for us. And then we're always interested in any post-collection assets. Anything with infrastructure, we feel is very attractive to the network as well.

The next question will come from Tony Bancroft with Gabelli Funds.

Great job on the quarter. I know I'm sort of being embedded here. But with M&A game plan, maybe another way to look at it, it's obviously a huge draw of energy demand but data centers. Any thoughts maybe just a longer-term view or vision of M&A in sort of in that space with E&P or energy based? Or is it more the traditional stuff. Maybe you could talk about that a little bit.

Yes. That will certainly help us on the margins. Those things get constructed. There's opportunities around earthmoving and soil and remediation opportunities. And then listen, our landfills, less than half of them have landfill energy projects on them? And could those projects be electric based kind of back to the future in the sense that that's where we serve those projects, and it's been all RNG over the last few years.

We're certainly exploring some technologies around getting after lower flow sites, smaller landfills. And electricity projects might be part of that, and that might be feed into that grid. I'd say from a macro standpoint, we don't participate -- those facilities don't create a ton of ongoing waste and recycling or environmental solutions opportunities once they're up and constructed. But during the construction phase, we'll certainly participate.

At this time, there are no further questions. I would like to turn the call back over to Mr. Vander Ark for closing remarks. Please go ahead, sir.

Thank you, Chuck. Before we conclude today's call, I want to take a moment to recognize the great work of the entire Republic Services team. The team's commitment to safety, sustainability and providing outstanding service continues to drive our performance. We are confident in our strategy, our people and our ability to continue delivering value to our customers, communities and shareholders. Have a good evening and be safe.

Ladies and gentlemen, this concludes the conference call. Thank you for attending. You may now disconnect.

Good afternoon, and welcome to the Republic Services Second Quarter 2025 Investor Conference Call. Republic Services is traded on the New York Stock Exchange under the symbol RSG. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Mr. Aaron Evans, Vice President of Investor Relations. Please go ahead, sir.

Good afternoon. I would like to welcome everyone to Republic Services' Second Quarter 2025 Conference Call. Jon Vander Ark, our CEO; and Brian DelGhiaccio, our CFO, are on the call today to discuss our performance.

I would like to take a moment to remind everyone that some information we discuss on today's call contains forward-looking statements, including forward-looking financial information, which involve risks and uncertainties and may be materially different from actual results. Our SEC filings discuss factors that could cause actual results to differ materially from expectations. The material that we discuss today is time-sensitive. If in the future, you listen to a rebroadcast or a recording of this conference call, you should be sensitive to the date of the original call, which is July 29, 2025.

Please note that this call is the property of Republic Services, Inc. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Republic Services is strictly prohibited.

Our SEC filings, our earnings press release, which includes GAAP reconciliation tables and a discussion of business activities, along with the recording of this call, are available on Republic's website at republicservices.com. In addition, Republic's management team routinely participates in investor conferences. When events are scheduled, the dates, times and presentations are posted on our investor website.

With that, I'd like to turn the call over to Jon.

Thanks, Aaron. Good afternoon, everyone, and thank you for joining us. We are pleased with our second quarter results, which reflect the resilience of our business model and consistent operational execution. We delivered robust earnings growth and margin expansion, overcoming continued lower demand from construction and manufacturing end markets. We continue to invest in our differentiated capabilities, to meet the needs of our customers, allowing us to consistently grow our business and enhance profitability.

During the quarter, we achieved revenue growth of 4.6%, generated adjusted EBITDA growth of 8%, expanded adjusted EBITDA margin by 100 basis points, delivered adjusted earnings per share of $1.77 and produced $1.42 billion of adjusted free cash flow on a year-to-date basis. Our focus on delivering world-class essential services continues to support organic growth and enhance customer loyalty. Our customer retention rate remained strong at more than 94%. We continue to see favorable trends in our Net Promoter Score due to the value of our offerings and quality of our service delivery.

Organic revenue growth during the second quarter was driven by strong pricing across the business. Average yield on total revenue was 4.1% and average yield on related revenue was 5%. This level of pricing exceeded our cost inflation and helped drive 100 basis points of adjusted EBITDA margin expansion during the quarter. Organic volume increased 20 basis points in the quarter. Volume growth included outsized special waste and C&D landfill activity. This related to hurricane recovery efforts in the Carolina's and wildfire remediation in the Los Angeles area.

