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Good afternoon, and welcome to the Republic Services Third 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 John Weeks, Vice President of Investor Relations. Please go ahead.

Good afternoon. I would like to welcome everyone to Republic Services Third Quarter 2026 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 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 29, 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 expressed written consent 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 a 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, John. Good afternoon, everyone, and thank you for joining us. We delivered another strong quarter of results, driven by disciplined pricing and improving volume trends, while successfully overcoming elevated diesel fuel costs. Positive momentum across the business included profitable growth in Environmental Solutions, underscores the strength and resilience of our business model and our ability to capitalize on improving macro economic trends. Our results reflect our continued focus on pricing ahead of cost inflation and effective cost management while making strategic investments that strengthen our competitive advantages and position us to deliver sustainable growth and long-term shareholder value.

During the quarter, we achieved revenue growth of 8.2%, increased adjusted EBITDA, 4.8%, delivered adjusted earnings per share of $1.94 and generated year-to-date adjusted free cash flow of $2.28 billion. With respect to customer deal, our commitment to deliver world-class essential services continues to drive organic growth and strengthen customer satisfaction. Customer retention remained high at more than 94%. Customers value the quality and breadth of our services, which extends continued loyalty and supports our ability to earn attractive returns for the value of the services we provide. Strong pricing across the business remained the primary driver of organic revenue growth during the third quarter.

Core price on related revenues was 6.3%, which was relatively consistent with our second quarter performance. Combined with higher fuel recovery fees, the price increase was over 8%. Average yield on related revenues is 3.5% and continue to exceed our internal cost inflation. The sequential moderation in average yield was primarily due to better-than-expected volumes in our small and large container businesses, which included an increase [indiscernible] levels.

Service increases are profitable and increased route density, but typically have a dilutive impact on average yield. Organic volume decreased 70 basis points on related revenue and were positive 20 basis points after adjusting for onetime landfill event volumes received in the prior year. Importantly, volume in both small and large container businesses increased 50 basis points. This marks the first time in more than 3 years that both businesses generated positive [indiscernible] at the same time.

Organic revenue in the Environmental Solutions business increased 21% compared to the prior year and contributed 2.1% to total company revenue growth in the third quarter. Revenue growth in this business was driven by a few large emergency response jobs. Revenue grew in this segment by approximately 9%, excluding these jobs. We continue to see strong demand for our Environmental Solutions customers and expect positive revenue growth to continue through the rest of the year and into 2027.

Turning to digital. We continue to advance our technology and AI initiatives to improve pricing effectiveness extend customer retention and increase labor productivity. AI-enabled pricing technology is now deployed across the business, providing enhanced insights to support pricing decisions that reflect service requirements and market conditions. These enhanced capabilities are designed to better reflect customer needs and support long-term revenue retention. We continue to pilot our new AI-enhanced routing platform to improve service execution gain route efficiencies and reduce disposal costs. This new technology combines AI capabilities with advanced routing algorithms to optimize every aspect of our routing logistics. Full scale deployment is expected to begin early next year.

And with respect to our call centers, digital tools are transforming how we manage 11 million inbound calls each year. We believe that, over time, more than half of these calls can be eliminated or handled through a lower-cost channel. This enables faster resolution and a more seamless customer experience.

Moving on to sustainability. Construction of our third polymer center in Allentown, Pennsylvania remains on track with commissioning planned for early next year. Our renewable natural gas projects with our partners continue to make progress. We are on track to complete 2 additional RNG projects by year-end, which will bring the total project additions for the year 4. We continue to electrify our fleet.

During the quarter, we launched Florida's first fully electric residential recycling and waste collection fleet in the city of Coconut Creek. We ended the third quarter with more than 280 electric collection vehicles in operation across our business. We remain on track to finish the year with more than 300 EV trucks as we continue to grow this differentiated offering. We strive to be the employer where the best people want to work. Employee engagement remains high and turnover is at a record low. We were recently named 1 of 3 BL's 100 Best Corporate Citizens and earned Great Place to Work certification for the tenth consecutive year.

With respect to capital allocation, we invested $1.1 billion in value-creating acquisitions so far this year. We expect to finish 2026 with at least $1.2 billion in acquisition investments. Looking ahead, our acquisition pipeline remains active across both Recycling and Waste and Environmental Solutions. Year-to-date, we returned $1.43 billion to shareholders including $884 million of share repurchases and $577 million of dividends.

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

Thanks, Jon. Core price on total revenue was 5.3%. Core price on related revenue was 6.3%, which included open market pricing of 7.6% and restricted pricing of 4.1%. The components of core price on related revenue included small container of 8%, large container of 7% and residential of 5.8%. Average yield on total revenue was 2.9% and average yield on related revenue was 3.5%. The 50 basis point sequential decline in yield on related revenue was primarily driven by increased unit growth in our small and large container businesses. Fuel recovery fees increased total revenue by 1.8%, which offset higher fuel expense and related surcharges. Third quarter volume decreased total revenue by 60 basis points and related revenue by 70 basis points. The decline was driven by a 90 basis point headwind from event-driven landfill volumes received in the prior year.

The rest of the business increased 20 basis points on a year-over-year basis. The details of volume performance during the quarter included a 50 basis point increase in small container volume driven by net new business and increased service levels by our same-store customers, a 50 basis point increase in large container volume, primarily due to increased service levels and a 6.4% increase in special waste revenue. This was more than offset by residential volume, which declined 4.3%, primarily due to certain municipal contract losses and reduction in construction and demolition and fill volume which related to the previously mentioned event work in the prior year.

Moving on to recycling. Commodity prices were $142 per ton during the third quarter, compared with $126 per ton in the prior year. Recycling processing and commodity sales increased $15 million during the quarter, driven by higher polymer center volumes and recycled commodity prices.

With respect to Environmental Solutions, third quarter revenue increased $96 million compared to the prior year. Environmental Solutions revenue increased 21% compared to same-store revenue in the prior year and contributed 2.1% to total company revenue growth. Adjusted EBITDA margin in the Environmental Solutions business was 25.4% which represented 440 basis points of margin expansion compared to the prior year. Total company adjusted EBITDA margin was 31.8%. Margin performance during the quarter included a 50 basis point decrease from net fuel, a 40 basis point decrease from landfill event volumes received in the prior year and a 60 basis point decrease from elevated health care costs. This was comprised of 20 basis points from a prior year rebate that did not repeat and 40 basis points from above-average large claims activity. Healthcare claims activity returned to more normal levels in the month of October.

The rest of the business expanded margin by 50 basis points, which was in line with our expectations. Year-to-date adjusted free cash flow was $2.28 billion, driven primarily by EBITDA growth in the business. Total debt was approximately $14.2 billion and total liquidity was $2.3 billion. We ended the quarter with a leverage ratio of 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 21.7% during the quarter. For the full year, we expect an equivalent tax impact of approximately 24%.

I will now turn the call back over to Jon.

Thanks, Brian. Based on results to date and our outlook for the remainder of the year, we updated our full year 2026 financial guidance as follows: Revenue is now expected to be in the range of $17.425 billion to $17.475 billion. Adjusted EBITDA is now expected to be in the range of $5.5 billion to $5.575 billion and adjusted free cash flow is expected to be in the range of $2.565 billion to $2.585 billion. Most of the revenue increase is due to higher fuel recovery fees related to elevated diesel fuel costs. As a reminder, our fee recovery program is designed to offset the cash impact of changing diesel costs and is dilutive to margin when fuel costs are increasing.

As we look to the year ahead, we remain confident in our ability to execute in a dynamic market and are encouraged by the momentum building across the business. We are still in the middle of our planning process and our initial perspective regarding 2027 is that our long-term growth algorithm is intact. This calls for consistently delivering mid-single-digit revenue growth while growing EBITDA, EPS and free cash flow even faster than revenue. This is designed to drive 30 to 50 basis points of annual EBITDA margin expansion. Our perspective is supported by continued disciplined pricing, improving volume trends and the momentum building in Environmental Solutions business. Benefits from investments in digital capabilities and sustainability innovation should further support profitable growth and continued value creation. We plan to provide 2027 guidance on our earnings call in February.

