NYSE:RSG Republic Services Q1 2023 Earnings Report $243.96 +3.20 (+1.33%) Closing price 03:59 PM EasternExtended Trading$235.30 -8.66 (-3.55%) As of 07:41 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Republic Services EPS ResultsActual EPS$1.24Consensus EPS $1.13Beat/MissBeat by +$0.11One Year Ago EPS$1.14Republic Services Revenue ResultsActual Revenue$3.58 billionExpected Revenue$3.43 billionBeat/MissBeat by +$153.67 millionYoY Revenue Growth+20.60%Republic Services Announcement DetailsQuarterQ1 2023Date4/27/2023TimeAfter Market ClosesConference Call DateThursday, April 27, 2023Conference Call Time5:00PM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by Republic Services Q1 2023 Earnings Call TranscriptProvided by QuartrApril 27, 2023 ShareLink copied to clipboard.There are 14 speakers on the call. Operator00:00:00Afternoon, and welcome to the Republic Services First Quarter 2023 Investor Conference Call. Republic Services is traded on the New York Stock Exchange under the symbol RSG. All participants in After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Aaron Evans, Vice President of Investor Relations. Operator00:00:43Please go ahead, sir. Speaker 100:00:46I would like to welcome everyone Public Services' Q1 2023 conference call. John Vander Aark, our CEO and Brian Delgaccio, Our CFO for joining me as we discuss our performance. I would like to take a moment to remind everyone that some of the information we Discussed on today's call contains forward looking statements, which involve risks and uncertainties and may be materially different from our 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. Speaker 100:01:22If in the future, you listen to a rebroadcast or rerecording Of this conference call, you should be sensitive to the date of the original call, which is April 27, 2023. 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. I want to point out that 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. I want to remind you that Republic's management team routinely participates in investor conferences. Speaker 100:02:08When events are scheduled, the dates, Times and presentations are posted on our website. With that, I would like to turn the call over to John. Speaker 200:02:18Thanks, Erin. Good afternoon, everyone, and thank you for joining us. We started the year strong and are pleased with our Q1 results. Our performance reflects our ability to grow across our business, while enhancing profitability. We remain well positioned to capitalize on additional growth opportunities in the including 11% from acquisitions, generated adjusted earnings per share of $1.24 and produced $496,000,000 Speaker 300:02:57of adjusted free cash flow. Speaker 200:02:59We continue to believe that investing in acquisitions is the best We invested $224,000,000 in acquisitions during the Q1. All transactions were in the recycling and solid waste space. Our acquisition pipeline remains supportive of outsized levels of activity in both the Recycling and Sound Waste and Environmental Solutions businesses. We continue to see opportunity for well over $500,000,000 investment in value creating acquisitions in 2023. We are making great progress on the integration of U. Speaker 200:03:36S. On the valuable services we provide. The acceptance of our pricing actions remains high with very little customer defection. Cross selling our complete set of products and services continues to run ahead of plan with more than $60,000,000 in new sales to date. We have now achieved over $40,000,000 of annualized cost synergies. Speaker 200:04:08As a result of the actions taken in the Environmental Solutions business, EBITDA margin improved to just over 20% during the Q1. We continue to generate outsized growth by executing our strategy supported by our differentiating capabilities, customer zeal, digital and sustainability. Regarding customer zeal, we remain laser focused on providing a world class customer experience to drive increased loyalty and organic growth. Our customer retention rate remained at 94%. We continue to see positive trends in our Net Promoter Score supported by improved service delivery. Speaker 200:04:49Our frontline colleagues, including drivers, technicians and the customer experience team are determined to fulfill our daily commitments to our customers. We delivered robust organic revenue growth during the quarter and simultaneously increased in both price and volume. Floor price and related revenue increased to 9.3% An average yield on related revenue increased to 7.4%. Organic volume growth on related revenue was 1.8%. Volume growth was broad based across our market verticals and geographies. Speaker 200:05:27Turning to digital. We continue to make progress on deploying Ryze Tablets in our collection business. Over 75% of our residential routes are operating with Ryze Tablets. The remaining routes are on track to be completed by mid year. This technology is the foundation that will allow us to further enhance our digital service offerings and improve our customers' experience. Speaker 200:05:50Moving on to sustainability. We are investing in differentiated capabilities to leverage sustainability as a platform for profitable growth. In February, we announced our plans to significantly scale Our electric fleet through our long term agreement with Oshkosh. We will begin operating 2 fully integrated electric recycling and solid waste collection prototypes later this year and expect to start buying at scale in 2025. This announcement supports our industry leading commitment to fleet electrification through a multi supplier strategy. Speaker 200:06:26Development of our Polymer Centers in Las Vegas and the Midwest remain on track, with the centers becoming operational in late 2023 and late 2024 respectively. The 57 renewable natural gas projects being co developed with our partners are advancing. We expect at least 6 of these projects to commence operations this year. Our approach to sustainability includes our aspiration to be the employer of choice in the markets that we serve and we are seeing positive results. Turnover rates continue to improve and we are now below 2019 levels. Speaker 200:07:03As a result, we are better staffed to capitalize on growth opportunities in the market. We continue to be widely recognized for our comprehensive sustainability performance. For example, we were recently named to Barron's 100 Most Sustainable Companies List, FS Sphere's World's Most Ethical Companies List and Fortune's List of the World's Most Admired Companies. A positive momentum in our business continues to build as we harness the power of our differentiated capabilities. We will continue to invest for the future profitable growth to deliver the results that create unmistakable value for our stakeholders. Speaker 200:07:42I will now turn the call over to Brian, who will provide financial details for the quarter. Thanks, John. Core price on total revenue was 8.2%. Core price on related revenue was 9.3%, which included open market pricing of 11.7% and restricted pricing of 5.4%. The components of core price on related revenue included small container of 12.6%, Large container of 9.6 percent and residential of 8.4%. Speaker 200:08:14Average yield on total revenue was 6.5%. Average yield on related revenue was 7.4%, an increase of 70 basis points when compared to our 4th quarter performance. We continue to price new and existing business ahead of cost inflation to drive margin expansion in the underlying business. Volume on total revenue increased 1.6%, while volume on related revenue increased 1.8%. The components of volume on related revenue included an increase in small container of 1.6%, an increase in large container of 80 basis points and an increase in landfill of 8.6%. Speaker 200:08:53Landfill was primarily driven by a 21.7% increase in special waste revenue. Moving on to recycling. Commodity prices were $105 per ton in the quarter. This compared to $201 per ton in the prior year. Recycling processing and commodity sales decreased revenue by 90 basis points during the quarter. Speaker 200:09:15Current commodity prices are approximately 100 and 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. Next, turning to our Environmental Solutions business. 1st quarter Environmental Solutions revenue increased $309,000,000 over the prior year, which primarily relates to the acquisition of U. S. Ecology. Speaker 200:09:41On a same store basis, Environmental Solutions contributed 50 basis points to internal growth During the quarter, adjusted EBITDA margin for the Environmental Solutions business was 20.6%, Sequential increase of 3 50 basis points. Total company adjusted EBITDA margin for the Q1 was 29%. This compares to 30.4% in the prior year. Margin performance during the quarter included a 130 basis point decrease from acquisitions, which includes 90 basis points related to U. S. Speaker 200:10:15Ecology, a 60 basis point decrease from recycled commodity prices and a 30 basis point decrease from an additional workday, partially offset by a 40 basis point increase from net fuel and margin expansion in the underlying business of 40 basis Adjusted free cash flow was $496,000,000 in the Q1 or approximately 25% of the midpoint of our full year guidance. Free cash flow conversion was 47.6%. Total debt was $12,100,000,000 and total liquidity was With respect to taxes, our combined tax rate and effects from solar investments resulted in an equivalent tax impact of 26.3% during the Q1, which was in line with our expectations. With that operator, I'd like to open the call to questions. Operator00:11:14Thank you. We will now begin the question and answer session. In the interest of time, we ask that you limit yourselves to one question and one follow-up question today. If your The first question comes from Toni Kaplan with Morgan Stanley. Please go ahead. Speaker 400:11:47Hi there. Thanks so much. Pricing seemed really strong this quarter. I know you talked about it sort of decelerating through the year, but Just wanted to get your latest thoughts, any additional color on pricing and how second quarter looks as well? Thanks. Speaker 200:12:06Yes, certainly a very strong environment still. We expect kind of maintain that momentum for the first half and for lots of reasons we think that A portion of our business obviously, right, 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. Speaker 400:12:38Terrific. And I wanted to ask if you could just give us an update on how you're thinking about the specialty waste opportunity, talk about any of the synergies and areas of potential future opportunity there? Thanks. Speaker 200:12:56Yes, really strong quarter for us obviously, right, over 20% and broad based and A portion of that is certainly the cross sell opportunity that I talked about in my prepared remarks and that we're offering customers a comprehensive and integrated offering. And part of that is showing up in our recycling salt waste business and going special waste into our landfill. And that's the benefit of our offering, right? We can take things into liquid hazardous waste. We can take Solid and hazardous waste, we can take special waste, so we can provide a range of solutions to customers and that's put us in a pretty differentiated position in the marketplace and Excited about the momentum that the team has. Speaker 200:13:39Yes. And also what I would add to that is that our pipeline for special waste opportunities remains very strong. And about 20% of that pipeline is a direct result of cross sell opportunities. Speaker 400:13:52Perfect. Congrats again. Speaker 200:13:54Thank you. Thank you. Operator00:13:58The next question comes from Tyler Brown with Raymond James. Please go ahead. Speaker 500:14:03Hey, good afternoon guys. Speaker 200:14:05Hey, Todd. Speaker 600:14:07Hey. So, Speaker 500:14:08I just want to be clear. So, are you effectively reiterating all the pieces of the guidance? Speaker 200:14:16Yes, we feel we're certainly Feel good about the guidance at this point. Speaker 500:14:21Okay. Okay. This wasn't totally 100% clear. But Kind of going back and following on the previous question, pricing was strong out of the gates. But can you talk a little bit about unit cost Inflation, so I think you guys guided to something like 5% to 5.5 percent unit cost inflation for 2023, I think on the last quarter