RSG - Earnings call transcript Q4 2018 | Republic Services, Inc.

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Operator

Good afternoon and welcome to the Republic Services' Fourth Quarter 2018 Investor Conference Call. Republic Services is traded on The New York Stock Exchange under the symbol RSG. All participants in today's call will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. to President conference Treasurer. of like Giandinoto, to now Vice Senior Investor would turn over the Nicole I Relations and

Nicole Giandinoto

afternoon call our Republic for to you our discuss President conference and like everyone I and Slager, we joining different Good like Chuck I would me CEO; would may we to forward-looking Serianni, today's that discuss call. of performance. joining moment and remind Don welcome take are fourth Services' involve us. our to to from and which information quarter some the on CFO, uncertainties, risks contains statements, XXXX a everyone thank as actual and results. materially be

quarter and had new standard XXXX. a want of and tables; a release SEC I the Services January of forma materially original press time-sensitive. be schedules as Republic is include The the that to at Xth, today the sensitive recording from Inc. is we note call, republicservices.com. without discuss filings of Republic includes pro strictly retransmission, of revenue the activities, rebroadcast in to call, Any date revenue are consent If Please that our you this this Also expectations. costs this should available Services, fourth cause SEC Our GAAP redistribution, February written reconciliation on discussion with unaudited of any to or XXXX. of factors our website release, differ included that the call material is supplemental adopted discuss the future this form along conference out point or could in recording prohibited. recognition property rebroadcast Xst, is press a are Republic's of you filings; business the of which listen our all to in call, we call which view that actual express that earnings results of XXXX

forma are versus based all to which results. figures, XXXX prior During today's XXXX year changes references are to comparable call, the pro on the

Finally, team With are to times to scheduled, Republic's management I I posted our call turn website. participates would conferences. want dates, to remind the and like Don. in you presentations When on investor that, that are events the routinely over

Donald Slager

afternoon Thanks Nicole. Good us. thank for everyone you and joining

We despite are very route short-term, shareholders and shareholders. executing acquisition cash strong $X.X the acquisitions, transform improving in $X.XX X%. our to mitigate our guidance our business, XXXX negative was in returning guidance return exceeded was these was our plans waste capitalizing was over end this upper shareholder $XXX to cash finish investment and a both X% pleased The solid range. and results growth, price line total volume with through We from with drive to flow headwinds density to range. billion, recycling compared cash on to $XXX strategy the business. and while Full return XXXX. our return by Free and advancing the of $X.X EPS Total accomplished billion million the our was team efficiently million. to delivered our long-term headwind strengthening of to and Total XXX's recycling the trends position, S&P year market

delivered assets. double-digit earnings and divested million quarter invested value-enhancing million fourth to $XX non-strategic acquisitions, share, in we Turning highlights, growth $XX in per of

average X.X%, yield highest share through Throughout pricing repurchases. of returned the fourth also X.X% We level in and price achieved $XXX quarter, be continued to million dividends nearly to our core of and the We pricing shareholders a environment favorable. decade.

to enhancing We our superior experience an attribute laser focus these also customer on all-time service. rate and defection sub-X%. We low customer achieved the accomplishments of delivering

or X% waste index waste-related of CPI. converted more continue XX% closely $XXX increase representing than successfully run or our million a contracts, of and higher cost to indices our to aligned with These structure we greater. fixed are CPI-based Additionally, rate

also the volume our continued underlying During we to growth disposal see quarter, in businesses. collection and

Excluding total increased over year. points special basis comp, the volume non-regrettable and the prior losses waste XX a impact difficult of

continued in Our increase improved processing recycling costs the and fourth fees. business quarter. also The manage tightly to team collection recycling operating and

current to As a market economically expected, the catalyst serve durable conditions business. recycling a us as transform and more into continue to sustainable

quality next-gen items we it Additionally, We a next-gen that first are in we allows us sort can positive includes also our processing environmental we Texas. learning residents where and call traditional the items recyclable, processing higher here, that remove are so square-foot learn leveraging the and community, X,XXX because technology less recyclable. labor. to to are primarily way to a center for with opened their resource reduce impact. produce extract unlike configuration product Plano, recycle proper sort recycling not This a The facility center, center state-of-the-art

model. partnership is our new business with of Our of City the recycling an Plano example

majority an process appropriate enables in the an technology our commodity is the material the on structure invest to the to while contract of back return This paid appropriate are to earning community. fee and We new rebated us value investment.