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

[Operator Instructions] Your first question today comes from Sabahat Khan with RBC Capital Markets.

Great. I'm hoping you can provide a little bit more color on the ES segment and the evolution there. I think last quarter, you alluded to sort of the incremental getting better and some upside momentum through H2. Maybe just talk about materialized through Q3 in that silo on the top line and the margin progression and sort of what's embedded for Q4? Thanks.

Yes. I think we talked about at the outset of the year that the first half was going to be tougher, and we saw an inflection point and momentum into the second half of the year, and that's what we're seeing. And we're calling that shop because the sales pipeline was building and we saw a number of jobs that were confirmed, but hadn't started yet. And we saw a lot of that momentum [indiscernible]. Obviously, there were a couple of big ER jobs that helped create an outsized outcome. But I think we mentioned you strip that away, we're still up 9%. And so a very broad-based growth geographically and across verticals. So I think it's a function of the underlying industrial economy continuing to improve. And then I think our team executing at a high level.

Great. And then just for a follow-up, the commentary around volumes getting a little bit better, not asking for guidance on '27. But as you think about the mid-single digits, do you expect at least year-over-year volume trends just sort of across your platform based on what you're seeing that to be a bit more positive sequentially. Just maybe if you can break out some of the puts and takes you're seeing on the volume front across your business.

Yes. I think the industry -- second waste is coming out of a 4-year period of really negative growth. And Environmental Solutions is coming out of an 18-month period where I think it was kind of hit an air pocket in volume. I think both markets are now trending in a good direction. I think recycling and waste will tip the positive growth in 2027 across the industry, and we'll certainly try to match that or do a little better than that performance and Environmental Solutions will be on a nice growth trajectory.

And again, we'll try to match market or do a little bit better than that from a volume standpoint.

The next question comes from Bryan Burgmeier with Citi.

Maybe just on the updated EBITDA outlook for 2026. Just curious if you could help us bridge that a little bit. I guess you're going to have a little bit of help from commodities, a little bit of M&A not sure if ESP in the quarter versus your model or if it was in line? Just any detail on the improved outlook there.

Yes. I'll give you both pieces when you take a look at our guide that we updated in July compared the guide that we just recently updated. So at the midpoint, revenue is up about $200 million on the revenue. And $150 million of that or so is related to fuel fees, $50 million is related to Environmental Solutions. Most of that has already occurred with those handful of large emergency response jobs that we called out.

With respect to the EBITDA, we're expecting some contribution from fuel fees, call it in the $10 million ZIP code in part just because we saw the big spike in fuel costs in the month of September. They move from the kind of mid $5 a gallon up to [ $6.50 ] or so in September. So we expect our fuel recovery fee to catch up early in the fourth quarter and about [ $15 million ] of the contribution from that $50 million on Environmental Solutions will positively impact EBITDA. And that's how you go from the previous guidance to approximately $25 million of incremental EBITDA at the midpoint.

Got it. Got it. Really appreciate that detail. And then one follow-up for me, just going back to ES. I suppose it will always be a bit of a lumpy business just given the nature of the work but I'm just curious if you could try to frame what you think is maybe a sustainable level of margins. We've covered a lot of ground this year from high teens to mid-20s. And just, yes, curious about how you think about the sustainability of the 3Q performance and sustainable margin level?

Yes. We talked about expanding the business 30 to 50 basis points. So we'll try to kind of match that or beat that margin expansion within ES. We think there's a lot of upside over the long term in that margin. I would tell you that if you measure it exactly by the quarter, right, you might not get the exact results you want. I think you've got to look at the trend across years and when you measure that trend, it's to the upper or the right. I think given the nature of this business, assets that are possible to permit. The waste that moves long distances gets priced by the pound or the yard versus the tone. I think there's a lot of opportunity to price for the value we deliver over time. And I think you're going to see steady progress on that in the years to come.

The next question comes from Noah Kaye with Oppenheimer.

Getting some questions on the yield dynamics you called out as it relates to volume. Can you maybe just give us a little bit more of an explanation because it sounds like you're picking up new business, you're seeing volume growth, your same-store price is good, but there's just some business coming on at a lower starting price. So any more nuance to it than that? Or is this something that we should be expecting in coming quarters if we continue to see volumes improve?

I'd say that when the business expands, that's either through service increases at existing customers or taking on new customers, you are almost always going to take on those units that are profitable, but they're below the average rate. That's the nature of our subscription-based business and the recurring revenue elements of the business. And so that arithmetically puts downward pressure on yield. But it's profitable business and so normally, you see margin expansion. I think this we got caught a little unique circumstance this quarter with a comp in the landfills with a spike in diesel price, which that increase hurts us. We're fine at the level, but the increase of [indiscernible] and then some onetime healthcare costs that Brian mentioned that have already receded and come back down in October.

Outside of that, you see margin expansion. So we'd expect that yield number going forward to probably trend slightly up, but certainly, the margin expansion to flow through because those units certainly contribute are profitable and they come into the system.

Yes. Makes sense. And look, I mean all things considered for the business your size, what is the $18 million to $20 million higher is not a massive number, but the healthcare costs despite what was noticeable enough for you to call it out? I guess are there any other elements that maybe you call out as unusual for the balance of the year. You mentioned that as the rebate, I know that there have been some true-ups in the industry around risk management, accruals. Just anything we should be thinking about for 4Q?

Nothing significant when you take a look at our prior period results, it was fairly straightforward, and that's what we're anticipating for this fourth quarter, and that's what's included in the guide.

The next question comes from Toni Kaplan with Morgan Stanley.

This is Yehuda Silverman on for Toni Kaplan. Just a quick one on the end market health. I think I heard you mention earlier in the call that combined price and higher fuel recovery fee was about over 8%. Just curious if you could discuss the customer receptivity to pricing and how that's evolved, particularly in an environment with seems that this elevated fuel price and broader inflationary pressure might be here for a bit longer?

We certainly look at what the bill of the customer is going to receive and affordability is a very popular term right now, we're mindful of that. This is where our tools really help us to understand the lifetime value of that customer, and we want to run the business forever, not maximize any type of in-year pricing or any return on that.

So I'd say on the margin, that probably caused us to back off slightly on pricing, which we would have otherwise priced. But in terms of the core price and what you're seeing in the metrics really positive in terms of receptivity Again, I think the benefit of our tools is we're getting that price right and that customer is staying with us.

Got it. And just one quick one on the cost side, that labor and related benefit increased year-over-year a bit. Is that where the health care onetime came in there or some of the costs you saw a step up?

Yes. That's where most of it would be in that labor category.

The next question comes from Jerry Revich with Wells Fargo.

I want to ask on the AI part of the conversation in your prepared remarks. You folks spoke about some interesting pricing tools and opportunity to reduce the phone operator cost. Can we just talk about over what period of time do you think we'll see a meaningful impact on numbers? How long will some of these initiatives take to play out? And can you just size for us if we're talking about food and service, how meaningful of a bucket is that as we think about the margin upside?

Yes, pricing we're already seeing right now when you're seeing that in the numbers and the impact, especially in the fuel-related environment. Customer service, you're starting to see just small bits of that, but most of that impact will come in next year. And then on the routing, which is the biggest opportunity, most of the will be rolled out next year, so you'll see some impact towards the back end of next year, but that will really be a 2028 story in terms of getting the full benefit of that. Think we mentioned $100 million run rate EBITDA by the end of 2028, and we still feel like we're on track for that number.

Okay. Great. And then [indiscernible] are about '27 in about 3 months, but putting the pieces together, we've got good momentum on ES for the first time in 18 months. And if we were thinking about good core margin improvement in the base business on top of it, it could be in total a year of outsized margin expansion '27 versus '26. Brian, anything that we need to keep in mind given that up? And obviously, we'll talk more detail in 3 months, but would love to get your initial thoughts on the high-level opportunity.

Yes. Remember, I mean, we didn't provide guidance, but we did talk about our long-term growth algorithm. And we feel that '27 is laying into the construct of what we talk about that long-term growth algorithm, which calls for 30 to 50 basis points of margin expansion.

The next question comes from Adam Bubes with Goldman Sachs.

I think organic growth ex event-related volumes in ES was 9%. Can you just help us understand the drivers of the strength there? How much is volume versus price, which business lines are you seeing the strongest growth?