These volumes were partially offset by declines in the collection business. The decrease in collection volumes related to continued softness in construction and manufacturing end markets and shedding underperforming contracts in the residential business. Organic revenue was down in the Environmental Solutions business and resulted in a 90 basis point headwind to total company revenue.

Environmental Solutions revenue has been negatively impacted by continued sluggish manufacturing activity, uncertainty around tariff policy and lower event-based volumes. Even with the revenue headwinds, our Environmental Solutions team demonstrated effective cost management to maintain EBITDA margin performance consistent with prior year results.

Moving on to sustainability. We believe that creating a more sustainable world is both our responsibility and a platform for growth. We recently released our latest sustainability report highlighting the progress we are making toward our 2030 goals and the positive impact we're delivering to our customers and the communities we serve. Our 2030 goals are supported by the investments we are making in the employee training and development programs, plastic circularity and decarbonization.

We are making progress on the development of our polymer centers and Blue Polymers joint venture facilities. Regarding the Indianapolis Polymer Center, we commenced commercial production in July. This operation is co-located with our Blue Polymers production facility. We hosted a grand opening ceremony for this facility in June. We expect commercial production to begin in the fourth quarter upon the completion of equipment commissioning.

The renewable natural gas projects we're developing with our partners are advancing. Four projects came online during the second quarter, along with another project completed in early July. This brings total projects completed this year to 6. We still expect a total of 7 RNG projects to commence operations in 2025.

We continue to advance our commitment to fleet electrification. We had 114 electric collection vehicles in operation at the end of the second quarter. We expect to have more than 150 EVs in our fleet by the end of this year. We currently have 27 facilities with commercial scale EV charging infrastructure. We expect to have more than 30 facilities with charging capabilities by the end of 2025.

As part of our approach to sustainability, we continually strive to be the employer where the best people want to work. We continue to have high employee engagement scores, and our turnover rate continues to trend lower compared to the prior year. With respect to capital allocation, year-to-date, we have invested nearly $900 million in strategic acquisitions. Our acquisition pipeline remains supportive of continued activity in both the recycling and waste and Environmental Solutions businesses. We continue to see the opportunity for more than $1 billion of investment in value-creating acquisitions in 2025.

Year-to-date, we have returned $407 million to shareholders through dividends and share repurchases. Additionally, we recently announced an increase of the dividend for the 22nd consecutive year. We updated our full year 2025 financial guidance based on results delivered through the first half of the year, recently enacted tax legislation and our outlook for the remainder of the year. We now expect revenue to be in the range of $16.675 billion to $16.75 billion.

We maintained our original guidance for adjusted EBITDA and adjusted earnings per share as follows: adjusted EBITDA is expected to be in the range of $5.275 billion to $5.325 billion, and adjusted earnings per share is expected to be in the range of $6.80 to $6.90. We increased our full year adjusted free cash flow guidance, which is now expected to be in the range of $2.375 billion to $2.415 billion. This increase reflects a benefit to cash taxes from 100% bonus depreciation, which passed earlier this month. Our updated financial guidance includes the contributions from acquisitions closed through June 30.

We plan to remove the impact of recent labor disruptions from our adjusted results, which is reflected in our updated full year guidance. Regarding the labor disruptions, we've been negotiating good faith and remain committed to reaching a fair and equitable agreement that balances the needs of our employees, our customers and our business. While the labor disruptions have been localized and impact, I'm proud of how our team is working tirelessly to serve our customers.

I will now turn the call over to Brian, who will provide details on the quarter.

Thanks, Jon. Core price on total revenue was 5.7%. Core price on related revenue was 7%, which included open market pricing of 8.6% and restricted pricing of 4.6%. The components of core price on related revenue included small container of 9%, large container of 7.1% and residential of 6.6%. Average yield on total revenue was 4.1% and average yield on related revenue was 5%. Second quarter volume performance on total revenue and related revenue increased 20 basis points.

Volume results on related revenue included a 47% increase in landfill C&D volume driven by hurricane cleanup activity in the Carolina's and a 22% increase in landfill special waste revenue driven by wildfire remediation efforts in Los Angeles. Large container volumes declined 3.4% primarily due to continued softness in construction-related activity in most manufacturing end markets. In residential, volume declined 3.2% due to shedding underperforming contracts.

