Republic Services Outsizes Revenue Growth in Q3, Plans More than $1 Billion in Acquisitions

As the last quarter of the year arrives, Republic Services (NYSE: RSG) reported its Q3 results, noting its highest level of investment in acquisitions in more than a decade.

This coincides with the waste industry's appetite for merger and acquisition activity as volumes rise and reopening activity continues. Republic Services has added $922 million in acquisitions so far in 2021, or $876 million net of divestitures.

Jon Vander Ark, president and CEO, told investors that the company's acquisition pipeline "remains robust, with broad-based opportunities in the recycling and solid waste business and in our environmental solutions business."

Republic Services expects to invest more than $1 billion in acquisitions by the end of 2021. Vander Ark mentioned the company's acquisition of New Jersey-based ACV Enviro, which was completed in August 2021, as a move that " broadens our capabilities and offerings in the environmental services industry. It also provides us with a platform to pursue additional growth."

The company's core price remained at a high of 5.2 percent. Revenue growth from average yield increased 3.2 percent. Volumes also grew 4.3 year over year (YOY). Acquisitions added 350 basis points to total revenue growth.

Technology investments have added to Republic's drive for exceeding customer expectations. 

During Q3, Republic Services moved to the next phase of its RISE platform. Nearly 70 percent of the company's large and small container fleets now utilize tablets, with an expectation to roll out the equipment to all fleets by the end of the year. Vander Ark said the company plans to further deploy technology upgrades to its residential fleet in 2022.

Landfill gas-to-energy partnership opportunities continue to rise for Republic Services. The company has 17 projects in the pipeline with hints at more activity in the future. 

"On top of the royalty revenue these plans will generate a majority of equity investment opportunities to further participate in the project economics," Vander Ark indicated.

On the solar front, Republic's solar project located on a closed landfill in Bellevue, Ill comprises 30,000 solar panels that will power 2,200 households annually. 

As part of the company's 2030 sustainability goals, Republic opened its first solar-powered compost facility in the San Diego area to enhance the organic processing capabilities of residents and businesses.

Republic raised its full-year adjusted diluted EPS guidance to $4.10 to $4.13 and its full-year adjusted free cash flow guidance to $1.475 billion to $1.5 billion.

"We are expecting the positive momentum in our business to continue to produce profitable growth in 2022," Vander Ark said during the earnings call. "At this point, we anticipate producing above-average revenue growth, leading to high single-digit adjusted free cash flow growth compared to our full year 2021 performance."

Third-Quarter 2021 Highlights:

Revenue: $2.9 billion, up from $2.57 billion in Q3 2020.
Net Income: $350 million up from $260 million in Q3 2020.
Adjusted EBITDA Margin: 30.4 percent of revenue, a 10-basis point increase from 2020. 90 basis point increase for recycled commodity prices.
Adjusted Earnings Per Share: $1.11 up from $1, or 11 percent, in Q3 2020
Adjusted Free Cash Flow: $1.4 billion up from $1.1 billion, or 22 percent, in Q3 2020
Cash Provided By Operating Activities: $2.1 billion, up from $1.909 billion, an increase of 12 percent versus the prior year.
Average Recycled Commodity Price Per Ton: $230, up $131 ton from the previous year.