You balance across both more volume and price, but certainly got our fair share on price. I think what you're seeing is just all the factors driving the industrial economy, PMI now has been over [ 50% ] for a number of months. You're starting to see the reshoring activity, obviously, a big build-out in all parts of the technology sector. And semiconductors and data centers and everything else. And all of those things are contributing to our performance.

Yes. And to Jon's point, it was broad-based. We saw increases at our hazardous waste landfills. We saw increase in E&P volumes. We saw it in our TSDF, in our Field and Industrial Services. So it's a very broad-based increase.

And then on the residential side, I think you cited some municipal contract losses. Were those new in 3Q? Or was that already in the base? And then I think last quarter on the call, you might have talked about potential to get closer to down 2% number sometime in 2027. Does that still hold? Or should we think about this as incremental shedding?

No. All these were actions or decisions that were taken last year that we're living with the effect through the course of this year and that we will certainly move up in our trend. And I think that roughly 2% is probably about where we'll end up landing next year.

The next question comes from Trevor Romeo with William Blair.

Just a couple more for me on ES just because it was nice to see the improvement there. I mean, one, I appreciate the comments about the sort of long-term growth algorithm in '27, and I know you don't want to be getting into detailed guidance, but just thinking you're already kind of organically ex events growing 9%, that kind of an easier comp in the first half next year, and you've got the manufacturing back up improving and all kind of the other secular factors there. So I mean, how are you thinking about the potential for '27 for ES to just be kind of an above-average growth here? And kind of what needs to happen for it to get there?

So we'll continue to build the pipeline and have high aspirations for our team. I think we gave you the long kind of the broad -- the broad markers of how the business does. Keep in mind, we're still in the sub [ 15% ] of the overall business. So when we give you the overall markers for how we're going to do next year, you could still outsize performance in ES and can fit within the envelope that Brian talked about.

Okay. I appreciate that, Jon. And just a quick follow-up on ES as well. I mean, -- on the ER project overall, I guess, how has this year kind of been trending relative to a normal year? And then I know pricing on the ER work is something you've talked about maybe the past several quarters. You feel like that's kind of gotten back to an equilibrium at this point now that you're kind of winning more jobs?

Yes, I think we're getting better and smarter every day. We do thousands of ER jobs every year. Most of them are very small. It's the outsized jobs that can kind of drive the economics. And really, the last 18 to 24 months prior to this quarter, it's been the dearth of those larger jobs. And so typically, you see 1, 2 or 3 of these bigger jobs every year. We had a couple of them this quarter. Team did a great job, and we leverage the full capabilities of our offering. So it wasn't just Environmental Solutions, Field Services team and post-collection group, but it was also our recycling and waste landfills that played a pretty big part in providing the right solutions for our customers.

The next question comes from Tami Zakaria from JPMorgan.

I wanted to understand the mid-single-digit growth algo that you have for the long term a little bit better. So you've been able to achieve that despite residential construction, housing formation being very weak in the last few years. So if and when that begins to recover. How should we think about a lift to that mid-single-digit percent number? Or what kind of improvement have you seen -- did you see in the past when prior resi up cycles begin?

Yes. I'm very optimistic about the U.S. housing market over time. I'm very pessimistic about it in the short to medium term. I think we're going to need to get the 10-year down and the interest rate down to unlock both people to move and investment in the new housing construction with which the country badly needs. It will have a nice, steady positive tailwind to the industry. And it will start large container temp because that will be the work we do, we'll add then some residential units and then the knock-on effect is adding some small container units around that as you see business formation happen around households. So that will be a steady -- it's not points and points of growth to the top line, but there will be certainly basis points of tailwind, and those will be profitable units will add to the system.

Yes. If you want to sensitize it direct construction-related activity is about 6% to 7% of our total revenue base.

Next question comes from Seth Weber from BNP Paribas.

Just a couple more on [indiscernible]. The 9%, excluding the emergency business, do you feel like that's a catch-up of just stuff that has been delayed? Or do you feel like you're taking market share here?

I think I would encourage you do not over interpret a given quarter. In this business, there's always puts and takes in event job where recycling of waste given the predominantly recurring revenue nature of that business, right, very repeatable, predictable and you can start to spot trends easier in that business. I think we're seeing a reignition of growth in the sector and we're certainly getting our fair share, and we feel probably more than our fair share right now. That could change over the quarter, but we'll -- again, over the cycle, we'll look to get growth slightly ahead of market and certainly lead with price and then take volume behind that. And I think we're very encouraged by the -- of the efforts the team has made in that business.

Okay. And then just as this business turns, would you expect outsized incremental margins in this business for the, say, 2027?

I think it depends a lot on mix and the nature of that work. In general, yes, you get leverage on post-collection assets, you get leverage on your labor. So there's some fixed cost nature of that work on the Field Services as well. But the nature of that work and the mix of the work could determine it, but on balance, yes.

The next question comes from Shlomo Rosenbaum with Stifel.

First question, just a little bit about operational landfill costs. I think you're the first company reporting this quarter that has not mentioned that they're starting that they're going up. And I'm just wondering, are you noticed that happening recently and is there a way to console it if it is? And if not, why do you think you're not seeing it versus some of the other ones that I was talking about in now?

Yes. Some of it depends on weather and rain and the mix of where your landfills are located. And again, in any given quarter or year, you might be slightly more elevated than others than that. Landfills are certainly getting more expensive to operate, but our team has done a really good job of managing those costs, getting in front of it, and most importantly, protecting the health of those landfills across the cycle.

Do you see anything regulatory-wise particularly where your landfills are located that's making a bigger difference now versus some of the other ones?

We're working every day across multiple state capitals, shaping regulation or sometimes working against regulation if we think it's really bad for the customer, but most of the time shaping regulation to help improve the environment and manage those assets.

Great. Just a follow-up, Brian, can you just talk about the price of diesel that's expected in your 4Q '26 numbers?

Yes. We've seen diesel modulate a little bit. The high point in September was approximately [ $6.50 ]. As we sit here today, we're, call it, [ $6.35 ]. We expect that to taper down a little bit and approach the $6 mark by the time we exit the year.

The next question comes from Stephanie Moore with Jefferies.

Hi, good afternoon. Thank you. Okay. So maybe first question, I do want to touch about M&A. Maybe if you could talk about how you're just viewing the M&A environment today where you're seeing the most attractive opportunities across [indiscernible], ES or anything else? And then -- what should we expect maybe your focus to remain? Is it more so tuck-ins? Is there an appetite for maybe a larger more strategic deal? I would love to get your thoughts. Thank you.

The balance of our pipeline is always going to be smaller tuck-ins. We'll probably end up doing some more 25 acquisitions this year, most of which will be small tuck-ins. It will be balanced across Recycling and Waste and ES. Most of it will be recycling of waste, just given the size and the nature of those opportunities. There were certainly some medium-sized deals this year, and there'll be some more next year. The pipeline remains very, very strong. In terms of anything larger, we remain take a perspective on everything, but I wouldn't anticipate something in that. Stage of that size to happen to be in our wheelhouse here in the short to medium term.

Understood. And just a quick follow-up on the volume piece. Can you just remind us where you are in the -- just the residential shedding journey? When we should see maybe that optimal mix and then also any color you can give in terms of what this is implied from just a margin standpoint as well?

Well, I think there's always going to be some underlying shedding because as we acquire companies, we know part of their portfolio are municipal contracts that will either upgrade or exit. They just don't meet our returns threshold. And so again, across 25 deals, we don't pay for that portion of the deal when we buy those contracts. So we retain some of them, but we know some of them would be unlikely to retain.

And then going forward, we don't aspire to shrink that business. We would like to grow that business over time, but we're going to make sure that we get attractive returns on the hard work that our people do. And so we're going to continue to look for customers that are willing to pay for a differentiated offering and to get that market will move over time, but when forced to choose, we're going to take price over volume.

And the margin implications of that to your question is if you're shedding lower profitable work within the residential business, but gaining on the more profitable small and large container work that's going to mix up from a margin perspective.

The next question comes from Tobey Sommer with Truist. Tobey, your line maybe muted.