Moving on to recycling. Commodity prices were $149 per ton during the second quarter, this compared to $173 per ton in the prior year. Recycling processing and commodity sales increased by $7 million during the quarter. Increased volumes at the polymer centers and reopening a recycling center on the West Coast offset lower recycled commodity prices.

Current commodity prices are approximately $130 per ton. This is the basis used for the second half of the year in our updated guidance. This would imply a full year average commodity price of approximately $140 per ton. Total company adjusted EBITDA margin expanded 100 basis points to 32.1%. Margin performance during the quarter included a 60 basis point increase from previously noted event-driven landfill volumes and margin expansion in the underlying business of 70 basis points. This was partially offset by a 10 basis point decrease from net fuel, a 10 basis point decrease from recycled commodity prices and a 10 basis point decrease from acquisitions.

With respect to Environmental Solutions, second quarter revenue decreased $11 million compared to the prior year, driven by lower event volumes and softness in most manufacturing end markets. Adjusted EBITDA margin in the Environmental Solutions business was 23.7%, flat when compared to the prior year. Year-to-date, adjusted free cash flow was $1.42 billion. Our performance reflects EBITDA growth in the business and the timing of capital expenditures. Year-to-date, capital expenditures of $727 million represents 38% of our projected full year spend.

Total debt was $13.1 billion, and total liquidity was $3 billion. Our leverage ratio at the end of the quarter was approximately 2.5x. With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 23.3% during the quarter.

With that, operator, I would like to open the call to questions.

[Operator Instructions] And the first question will come from Tyler Brown with Raymond James.

Brian, I know there's a few moving pieces, and I appreciate the EBITDA hold. But can you just kind of maybe parse out a little bit the $200 million or so reduction in the revenue guide? Just how much of that was [indiscernible] versus, say, commodities?

Yes. Tyler, it's actually -- I would say there's 2 primary components. So one, we are reducing our volume expectation within the recycling and waste business that is predominantly due to, again, we talked about weakness in construction-related activity but also the weakness in manufacturing end markets, which impacts our recycling waste business. So that's about $65 million or so of the $190 million reduction at the midpoint and then the rest of it primarily being in Environmental Solutions. If you think about commodity sales, fuel recovery fees and RINs, the decrease we're seeing there is predominantly offset by incremental acquisitions that we completed in the second quarter.

Okay. Okay. That's extremely helpful. And then just a little additional color maybe on why ES has been a little slow? I mean, I know that the industrial markets in the malaise, and it sounds like you had some bigger project work roll off. But is that really the story? Or were there any share losses? Or just any additional color?

Yes. I think the dominant is the macro. I mean you think about manufacturing, and this is where trade policy impacts us, which is manufacturers are not making capital decisions, right? Production is slow. You can see that through PMI. Now somewhat optimistic here, we see a recovery of that. But that's what's impacted us to date and that we're forecasting being conservative for the rest of the year, kind of more of the same on that front.

And look, we haven't always gotten it right. We've done a tremendous job of taking price. And you've seen that, and some of that is shedding nonratable work. And then some of that is -- we probably just priced ourselves out of a couple of opportunities that we're now getting ourselves back into. And then listen, a couple of parts of the business -- when volume is slow, we've seen this in ES, and we've seen this in national accounts, you see people getting -- trading off volume for price. And so those are short-term phenomenons we think on that front and when forced to choose, we're always going to take price.

Okay. And just real quickly, I know that US Ecology and the Ultra Vita business are maybe kind of hidden in that portfolio, but can you just remind us how big your E&P business is in the U.S.?

Yes. So of the E&P when you think about of total Environmental Solutions, it's representing -- yes, mid-single digits of kind of the total portfolio.

The next question will come from Bryan Burgmeier with Citi.

Maybe just on the kind of estimated impact from labor disruption, are you able to share sort of what comprises the estimated impact forecasted? I mean, is it entirely lost volume? Or is there an element of assuming some higher wages or maybe you're paying an outside hauler? Is it possible to say maybe how much of that has already been experienced and how much is sort of going to be August, September moving forward?

Yes, it's primarily 2 things. The primary is the additional labor costs we have of moving our colleagues in to service our customers so that our customers aren't experiencing disruption and feel very good about where we're at with that today. And then the secondary cost is some credits will issue to customers in markets where that have had labor disruption. Again, most of the time, we've had a very quick recovery. In places where it's been a little more protracted, we're going to take care of customers on that front.