call. Speaker 500:14:44You kind of still see that? Are you still seeing maybe inflation starting high and then it kind of easing as the year goes on? Speaker 200:14:54Yes, start where you ended. It's certainly starting higher and modulating throughout the course of the year. I think it's going to be a little higher than the 5.5%, right closer to 6 Would be our best look at this point right now and a few different factors on that. Certainly truck delivery would be one where we got about 90% of our trucks last year and we think we're going to get probably that 10% from last year and about 90% of this year And we're growing. So that means we're buying some older trucks or we're operating some older trucks to service those growth opportunities and they have a higher cost per engine hour. Speaker 200:15:31And so that's elevated maintenance costs, it's higher costs, not necessarily unit cost inflation on the part, for example, it's just operating more expensive vehicles. And Hopefully in 2024, the suppliers catch up, but we can kind of get back on track. So that'd be one example why it's just a little bit higher than we predicted. Speaker 500:15:49Okay. All right. That's perfect. Just my last one here. Going back to environmental services. Speaker 500:15:56So There's a lot of traction there. It seems like that franchise is maybe run rating $1,500,000,000 in total revenues. And I don't have the calculation I'm at my fingertips here, but is that kind of like a low, low 20% margin today? I think you had talked about maybe getting that to 30% longer term. So do you still see that John? Speaker 500:16:17And kind of what are the couple of the key drivers to get you there? Is it just we need to go through a couple more Cycles of pricing or just any thoughts on timing and how we go from call it 20 to circa 30? Speaker 200:16:32Yes. Listen, I think pricing is certainly going to be a huge lever in terms of how we get there and the primary lever. I think a little bit of scale benefit obviously, which allows us to leverage our overhead. We've built this thing for growth. So as we continue to grow, we get some leverage on our overhead spend in That space as well. Speaker 200:16:50And just additional integration opportunities across recycling and salt waste business, right? We haven't really taken advantage of all those things yet. And then the last one will be just cost management, right, cost discipline and making sure that we are pricing work appropriately and understanding the cost position of all that work, So that all of our individual opportunities and projects are profitable. We've made great progress on that, but there's more room in front of us. And this was the investment thesis when we did the deal, obviously. Speaker 200:17:20We did it based on intrinsic and $40,000,000 of cost synergies. We've just gotten there quicker than we expected, right? We've gotten the 40 already. I think we're going to end up closer to 50 when we're said and done. And then we thought there was upward pressure on pricing. Speaker 200:17:34We thought there was cross sell opportunity. We said we'd get $75,000,000 to $100,000,000 over 3 years. We've already gotten 60, which tells you with a good pipeline, which tells you that we're going to get to that 75 to 100 quicker than we expected. And we know that when we price or we anticipate there'll be some customer fallout churn, but the net dollars work over time. We've just seen very, very little churn, which speaks to the fact that this is a valuable offering. Speaker 200:17:59It's a very small portion of the vast majority of our customers' cost structure And that we're going to continue to price for the value we deliver. Speaker 500:18:08Yes, perfect. No, lots of momentum there. I appreciate the time guys. Thanks. Operator00:18:14The next question comes from Noah Kaye with Oppenheimer. Please go ahead. Speaker 700:18:20Good afternoon. Thanks for taking the questions. There's been maybe some mixed messages today in earnings, Previous earnings around the macro, the health of the macro. I have a feeling your answer may be not so mixed, maybe a little more Unambiguous, but can you talk today about the health of the customer, the sustainability of your pricing? You mentioned that your retention rates are at 94%. Speaker 700:18:48So they're sticking. But looking at your Both the pricing and some of the volume trends you reported, they're very robust. And so we just love your perspective on what you're seeing and the Speaker 200:19:05Yes, let me put a caveat on it first, which is we remain Humble and dynamic, right? The last 3 years have caught a lot of people that there's fundamental uncertainty in the market. And I read the same things you do, which is people have been talking about recession here now for 12 months to 18 months. So we give our eyes and ears open and that will be nimble All that being said, we see a lot of positive signs, right? We're seeing strong growth and pricing. Speaker 200:19:35Let me give you a number or a perspective. In our open market, right, we're sending out more a higher gross price increase than we ever have before And our realization rate, which is the percentage of that pricing that sticks, right, customers don't call back to negotiate, etcetera, is the highest it's ever been, Which is somewhat of an astounding number to think about. They were putting a lot of price, that price is sticking In the marketplace, we're growing. We talked about special waste in that pipeline being strong. We're starting to see a commodity rebound, which We put a modest rebound in our plan and I think we feel really good that the outlook there looks strong. Speaker 200:20:13On that front, we've seen a little decline in temp Units year over year, we anticipated that in our plan with where residential and commercial construction were going at the end of last year, But our yield number is very, very strong there. So we're doing some of that to ourselves in terms of yielding on those assets. So we're Pretty confident in the very near term and cautiously optimistic around the demand environment for the remainder of the year. Speaker 700:20:38Yes. And then maybe as a little bit of a follow on, but also housekeeping. Can you comment to what MSW tons did? And then did the quarter have any benefit on the cleanup related to the train derailment in Ohio? I don't know if Remediation work ended up being significant. Speaker 200:20:58Yes. Let me address the MSW. So MSW volume was up 1.2%. I think more importantly though, MSW yield was up 5.6%. So very strong pricing in that portion of our business. Speaker 200:21:12And then the specific to REM and Ohio, I think is the one you're referring to, a de minimis impact in the quarter. Speaker 700:21:19Okay. So it was really all just strong demand in kind of the environmental services part of the business. And can you give us sort of a sense of how much of that was priced? Speaker 200:21:33Very strong, very broad based. Listen, we've gone out with multiple Double digit price increases, which is sticking. Obviously, that business is more unique and there's a lot of mix elements You're doing a lot of individual project work and a lot of things like special waste on the hazard side that come in, right. So we haven't yet developed our yield metric, which We aspire to do over time for that portion of the business. And I'd say the industrial economy from our seat in the park is still very strong. Speaker 200:21:59Now It's not universally strong on a motor, for example, it would be a spot that's a little bit down. So we're seeing some of that in the Midwest, which has a lot of manufacturing Capacity there, but other parts are very, very strong on the industrial side. Great. Thanks for the color. Operator00:22:18The next question comes from Walter Spracklin with RBC Capital Markets. Please go ahead. Speaker 300:22:25Yes. Thanks very much, operator. Good afternoon, everyone. Speaker 200:22:28Hey, Walter. Speaker 300:22:29So I wanted to go back to the recession question and really talk about I know your Resiliency is quite admirable during the cycle. Just curious with You have a little bit of a different book of business now compared to 2008, 2009 and just wondering what your thoughts are on whether The resiliency of your earnings profile is as good as it was back then or if the addition U. S. Ecology has added any volatility there and particularly on special waste. I don't know if you've answered many questions about Your sensitivity to a recessionary environment on your special waste volumes, if you have any color on that. Speaker 200:23:17Yes. Walter, I would say that the first thing to keep in perspective is that Environmental Solutions revenue in total is about 10% of our Right. So you got to keep that in mind. That being said, a good portion of this revenue stream is has a consistent and recurring nature to it, Right. And increasingly more, we're trying to get closer to the customer to make that more of an annuity type revenue stream. Speaker 200:23:39So is it exactly the same? Maybe not. But is it pretty close? I would say, yes. Speaker 300:23:47And sensitivity on special waste, any sense there? Speaker 200:23:52As far as? Yes, I think you get moving pieces there. Obviously, when the economy goes down, right, people will get cautious and things that have Discretion to them, you're going to see some delays, but the vast majority of our special waste, those are jobs that need to get completed and need to get done. So it's not a matter of the job getting canceled, it's a matter of the job getting pushed. And I'd say the counterbalance of that right now is just all of the infrastructure spending and government funding, we see a lot of those opportunities just starting to emerge, but we really haven't taken advantage A lot of that spending hasn't flowed all the way through to jobs being commissioned yet. Speaker 300:24:31Okay. Those are my two questions. Thanks very much. Appreciate the time. Speaker 200:24:35Thank you. Operator00:24:37The next question comes from Jerry Raveesh with Goldman Sachs. Please go ahead. Jerry, is your line muted? Speaker 200:25:06Operator, why don't we move on to the next question? Operator00:25:08Okay. The next question comes from Sean Eastman with KeyBanc Capital Markets. Please go ahead. Speaker 800:25:16Hi, team. Nice start to the year. I kind of hate to do this, but just pressing on the On the guidance, I mean not much of a mention on kind of where we stand. To me, it kind of feels like we're running ahead of schedule. So I just wanted to Run that by you, is it fair to say that perhaps with the momentum in environmental solutions, Clearly price volume looking strong that we're kind of tracking a little ahead of that initial outlook for the year. Speaker 200:25:49Hey, we feel really good about the start to the business and Syskin outlook remains quite positive. As you know, it's a Seasonal business, so you get a ramp up here in Q2 and Q3 and we'll want to see that ramp up fully take hold. We're starting certainly to See some of that already, but that gets into full swing here in May and into the summer months in the northern part of the country. And so we'll come back in July when we talk again and see our progress there and we'll tell you if we have any update at that point. Speaker 800:26:22Okay, understood. And perhaps the moving parts on the year on year margin bridge in the first Quarter would be helpful to assess. I mean, did those kind of commodity inputs come through as expected? Speaker 200:26:39That one would be good to jump into. Yes. From a commodity perspective, we're tracking almost exactly the way that we thought we would, So we thought we would start the year right around this call it $100 a ton, sequentially increasing with the full year average about $125 per ton. And so right now, we would say with what we saw in the Q1 on average plus where current prices are at $115 per ton, It's playing out exactly the way we thought it would. And so when you think about the margin cadence of that, You look in this quarter was a 60 basis point headwind. Speaker 200:27:16We think it's a relatively consistent headwind in Q2 That drops to, call it, a 20 basis point headwind in Q3 and then flips positive in Q4 at those levels. Speaker 800:27:28Okay, perfect. Perfect. And one last quick one for me. I just want to make sure I understand this