We will take the next question from Kevin Chiang with CIBC.

Maybe just on Environmental Services, again, good results in the quarter. I appreciate, as you called out, mix can play a role here and maybe just the underlying cyclicality of the business. But I guess when I look further route. It feels like your income [indiscernible] margin in this business can be kind of like 30% to 50%, I guess, depending on mix as that revenue comes through. Is that kind of the right ballpark to think about how that incremental revenue flows through to the bottom line and then mix is maybe a 20-point variance around that goalpost?

Yes. To Jon's earlier point, it depends on the type of work that you're getting. So certainly, if you're getting it through your post-collection infrastructure, the TSDFs, the landfills, the E&P work, certainly can be those levels.

Field and Industrial Services, it's going to be accretive to those lines of business, but not to that level. So certainly, what we saw in this period given the large emergency response jobs as well as increases in both the headways landfills and E&P. That's why you saw the incrementals that we produced this quarter.

That's helpful. And just my follow-up question. If I look back the last 5 years or so, I don't think we've seen a quarter where small container, large container and special waste all put a positive volume. I guess the last time we saw it was coming out of the pandemic. I guess does this foretell how volume trends in 2027 ex the intentional shedding? Like could you have let's say, positive volumes next year ex some of the purposeful shedding you're pursuing in your resi book?

Yes. I think the market is starting to expand. Again, the market is not taking off. I don't want to oversell it, but the market is absolutely trending up and trending to a positive period. And the one caveat and all that is there's a lot of things going on geopolitically and with AI and big investment cycles and other things. So the macro would have to be supportive of that. But if the macro hangs in there, we would absolutely expect to see positive volume next year.

The next question comes from Tobey Sommer with Truist.

Sorry about that, the trick or treating came earlier this year. I wanted to ask a question about if you look over the horizon sort of in the quarter, we've had a couple of 2, 3 years where landfill natural gas provided a little bit of kind of new opportunity in spice for profit and revenue and cash flow growth. What do you see over the next 3, 7, 8 years that might provide another spicy period with a minor but interesting catalyst to spur those growth rates a little higher.

We're certainly looking at everything that goes into a landfill and challenging all the tons. Landfills while they are profitable, they are also a cost right? You've already collected the money from somebody that are cost to us. So is there something else we could do with that material. And some of that -- we get a little bit of diversion out of that of our sustainability investments around advanced recycling. Most of that is up-cycling, but there is some opportunity of taking things inverting them out of the landfill.

So the biggest opportunity we're pursuing right now is organic material, which is 20% to 25% of what shows up in a landfill. And we have a lot of those projects today, are there more different things that we can do with those over time. That's not a kind of near-term 1- to 2-year opportunity. But over 3 to 5 years, I think that could provide a -- start to be an interesting and meaningful revenue stream.

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

Thank you, Chloe. I want to thank the entire Republic Services team for their continued great work and dedication to exceeding our customers' expectations. We've accomplished a lot already this year, and I'm confident we will carry this momentum through the end of the year and into 2027 as we continue creating long-term value for our customers, employees and shareholders. I would also like to say congratulations to Jim Fish on a terrific career at WM, and I wish him the best in retirement. 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 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 John Weeks, Vice President of Investor Relations.

Good afternoon. I would like to welcome everyone to Republic Services' Second Quarter 2026 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 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 may 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 August 6, 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 expressed 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 a 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, John. Good afternoon, everyone, and thank you for joining us. Our strong second quarter results reflect the resilience of our business model and consistent operational execution. We delivered solid growth on both the top and bottom lines. At the same time, we continued investing in technology, automation and customer-focused solutions that strengthen our competitive position, improve customer experience and enhance long-term profitability.

During the quarter, we achieved revenue growth of 4.6% and generated adjusted EBITDA growth of 4.5%. We maintained adjusted EBITDA margin at 32.1% and overcame headwinds associated with event-driven landfill volumes received in the prior year. We delivered adjusted earnings per share of $1.85 and produced $1.58 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. With respect to customer zeal, our customer retention rate remained strong at more than 94%. We continue to see favorable Net Promoter Scores 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 3.4%, and average yield on related revenue was 4%. This level of pricing exceeded our cost inflation, which drove margin expansion in the underlying business.

Organic volume was down 1.9% on related revenue or 1.6% on total revenue. This level of performance was expected with 1.3% of the decline in total revenue associated with landfill event volumes received in the prior year. Aside from the tough prior year comp, volume performance improved 50 basis points from the first quarter.

Organic revenue in the Environmental Solutions business decreased total revenue by 20 basis points in the second quarter, which was in line with our expectations. Our Environmental Solutions sales pipeline continues to build with increased activity across multiple end markets. We continue to expect year-over-year revenue growth in this business in the second half of the year.

Turning to digital. Our investments in technology and AI are advancing. Over time, these capabilities are expected to drive additional growth 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 increase route efficiency. Early pilots confirm the expected value from this initiative.

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.

Moving on to sustainability. Last week, we released our latest sustainability report, highlighting the meaningful progress we are making toward our 2030 goals and the positive impact we are delivering for our customers and communities. Our suite of sustainability reports and materials is available on our website.

We continue to believe that our investments in plastic circularity and decarbonization position us for profitable growth and long-term value creation. Production volume continues to increase across our polymer center network as we optimize processing operations. Construction on our third polymer center in Allentown, Pennsylvania is progressing. Facility commissioning is planned to begin early next year.

We continue to advance renewable natural gas projects with our partners. We commenced operations at 2 RNG projects during the second quarter and expect 2 additional projects to begin operations by year-end. We made further progress on our commitment to fleet electrification. We had more than 250 electric collection vehicles in operation at the end of the second quarter. We expect to exit this year with more than 300 EV collection trucks in our fleet, and we'll continue to grow 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 see high employee engagement scores, and our turnover rate is the lowest on record. With respect to capital allocation, we invested $860 million in strategic acquisitions in the first half of the year. Our acquisition pipeline remains supportive of continued activity in both the Recycling & Waste and Environmental Solutions businesses. We expect to invest more than $1.2 billion in value-creating acquisitions in 2026.

During the first half of the year, we returned more than $1 billion to shareholders through dividends and a repurchase of approximately 1% of our outstanding shares. Additionally, we recently announced an increase of the dividend for the 23rd consecutive year. Building on the strong results delivered through the first half of the year and continued momentum we see across the business, we raised our full year 2026 guidance as follows: revenue is expected to be in the range of $17.2 billion to $17.3 billion. Adjusted EBITDA is expected to be in a range of [ $5.525 billion ] to $5.55 billion. Adjusted earnings per share is expected to be in the range of $7.23 to $7.28, and adjusted free cash flow is expected to be in a range of $2.54 billion to $2.575 billion. Our full year guidance incorporates higher-than-expected fuel recovery fee revenue through July increased recycling commodity revenue based on current prices and the contribution of acquisitions closed to date.

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

Thanks, Jon. Core price on total revenue was 5.3%. Core price on related revenue was 6.4%, which included open market pricing of 7.8% and restricted pricing of 4.1%. The components of core price on related revenue included small container of 8.1%, large container of 6.9% and residential of 6.3%. Average yield on total revenue was 3.4% and average yield on related revenue was 4%. Additionally, fuel recovery fees increased total revenue by 1.8%, which offset higher fuel expense and related surcharges.

Second quarter volume decreased total revenue by 1.6% and related revenue by 1.9%. Most of the decline was due to the event-driven landfill volumes in the prior year. Volume performance on related revenue also included a 1.1% increase in landfill MSW. This was more than offset by large container volumes, which declined 2.2%, primarily due to continued softness in construction-related activity, residential volume, which declined 4.3% due to known contract losses, and landfill special waste, which declined 30 basis points. It's important to note that landfill special waste increased 10.7%, excluding the tough comp from wildfire volumes received in the prior year.

Moving on to recycling. Commodity prices were $136 per ton during the second quarter. This compared to $149 per ton in the prior year. recycling processing and commodity sales increased by $8 million during the quarter. Increased volumes at our polymer centers offset lower recycled commodity prices.

Current commodity prices are approximately $140 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 $135 per ton.