Got it. Got it. And then maybe longer term when these contracts are eventually renewed, presumably with some level of a wage increase. Can you maybe talk about how Republic has historically sort of mitigated the impact from higher wages? What that could sort of look like flowing through the P&L? And yes, maybe just what kind of levers are available to you?

Yes. Look, we're very front line focused. So we want our people to make a very competitive wage in which the markets they operate, whether they're represented by a union or not. So we think about that all the time. It's critical for us to get that right, too low, right? Obviously, we have high turnover, and we can't service our customers. Too high isn't good either. It's not good for frontline people because we become less competitive in the market and we lose opportunities to serve customers and we shrink our workforce.

And across our markets today, we're very confident in terms of the wages that we put out and benefits for our colleagues in many of these markets, we're experiencing single-digit turnover, right? So this isn't -- not -- we don't have a wage or benefit problem in these markets. We've got a labor disruption that we're working through, and we're actively ready to negotiate and hopefully get through it quickly, but we're also prepared for any scenario.

Your next question will come from Noah Kaye with Oppenheimer.

First one, just on the higher free cash flow outlook, maybe just for avoidance of doubt, is that all really from the bonus depreciation benefits? Can you say how much those were? And is there any other moving pieces to take the free cash flow outlook higher?

Yes. So no, it's 2 components. So the increase from bonus depreciation, about $80 million benefit, that's partially offset by an increase in the CapEx of $25 million. In part, we've got a relatively small impact from some potential tariffs, but also some opportunities that we took to buy out some leases and really leverage our favorable balance sheet there and just our lower cost of capital.

Right, which has some margin benefits over time, which actually leads into my next question. I think, to pick up on Tyler's point, the revenue outlook was helpful, the bridge to prior margins are going higher here and I guess, maybe the lower expected revenues in the U.S. could be mix positive, but it just seems like there's kind of better underlying solid waste margin expansion here. So can you kind of help us do the similar bridge on the margin outlook versus what you had before?

Yes. And so again, as we talked about when you have the revenue and then you take a look at the flow-through to EBITDA, there is some positive mix. So while we're seeing a reduction in Environmental Solutions revenue, and I mentioned the -- on the recycling waste side, the reduction in expectations around construction activity, we did see the positive contribution from those landfill volumes, right? So in both Los Angeles as well as in the Carolinas. So that mix helps the overall margin just because those landfill volumes fall through at a relatively higher EBITDA margin than, let's say, the collection volumes or the ES volumes.

And I would say it does point out the overall strength of the business, right? You think about the demand environment, outside of COVID, this has been the most challenging demand environment now protracted for more than a decade. And softness in volume in a few spots, but overall, right, expanding margins in a very challenging environment, I think, speaks to the strength in the long-term nature of the business. And when you start to see volumes come back and return, I think we're setting our sights on even higher targets.

Your next question will come from Toni Kaplan with Morgan Stanley.

First, I wanted to ask on the C&D volumes look particularly good in the quarter, and we saw some disparity between the big 3 on this particular line. I was wondering if you thought that this was a geographic thing or definitional? Or are you taking share in this particular part of the business? Just any color on strength versus the market would be great.

Yes. Listen, Toni, the -- I mentioned the hurricane volumes. They're coming through the C&D line item within our landfill book of business. So that's what that entirely is. When you take a look at construction more broadly, where you see some of the temporary large container volumes, you can see those continue to run negative, which is impacting our large container volume. So we would say more broadly, when you take a look at a pure construction activity, that's still a negative demand environment.

And those events almost always end up being connected to the landfill that's got the lowest cost logistics. So proximity matters the most in those cases.

Great. And then I wanted to ask the labor disruption question in maybe a different way. I guess, how do you think that -- well, first, it sounded like maybe you're alluding to -- you see it as specific regional issues in different areas. Do you think it impacts the cost in the industry in the future on price cost spread? Like, is it more of an industry thing? Or do you think that it's more contained and specific?

Yes. I think it's more contained and specific. We don't have a national contract. We have all local contracts, and we're about 1/3 unionized in our frontline workforce. And again, we feel very strong about the competitiveness of our cost position and the fitness of it as I mentioned, right? We don't want to get it too high because a lot of market and we lose work. We also don't want it to be too low because then we can't retain our very talented people and can't service our customers, which allows us to get that price increase. So we feel very comfortable with the cost position today and moving forward.