big special waste print in the quarter. I mean, are you guys saying that as a reflection of the cross sell opportunity really coming through on the Environmental Solutions Speaker 200:27:43strategy? Certainly in part, right. That's where you're going to see it. When you actually sell into the recycling and solid waste business, you're going to see is that's where a good portion of it's going to come in. That's a lot of the volume aspect of it. Speaker 200:27:57But at the same time, we're seeing that, again, we're talking about Total revenue being up about 22%, it's a pretty good split between both price and volume. So it's a combination of both and that's going to be a reflection again of just Healthy activity, which includes the Speaker 100:28:12benefits of that cross sell. Speaker 800:28:15Okay, understood. I appreciate the insights guys. Operator00:28:20The next question comes from Stephanie Moore with Jefferies. Please go ahead. Speaker 900:28:26Hi, good afternoon. Thank you. Speaker 200:28:29Hi, Stephanie. Speaker 900:28:31Hey, there. I wanted to touch a little bit on the M and A environment. I Thank you. You noted that you expected to execute on, I think, close to $500,000,000 M and A this year, not included in the guidance. So maybe if you just wanted Sean, what you've seen for the Q1 of the year and kind of any changes or expectations there. Speaker 900:28:51And I know you noted that A lot of those acquisitions is in the recycling and solid waste business, but what about more so in the specialty waste? Is that an opportunity this year as well? Speaker 200:29:04So yes, we put out in our initial guidance, we anticipated spending $500,000,000 I think we'll exceed that number as we go throughout the year. We have a really attractive pipeline, both in recycling and solid waste and environmental solutions. And so I think you'll see some of those deals come across through the remainder of the year and we can things are at different stages, right. We're all the way in the front end of conversation 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 be pulled forward or they can move out Few months here or there, the pipeline remains strong. Speaker 200:29:50I think both for 2023 and all the way into 2024 at this point, we feel really good about the pipeline. Speaker 900:29:57Got it. And then maybe touching back on the pricing and the cost environment as well. And you just noted on 2024 and Obviously, a lot of things can happen between here and there. But how would you think about that just general structural spread cost between pricing costs as we move through 24, given some of the maybe headwinds this year and what next year in the series could be a more normalized environment if that exists anymore. But How would you view just how that spread has changed over time versus maybe historically? Speaker 200:30:31Yes. Look, we remain committed to pricing ahead of our cost inflation to allow us to expand margins across the business. So we've talked about 30 to 50 basis points of margin expansion, that's kind of the pace that we go after and that would be our initial and going Assumption of 2024, now a lot can change between now and then in terms of could we get more than that, right? If we can do that and maintain and The health of our overall business, we'll certainly do that, but more to come down the road here on 20 24 perspective. Speaker 900:31:04Thank you so much. Operator00:31:08The next question comes from Tony Bancroft with Gabelli Funds. Please go ahead. Speaker 1000:31:14Yes. Thanks so much for the opportunity. Very nice quarter. Just a question on Keyfas, could you just sort of review, I know there's a lot of news articles coming out about that right now and some Potential rulings and some regulation coming out. Just maybe review what that potentially means for you in Landfill cost structure potential opportunities, maybe a review that would be helpful. Speaker 200:31:43Yes, very important regulation. And again, we're not opposed to regulation, right? We happen to if it's well constructed. So we have a seat at that table and we're Involved in those conversations to make sure that we don't as a company or even an industry get penalized for something that we catch, right? We didn't create the problem. Speaker 200:32:01People should be happy That we've got the modern infrastructure and systems to protect the environment. Net net, we see it as more of an opportunity over time, especially with our environmental Solutions business and being able to serve customers. Could that have some elevated costs in our landfill? Yes. We've got a really good history of passing those types of costs, regulatory costs On the customers and so more to come on that as we move forward, but we're very much in the conversation and we'll be active in shaping In a way that it enhances the business versus penalizes the business. Speaker 1000:32:35Thank you for that. And then I guess my second one, just on electrification, You've touched on it in your comments. Just maybe again an update on that. You've talked about in the past, but how is that going? There's been I think people talking about infrastructure issues and making it all sort of work. Speaker 1000:32:55What's your view on it? Is it on track? Is it off track? Or Just maybe you could give us some thoughts on that? Speaker 200:33:03No, very much on track, right? We've got more than 20 trucks Right around the country right now that are electrified through multiple manufacturers. We talked about our Oshkosh partnership and that's the first Kind of bottoms up 0 emission designed vehicle and excited about that. And we'll be that number of 20 will North of 50 next year and by 2025, we'll have several 100 vehicles. And it is important, it's not just the vehicle, it's the system. Speaker 200:33:33So you need to have the infrastructure, you need to have understand the government regulations, you need to understand the incentives and we've been working for years on those things and have multiple infrastructure projects already going on anticipating where we're going to put vehicles in and working closely with customers. So we We feel on track and listen, innovation is hard. There'll be some bumps and twists and turns, but we're really, really confident that this is a product that the customers want to buy And that this is very viable for again for us to operate in a way that enhances our business versus penalizes it. Speaker 1000:34:07Thanks so much. Congratulations John and team. Speaker 200:34:10Thanks, Sunny. Operator00:34:15The next question comes from Tobey Sommer with Truist Securities, please go ahead. Speaker 300:34:21Thank you. When you look at your M and A bogey for this year and you say you have Good visibility in the pipeline for next year as well. What does the pipeline look like in terms of distribution across Your business is it and has that changed as you've engaged in conversations? Speaker 200:34:45Well, if you go back from 5 years ago, it certainly has changed when we were predominantly, vastly recycling and It's a waste player and we've obviously grown the Environmental Solutions business. To tell us point, right, that's still about 10% of the business Broadly, the pipeline is probably an eightytwenty mix of 80% recycling and solid waste and 20% Environmental Solutions, so that will grow faster just because there's more geographies to fill in, there's new product lines to build out. So there's more kind of inherent growth In that, in terms of our starting point, but the balance of the business will still be recycling and solid waste and feel really confident with that. In any given time period, right, That could shift a single deal could flip it to eightytwenty in any given quarter. But if you look across a longer time horizon of 3 to 5 years, I think that eighty-twenty makes a pretty good barometer. Speaker 300:35:41Right. Thank you. And year to date, if you look at your employee base, What is the trend then like in not just employee turnover or perhaps improved Turnover and attrition rates, but also the heavy lift that it is to Recruit and hire new ads and train them, are both of those sides of the equation getting easier? Speaker 200:36:11Yes, turnover is down. Employee engagement is up from a very high Hi, Watermark. So people are engaged, right, turnover is down and this the recruiting situation in the last 4 to 5 months Has substantially improved, right? Number of applicants per open rec, right, has substantially improved. So There's still pockets of tightness around, so it could be very geographically dependent. Speaker 200:36:37But from a broad based macro level, I'd say the situation versus 6 months ago is Substantially better. Speaker 300:36:44Is there room for continued improvement or are we already at healthy metrics if you Make a longer term comparison more than just sort of the great recession and 6 months ago period. Speaker 200:36:56Yes. We talked about turnover being below 20 Levels, we aspire to continue to grind that down, 30 basis points to 50 basis points of reduced turnover Long term would be great for us. Turnover is never going to be 0. People move and have changes in life circumstances and there's always Bringing new talent, but we'll look to bring that down. But we feel like right now, we're at a very healthy level and that we can continue to improve from here. Speaker 200:37:23Thank you. Operator00:37:28The next question comes from Jerry Revich with Goldman Sachs, please go ahead. Speaker 1100:37:34Good afternoon. Can you hear me now? Speaker 200:37:37Yes. Welcome back. Speaker 1100:37:39Thank you. I'm wondering if we could talk about the performance in the quarter. So your margins were up about 2 points sequentially 1Q versus 4Q, which is a good bit better than normal seasonality. Is it possible to parse how much of that was price cost and municipal solid waste Part of the business, you mentioned the ESPs. I'm wondering if we could just flush out the rest of that bridge in terms of that performance versus normal seasonality? Speaker 200:38:08Yes. Jerry, we mentioned sequentially the Environmental Solutions business improving 3.50 basis points. But also in the Q4, remember, as we outperformed the year, we had heavier incentive compensation expense in the Q4. So I would say there were some things that were more unique in Q4 as far as expenses are concerned, off to a strong start this year. I think that's why you're seeing more of that This year we would expect just more normal seasonality and a Q4 that looks like what you've seen in the 3 to 4 years as compared to what you saw last year from a margin perspective. Speaker 1100:38:46Super helpful. And then can I ask, it feels like Are stabilizing, should we look for the price cost gap sequentially to improve In the Q2 as a result of that dynamic? Speaker 200:39:02Yes. Some of when we think about some of the cost Inflation, we see some of it anniversarying, which is just a little bit more when we saw some of those cost increase going into play last year. So yes, we start to anniversary some of those things in the Q2. We start seeing a lot of that more on the wage side. We also start see some of that modulate from a comp perspective on transportation costs beginning in the 3rd Q4. Speaker 200:39:28So we would expect the inflation levels To decrease as we move sequentially. Again, it's not that we're seeing a significant price decrease in the current period, it's just that we're anniversarying the cost increase that went in, in the prior year. Speaker 1100:39:42Got it. And lastly, can I tell you to share with us the incremental tailwinds to your business from the plastics And landfill gas investments that are scheduled to come online for 2024 versus 2023 and 2025 versus 2024, when do we get the most significant Step up relative to the cadence? Speaker 200:40:03Yes. So if you think about let me start with the plastic side on the Polymer Center. So that's We start to see that in 2024, start to layer in with call it $15,000,000 or so of EBITDA And then it really ramp up into 2025 and into 2026 until you get to a run rate of call it somewhere in that $75,000,000 plus type EBITDA range. When you take a look at from a gas perspective, again, most of that you're starting to see again, you start to see the first projects come online Towards the end of 2023, so most of the contribution coming in, in 20 