Total company adjusted EBITDA margin was 32.1%. Margin performance during the quarter included margin expansion in the underlying business of 90 basis points, which was offset by a 50 basis point decrease from landfill event volumes, a 30 basis point decrease from net fuel and a 10 basis point decrease from recycled commodity prices.

With respect to Environmental Solutions, Second quarter revenue increased $53 million sequentially, driven by higher event volumes and additional seasonal activity across the business. Adjusted EBITDA margin in the Environmental Solutions business was 20.2%, a sequential improvement of 100 basis points. Year-to-date, adjusted free cash flow was $1.58 billion. Our performance was driven primarily by EBITDA growth in the business.

Total debt was $14.2 billion, and total liquidity was $2.8 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 23.8% during the quarter. We now expect an equivalent tax impact of approximately 24.5% for the year.

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

[Operator Instructions] Your first question today comes from Tyler Brown with Raymond James.

Brian, it looks like the EBITDA midpoint was up, call it, $40 million, I think, at the midpoint. Just curious if you could break that increase down between M&A and the core. And then is flat to slightly down margins in Q3 is still a good placeholder?

Yes. When you look at the increase of the $40 million or so in EBITDA, majority of that is just due to increase in commodity prices. So if you look at both the revenue and the related EBITDA, that's about $25 million, and then the rest is due to the contribution from incremental acquisitions. So if you look at the revenue that's increasing, you've also got the increase from fuel recovery fees, but that is mostly offset by fuel costs as well as related surcharges.

Okay. And then on the Q3 margins.

Yes. So Q3, think of it relatively flattish with the prior year with margin expansion in the fourth quarter.

Okay. Perfect. And then this is a big picture question. So first, congrats to the team for giving the sustainability report. I know those are big undertakings. But Jon, one of the things that come my eye in there was your total TRIR safety numbers, I think those are a decade low. I know that 0 is the goal. But can you kind of talk about what you think the top 1 or 2 items that are really driving that success are?

Yes. Thank you for noticing. That's our #1 priority and value. And I think it's a mix of things. We've always had a very good safety culture and very good at training, prioritizing on the front line. I think the big increases have really been technology. We put a lot of equipment into vehicles. And it's not just the camera, the technology. It's also the coaching and training around it. That system has really been encouraging. And I'd say our next frontier is really to use AI in that capacity and think about analytics and understand what types of environments create unsafe opportunities and how do you then create management actions and systems and tools and processes around it.

So I think we've got more room to run on that. We don't take it for granted. We wake up every day and try to keep all 42,000 colleagues safe, but we're making great progress.

The next question will come from [ Adam Bubes ] with Goldman Sachs.

Wondering if you could just break the performance out across the major lines in Environmental Solutions because I know there's a lot of moving pieces there. And then Nice to see that sequential seasonal step-up? Just how are you thinking about potential magnitude of growth in the balance of the year?

Yes. So if you take a look at the performance in Environmental Solutions, we saw an increase in emergency response jobs year-over-year, which was partially offset by a reduction in landfill tons. And again, we are just slightly down on a year-over-year basis, but we saw sequential improvement each of the month throughout the second quarter. And we're optimistic, and again, we project that we're going to grow from a top line perspective as well as related margin expansion in the second half of the year.

And then on the volume side, I think this year's residential volume trends reflected the loss of a few larger residential contracts that you called out last quarter. How are you thinking about volume trends beyond 2026 as you lap those contracts? Is low to mid-single-digit volume declines is the right framework over the medium term? Or is there a path towards stabilization in residential?

Yes. Maybe I think start with market. We're coming out of a period of nearly 4 years of negative growth in Recycling & Waste. That's really been driven by industrial and construction or lack thereof in terms of activity. And I think we're now in a market that's sequentially improving. I would think of it more flat with encouraging signs month-over-month. And in that context, we're obviously losing a little bit of share in residential, and we're gaining some share in industrial and small container, which will take all day long if we can make that mix change.

You'll see residential, the rate of decline certainly start to narrow as we get into '27. And listen, we don't aspire to lose or shrink in that category, but we're always going to take price over volume, and we're going to continue to get a fair return on the hard work that our people do and the assets we invest. And if we need to continue to slightly prune in order to find more value there, we're going to do it.

Next question will come from Sabahat Khan with RBC Capital Markets.

Great. Maybe hoping to get some additional color on the commentary on the increased use of AI. I guess, based on the learning so far, have you been pointing into direction of locate these customers that you previously weren't pushing on price, but you can. Or is it kind of same customer as higher magnitude? Maybe what are the learnings? And how much more runway do you think there is on that front?

Yes. I think AI is going to transform us broadly across the business, and we're using -- experimenting with it, I'd say, almost everywhere. We talked about the 3 major areas that we're going deep, and there's a few other ones that we'll add to the list over time in terms of investing at scale across the enterprise.

On pricing specifically, it's understanding the specific price that you want to give to a customer that both maximizes value in the short term but also the long term, right? So you could price more, but then if you're going to drive defection, that's not a very good long-term trade-off. And so this now takes in dozens of variables about the customer, and each customer has their own fingerprint in terms of the service history and background and size and scale and location. And so we're able to put all of those variables in to really get a precise optimized price that maximizes long-term value. We've always done analytics, but this is totally, as an order of magnitude, different level of sophistication.

Great. And then just a second one on M&A. It sounds like about $1 billion and change for this year. Is this a pipeline that's building up? Or you think it could kind of seep into next year and next year could also be an outsized year? Or most of these closing this year or these transactions closing this year maybe not as much momentum into next year? Any color there?

Yes. The pipeline is certainly strong and how many of those things closed in the back half of the year versus push into the first part of next year, we'll expect to have another strong year next year. We'll probably give a relatively conservative guide because I never want the team to chase an M&A number because you can easily hit that and not get the returns that we expect. But everything we see going forward, that pipeline looks strong and continues to build both in the short and the medium term.

The next question will come from Bryan Burgmeier with Citi.

Maybe just following up on Tyler's question on the revision to 2026 EBITDA guidance. Are there any changes to your underlying assumptions for the core solid waste business, specifically just thinking about volume or cost inflation for some key buckets?

I would say, look, the components of organic growth, the price, the volume and then obviously, the related inflationary costs are all coming relatively in line with our initial expectations. So most of the update to the guide, again, was due to, as I mentioned earlier, those -- the increase in fuel recovery fees, due to just increased diesel costs, the incremental acquisitions. So we came into the year thinking we got about 70 basis points of contribution to top line growth due to both rollover as well as the in-year deals. Now that's 100 as well as the increase in commodity prices moving from $115 per ton to $135.

Got it. Got it. Really appreciate that detail. And then maybe just on the kind of margin outlook or the margin cadence that you described for the second half of the year, waste and recycling margins were up like 40 bps in 2Q, and then I guess commodities will maybe be more helpful in 3Q. But it sounds like you're maybe expecting flattish kind of year-over-year, so just help us kind of frame that or maybe some headwinds I might not be thinking of.

Yes, we still have the continuation of the landfill event volumes in the prior year. So that's about a 40 basis point headwind. We also, just because of the timing of the acquisitions themselves, when we look at the integration costs that we expect to incur, most of that's going to happen in the third and fourth quarter, which is a headwind. But again, when you take a look at the overall performance, we expect the underlying business to continue to remain strong and the margin expansion in the underlying business such that when you take a look at what we expect for the full year, we're looking at 60 to 70 basis points of margin expansion in the underlying business.

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

I wanted to follow up on volumes because some of your peers in the waste space have talked about their changing views around volumes and kind of talked about maybe fuel surcharges impacting some volumes. So it sounds like you're not changing your view on that and not seeing anything different. And I'm just curious if you have a perspective on why that might be? And what's your interpretation is of what's going on around -- from a macro perspective on volumes?

Yes. I think the -- look, I talked about this. This has been a negative market recycling waste for almost 4 years, driven by construction and industrial activity was changing. As I'd say, commercial construction, we're starting to see slight rebound. I'd still say it's depressed overall but slight rebound. Residential construction is still very challenged. And on the industrial activity, that's where you're starting to see more momentum. And you can see that with the PMI prints that are over 50 for the last 5 months and starting to accelerate, and we just see that with service changes with our large container customers. So that's where we're seeing some volume lift.