Your next question will come from Sabahat Khan with RBC Capital Markets.

Maybe just on some of the commentary from earlier around tariffs, other moving pieces in the macro. Presumably, there's some cost increase across the business, I guess. With the macro where it is, how are your discussions on pricing for next year going -- not looking for guidance, but just the acceptance of price, customers understanding that there are tariffs and other moving pieces. Should we expect a similar type of trajectory going forward relative to what we've seen recently?

Yes. We're seeing that tariff impact come through. Again, it's de minimis for us compared to most organizations. And we're working on 2 fronts, obviously, getting transparency with our suppliers, making them call out what is tariff related and then negotiating and pushing back on that, not down to 0 in every case, but pushing back to make sure that we're not just taking the headline number that they present to us.

And on the other side, some of that, there will be cost increases, and we'll do everything we can to pass that through to price next year. So again, thinking about a 30 to 50 basis point margin spread per year across the cycle, we still think we're capable of doing that in this environment.

Okay. Great. And then understanding that some of the ES volumes could be affected by the macro like they might be this year, does that change the margin trajectory or the margin improvement journey you're on? And kind of second part, how far long are you on that journey if you just think about since adding some of those platforms to your business, maybe how much more runway is there still on that front?

And maybe I'll start with the end. Over time, we think there is considerable run room. Just given the nature of the very technical waste streams we challenged, given the number of landfills and incinerators in the post-collection environment, we think all that creates opportunity for margin expansion over time. But I mentioned before, if you measure the progress here in any given quarter, you're going to be disappointed because this isn't going to be a straight line of progress. There's going to be ups and downs and it's a smaller business so you have comps and changes in demand.

But if you look across the years, I think we've demonstrated very consistent steady margin expansion. And if you look forward, I think you're going to see the same trajectory over the next 4 to 5 years.

Your next question will come from Tami Zakaria with JPMorgan.

My first question is actually if you could provide a little more color on the volume cadence for the remainder of the year? Should we expect volumes to get sequentially better or pretty much ratable in 3Q, 4Q? Is there any color on volume?

Yes. We would expect, as we think about the second half of the year, if you just do the math based on what we're guiding to, to be flat to slightly negative in the second half of the year here. So we do have some of the event-driven landfill volumes. We do have some contribution continuing into the third quarter. So we expect that to be somewhat flattish on a year-over-year basis and then turn it to negative by the time of the fourth quarter as those projects are completed.

Got it. That's very helpful. And then similarly on pricing, any color on what to expect for 3Q versus 4Q?

Well, we've been just over 5% average yield on related revenue in the first half. We're maintaining our perspective of 5% for the full year. So it modulates a little bit, but you can think just under 5% in the second half of the year.

The next question will come from Faiza Alwy with Deutsche Bank.

So I wanted to ask about the lower revenues that you're citing on the core business, I think you said $65 million. So I just want to put a final point on that because I don't think you had a lot of the event-based maybe impact that was in the guide. So I would have thought that, that would offset the incremental macro weakness. So just give us a bit more color on, like, is it more regional? Is there sort of any specific exposure that you might have that's kind of impacting the lower volume? I know you also talked about weather in the first quarter. So maybe it's related to that.

Well, look, if you think about when we entered the year, right, so our guidance was predicated on an economy that was relatively flat. So again, we were seeing volume declines in the construction business throughout last year. So we really expected that to anniversary and produce year-over-year results that were flat with the prior year. And you can see we're still on the large container side [indiscernible] perspective than what we saw in the prior year. That was not expected. So most of it is really that construction-related activity.

And as I mentioned earlier, when you think about weak manufacturing end markets, that just doesn't impact our Environmental Solutions business. We have a $1.5 billion market vertical in recycling and waste that's focused on manufacturing end markets. So Jon just talked about the weakness that we're seeing there, some of the uncertainty that our customers are seeing and what that does to volume production, and it's certainly having an impact on our business.

All right. Understood. And then just on the Environmental Solutions business, could you give us a sense of like what your -- where we are from a volume and price perspective? I'm curious, I know we had -- last year, you had maybe talked about sort of pricing above, I guess, trend. And I'm curious where we are at this point? And I know you mentioned sort of some of the volume versus price dynamics. So curious if you can tell us where -- what you saw volume versus price in [indiscernible]?