24, you could see $25,000,000 plus type incremental EBITDA in 24,000,000 and then sequentially in a $15,000,000 to $20,000,000 per year until we get to that $100,000,000 worth of total contribution by 2028. Speaker 1100:40:54Super. Appreciate it. Thank you very much. Speaker 200:40:56You bet. Operator00:40:59The next question comes from Kevin Chiang with CIBC. Please go ahead. Speaker 1200:41:06Hi, thanks for taking my question. Maybe just on Environmental Services, obviously, a good showing in Q1 here. You continue to make good progress. I get the sense early on when you acquired U. S. Speaker 1200:41:18Ecology, there was a fear that this business was more cyclical. Just wondering, as you cross sell more and as you kind of Hold this under the RSG umbrella. Do you think it changes the cyclicality of that business? Like does the customer look at that service They're also buying other RSG services. I know it's early days, but just wondering how that experience has been, just given the broader economy has been shaky here. Speaker 200:41:43I think 2 things are true. When you're just a post predominantly a post collections player, Everything you see can look variable and cyclical because it could be a recurring Revenue stream, but that provider might farm that out or source that out to a few different places looking for price. When you get closer to the generator, right, then you under you have control of that product. Now could they take that somewhere else? Of course, they could over time. Speaker 200:42:13But when you provide excellent service and you have an integrated offering, you become stickier. And so Huge opportunity that we're seeing right now to take things that might have looked more cyclical or volatile or variable to become more consistent and recurring In the revenue stream, that doesn't mean that will be 100% of it like we have in our current business, right? We have some of that base work. On the landfill side, we'll certainly have some of that, Over time, the profile will migrate closer to the recycling and solid waste side. Speaker 1200:42:44Okay. That's helpful. I apologize if this is somewhere in your release, but if I look at your organic growth composition, let's call it eightytwenty split between Yield and volume or price and volume, what would that look like today in your Environmental Services business, If I could deconstruct the organic growth between volume and price, I apologize if I missed this earlier. Speaker 200:43:11Yes. I would probably say it's probably relatively similar just from the perspective of some of these are project related jobs. We have seen That being said, we've seen really good pricing in that business, but we've also just seen an increase of activity at the same time, which is really a function of now offering the most complete set of products and services in the space, right? So again, we're seeing a combination of both And that's what's really driving the outsized revenue growth in that portion of the business. Speaker 1200:43:42Excellent. That's it for me. Congrats on a great start to the year. Operator00:43:45Thank you. The next question comes from Mike Senager with Bank of America. Please go ahead. Speaker 1300:43:54Hi, everyone. Thanks for squeezing me in. Brian, the growth on the ES side and now layering in the incremental EBITDA from plastic Recycling and the landfill gas in 24 and beyond, does that change how we should be thinking about the free cash flow conversion And the improvement you guys are seeing there and potentially going forward? Speaker 200:44:18Well, look, I mean, we've said that we can Rewind the clock 2, 3 years ago and we were up high 30% free cash flow conversion company. We've moved that into the mid-40s and we said we have line of sight into the high 40 and beyond, right? And we're working on these things. And again, those are some of the things that we're going to do in order to achieve that level of performance, Even while we're overcoming some headwinds, getting into that high 40% interest expense Is a headwind to free cash flow conversion, the expiration of bonus depreciation, which is phasing out over the next 5 years, those are all headwinds. And even in the face of those things, We think we can achieve that level of performance and everything you just mentioned is the way we're going to get there. Speaker 1300:45:03Great. And I realize the regional banking crisis, tightening lending standards is likely not an issue for you and your customers. Do you hear of any issues for some of your smaller regional competitors' ability to finance and buy new trucks, Trying to expand, just curious how the competitive dynamic or even some of the M and A opportunity going forward? Speaker 200:45:31I don't think we've seen that show up specifically. There's probably an example somewhere in our M and A pipeline Of that being the case, I do think it's becoming more challenging, right, just given supply chain challenges, right, We got 90% of our truck. If you were a spot buyer of trucks, right, you're in a really tough spot, right? You're going to be driving that truck not in a matter of months, but a matter of years before you can get allocation on that. So digital, we've talked about that a number of times, that being The second moat in the business and our investments in that space and the ability to service customers and connect it to our operations and core systems, Those are all things that make it attractive time for smaller players to sell. Speaker 200:46:18Thank Operator00:46:27The next question comes from Michael E. Hoffman with Stifel. Please go ahead. Speaker 600:46:33Hey, JV, Adele, thanks. On the ES business, There's a bunch of pieces here. One, can you help fill in the gaps on what contributed to the 3 50 basis points sequentially? And the idea of margin improving, I just want to make sure I understand mix. I mean, if I'm wrong, I'm wrong. Speaker 600:46:53But I thought about a third of this was Fixed asset disposal, so high margin and 2 thirds is sort of billable hours services that are good returns, but lower margin. I'm trying to figure out where that mix goes in order to achieve the target that was suggested earlier in the call. Speaker 200:47:15Yes, Michael, first of all, I think that it's a little bit more, I would sit there and say in the fifty-fifty rather than The thirtyseventy between those two aspects of the business, I think you have a combination of things. First, let's talk about what happened sequentially. So we talked about price increases that we put in late in 2022 as well as early 2023. So certain aspect of that was certainly timing. Also as you just think about increasing utilization as we're actually achieving the cross sell, some of that is that we're utilizing some Excess capacity that's in that system, so it's the flow through of that incremental revenue is at a very high margin. Speaker 200:47:55We're seeing the combination of both. So John mentioned it when we were on the call. Some of the way that we're going to get there is also just by scale. When you take a look at the size of our areas, when you take a look at our 4 areas, they're managing less revenue than their counterparts on recycling and solid waste base, which just gives us capacity to grow into that and leverage that SG and A. So we built that area structure So look a lot like the recycling and solid waste side, even though they're managing less revenue, which gives them opportunity to grow without adding any additional SG and A costs. Speaker 200:48:27And Michael, on the field services side of the business, some of that would be getting MSAs with large industrial customers who We know we're going to have a set of projects throughout the year. They're going to be in different spots, but if you look over a 10 year period, right, you've got a relatively consistent demand profile Their level of project spend, clean up, plant turnarounds, etcetera, that you can when you have the MSA and the relationship, Right. That revenue stream then looks starts to look very recurring versus it's just an event or a job. Speaker 600:49:02Okay. And that's always been the secret challenge or challenge for the billable hours world is they struggle with Utilization of their billable hour resource. So what I'm hearing you say is you're striking a balance on how to maximize that? Speaker 300:49:19Correct. Speaker 600:49:20Okay. On the price cadence for the remainder of the year to get to the 5.5%, can you help us With the mix between open and restricted through the remainder of the year, so we sort of understand how to think about that that gets us to the total of 5.5 for the year? Speaker 200:49:39Yes. So the if you think about we expect sequential increase into Q2 on the restricted portion of the book, then that kind of Hits the high watermark and then it will decrease sequentially. Our expectation is it will decrease sequentially into Q3 and Q4. We think the high watermark on the open market is here in Q1 and it decreases sequentially, but modestly. So again, I would sit there and as we talked about earlier, I guess 60 days ago at this point that the spread between the high and the low by quarter is not that significant, I'll call it 50, 60 basis points plus or minus from the midpoint and that's what we would Speaker 100:50:16expect for the full year. Speaker 600:50:18Okay. And just to be clear, so I got So many numbers coming at us. The high watermark for the beginning of the year sorry, I'm flipping pages, there's 11.7 in the open and 5.4 for Speaker 200:50:35Yes, that is correct. Right. Okay. That's on core price, Michael. Speaker 600:50:39That's core, not yield. What was the yields? Speaker 200:50:42Correct. Speaker 300:50:43That's core. Speaker 200:50:43The yield in total, we don't break the yield up between the 2. The yield in total 7.4% on related revenue. On total revenue, it was 6.5%. Speaker 600:50:53Right. Okay. Speaker 200:50:53And again, if you're building it into a mop go ahead. Speaker 600:50:56Yes. No, no, go ahead, please. That's what I wanted to say. Speaker 200:50:58I was going to say the reason we do we break the 2 out is that if you're building it on a model and you're using the base The entire base period revenue, I have to use the total revenue number. Again, we disclose the related revenue because we don't calculate price On all components of revenue. So again, if you want to get the true effectiveness of our pricing programs, that's why related revenue is applicable. Speaker 600:51:20Okay. And then John, you made a comment earlier to answer your question, it said 6% and I missed is that 6% inflation or you thought yield would maybe land at 6% by Speaker 200:51:31No, we said cost inflation we think throughout the year, right, will be our end up around 6%. We're originally said going into the year 5.5%, right. So we're seeing a little elevation there primarily here in the first and the Q2, but again we're pricing ahead of our expectations as well. So we're getting the performance that we expected, just a little bit different path to get there. Speaker 600:51:53Right. Would suggest the guide of 5.5 probably works its way up to staying on top of that. Speaker 200:52:01We'll update you in July. Speaker 600:52:04Had to try. See you in New Orleans on the weekend. Thanks. Operator00:52:12At this time, there appears to be no further questions. Mr. Vander Ark, I'll turn the call back over to you for closing remarks. Speaker 200:52:21Thank you, Vishnavi. I would like to thank our 40,000 employees for their commitment to deliver an essential service in the markets we serve. Our results are a direct reflection of the team's ongoing efforts to deliver best in class service to all our customers. Have a good evening and be safe.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallRepublic Services Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) Republic Services Earnings HeadlinesRepublic Services (RSG) Gains Price Target Boost from BMO Capital | RSG Stock NewsApril 25 at 5:43 PM | gurufocus.comRepublic Services (RSG) Price Target Raised to $245 by Baird Analyst | RSG Stock NewsApril 25 at 5:43 PM | gurufocus.comTrump Treasure April 19Thanks to President Trump… A $900 investment across5 specific cryptos… Could gain 12,000% so quickly that, just 12 months later…April 25, 2025 | Paradigm Press (Ad)Republic Services (RSG) Sees Price Target Boost Amid Strong Q4 Performance | RSG Stock NewsApril 25 at 5:42 PM | gurufocus.comRepublic Services (NYSE:RSG) Reports Q1 Sales and Income Growth with US$4 Billion RevenueApril 25 at 3:13 PM | finance.yahoo.comQ1 2025 Republic Services Inc Earnings CallApril 25 at 10:13 AM | finance.yahoo.comSee More Republic Services Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Republic Services? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Republic Services and other key companies, straight to your email. Email Address About Republic ServicesRepublic Services (NYSE:RSG), together with its subsidiaries, offers environmental services in the United States and Canada. It is involved in the collection and processing of recyclable, solid waste, and industrial waste materials; transportation and disposal of non-hazardous and hazardous waste streams; and other environmental solutions. Its residential collection services include curbside collection of material for transport to transfer stations, landfills, recycling centers, and organics processing facilities; supply of recycling and waste containers; and renting of compactors. The company also engages in the processing and sale of old corrugated containers, old newsprint, aluminum, glass, and other materials; and provision of landfill services. It serves small-container, large-container, and residential customers. 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There are 14 speakers on the call. Operator00:00:00Afternoon, and welcome to the Republic Services First Quarter 2023 Investor Conference Call. Republic Services is traded on the New York Stock Exchange under the symbol RSG. All participants in After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Aaron Evans, Vice President of Investor Relations. Operator00:00:43Please go ahead, sir. Speaker 100:00:46I would like to welcome everyone Public Services' Q1 2023 conference call. John Vander Aark, our CEO and Brian Delgaccio, Our CFO for joining me as we discuss our performance. I would like to take a moment to remind everyone that some of the information we Discussed on today's call contains forward looking statements, which involve risks and uncertainties and may be materially different from our 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. Speaker 100:01:22If in the future, you listen to a rebroadcast or rerecording Of this conference call, you should be sensitive to the date of the original call, which is April 27, 2023. 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. I want to point out that 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. I want to remind you that Republic's management team routinely participates in investor conferences. Speaker 100:02:08When events are scheduled, the dates, Times and presentations are posted on our website. With that, I would like to turn the call over to John. Speaker 200:02:18Thanks, Erin. Good afternoon, everyone, and thank you for joining us. We started the year strong and are pleased with our Q1 results. Our performance reflects our ability to grow across our business, while enhancing profitability. We remain well positioned to capitalize on additional growth opportunities in the including 11% from acquisitions, generated adjusted earnings per share of $1.24 and produced $496,000,000 Speaker 300:02:57of adjusted free cash flow. Speaker 200:02:59We continue to believe that investing in acquisitions is the best We invested $224,000,000 in acquisitions during the Q1. All transactions were in the recycling and solid waste space. Our acquisition pipeline remains supportive of outsized levels of activity in both the Recycling and Sound Waste and Environmental Solutions businesses. We continue to see opportunity for well over $500,000,000 investment in value creating acquisitions in 2023. We are making great progress on the integration of U. Speaker 200:03:36S. On the valuable services we provide. The acceptance of our pricing actions remains high with very little customer defection. Cross selling our complete set of products and services continues to run ahead of plan with more than $60,000,000 in new sales to date. We have now achieved over $40,000,000 of annualized cost synergies. Speaker 200:04:08As a result of the actions taken in the Environmental Solutions business, EBITDA margin improved to just over 20% during the Q1. We continue to generate outsized growth by executing our strategy supported by our differentiating capabilities, customer zeal, digital and sustainability. Regarding customer zeal, we remain laser focused on providing a world class customer experience to drive increased loyalty and organic growth. Our customer retention rate remained at 94%. We continue to see positive trends in our Net Promoter Score supported by improved service delivery. Speaker 200:04:49Our frontline colleagues, including drivers, technicians and the customer experience team are determined to fulfill our daily commitments to our customers. We delivered robust organic revenue growth during the quarter and simultaneously increased in both price and volume. Floor price and related revenue increased to 9.3% An average yield on related revenue increased to 7.4%. Organic volume growth on related revenue was 1.8%. Volume growth was broad based across our market verticals and geographies. Speaker 200:05:27Turning to digital. We continue to make progress on deploying Ryze Tablets in our collection business. Over 75% of our residential routes are operating with Ryze Tablets. The remaining routes are on track to be completed by mid year. This technology is the foundation that will allow us to further enhance our digital service offerings and improve our customers' experience. Speaker 200:05:50Moving on to sustainability. We are investing in differentiated capabilities to leverage sustainability as a platform for profitable growth. In February, we announced our plans to significantly scale Our electric fleet through our long term agreement with Oshkosh. We will begin operating 2 fully integrated electric recycling and solid waste collection prototypes later this year and expect to start buying at scale in 2025. This announcement supports our industry leading commitment to fleet electrification through a multi supplier strategy. Speaker 200:06:26Development of our Polymer Centers in Las Vegas and the Midwest remain on track, with the centers becoming operational in late 2023 and late 2024 respectively. The 57 renewable natural gas projects being co developed with our partners are advancing. We expect at least 6 of these projects to commence operations this year. Our approach to sustainability includes our aspiration to be the employer of choice in the markets that we serve and we are seeing positive results. Turnover rates continue to improve and we are now below 2019 levels. Speaker 200:07:03As a result, we are better staffed to capitalize on growth opportunities in the market. We continue to be widely recognized for our comprehensive sustainability performance. For example, we were recently named to Barron's 100 Most Sustainable Companies List, FS Sphere's World's Most Ethical Companies List and Fortune's List of the World's Most Admired Companies. A positive momentum in our business continues to build as we harness the power of our differentiated capabilities. We will continue to invest for the future profitable growth to deliver the results that create unmistakable value for our stakeholders. Speaker 200:07:42I will now turn the call over to Brian, who will provide financial details for the quarter. Thanks, John. Core price on total revenue was 8.2%. Core price on related revenue was 9.3%, which included open market pricing of 11.7% and restricted pricing of 5.4%. The components of core price on related revenue included small container of 12.6%, Large container of 9.6 percent and residential of 8.4%. Speaker 200:08:14Average yield on total revenue was 6.5%. Average yield on related revenue was 7.4%, an increase of 70 basis points when compared to our 4th quarter performance. We continue to price new and existing business ahead of cost inflation to drive margin expansion in the underlying business. Volume on total revenue increased 1.6%, while volume on related revenue increased 1.8%. The components of volume on related revenue included an increase in small container of 1.6%, an increase in large container of 80 basis points and an increase in landfill of 8.6%. Speaker 200:08:53Landfill was primarily driven by a 21.7% increase in special waste revenue. Moving on to recycling. Commodity prices were $105 per ton in the quarter. This compared to $201 per ton in the prior year. Recycling processing and commodity sales decreased revenue by 90 basis points during the quarter. Speaker 200:09:15Current commodity prices are approximately 100 and 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. Next, turning to our Environmental Solutions business. 1st quarter Environmental Solutions revenue increased $309,000,000 over the prior year, which primarily relates to the acquisition of U. S. Ecology. Speaker 200:09:41On a same store basis, Environmental Solutions contributed 50 basis points to internal growth During the quarter, adjusted EBITDA margin for the Environmental Solutions business was 20.6%, Sequential increase of 3 50 basis points. Total company adjusted EBITDA margin for the Q1 was 29%. This compares to 30.4% in the prior year. Margin performance during the quarter included a 130 basis point decrease from acquisitions, which includes 90 basis points related to U. S. Speaker 200:10:15Ecology, a 60 basis point decrease from recycled commodity prices and a 30 basis point decrease from an additional workday, partially offset by a 40 basis point increase from net fuel and margin expansion in the underlying business of 40 basis Adjusted free cash flow was $496,000,000 in the Q1 or approximately 25% of the midpoint of our full year guidance. Free cash flow conversion was 47.6%. Total debt was $12,100,000,000 and total liquidity was With respect to taxes, our combined tax rate and effects from solar investments resulted in an equivalent tax impact of 26.3% during the Q1, which was in line with our expectations. With that operator, I'd like to open the call to questions. Operator00:11:14Thank you. We will now begin the question and answer session. In the interest of time, we ask that you limit yourselves to one question and one follow-up question today. If your The first question comes from Toni Kaplan with Morgan Stanley. Please go ahead. Speaker 400:11:47Hi there. Thanks so much. Pricing seemed really strong this quarter. I know you talked about it sort of decelerating through the year, but Just wanted to get your latest thoughts, any additional color on pricing and how second quarter looks as well? Thanks. Speaker 200:12:06Yes, certainly a very strong environment still. We expect kind of maintain that momentum for the first half and for lots of reasons we think that A portion of our business obviously, right, 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. Speaker 400:12:38Terrific. And I wanted to ask if you could just give us an update on how you're thinking about the specialty waste opportunity, talk about any of the synergies and areas of potential future opportunity there? Thanks. Speaker 200:12:56Yes, really strong quarter for us obviously, right, over 20% and broad based and A portion of that is certainly the cross sell opportunity that I talked about in my prepared remarks and that we're offering customers a comprehensive and integrated offering. And part of that is showing up in our recycling salt waste business and going special waste into our landfill. And that's the benefit of our offering, right? We can take things into liquid hazardous waste. We can take Solid and hazardous waste, we can take special waste, so we can provide a range of solutions to customers and that's put us in a pretty differentiated position in the marketplace and Excited about the momentum that the team has. Speaker 200:13:39Yes. And also what I would add to that is that our pipeline for special waste opportunities remains very strong. And about 20% of that pipeline is a direct result of cross sell opportunities. Speaker 400:13:52Perfect. Congrats again. Speaker 200:13:54Thank you. Thank you. Operator00:13:58The next question comes from Tyler Brown with Raymond James. Please go ahead. Speaker 