So special waste, take out the comp from last year on the wildfire, and that looks good. It's a market that is slightly improving. I think there's still plenty of caution from geopolitical environment with oil prices and other things. So where we have a positive outlook, but we're still waiting and seeing for this economy, I would say, fully fired.

Okay. Makes sense. And then just to clarify on the guidance change. is the incremental M&A that's in the guide, is that for the $1.2 billion? Or I think it's $860 million that's closed so far. So could you just confirm that it's only what's closed so far?

And then secondly, I think you said that the fuel surcharge that was included in the guide is only through July. And I'm assuming that these -- like that represents some upside to revenues and possibly EBITDA because I think diesel prices are still ahead of last year. So just those 2 quick clarifying things.

Yes, you are correct. So on the fuel recovery fees, we took what we knew through the month of July, right? So fuel prices have been highly volatile. So we didn't want to assume that they would remain elevated than to just have them come down, and now you're talking about a revenue change because of that assumption. So we took August through the end of the year back to our original assumption, which was just below $4 a gallon from a cost per gallon perspective on diesel. And I'm sorry, on your first question...

Yes. That was just the confirmation of the M&A because I think you're saying you're expecting $1.2 billion of M&A. So I just want to make sure that, that entire EBITDA impact of that is not in the guide. That's just what's closed so far.

Yes. So through today, we've closed just shy of $1.2 billion of investment in acquisitions, all of which is included in the guidance for the full year.

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

I wanted to ask on pricing. Core price stepped down a little bit this quarter. Just wanted to know your thoughts on how you see that trending through the rest of the year. And then maybe also a sort of a follow-up on pricing. Like if you think about you're doing AI initiatives to sort of optimize your pricing, and I imagine that others are as well, like how do you think that, that changes like the industry's pricing dynamics in the long term? Like do you sort of have even more stickiness and things like that because everyone's sort of charging the optimal price for the business that's maybe geographically advantaged, et cetera?

Yes. If you think about pricing over time, fuel skyrocketed, and that becomes a meaningful portion of our customers' bills. So this is where AI helps us to think about the optimization of that and making sure we're playing a long-term game. So probably went out with balancing for a couple of months, a little less gross price than it would have in an environment I don't see the pricing environment changing broadly, which is we're pricing ahead of our cost structure. I think even in a challenged industry period, I think industry conduct around should structure around price, right, has maintained pretty good discipline for my seat in the park, and now you see units starting to come back, that will be very positive.

And then with respect to AI, I think this is true of almost any AI investment. It's almost always a scale investment. And so when you do routing, whether you roll that across 100 routes, 1,000 routes or 10,000 routes, you've got to do the same underlying work. Same thing with customers, whether you do that across 2,000 customers or 2 million customers, you've got to do the same underlying work. So I think it will favor scale players who are able to invest in these tools.

And on the core price, we would expect it to stay near what we posted here in the second quarter, so in a range, call it [ 6 2 to 6 4 ] in that ZIP code.

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

This is Melissa on for Trevor Romeo. Maybe just turning to Environmental Solutions. Can you guys speak to what the PFAS business is running at on a revenue dollar and year-over-year growth basis and maybe just what kind of opportunities you're seeing on the disposal waste water treatment and remediation or service side of that?

Yes. strong. I think, again, we did over $100 million last year, and we're going to exceed that number this year. Kind of we're well ahead of that pace, and we're seeing it across the full suite of our assets. So it's taking -- certainly utilizing our hazardous landfills and our water treatment capabilities, but it's also utilizing our solid waste landfills. So some of that special waste growth you see, our jobs initiated through our Environmental Solutions team that are actually flowing through the recycling and waste P&L. And that's one of our advantages given that we have a broad set of offerings for clients that different levels of PFAS require different solutions. And for low levels, a subtitle landfill is the most cost-effective solution. And so we're taking advantage of that.

And we think that pipeline is building. And so we would expect to comfortably beat our number again next year.

Great. And then maybe just a quick follow-up on that end as well on the reshoring trend. I realize this could be a multiyear opportunity, but are you seeing any tangible near-term lift with clients that are building out their presence in the U.S.?

Yes, we're starting to see that with some construction projects. I think it's mostly been -- first, it was talk and policy and now than it was planning, and I think we're now starting to see shovels in ground, and that will be good for us on both sides of the business. Certainly, in that construction activity, whether it's remediating, the dirt to prepare the construction side or the construction process itself and then the ongoing service of those facilities across a range of end markets in the manufacturing space will be good, and we'll -- that will be, I think, a tailwind for this business for 5-plus years.

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

Maybe just to start on the pricing discussion. The spread between open market pricing and restricted pricing this quarter was perhaps one of the smallest we have seen, I think, in the last many years, what are you seeing in terms of competitive dynamics? And is there anything specific to like macro fuel that's influencing that?

Yes. Some of this is just the -- that's a natural effect of a declining inflationary environment, which we've seen over the last year, obviously, spiking because of oil in the last couple of months, but there's typically a 12-month lag between when inflation or CPI would print and then when you see that in the restricted business. And then the open market, we think about pricing relative to that context overall. So that's why we talked about gross prices coming down, but our cost structure is also coming down, so we're maintaining that spread over time.

And then in terms of price activity in markets, there are a handful of markets where you see low-cost players come in and try to build up a book of revenue almost exclusively to sell that over time. And that's distracting in a handful of markets, but that's really been true for the last 30 years in this business. And we do a good job of fiercely defending and making good price volume decisions there over time.

Those players who then don't end up transacting pretty quickly figure out that their set of assumptions around cost of service higher than they expected, and those decisions oftentimes are not very profitable in the end.

Okay. Understood. And if I can follow up on the RNG business, BP is looking to sell the Archer Energy business they have. You guys have some good relationships with them, I guess. Do you anticipate any changes as part of the sale process with the future owners? Obviously, you don't know who that could be. But like what are some of the kind of guardrails in your contracts with them, which can protect you in terms of any changes potentially that may happen?

Yes. We feel very comfortable. That business is very well contracted. So we will have a seat in the table in that process, and we'll be assured that our contract rights are going to live going forward with whoever they transact that business to.

The next question will come from Jerry Revich with Wells Fargo.

I'm wondering if you could just talk about Environmental Services. So nice to see the sequential margin improvement. Can you just update us on how you're thinking about the margin opportunity on a multiyear basis. At 1 point, I think we were talking about margins potentially in the high 20s as being feasible. Is that off the table at this point? Or what are the significant opportunities and the levers that you could pull to drive margin upside here over time and what's a reasonable expectation?

Yes. That long-term aspiration certainly hasn't changed. We've got to operate in a broader context and market, so we're going to make the right price volume trade-offs and we talked about probably didn't get it perfect as demand dropped at the end of '24 and into '25. We probably -- we're pursuing price more aggressively than we would have in retrospect.

I think as we go forward and build from here, you'll see us, I think, ahead of our enterprise 30 to 50 basis points of margin expansion to talk about a year but you'll see Environmental Solutions expand at a faster pace than that. Exactly how fast? I think it will be a little bit dictated by both competitive environment but also the demand environment, right? And if industrial activity really starts to take another step up here, I think that will be very good for margin performance as well as growth.

And Jon, in terms of just to shift the conversation to the AI opportunities, you had sized that as $100 million 3 months ago. Can you just talk about has that estimate changed at all? And how are you thinking about the cadence, the 30 to 50 basis points of margin expansion? Could we be ahead of that in 2027 because of potential AI benefits?

Yes. I don't think we'll be ahead of it in 2027. Over the long term, we certainly could. I think what we've learned both in pricing and in routing have confirmed our assumptions that, that $100 million is on the table. The exact pace of rollout, I think, will certainly be trending toward that number in the end of 2027. The exact pace which we get it, we're going to make sure we get it and we stick it, right, not make it an event, but make it an ongoing capability. And the tool part I don't worry about. It's -- for routing, for example, you've got to get drivers to drive a different route that's optimized. And that change is easier said than done. You don't send out a memo and make that happen. You've got to work site-by-site, and that's leadership opportunity that I'm confident we'll capture, but that will take us a little bit of time to make sure it's durable.