Sure. Yes, price positive and volume negative. Obviously, that speaks to -- and that business has got some scale sensitivity to it given the post-collection environment. So to be able to have flat margins in that environment just speaks to, again, trading off price or volume in this case. And again, we haven't always gotten it perfectly right, lost a little bit of share in that volume. Team is working really hard in places where it's positive to go get those opportunities and feel optimistic about the growth outlook. Again, the next couple of quarters, I think, are going to be uncertain. But if you think of a longer-term view here over the next 4 to 5 years, I couldn't be more excited about manufacturing in the United States.

And if you just think about the results that we've produced since we acquired US Ecology, for the vast majority of that time frame, we've been in a PMI environment that's sub 50, right? So since the beginning of 2023, there's only been 3 months that have exceeded 50. So look at what we've done in a negative demand environment gives us a lot of confidence and really encourage us about what the future could bring when manufacturing activity actually resumes.

Your next question will come from Trevor Romeo with William Blair.

First one I had was just on the M&A pipeline. It sounds like maybe you did a couple of deals in Q2. You sounded pretty bullish, I think, in the past few quarters on the pipeline. So just any update there in terms of size, regions, any bias to one of the -- either recycling and waste or ES or just anything else on the pipeline would be really helpful.

Yes, pipeline remains strong and robust. I'd say with the exception of don't see any transformational deals in the immediate term. It should be a surprise. Most of what we do here some nice regional sized deals or small tuck-ins on that front. And listen, there's a little lumpiness to this pipeline, all -- the pipeline is strong, but the lumpiness of activity of when deals close on that front and already off to a strong year, and the forecast is strong for the rest of the year.

Okay. That makes sense. And then just going back to margins, I guess, as we look to model margins in the second half, anything specific you'd call out on kind of the quarterly cadence or seasonality just because you may have a few moving pieces? So just any thoughts on, I guess, Q3 versus Q4 and the consolidated margins would be great?

Yes. The one thing I would point out, and this is more of a year-over-year type comparison, is that we called out in the third quarter of '24, we called out about $20 million of out-of-period benefits which provided about 40 basis points of uplift to the margin in Q3 of 2024. So we have to overcome that. So again, when you take a look at, call it, relatively flat margin performance in the second half of this year compared to the prior year, probably a little bit negative in the third quarter because we have that 40 basis points we have to overcome and a little bit positive in the fourth quarter.

Your next question will come from Stephanie Moore with Jefferies.

I wanted to touch a little bit about the maybe medium-term margin opportunity or just investment opportunity that comes from leveraging your Ride platform. So now that this platform is successfully been rolled out across the network in your fleet. If you could talk a little bit about what's next in terms of how you can maybe harvest that data or the opportunity of having that rolled out that eventually we can see the -- can drive kind of longer-term margin opportunity?

Yes. I think are 2 components to it. One is it allows us to connect and communicate with the customer more proactively to understand giving them more precise times on service pickups, service verification, all of those things, and we're doing some of that already, but more proactive pushing and communicating. Anytime we're more digitally connected with the customer that they are going to stay with us longer, which creates an opportunity for a very profitable customer to stay in the portfolio.

And then on the efficiency side, we're starting to use AI to build routes. And so that's been the next opportunity to harness all that data and think about how do we more efficiently build routes and not doing that in a lights-out fashion, but using our very talented logistics team and AI together to figure out, hey, how do we get the same number of stops done in 5 less minutes, 10 less minutes, 20 less minutes a day. And we've talked about a minute taken out of the system across the years were $4 million to $5 million for us. So this is really a game of seconds and then minutes that can drive real cost efficiency into the business.

Got it. Just -- and then just wanted to touch a little bit on the polymer centers. Maybe you could just give us a quick update in terms of how the centers that are open are performing in terms of efficiency rates compared to what you've been targeting, pricing opportunity? Any color there would be great.

Yes. I think I guess we talked about a little slower out of the gate for some construction reasons on that. And then certainly had some learning curve on that in terms of exactly the quality specs our customer wanted in getting that communication clear. I think Vegas is making great progress. And then India is hitting its marks because we've taken all the learnings from Las Vegas and built those into Indianapolis. And then we'll leverage all those learnings, of course, in Pennsylvania for a third center as well. So we feel very excited that we're capturing the benefits of those learning.