500:14:03Hey, good afternoon guys. Speaker 200:14:05Hey, Todd. Speaker 600:14:07Hey. So, Speaker 500:14:08I just want to be clear. So, are you effectively reiterating all the pieces of the guidance? Speaker 200:14:16Yes, we feel we're certainly Feel good about the guidance at this point. Speaker 500:14:21Okay. Okay. This wasn't totally 100% clear. But Kind of going back and following on the previous question, pricing was strong out of the gates. But can you talk a little bit about unit cost Inflation, so I think you guys guided to something like 5% to 5.5 percent unit cost inflation for 2023, I think on the last quarter call. Speaker 500:14:44You kind of still see that? Are you still seeing maybe inflation starting high and then it kind of easing as the year goes on? Speaker 200:14:54Yes, start where you ended. It's certainly starting higher and modulating throughout the course of the year. I think it's going to be a little higher than the 5.5%, right closer to 6 Would be our best look at this point right now and a few different factors on that. Certainly truck delivery would be one where we got about 90% of our trucks last year and we think we're going to get probably that 10% from last year and about 90% of this year And we're growing. So that means we're buying some older trucks or we're operating some older trucks to service those growth opportunities and they have a higher cost per engine hour. Speaker 200:15:31And so that's elevated maintenance costs, it's higher costs, not necessarily unit cost inflation on the part, for example, it's just operating more expensive vehicles. And Hopefully in 2024, the suppliers catch up, but we can kind of get back on track. So that'd be one example why it's just a little bit higher than we predicted. Speaker 500:15:49Okay. All right. That's perfect. Just my last one here. Going back to environmental services. Speaker 500:15:56So There's a lot of traction there. It seems like that franchise is maybe run rating $1,500,000,000 in total revenues. And I don't have the calculation I'm at my fingertips here, but is that kind of like a low, low 20% margin today? I think you had talked about maybe getting that to 30% longer term. So do you still see that John? Speaker 500:16:17And kind of what are the couple of the key drivers to get you there? Is it just we need to go through a couple more Cycles of pricing or just any thoughts on timing and how we go from call it 20 to circa 30? Speaker 200:16:32Yes. Listen, I think pricing is certainly going to be a huge lever in terms of how we get there and the primary lever. I think a little bit of scale benefit obviously, which allows us to leverage our overhead. We've built this thing for growth. So as we continue to grow, we get some leverage on our overhead spend in That space as well. Speaker 200:16:50And just additional integration opportunities across recycling and salt waste business, right? We haven't really taken advantage of all those things yet. And then the last one will be just cost management, right, cost discipline and making sure that we are pricing work appropriately and understanding the cost position of all that work, So that all of our individual opportunities and projects are profitable. We've made great progress on that, but there's more room in front of us. And this was the investment thesis when we did the deal, obviously. Speaker 200:17:20We did it based on intrinsic and $40,000,000 of cost synergies. We've just gotten there quicker than we expected, right? We've gotten the 40 already. I think we're going to end up closer to 50 when we're said and done. And then we thought there was upward pressure on pricing. Speaker 200:17:34We thought there was cross sell opportunity. We said we'd get $75,000,000 to $100,000,000 over 3 years. We've already gotten 60, which tells you with a good pipeline, which tells you that we're going to get to that 75 to 100 quicker than we expected. And we know that when we price or we anticipate there'll be some customer fallout churn, but the net dollars work over time. We've just seen very, very little churn, which speaks to the fact that this is a valuable offering. Speaker 200:17:59It's a very small portion of the vast majority of our customers' cost structure And that we're going to continue to price for the value we deliver. Speaker 500:18:08Yes, perfect. No, lots of momentum there. I appreciate the time guys. Thanks. Operator00:18:14The next question comes from Noah Kaye with Oppenheimer. Please go ahead. Speaker 700:18:20Good afternoon. Thanks for taking the questions. There's been maybe some mixed messages today in earnings, Previous earnings around the macro, the health of the macro. I have a feeling your answer may be not so mixed, maybe a little more Unambiguous, but can you talk today about the health of the customer, the sustainability of your pricing? You mentioned that your retention rates are at 94%. Speaker 700:18:48So they're sticking. But looking at your Both the pricing and some of the volume trends you reported, they're very robust. And so we just love your perspective on what you're seeing and the Speaker 200:19:05Yes, let me put a caveat on it first, which is we remain Humble and dynamic, right? The last 3 years have caught a lot of people that there's fundamental uncertainty in the market. And I read the same things you do, which is people have been talking about recession here now for 12 months to 18 months. So we give our eyes and ears open and that will be nimble All that being said, we see a lot of positive signs, right? We're seeing strong growth and pricing. Speaker 200:19:35Let me give you a number or a perspective. In our open market, right, we're sending out more a higher gross price increase than we ever have before And our realization rate, which is the percentage of that pricing that sticks, right, customers don't call back to negotiate, etcetera, is the highest it's ever been, Which is somewhat of an astounding number to think about. They were putting a lot of price, that price is sticking In the marketplace, we're growing. We talked about special waste in that pipeline being strong. We're starting to see a commodity rebound, which We put a modest rebound in our plan and I think we feel really good that the outlook there looks strong. Speaker 200:20:13On that front, we've seen a little decline in temp Units year over year, we anticipated that in our plan with where residential and commercial construction were going at the end of last year, But our yield number is very, very strong there. So we're doing some of that to ourselves in terms of yielding on those assets. So we're Pretty confident in the very near term and cautiously optimistic around the demand environment for the remainder of the year. Speaker 700:20:38Yes. And then maybe as a little bit of a follow on, but also housekeeping. Can you comment to what MSW tons did? And then did the quarter have any benefit on the cleanup related to the train derailment in Ohio? I don't know if Remediation work ended up being significant. Speaker 200:20:58Yes. Let me address the MSW. So MSW volume was up 1.2%. I think more importantly though, MSW yield was up 5.6%. So very strong pricing in that portion of our business. Speaker 200:21:12And then the specific to REM and Ohio, I think is the one you're referring to, a de minimis impact in the quarter. Speaker 700:21:19Okay. So it was really all just strong demand in kind of the environmental services part of the business. And can you give us sort of a sense of how much of that was priced? Speaker 200:21:33Very strong, very broad based. Listen, we've gone out with multiple Double digit price increases, which is sticking. Obviously, that business is more unique and there's a lot of mix elements You're doing a lot of individual project work and a lot of things like special waste on the hazard side that come in, right. So we haven't yet developed our yield metric, which We aspire to do over time for that portion of the business. And I'd say the industrial economy from our seat in the park is still very strong. Speaker 200:21:59Now It's not universally strong on a motor, for example, it would be a spot that's a little bit down. So we're seeing some of that in the Midwest, which has a lot of manufacturing Capacity there, but other parts are very, very strong on the industrial side. Great. Thanks for the color. Operator00:22:18The next question comes from Walter Spracklin with RBC Capital Markets. Please go ahead. Speaker 300:22:25Yes. Thanks very much, operator. Good afternoon, everyone. Speaker 200:22:28Hey, Walter. Speaker 300:22:29So I wanted to go back to the recession question and really talk about I know your Resiliency is quite admirable during the cycle. Just curious with You have a little bit of a different book of business now compared to 2008, 2009 and just wondering what your thoughts are on whether The resiliency of your earnings profile is as good as it was back then or if the addition U. S. Ecology has added any volatility there and particularly on special waste. I don't know if you've answered many questions about Your sensitivity to a recessionary environment on your special waste volumes, if you have any color on that. Speaker 200:23:17Yes. Walter, I would say that the first thing to keep in perspective is that Environmental Solutions revenue in total is about 10% of our Right. So you got to keep that in mind. That being said, a good portion of this revenue stream is has a consistent and recurring nature to it, Right. And increasingly more, we're trying to get closer to the customer to make that more of an annuity type revenue stream. Speaker 200:23:39So is it exactly the same? Maybe not. But is it pretty close? I would say, yes. Speaker 300:23:47And sensitivity on special waste, any sense there? Speaker 200:23:52As far as? Yes, I think you get moving pieces there. Obviously, when the economy goes down, right, people will get cautious and things that have Discretion to them, you're going to see some delays, but the vast majority of our special waste, those are jobs that need to get completed and need to get done. So it's not a matter of the job getting canceled, it's a matter of the job getting pushed. And I'd say the counterbalance of that right now is just all of the infrastructure spending and government funding, we see a lot of those opportunities just starting to emerge, but we really haven't taken advantage A lot of that spending hasn't flowed all the way through to jobs being commissioned yet. Speaker 300:24:31Okay. Those are my two questions. Thanks very much. Appreciate the time. Speaker 200:24:35Thank you. Operator00:24:37The next question comes from Jerry Raveesh with Goldman Sachs. Please go ahead. Jerry, is your line muted? Speaker 200:25:06Operator, why don't we move on to the next question? Operator00:25:08Okay. The next question comes from Sean Eastman with KeyBanc Capital Markets. Please go ahead. Speaker 800:25:16Hi, team. Nice start to the year. I kind of hate to do this, but just pressing on the On the guidance, I mean not much of a mention on kind of where we stand. To me, it kind of feels like we're running ahead of schedule. So I just wanted to Run that by you, is it fair to say that perhaps with the momentum in environmental solutions, Clearly price volume looking strong that we're kind of tracking a little ahead of that initial outlook for the year. Speaker 200:25:49Hey, we feel really good about the start to the business and Syskin outlook remains quite positive. As you know, it's a Seasonal business, so you get a ramp up here in Q2 and Q3 and we'll want to see that ramp up fully take hold. We're starting certainly to See some of that already, but that gets into full swing here in May and into the summer months in the northern part of the country. And so we'll come back in July when we talk again and see our progress there and we'll tell you if we have any update at that point. Speaker 800:26:22Okay, understood. And perhaps the moving parts on the year on year margin bridge in the first Quarter would be helpful to assess. I mean, did those kind of commodity inputs come through as expected? Speaker 200:26:39That one would be good to jump into. Yes. From a commodity perspective, we're tracking almost exactly the way that we thought we would, So we thought we would start the year right around this call it $100 a ton, sequentially