The next question will come from Seth Weber with BNP Paribas.

Just another -- sorry, another look back on the ES business. The margin -- the kind of the flattish revenue and lower margin. I just want to confirm that that's really just a mix issue and not -- there's nothing weird going on with pricing. You feel like pricing in ES has kind of stabilized or settled out in a good spot here. Is that fair, accurate?

Yes, very much. And this is kind of how we forecast and talked about it, that we would see this leveling out in the second quarter, and that would be a base to build from. And this pipeline, some things happen right away like ER, but most of these things, you get a longer sales pipeline. So we can see into the fact that we'll have momentum into the second half, just like we saw in the back half of last year, what the results will be in the first half of this year.

Got it. Okay. And then just on free cash flow, if my math is right, it looks like free cash conversion goes a lot lower in the second half. Is that just a timing issue relative some stuff got pulled into the first half or something or perhaps my math is wrong. But it looks like free cash conversion goes lower.

Yes. It's the normal seasonality of the business. And if you take a look at [ 2 ] years or somewhat like we paid proportionately less cash taxes in the first half of the year, and our CapEx tends to be more back-end loaded. So this is consistent with what you've seen in prior periods, and it's right on top of our plan.

The next question will come from Will Grippin with Barclays.

Wanted to just come back to your fuel recovery fee assumptions in the second half. It sounds like you're assuming, I think you said $4 diesel and kind of a neutral EBITDA impact. I would have thought just based on your disclosed sensitivity and assuming diesel is either stable from here or perhaps coming down a bit, that we should see actually a net margin uplift in the second half. Is that correct? And are you sort of just being conservative here? Or what am I missing in that?

Yes. So that sensitivity was the fuel recovery fees, and it was the direct impact of diesel fuel. We've talked about this, I talked about in the last quarter. There are other costs that we incur, transportation surcharges and other indirect expense charges that we get as well as from an overall cash perspective, increased CapEx when you've got the increased oil prices for landfill liner, for example.

So we try and recover from a comprehensive or a holistic perspective, the cash impact of changes in diesel prices. And so we've expanded and you'll see when you see the 10-Q, expanded to include some of those other cost increases so that you get to a relatively neutral EBITDA impact from changes in diesel prices.

Okay. But there wouldn't be any sort of like margin catch-up or anything because you have a lagged effect in the first half, so it goes down.

Yes. So you do see that. There is a lag, right? So again, we actually wound up having a net negative from a net fuel perspective in the first quarter. As you saw, diesel prices rise in the month of March, and we didn't start recovering those costs until April. So if you see fuel costs come down precipitously in the second half of the year, we could get that back. But it's really just a timing issue. It's not something that's sustained.

Okay. And last one for me. But within the ES business, I would be curious to hear what you've been seeing in terms of recent emergency response trends. We've been hearing that this year has maybe been historically low, sort of below baseline levels for emergency response activity. Is that consistent with what you've been seeing?

It was pretty slow for us last year, actually. And I'd say it's slightly on the pickup this year, but versus historic norm, yes. If you think about many years, there's kind of large big jobs you can point to across a number of different providers. And we're just not seeing that level of kind of transformational type or big jobs that you would call out.

The next question will come from David Manthey with Baird.

What was the approximate annual revenue run rate of acquisitions that you completed in the first quarter and then the same for the second quarter?

Yes, we're not -- so in total, if you just take a look at what we -- what we guided to through the acquisitions completed in the first quarter, was that 70 basis points contribution. Again, that was a combination of rollover as well as in year. If you take a look at what we just added in the second quarter, it was basically an additional 30 basis points of contribution to the top line.

Okay. But does that take you to the $1 billion? Or does that take you higher than the $1 billion?

That takes you to about the $1 billion. One of the deals that we include that we closed on here most recently, was something where we already had a 50% ownership interest in. So as we complete that deal, when you see that flow through, we were already consolidating that entity. So there's no incremental revenue, but there will be incremental EBITDA.

Okay. I see. And then second, you've kind of framed the second and third quarter EBITDA margin as flat with all of the expense coming in the fourth quarter. It looks like it will be -- should be 50 or 70 basis points depending on the range of the guidance. But could you tell us just how much of that is already locked in because of the normalizing comps and the actions you've already taken and maybe some of the lagging CPI price benefits versus what's dependent on future actions and future demand?

Well, I think you have take into consideration what's already happened through the first half of the year. So we had 50 basis points of margin expansion in the first quarter, relatively flat in the second. So year-to-date, you're at plus, call it, 25. If you're flat in the third quarter, then that kind of squeezed out what you need in the fourth quarter to get to the overall year, which we're saying is in the 10 basis point ZIP code. So not the entire year's worth of margin expansion isn't coming in the fourth quarter. Some of it already came in the first.

The next question will come from Shlomo Rosenbaum with Stifel.

I just want to probe a little bit more about the pipeline of activity that you're seeing in ES and the nature of it. You said you have pretty good visibility. Can you just give us a little later deeper into what's building, where you're winning? How much is kind of you're winning versus the overall market just getting a little bit better? And then I have one follow-up.

Yes. I think it's across end markets. Obviously, anything manufacturing related, it's probably about half of that business probably to find oil and gas and semiconductors and a range of different industries there. Listen, our strongest value proposition is going to be an integrated offering where we can bring to bear field services, hazardous waste, landfills, solid waste landfills, water remediation, even hazardous liquids. We've got great partnerships on incineration. So the more complex and broad the job is, the more competitive we're going to be versus a single oil spill is going to be a pretty competitive environment where we're going to be less competitive in that space. So I'd say it's -- the pipeline is robust. It's not hanging on a single job or a single opportunity. It's broad-based geographically and across end markets.

Okay. Great. And then could you talk -- did anything change in terms of your expectations for incremental revenue and EBITDA from both the polymer centers and RNG for the year?

No, it's consistent with what we originally guided to. So this year, when you take a look at our entire sustainability portfolio, we're expecting about $40 million of incremental revenue with about $20 million of incremental EBITDA.

The next question will come from Kevin Chiang with CIBC.

Just 2 -- maybe 2 clarification questions. Just back to ES, if I look at the sequential improvement in revenue and EBITDA, we saw about a 28% incremental margin lift. Is that kind of the right way to think about the back half incremental margins as you return to growth on the top line there?

Yes. I mean I think when you think on the increment, you're in the ZIP code there of what we would expect to see on those incremental revenues, in part, when you think about the mix. So as we get some more of the waste solutions, which is that post collection centric type volumes, they tend to carry a relatively higher margin but also just eating into some of the capacity we have on the field and industrial services side.

Okay. That's helpful. And just you mentioned 1 of the acquisitions you made was a 50% ownership. Does that impact the equity investment line at all in the income statement? I just missed how that was being accounted for before.

No, we were consolidating it, so we had the revenue and then we were basically paying out the 50% interest through subcontract costs. Basically, we'll eliminate that subcontract cost line item.

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

I actually -- on that subcontractor cost, I was actually looking at that line item and your components of OpEx, and it looked like that jumped more than usual. Usually, there's a seasonal jump in the second quarter, but this looked like it was more than usual. And I was wondering if that was due to fuel, indirect fuel expenses and if there's an opportunity that, that could come down in the second half or whenever fuel prices decline.

Yes, a lot of that would be the increase in fuel, and we have -- they have fuel recovery mechanisms that we negotiate with them just like we have in our contracts. And that to Brian's comment earlier, we've got a pretty good overall hedge. There's a little bit of lag and drag as fuel moves up and down. But when you think about direct fuel costs and then those indirect fuel costs, we feel pretty good about being covered across different fuel prices.

Okay. And then you -- I think you said you have 250 EV trucks. You've been running these for several quarters now. Just curious to hear how has the performance been? What are the pros and cons? I mean we know that the capacity of those trucks are somewhat limited by -- with all the batteries but maybe at a time like now when fuel prices are high, maybe that's helping you out. So just sort of broad based over the past couple of years, how happy are you with those? And any color there would be appreciated.