impact in we components. the this Trucks truck we Mack with integrated announced design to in the our fleets operate vocational of are one diesel continuously a our to trucks. and the evaluating garbage electrification Earlier economics, test and approaches fully U.S.; performance, partnership Lastly, largest improve of zero technologies week, and environmental innovative given propulsion

discuss efficient results this result an to proud significant detail. quarter with a towards over and I'll that call step greater will be more fourth are now cleaner, turn Chuck in We the With in partnering that, even financial optimistic fleet. Mack to our to

Chuck Serianni

$XX $X.X components or and points. quarter prior X.X% growth an This million approximately over the of year. follows. of of are Fourth increase as includes Don. XX internal growth revenue increase of basis X.X% acquisitions internal billion, was Thanks The

container Total X.X%. X.X%, post-collection which of X.X% landfill average was First, yield level in our small the of large yield was The majority price, the core and in residential included is since and seen MSW of X.X% market Average third-party with was X.X%, yields increases MSW portion business measures rollbacks, of pricing open in was X.X%. price included the average was that business X.X%. X.X%. containing which of the business we've price our highest customers business, was which restrictive restrictions. have XXXX. municipal X.X% of increased and Core landfill our collection less X.X%, container In contracts

total The component is internal second growth of volume.

As expected, XX total basis the year. volume over points decreased prior

intentionally volume non-regrettable impact which This as behalf small growth non-regrettable. view includes on a the certain performed work waste container anticipated. of basis have business we basis Excluding from difficult of basis point Volume would in points losses points. special XXX XX been brokers, decreased XX comp, and as our shedding headwind

Excluding basis Volume that have these our increased XX And container our large losses, below certain increased decreased XX to small return basis business points. renew residential X.X% container in not to contracts volume criteria. business points. our our fell due decision volume would strategic in

volume C&D XX.X%. In Next, special The volume in and landfill Landfill a volume. waste decrease waste was XX%. while turning XXXX, and to grew due and the special increased to C&D C&D both MSW X.X%, waste difficult volume decreased prior year. over special in decreased XX.X% comp

gallon. gallon recycling fee by our next versus the quarter we fuel activity a from to number It's processing The XX this XX%. average points. fees, the lower component tons The per decrease fuel. of energy to revenue, was of revenue, XX in in note diesel out with basis the prior primarily customers. not average points current diesel fee the The price The component our of offset rolled growth an $X.XX price commodity $X.XX was XX pricing. cost year, is increase This benefit. rise of component, prior Permian and sold remains The contributed market increased well-positioned, $X.XX internal processing and year, points in drilling the services expectations. yield are to growth In new where of of to collection the is in basis recovery final This include which the that fuel partially is change revenue recycle which due X.X% third prices. does of our the per important relates to steady. average The decrease increased fourth which recycling basis recycling internal open of in in was commodity decreased line flat Basin,

per prior year. the average Excluding XX% the prices organics, commodity in $XXX decreased $XXX in fourth ton quarter, to glass ton down per from

margin Next, $XX to discuss recycling points In non-cash was quarter basis from XXXX XX day. $XX offset million, and point included and additional quarter, changes interest which was fourth I expense XX.X% a from the basis will by which of prior waste from of year. headwind Fourth work basis headwind margin. a solid amortization. million the expansion adjusted point one from XX in the XX EBITDA points XX basis decreased in This included business, XX.X% margin

quarter EPS effective from and fourth an all-in related versus that increased XX%. XX% Our tax $X.XX the a benefit tax prior charge to credits. $XX approximately a was non-cash was Fourth included or tax million of qualified This for quarter investments includes solar rate energy EPS adjusted for $X.XX XX% tax and rate of adjusted $X.XX the year. reform.