And listen, we have the supply. That's one of the reasons we did it. And the demand for the product is through the roof, right? The world is short supply. The country is short supply on recycled PET. So we feel very confident about the returns profile of this over time.

The next question will come from Tobey Sommer with Truist.

I wanted to ask a question about your on the labor side. So you've covered a bunch of the demand and top line stuff. Turnover and associated expenses recruiting, safety, et cetera, have gone down now successfully for a number of consecutive years. Do you think there's room to go on this? Or if we see the labor market pick up and the economy pick up, might there be sort of a trade-off between industrial volumes improving, but the labor-related expenses sort of creeping higher as well?

Yes. We're certainly not immune to the macro. And so economy takes off and we go back to a very, very tight employment market, that's going to have some impact on either our growth and/or to be able to supply workers and/or wage rates. Although, again, I feel really good about our team and our talent of recruiting people, but also the culture we've built, right? We focus intensely on employee engagement and being a place where the most talented people want to come to work. So how you treat them as a big part of that. The stability of the work is a big part of that.

And then also compensation benefits. I think I talked a lot about that on this call about being getting that right and being very competitive. And while we're not perfect every time, I think we've done a really good job of improving that successfully every year and dynamic enough to adjust that based on the macro environment. So it doesn't cause me any concern in terms of a hotter economy causing a labor pinch for us.

Okay. And on the ES side, you mentioned if confronted with price versus volume, you're always going to choose price. Anything you're seeing out in the market with respect to competitors' behavior make you think that there's a greater or lesser chance of continuing to fuel the business with acquisitions? Just curious if any of those behaviors are interrelated and therefore, inform the M&A outlook?

No, I think the M&A outlook is strong. I think from a competitive contract standpoint, listen, when you're not in a challenging demand environment for a period of years, you start to see some people can make different trade-offs on volume versus price. We're seeing that in part of the U.S. market, and we're going to stay disciplined. And I think the good news is that is marginal in the broader scheme of things and a really good story in terms of margin improvement in that part of the business over time, and we don't see that trend stopping.

And the next question will come from Rob Wertheimer with Melius Research.

I had a question on the second half incrementals, which you guys covered pretty well. But I was still left a little bit wondering if when you add back labor, are there any residual inefficiencies just from dealing with a situation that depressed margins slightly in 2H?

No. Again, I think if you -- when we talked about the labor disruption, I mean, again, we're planning on backing those out of the adjusted results. So -- and again, those were those incremental costs that Jon walked through. So when you talk about in the second half, it's not as much about what's happening in the current period. If you take a look at prior year, you can see a sequential ramp-up that we saw first half into second half, we just get into tougher comps.

So we still expect to price ahead of cost inflation, and we still expect to sit there and see the benefits of some of the labor productivity investments that we're making. It's just going to sit there and it's going to modulate and taper off as compared to what you saw as margin expansion in the first half of the year and that was fully anticipated when we provided guidance at the beginning of the year as well.

Got you. No, understood. And then just a second minor one. When you look at the big beautiful build, does that change your appetite for CapEx? You have areas you can invest profitably. I'm just curious if you reevaluate plans given the bonus depreciation?

Yes. When you take a look, and again, you -- there's a certain amount of replacement CapEx that you're going to do each and every year, and we do that somewhat ratably. So just because you have a 100% bonus depreciation, that doesn't mean that you're going to sit there and take a asset that still has remaining life and retire it. So again, it actually -- on the margin, if you sit there and say, would you sit there and accelerate some things? I mean, perhaps on the margin. But for the most part, we are steady, we are consistent, and we're ratably replacing the assets in the business year in and year out.

The next question will come from David Manthey with Baird.

I just wanted to be clear on the third quarter '24 unusual benefit there. So I recall there was a 50 basis point insurance recovery and then there was also a bad debt item. I wasn't clear on whether that was a positive or a negative? It sounds like you're saying that was a minus 10 leading to the net 40 basis points of favorability. Is that correct?