increasing with the full year average about $125 per ton. And so right now, we would say with what we saw in the Q1 on average plus where current prices are at $115 per ton, It's playing out exactly the way we thought it would. And so when you think about the margin cadence of that, You look in this quarter was a 60 basis point headwind. Speaker 200:27:16We think it's a relatively consistent headwind in Q2 That drops to, call it, a 20 basis point headwind in Q3 and then flips positive in Q4 at those levels. Speaker 800:27:28Okay, perfect. Perfect. And one last quick one for me. I just want to make sure I understand this big special waste print in the quarter. I mean, are you guys saying that as a reflection of the cross sell opportunity really coming through on the Environmental Solutions Speaker 200:27:43strategy? Certainly in part, right. That's where you're going to see it. When you actually sell into the recycling and solid waste business, you're going to see is that's where a good portion of it's going to come in. That's a lot of the volume aspect of it. Speaker 200:27:57But at the same time, we're seeing that, again, we're talking about Total revenue being up about 22%, it's a pretty good split between both price and volume. So it's a combination of both and that's going to be a reflection again of just Healthy activity, which includes the Speaker 100:28:12benefits of that cross sell. Speaker 800:28:15Okay, understood. I appreciate the insights guys. Operator00:28:20The next question comes from Stephanie Moore with Jefferies. Please go ahead. Speaker 900:28:26Hi, good afternoon. Thank you. Speaker 200:28:29Hi, Stephanie. Speaker 900:28:31Hey, there. I wanted to touch a little bit on the M and A environment. I Thank you. You noted that you expected to execute on, I think, close to $500,000,000 M and A this year, not included in the guidance. So maybe if you just wanted Sean, what you've seen for the Q1 of the year and kind of any changes or expectations there. Speaker 900:28:51And I know you noted that A lot of those acquisitions is in the recycling and solid waste business, but what about more so in the specialty waste? Is that an opportunity this year as well? Speaker 200:29:04So yes, we put out in our initial guidance, we anticipated spending $500,000,000 I think we'll exceed that number as we go throughout the year. We have a really attractive pipeline, both in recycling and solid waste and environmental solutions. And so I think you'll see some of those deals come across through the remainder of the year and we can things are at different stages, right. We're all the way in the front end of conversation 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 be pulled forward or they can move out Few months here or there, the pipeline remains strong. Speaker 200:29:50I think both for 2023 and all the way into 2024 at this point, we feel really good about the pipeline. Speaker 900:29:57Got it. And then maybe touching back on the pricing and the cost environment as well. And you just noted on 2024 and Obviously, a lot of things can happen between here and there. But how would you think about that just general structural spread cost between pricing costs as we move through 24, given some of the maybe headwinds this year and what next year in the series could be a more normalized environment if that exists anymore. But How would you view just how that spread has changed over time versus maybe historically? Speaker 200:30:31Yes. Look, we remain committed to pricing ahead of our cost inflation to allow us to expand margins across the business. So we've talked about 30 to 50 basis points of margin expansion, that's kind of the pace that we go after and that would be our initial and going Assumption of 2024, now a lot can change between now and then in terms of could we get more than that, right? If we can do that and maintain and The health of our overall business, we'll certainly do that, but more to come down the road here on 20 24 perspective. Speaker 900:31:04Thank you so much. Operator00:31:08The next question comes from Tony Bancroft with Gabelli Funds. Please go ahead. Speaker 1000:31:14Yes. Thanks so much for the opportunity. Very nice quarter. Just a question on Keyfas, could you just sort of review, I know there's a lot of news articles coming out about that right now and some Potential rulings and some regulation coming out. Just maybe review what that potentially means for you in Landfill cost structure potential opportunities, maybe a review that would be helpful. Speaker 200:31:43Yes, very important regulation. And again, we're not opposed to regulation, right? We happen to if it's well constructed. So we have a seat at that table and we're Involved in those conversations to make sure that we don't as a company or even an industry get penalized for something that we catch, right? We didn't create the problem. Speaker 200:32:01People should be happy That we've got the modern infrastructure and systems to protect the environment. Net net, we see it as more of an opportunity over time, especially with our environmental Solutions business and being able to serve customers. Could that have some elevated costs in our landfill? Yes. We've got a really good history of passing those types of costs, regulatory costs On the customers and so more to come on that as we move forward, but we're very much in the conversation and we'll be active in shaping In a way that it enhances the business versus penalizes the business. Speaker 1000:32:35Thank you for that. And then I guess my second one, just on electrification, You've touched on it in your comments. Just maybe again an update on that. You've talked about in the past, but how is that going? There's been I think people talking about infrastructure issues and making it all sort of work. Speaker 1000:32:55What's your view on it? Is it on track? Is it off track? Or Just maybe you could give us some thoughts on that? Speaker 200:33:03No, very much on track, right? We've got more than 20 trucks Right around the country right now that are electrified through multiple manufacturers. We talked about our Oshkosh partnership and that's the first Kind of bottoms up 0 emission designed vehicle and excited about that. And we'll be that number of 20 will North of 50 next year and by 2025, we'll have several 100 vehicles. And it is important, it's not just the vehicle, it's the system. Speaker 200:33:33So you need to have the infrastructure, you need to have understand the government regulations, you need to understand the incentives and we've been working for years on those things and have multiple infrastructure projects already going on anticipating where we're going to put vehicles in and working closely with customers. So we We feel on track and listen, innovation is hard. There'll be some bumps and twists and turns, but we're really, really confident that this is a product that the customers want to buy And that this is very viable for again for us to operate in a way that enhances our business versus penalizes it. Speaker 1000:34:07Thanks so much. Congratulations John and team. Speaker 200:34:10Thanks, Sunny. Operator00:34:15The next question comes from Tobey Sommer with Truist Securities, please go ahead. Speaker 300:34:21Thank you. When you look at your M and A bogey for this year and you say you have Good visibility in the pipeline for next year as well. What does the pipeline look like in terms of distribution across Your business is it and has that changed as you've engaged in conversations? Speaker 200:34:45Well, if you go back from 5 years ago, it certainly has changed when we were predominantly, vastly recycling and It's a waste player and we've obviously grown the Environmental Solutions business. To tell us point, right, that's still about 10% of the business Broadly, the pipeline is probably an eightytwenty mix of 80% recycling and solid waste and 20% Environmental Solutions, so that will grow faster just because there's more geographies to fill in, there's new product lines to build out. So there's more kind of inherent growth In that, in terms of our starting point, but the balance of the business will still be recycling and solid waste and feel really confident with that. In any given time period, right, That could shift a single deal could flip it to eightytwenty in any given quarter. But if you look across a longer time horizon of 3 to 5 years, I think that eighty-twenty makes a pretty good barometer. Speaker 300:35:41Right. Thank you. And year to date, if you look at your employee base, What is the trend then like in not just employee turnover or perhaps improved Turnover and attrition rates, but also the heavy lift that it is to Recruit and hire new ads and train them, are both of those sides of the equation getting easier? Speaker 200:36:11Yes, turnover is down. Employee engagement is up from a very high Hi, Watermark. So people are engaged, right, turnover is down and this the recruiting situation in the last 4 to 5 months Has substantially improved, right? Number of applicants per open rec, right, has substantially improved. So There's still pockets of tightness around, so it could be very geographically dependent. Speaker 200:36:37But from a broad based macro level, I'd say the situation versus 6 months ago is Substantially better. Speaker 300:36:44Is there room for continued improvement or are we already at healthy metrics if you Make a longer term comparison more than just sort of the great recession and 6 months ago period. Speaker 200:36:56Yes. We talked about turnover being below 20 Levels, we aspire to continue to grind that down, 30 basis points to 50 basis points of reduced turnover Long term would be great for us. Turnover is never going to be 0. People move and have changes in life circumstances and there's always Bringing new talent, but we'll look to bring that down. But we feel like right now, we're at a very healthy level and that we can continue to improve from here. Speaker 200:37:23Thank you. Operator00:37:28The next question comes from Jerry Revich with Goldman Sachs, please go ahead. Speaker 1100:37:34Good afternoon. Can you hear me now? Speaker 200:37:37Yes. Welcome back. Speaker 1100:37:39Thank you. I'm wondering if we could talk about the performance in the quarter. So your margins were up about 2 points sequentially 1Q versus 4Q, which is a good bit better than normal seasonality. Is it possible to parse how much of that was price cost and municipal solid waste Part of the business, you mentioned the ESPs. I'm wondering if we could just flush out the rest of that bridge in terms of that performance versus normal seasonality? Speaker 200:38:08Yes. Jerry, we mentioned sequentially the Environmental Solutions business improving 3.50 basis points. But also in the Q4, remember, as we outperformed the year, we had heavier incentive compensation expense in the Q4. So I would say there were some things that were more unique in Q4 as far as expenses are concerned, off to a strong start this year. I think that's why you're seeing more of that This year we would expect just more normal seasonality and a Q4 that looks like what you've seen in the 3 to 4 years as compared to what you saw last year from a margin perspective. Speaker 1100:38:46Super helpful. And then can I ask, it feels like Are stabilizing, should we look for the price cost gap sequentially to improve In the Q2 as a result of that dynamic? Speaker 200:39:02Yes. Some of when we think about some of the cost Inflation, we see some of it anniversarying, which is just a little bit more when we saw some of those cost increase going into play last year. So yes, we start to anniversary some of those things in the Q2. We start seeing a lot of that more on the wage side. We also start see some of that modulate from a comp perspective on transportation costs beginning in the 3rd Q4. Speaker 200:39:28So we would expect the inflation levels To decrease as we move sequentially. Again, it's not that we're seeing a significant price decrease in the current period, it's just that we're anniversarying the cost increase that went in, in the prior year. Speaker 1100:39:42Got it. And lastly, can I tell you to share with us the incremental tailwinds to your business from the plastics And landfill gas investments that are scheduled to come online for 2024 versus 2023 and 2025 versus 2024, when