for cash flow benefit, better full billion XX%. working XX%. anticipated year would free conversion to this than Free cash $X.X primarily capital. flow was exceeded improvements expectations EPS and Adjusted the have in cash Excluding increased was due our

a This by to During DSO one-time and the cash approximately free improvement year, DPO provided we improved both days. flow. benefit two

to like is highlights the we XXXX review October. which consistent of I'd our provided guidance, the Looking with in ahead, outlook preliminary financial

our adjusted to be to $X.XX. taxes, for range year, growth per of guidance per After earnings For share. we expected in normalizing represents double-digit the $X.XX share the earnings in

million reform. million free flow capital approximately in $X.XXX a the adjusted approximately expect cash investing our flow to $XX of we frontline $XX billion. our employees capital for Next, are is incremental benefit of working and headwind free as result $X.XXX tax of cash of a we Included guidance of billion

X.XX% guidance single-digit Total revenue cash these our expected is to flow per free represents items, Excluding annual be growth share. two growth to in X.XX%. high

call make before And $X.X and We our $XXX acquisitions. over $XXX to $X.X million total expected business. share to approximately Furthermore, dividends XXXX $XXX given I'll the we the a adjusted over to to investing million margin by turn expected current are Q&A. net now capital expand expenditures strength to we closing finally, EBITDA in demonstrating to return Don billion. be leverage going XX of in expect basis points shareholders our billion comments anticipate cash few pipeline, XX to to operating of tuck-in repurchases. back million the XXXX, of to of

Donald Slager

Chuck. Thanks

and simplified finish recycling executing and the our model to year, seventh price the capital strong in what use XXXX. through by the continued enhance our durable, shareholders growth best our cost more to growing fund customers operator, experience, profitable, to the growth organic increases and to transform for securing a leverage positions effectively as us operating always, business campaign. customers volume retain through dividends to this this to strategy Our attract like repurchases. invest additional be drive of the and for excess pricing to growth, through We'll differentiation to deploying recycling efficiently, technology. straight profitable of finally, inflation, call achieve At And I'd cash questions. well our We'll on value-enhancing year growth time, our consistently to in of fee-based the municipal open people, educating share recycling returning the recycle customer and continuing how and by transitioning and through in

Operator

Thank you, sir.

Please Tyler question-and-answer now Brown from And We ahead. the session. Instructions] go your [Operator begin James. be question first of Raymond will will

Tyler Brown

good Hey afternoon.

Donald Slager

Hey Tyler.

Chuck Serianni

Hey Tyler.

Tyler Brown

Hey.

that see commodity guide. to sales XX on I basis in guide fees, expecting points processing the the positive XX So, in you're

So, the came clarity? processing but yesterday prices. -- that fiber I some it's in dip you've you think a out showed on on push got that fees, one data little unclear. I Can the just hand, surmise RISI I give a guess, us a continuing

guide? recycling the assuming Specifically, are of kind what you prices in

Donald Slager

the you middle of normally so guide the bit year, know how we'll bounce the time, the at feel -- it works it'll the $XXX. we it's has rate. through is over year. a about this about of right average And lower cycle now back I the but right thing than that think little Yes, that if through of sort

So, underprice number. in the

Tyler Brown

Okay, probably you and dislike it. as much asking Don, I that getting question as know dislike I

think might really generator? the waste price from you Republic do think vein, the for really, to intents changes, long itself down that in and so, how purposes, do if inoculate time, will over process all eventually you that pushing And commodity that, risk So, take?

Donald Slager

I we're term inoculate, about your so all Well, that. like that's --

to is doing. new paid live what do say So, this right within for paid if we're in about cities for right, I good environmental comments return in want to bear increasingly benefit the got with. burden, appropriately them. be which get get think committed the they We means contamination. City that in used to the it contamination can we value example a responsible, that of you of get left function appropriately, Again, the And and customers easy have part. to partner want a those that there for that customers We're over, that that the my be is fair. that's do we we the an for don't and contract to where recycle. end, the their communities on commodity made that's of collection, and our contract to the appropriately less for is believe way Plano, with to processing, the a But we've to what's be customers That's

going so that work And has from described. profitability perspective, true a that I sustainability investments forward recycling just only to have in and we're a like making