Yes. The performance is exceeding our expectations. So obviously, some flowing curve when you get the first ones off the line of the factory, but that's true of any new vehicle. That's not -- doesn't have anything to do with the powertrain. The battery performance and uptime and things have been really, again, exceeding our expectations. And in terms of capacity, that's true largely when you retrofit a diesel truck. That's where you get too much weight with a battery, and you start to take down payload and really limit the routes that, that truck can cover. When you have a truck that design studs up as an EV, that allows you to take out enough weight out of the vehicle where you're not sacrificing a lot of payload.

The next question will come from Tobey Sommer with Truist.

[ Henry ] on for Toby here. Maybe just to start with a quick. You add up some of the pieces, but maybe I missed, but anything on the pricing side, incremental improvement expectations there that drove part of the guidance increase?

No. The -- when you look at the components of the increase in revenue, again, the $150 million at the midpoint, approximately 1%, exclusively driven by increased fuel recovery fees due to the change in diesel prices, the incremental acquisitions for deals closed to date and then the increase in commodity prices. The combination of both price and volume are in line with our initial expectations.

Understood. And then thinking about CapEx for next year, how are you, I guess, thinking about that relative to this year, maybe some of the sustainability investments come in? And then maybe more specific around those for the longer term, if you can kind of lay out how you think about that on a multiyear basis.

I would say, relatively consistent as a percent of revenue of what you're seeing in 2026.

The next question will come from Stephanie Moore with Jefferies.

Actually, that's a segue into -- that's a good segue into what I want to talk about. Maybe taking again a longer-term view. I mean, I think over the last couple of years, you've built a pretty nice sustainability portfolio across RNG, in plastics. And so 2 parts. I wanted to get an update on just the returns of those investments, how they're trending as they stand today. But also, I think more importantly, are there any other areas within sustainability or even outside sustainability that might be outside of your core business now that you're kind of exploring, investing in, again, over the medium to long term? So a higher level question there.

Yes. Look, we've been really happy with the demand side of the polymer centers and that we could sell each of those out 3 or 4 times over, and we're largely exceeding our pricing assumptions. We have the supply, and so that was a strategic advantage and one of the reasons we got into it.

From a learning standpoint, we're probably too optimistic on the timing in terms of how we could get to full capacity. Now the good side is that when we hit full capacity, we're above our nameplate capacity. So we had originally talked about 4 polymer centers. We think we'd probably get there with 3 in the short to medium term just because we're getting more capacity out of those when they're running at full steam. So we're excited about that over time.

In terms of where we go to next is anything that goes into a landfill, we're going to challenge. We would landfill ultimately is the cost, and we would rather take volume out of that and get a second life on the second revenue stream for that. And that allows us to extend the life of landfills, which in many urban areas, we're running out of airspace and the industry is. So parts of New England and coastal California and other places, if you can get an extra 5, 6, 7, 10 years in those landfills, that's enormously valuable while getting a second revenue stream. So organic material, flexible packaging, those are all things that we're taking a look at. And we'll make sure that both is going to be environmentally sustainable, but economically sustainable. It's got to have a return for us to invest.

The next question will come from Noah Kaye with Oppenheimer.

Sorry, it's getting a little bit more fine with the points on the modeling here, but for our models for the back half, you mentioned that the total price volume outlook hasn't changed. Any moving parts within that? I mean could volumes be a little bit worse, pricing a little bit better? Because obviously, we're going to have still an overhang on volumes from a comp perspective here in 3Q, but just trying to get a little bit more granular if possible.

I would say only on the margin and what you see is, if you're going to grow, you're going to take on new units that are below your portfolio average. And so nominally, that would put lower pressure on yields. So we'll probably end up more toward the lower side of our yield guidance because we're doing slightly better on volumes.

Same thing with service increases, right? You're going to see service increases come in at a slightly lower rate, which again puts downward pressure on yield. But those are all additional activities, which are good for the business overall, and that's why you see the margin being strong because we still got a good overall price cost spread.

Helpful. And then there's been a lot of questions asked about ES today. And I kind of want to pull back for a minute and just ask you about how the business has performed over a longer period of time. And we're about 4 years into integrating U.S. ecology. And just curious where you'd assess the business is at now versus the deal model. And if you think about kind of controllable levels of improvement beyond just the macro, what sort of remains as clear opportunity?

Yes. We're more excited about that business today than we were when we purchased U.S. Ecology 4 years ago, and we've substantially exceeded the pro forma and driven really good returns for our shareholders there. I think we probably underestimated the challenge of integration of some legacy assets that both we had as well as legacy U.S. Ecology had and getting the systems and tools and processes put together. And we're playing a long game, so we're going to make the right decision for the long term, even if that sacrifices some short-term performance.

We haven't gotten it always perfect in the commercial side in terms of price volume, but I think that team keeps learning and growing. And on balance, if you look at the progress, you're taking a business that had in the 14%, 15% EBITDA margin and made substantial improvement. And I think that improvement going forward won't be a straight line. Nothing that you're building ever is going to be perfect. It's not a mature business yet, but the upward path is to the up and to the right on the margin standpoint and again, we're very excited about both the top and bottom line prospects of that business.

The next question will come from Connor Cerniglia with Bernstein.

You all highlighted AI-driven benefits in pricing and routing. There was a recent industry headline about automated AI-enabled systems being deployed at landfills. Can you talk about whether or not you've evaluated these technologies yet? And any early views on how landfill automation could impact your operations over time?

I think automation and AI will impact everything we do. I expect that to matriculate, it already is, matriculate into our vehicles and into our heavy equipment. I think the idea of getting to autonomy at scale, a truck driving down the road or operating at a landfill truly autonomous. You could do it. I'm not sure that there's going to be substantial cost savings because, in the end, somebody is likely going to be programming or driving that. So you're not going to see a huge labor arbitrage in that part of the business.

But if you look at other parts of the business in recycling centers, the more technology we put in, I mean, we have a fraction of the employees that we did a decade ago in many of our recycling centers through robots and automation. And so I think that we'll continue to invest and grow there.

But automation, just like everything else we do has got to have a return, right? We've got to make sure that we're solving a problem and not just automating for automation's sake.

And then maybe switching to residential. You mentioned residential volumes should improve sequentially from here. Can you maybe just refine the trajectory of the volume recovery? It seems like volumes maybe continue in the, call it, down 3% to 4% range before you lap the large contracts in Q1 of next year and then maybe you see volumes kind of closer down to 1%, 2%. Is that the right way to think about the trajectory or maybe a bit too specific. Any commentary there would be helpful.

Yes, we would expect sequential improvement in the volume performance, still negative, but in the, call it, 3% to 3.5% range in the second half of the year. And then that moving in '27 at this point, probably still down circa 2% based on what we expect right now. But as we've talked about, the other lines of business, small container, permanent large container, the landfill MSW, we're seeing those improve, which will -- again, when you take a look at the total volume performance, we would expect total company volume performance to sequentially improve quarter-on-quarter from here on out.

The next question will come from Tami Zakaria with JPMorgan.

One question for today. New York is proposing that landfills [indiscernible] for PFAS before discharging to waterways. I think the public comments here is open. Do you plan to provide comments? And more broadly, are you planning or preparing in terms of maybe changes your operations strategy should something like this go into effect?

Yes. Obviously, there's been a lot of dialogue at both the federal and state level about PFAS, and we are very active and engaged in those conversations. We're not opposed to regulation, but it's got to be sensible regulation. And what we are opposed to is blaming a landfill for all the inbound volume that contains PFAS. PFAS is pervasive. And so it shows up in every landfill because it's in all types of waste streams. And penalizing the landfill, we think, is the wrong solution. We're actually the right point to remediate that because we're capturing that leachate and we're able to treat it in many cases, pretreat it, in some cases, discharge it and work with our utility partners at the local level to make sure that we have the right solutions.

So I'd say it's something we get -- we're mindful of. We're in state capitals, we're in federal capital, but it isn't something, I think, is a fundamental risk to the business. We will manage through this just like all the regulation the industry has done in the past.

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, Nick. As we close today's call, I want to thank the entire Republic Services team. Their dedication to our customers and communities continues to strengthen our business and differentiate Republic in the marketplace. I'm proud of what we've accomplished in the first half of the year and confident in our ability to build on this momentum as we continue creating long-term value for our customers, employees 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 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.