do we get the most significant Step up relative to the cadence? Speaker 200:40:03Yes. So if you think about let me start with the plastic side on the Polymer Center. So that's We start to see that in 2024, start to layer in with call it $15,000,000 or so of EBITDA And then it really ramp up into 2025 and into 2026 until you get to a run rate of call it somewhere in that $75,000,000 plus type EBITDA range. When you take a look at from a gas perspective, again, most of that you're starting to see again, you start to see the first projects come online Towards the end of 2023, so most of the contribution coming in, in 20 24, you could see $25,000,000 plus type incremental EBITDA in 24,000,000 and then sequentially in a $15,000,000 to $20,000,000 per year until we get to that $100,000,000 worth of total contribution by 2028. Speaker 1100:40:54Super. Appreciate it. Thank you very much. Speaker 200:40:56You bet. Operator00:40:59The next question comes from Kevin Chiang with CIBC. Please go ahead. Speaker 1200:41:06Hi, thanks for taking my question. Maybe just on Environmental Services, obviously, a good showing in Q1 here. You continue to make good progress. I get the sense early on when you acquired U. S. Speaker 1200:41:18Ecology, there was a fear that this business was more cyclical. Just wondering, as you cross sell more and as you kind of Hold this under the RSG umbrella. Do you think it changes the cyclicality of that business? Like does the customer look at that service They're also buying other RSG services. I know it's early days, but just wondering how that experience has been, just given the broader economy has been shaky here. Speaker 200:41:43I think 2 things are true. When you're just a post predominantly a post collections player, Everything you see can look variable and cyclical because it could be a recurring Revenue stream, but that provider might farm that out or source that out to a few different places looking for price. When you get closer to the generator, right, then you under you have control of that product. Now could they take that somewhere else? Of course, they could over time. Speaker 200:42:13But when you provide excellent service and you have an integrated offering, you become stickier. And so Huge opportunity that we're seeing right now to take things that might have looked more cyclical or volatile or variable to become more consistent and recurring In the revenue stream, that doesn't mean that will be 100% of it like we have in our current business, right? We have some of that base work. On the landfill side, we'll certainly have some of that, Over time, the profile will migrate closer to the recycling and solid waste side. Speaker 1200:42:44Okay. That's helpful. I apologize if this is somewhere in your release, but if I look at your organic growth composition, let's call it eightytwenty split between Yield and volume or price and volume, what would that look like today in your Environmental Services business, If I could deconstruct the organic growth between volume and price, I apologize if I missed this earlier. Speaker 200:43:11Yes. I would probably say it's probably relatively similar just from the perspective of some of these are project related jobs. We have seen That being said, we've seen really good pricing in that business, but we've also just seen an increase of activity at the same time, which is really a function of now offering the most complete set of products and services in the space, right? So again, we're seeing a combination of both And that's what's really driving the outsized revenue growth in that portion of the business. Speaker 1200:43:42Excellent. That's it for me. Congrats on a great start to the year. Operator00:43:45Thank you. The next question comes from Mike Senager with Bank of America. Please go ahead. Speaker 1300:43:54Hi, everyone. Thanks for squeezing me in. Brian, the growth on the ES side and now layering in the incremental EBITDA from plastic Recycling and the landfill gas in 24 and beyond, does that change how we should be thinking about the free cash flow conversion And the improvement you guys are seeing there and potentially going forward? Speaker 200:44:18Well, look, I mean, we've said that we can Rewind the clock 2, 3 years ago and we were up high 30% free cash flow conversion company. We've moved that into the mid-40s and we said we have line of sight into the high 40 and beyond, right? And we're working on these things. And again, those are some of the things that we're going to do in order to achieve that level of performance, Even while we're overcoming some headwinds, getting into that high 40% interest expense Is a headwind to free cash flow conversion, the expiration of bonus depreciation, which is phasing out over the next 5 years, those are all headwinds. And even in the face of those things, We think we can achieve that level of performance and everything you just mentioned is the way we're going to get there. Speaker 1300:45:03Great. And I realize the regional banking crisis, tightening lending standards is likely not an issue for you and your customers. Do you hear of any issues for some of your smaller regional competitors' ability to finance and buy new trucks, Trying to expand, just curious how the competitive dynamic or even some of the M and A opportunity going forward? Speaker 200:45:31I don't think we've seen that show up specifically. There's probably an example somewhere in our M and A pipeline Of that being the case, I do think it's becoming more challenging, right, just given supply chain challenges, right, We got 90% of our truck. If you were a spot buyer of trucks, right, you're in a really tough spot, right? You're going to be driving that truck not in a matter of months, but a matter of years before you can get allocation on that. So digital, we've talked about that a number of times, that being The second moat in the business and our investments in that space and the ability to service customers and connect it to our operations and core systems, Those are all things that make it attractive time for smaller players to sell. Speaker 200:46:18Thank Operator00:46:27The next question comes from Michael E. Hoffman with Stifel. Please go ahead. Speaker 600:46:33Hey, JV, Adele, thanks. On the ES business, There's a bunch of pieces here. One, can you help fill in the gaps on what contributed to the 3 50 basis points sequentially? And the idea of margin improving, I just want to make sure I understand mix. I mean, if I'm wrong, I'm wrong. Speaker 600:46:53But I thought about a third of this was Fixed asset disposal, so high margin and 2 thirds is sort of billable hours services that are good returns, but lower margin. I'm trying to figure out where that mix goes in order to achieve the target that was suggested earlier in the call. Speaker 200:47:15Yes, Michael, first of all, I think that it's a little bit more, I would sit there and say in the fifty-fifty rather than The thirtyseventy between those two aspects of the business, I think you have a combination of things. First, let's talk about what happened sequentially. So we talked about price increases that we put in late in 2022 as well as early 2023. So certain aspect of that was certainly timing. Also as you just think about increasing utilization as we're actually achieving the cross sell, some of that is that we're utilizing some Excess capacity that's in that system, so it's the flow through of that incremental revenue is at a very high margin. Speaker 200:47:55We're seeing the combination of both. So John mentioned it when we were on the call. Some of the way that we're going to get there is also just by scale. When you take a look at the size of our areas, when you take a look at our 4 areas, they're managing less revenue than their counterparts on recycling and solid waste base, which just gives us capacity to grow into that and leverage that SG and A. So we built that area structure So look a lot like the recycling and solid waste side, even though they're managing less revenue, which gives them opportunity to grow without adding any additional SG and A costs. Speaker 200:48:27And Michael, on the field services side of the business, some of that would be getting MSAs with large industrial customers who We know we're going to have a set of projects throughout the year. They're going to be in different spots, but if you look over a 10 year period, right, you've got a relatively consistent demand profile Their level of project spend, clean up, plant turnarounds, etcetera, that you can when you have the MSA and the relationship, Right. That revenue stream then looks starts to look very recurring versus it's just an event or a job. Speaker 600:49:02Okay. And that's always been the secret challenge or challenge for the billable hours world is they struggle with Utilization of their billable hour resource. So what I'm hearing you say is you're striking a balance on how to maximize that? Speaker 300:49:19Correct. Speaker 600:49:20Okay. On the price cadence for the remainder of the year to get to the 5.5%, can you help us With the mix between open and restricted through the remainder of the year, so we sort of understand how to think about that that gets us to the total of 5.5 for the year? Speaker 200:49:39Yes. So the if you think about we expect sequential increase into Q2 on the restricted portion of the book, then that kind of Hits the high watermark and then it will decrease sequentially. Our expectation is it will decrease sequentially into Q3 and Q4. We think the high watermark on the open market is here in Q1 and it decreases sequentially, but modestly. So again, I would sit there and as we talked about earlier, I guess 60 days ago at this point that the spread between the high and the low by quarter is not that significant, I'll call it 50, 60 basis points plus or minus from the midpoint and that's what we would Speaker 100:50:16expect for the full year. Speaker 600:50:18Okay. And just to be clear, so I got So many numbers coming at us. The high watermark for the beginning of the year sorry, I'm flipping pages, there's 11.7 in the open and 5.4 for Speaker 200:50:35Yes, that is correct. Right. Okay. That's on core price, Michael. Speaker 600:50:39That's core, not yield. What was the yields? Speaker 200:50:42Correct. Speaker 300:50:43That's core. Speaker 200:50:43The yield in total, we don't break the yield up between the 2. The yield in total 7.4% on related revenue. On total revenue, it was 6.5%. Speaker 600:50:53Right. Okay. Speaker 200:50:53And again, if you're building it into a mop go ahead. Speaker 600:50:56Yes. No, no, go ahead, please. That's what I wanted to say. Speaker 200:50:58I was going to say the reason we do we break the 2 out is that if you're building it on a model and you're using the base The entire base period revenue, I have to use the total revenue number. Again, we disclose the related revenue because we don't calculate price On all components of revenue. So again, if you want to get the true effectiveness of our pricing programs, that's why related revenue is applicable. Speaker 600:51:20Okay. And then John, you made a comment earlier to answer your question, it said 6% and I missed is that 6% inflation or you thought yield would maybe land at 6% by Speaker 200:51:31No, we said cost inflation we think throughout the year, right, will be our end up around 6%. We're originally said going into the year 5.5%, right. So we're seeing a little elevation there primarily here in the first and the Q2, but again we're pricing ahead of our expectations as well. So we're getting the performance that we expected, just a little bit different path to get there. Speaker 600:51:53Right. Would suggest the guide of 5.5 probably works its way up to staying on top of that. Speaker 200:52:01We'll update you in July. Speaker 600:52:04Had to try. See you in New Orleans on the weekend. Thanks. Operator00:52:12At this time, there appears to be no further questions. Mr. Vander Ark, I'll turn the call back over to you for closing remarks. Speaker 200:52:21Thank you, Vishnavi. I would like to thank our 40,000 employees for their commitment to deliver an essential service in the markets we serve. Our results are a direct reflection of the team's ongoing efforts to deliver best in class service to all our customers. Have a good evening and be safe.Read morePowered by