No, actually, so there were $20 million worth of benefits in the third quarter of '24. The insurance recovery was a positive $15 million, and the bad debt recovery was a positive $5 million. That's what impacted the third quarter of '24. Our commentary on the 50 basis points last year was in the prior years, now you're back into '23, we actually had some negatives. So now you're talking about the spread, '23 over '24. Now what we're saying is when you compare '25 over '24, you're really just having to overcome that $20 million benefit that we saw in Q3 of '24. And again, the insurance recovery, $15 million, bad debt positive recovery was $5 million.

Perfect. All right. And then coal used to break out base versus event work. And it sounds like you're saying that the base ES were pretty lackluster given industrial production levels. Do you have any comments around environmental services event opportunities you're seeing in chemicals, metals, manufacturing, refining, some of the key industries there?

Yes, I'd say one thing and good news, bad news, there's been less emergency response work this year. So do it from a societal standpoint, we've got fewer emergencies to deal with. Challenging for the business, obviously, because those end up being very profitable opportunities for us to go. And we know that across the cycle, and there's going to be years of that spikes and years of that, that is a little lower on that front. It's been a slower first half of the year, we'll see what the second half looks like.

And then any discretionary work on site cleanups or other things, this is where the macro, I think, is causing manufacturers is to pause -- mean people are focused on tariff policy, relocating manufacturing, figuring out how to get warehouse goods, et cetera, anything ancillary to their operation. They've just put a pause. So our pipeline looks good, but events and those opportunities are moving at the pace that we would expect. And it's the uncertainty that hurts people as we get more certainty around trade policy, we're optimistic that, that starts to move.

Your next question will come from Konark Gupta with Scotia Capital.

I understand you will be adjusting out the labor impact from the adjusted results you will post. But just an update in terms of where the labor agreements are right now? My understanding is you had a few different regions of the country where you had these disruptions, but you have achieved maybe some agreements in some places. So can you update us there and what agreements are left right now?

Sure. Yes, what happened is a number of markets went out, right, with contracts that were expired and shows to strike. A few other of our contracts in different parts of the country have sympathy strike language where if people show up to take it, the workers don't cross those lines. We've kind of recovered on all of those sympathy strikes, our colleagues are back to work, and we typically see this ends up being a day or sometimes a week activity, right?

And now we're down to just a few markets where we're negotiating to get agreements on that front. And again, we're going to negotiate in good faith. We want a deal that is very fair and competitive for frontline people, but we're not going to do any deal that impairs the longer-term health of the business or hurts our colleagues longer term.

Okay. That's great. And just on the M&A, I think you provided some good color in terms of what the pipeline looks like. How much contribution in terms of revenue have you embedded in the guidance for full year?

Yes. So again, if you take a look at what we're expecting, there's 120 basis points of contribution to 2025 growth, 100 of which was included in the guide. Because again, we had known about that. That was the Shamrock deal that was already known at the time when we provided the guidance.

20 is incremental.

I'm sorry, what was that last part?

Sorry, 20 is the incremental, right? [indiscernible].

20 is the incremental, correct. And that's about $35 million of annual rep, correct.

Your next question will come from James Schumm with TD Cowen.

Just also on the M&A. But with respect to Environmental Services, there's been some high multiples paid for some of these targets, 14, 15, 16x EBITDA multiples have been paid. Are you seeing, as you look at takeover targets, that a lot of these sellers are trying to really up their asking price? And are you seeing like a widening of the bid-ask spread in the ES market with respect to M&A?

I don't think we're seeing a widening of the spread. I do think that if you look across the last years, multiples have absolutely gone up. They've gone up in recycling and waste too, but they've gone up faster in ES in large part because there's been so much value that's been driven in that part of the business. So the business are becoming more valuable on a forward-looking basis.

And the multiple is totally dependent on what you're buying. If you're buying something with limited infrastructure, more field services based, that multiple is going to be a fraction of what you mentioned. If you're buying something with great permitting and great infrastructure, that could be a very value-creating deal on that. And we're going to look at unlevered cash on cash returns, the multiple ends up becoming an output.

At this time, there appears to be no further questions. Mr. Vander Ark, I'll turn the call over to you for closing remarks.

Thank you, Chuck. As we close out today's call, I want to thank the entire Republic Services team for their unwavering focus on safety, sustainability and customer service. Their commitment, energy and ingenuity are solving today's challenges and positioning us for continued success. Have a good evening and be safe.

Ladies and gentlemen, this concludes the conference call. Thank you for attending. You may now disconnect.