Republic Services Delivers 21 Percent Revenue Boost in Q1 2023

Phoenix-based Republic Services (NYSE: RSG) delivered 21 percent revenue growth in Q1 2023, touting a strong acquisition strategy and investment in its environmental solutions segment.

CEO and President Jon Vander Ark reported acquisitions comprised 11 percent of the growth, generating $496 million in adjusted free cash flow.

"We continue to believe that investing in acquisitions is the best use of free cash flow to create long-term value," he told investors.

Republic Services added $224 million in M&Q activity in Q1 2023 in the recycling and solid waste sectors. Vander Ark said the company sees an additional $500 million in acquisitions through 2023.

"We have a really attractive pipeline, both in recycling and solid waste and environmental solution," he stated. "I think you'll see some of those deals come across through the remainder of the year, and we get things are at different stages. We're all the way in the front end of conversations to the back end of letters of intent, and we report on things once we sign and close those deals. So you'll hear more in the second quarter. And the exact timing of where that flows between Q2, Q3 and Q4, obviously, we don't predict that because things can people forward or they can move out a few months here or there. The pipeline remains strong. I think both for '23 and all the way into '24 at this point."

Pricing overrode cost inflation and subsequently contributed to underlying margin expansion. Vander Ark said the company expects this to continue in the first half of 2023.

"We think that sequentially comes down into the second half as some inflation starts to modulate," he explained. "In our restricted portion of our business, CPI comes down in terms of where the comps go, but we also expect cost inflation to modulate through the year. So, we think we'll have pretty good price margin spread throughout the year, which will lead to a positive result for the year."

Republic Services experienced "very little" customer turnover despite pricing fluctuations. Vander Ark noted $60 million in new sales to date with $40 million in annualized cost savings.

Recycling commodity prices reached $105 ton in Q1 2023, down from $201 per ton year over year. This contributed to a 90 basis point revenue decrease in Q1 2023. 

"Current commodity prices are approximately $115 per ton," commented CFO Brian DelGhiaccio. "We believe that commodity prices will continue to recover in the second half of the year as the global supply/demand imbalance continues to correct.

Vander Ark and DelGhiaccio further commented on the company's Environmental Solutions line of business, which saw $309 million in revenue growth from Q1 2022. This was largely driven by the acquisition of US Ecology. The segment contributed 50 basis points to internal growth.

"Adjusted EBITDA margin for the Environmental Solutions business was 20.6 percent, a sequential increase of 350 basis points," DelFhiaccio reported. "Total company adjusted EBITDA margin for the first quarter was 29 percent."

Q1 2023 Highlights:

Revenue: $3.581 billion
Operating Income: $644 million
Net Income: $383.9 million
Adjusted Net Income: 
Adjusted EBITDA: $1.04 billion
Core Price: 8.2 Percent