to frank, we've conversations So, we're right? there's with all had of having success. X,XXX And be contracts. customers, of kinds our So, all

terms have Some already new that agreed immediately work. to

us this Some have way. kind of, point, told no at

round think let and some it. in second third me We're talks. about of And said have the

push continue are to to this. We going

think, think us. for front up any way trying operator macro global, frankly, we've be, the to sign in of recycling when have would big, old thing to idiot an a word, nice I I'm this got to of

the going more XXXX a a But of going they record and tell So and that's And confidence. in great to team have of model. one problem We've recycle great us did kind carry that's XXXX, job. success XXXX, great in ton anniversary the XXXX. in the We're reasons I'm change people here. got of broken forward to work job to we want going continues. did The we've than XXXX the and around into the to we're and a done a work isolating

two -- to You're going $X they're is homeowner more about to have have have every give going minutes to and a to about us us week, to to give going us pay good their a provide we're glad more we'll be they to recycling trash day because service instead really don't at And service good, of want to do that. of if that, responsible time.

Tyler Brown

that's really the then to Yes, And one on right. one All good. XX zero guide last volume of just bps.

think I has comps. lane. coal thought puts were So, environment. and takes can frankly, And I just you special the of some largely feel waste there? big any doesn't it talk through the about you broker mean, like real I volume don't really a zero

Is -- you can driving more just that that there is So, outlook? just Thanks. conservatism? And or talk about something what's idiosyncratic?

Chuck Serianni

a the associated that from waste XXXX XXXX. special into there Yes, is have we back with headwind going

volume volumes, to done you those quarter. to at equation, why of one growth And part halfway remove of the one that's a of year, is growth more But and reason broker be about the the volume to the of if that end volumes muted. out that So, we're going in is event with you this if shedding brokers. extract closer

Tyler Brown

you. Thank perfect. Okay,

Donald Slager

me On we've get very some top we're we that, that. and got volume. add price trade-off of we can being here, to So, price the strong too, Yes. understand And pricing, right? and about intentional of let where

So, for that instance, you Tyler. roll-off and our temp so know business works, in forth, how

a let So, that give is of -- if see demand point price extra purpose. because little there, -- might we we for go we might can get volume

Tyler Brown

Right.

Thank you. Okay.

Donald Slager

Great.

Operator

Maguire Please from go be next The Sachs. question ahead. Brian will of Goldman

Brian Maguire

afternoon Chuck, and good Nicole. Hi, Don,

Donald Slager

Hey Brian.

Chuck Serianni

Hey Brian.

Nicole Giandinoto

Hey Brian.

Brian Maguire

looks we're question range, little business in roughly I away XX% CapEx that past, up less actually like more routes of the trucks sales some sales. your like bit to like if interrelationship I some we're of volumes thought, the be that And productive doesn't from walking have the to But getting of, would of maybe have shifting more the broker routes. thought X% productive model CapEx being growth. residential would from it will XX% be come business the in volume on Hey. appreciate going totally XX% It to meet a or again return A because some XX% and reductions and hurdles. and between just CapEx seems in with that

me can be this kind could flat is volume that being you help understand where heading it of why so maybe a where number high? CapEx in over time So, and should and spent environment, be

Chuck Serianni

Yes.

business included that going mind the of back into in keep to that So, money, associated reform, frontline benefiting that in I and $XX the guide, CapEx said, spend million there's we're we're employees. calling put with what tax that's as

So, if XX%. that's is basis, line what with kind that the with of which up which told would XX.X% The a -- to right historical what Street recognition, to end is you we post-rev then CapEx we've you try out pull on is, where revenue, at closer of of is you and closer equation, in that be

believe our be. So, that's with line right in our should we -- what long-term average

Brian Maguire

be will the spend year this on outsized that stuff? employee of And with last sort

Chuck Serianni

Yes, $XXX we've year, we XXXX. that to keep we're doing talked mind about going going But we're million back that tax being thing. one spend into have reform enacted where first about that was -- we same to this XXXX, got more going QX in when the

Brian Maguire

us like a and then line just outlined on but looks a if little the EPS than one -- little Got in I rate your general be And was tax me guidance. about XQ then was lower is you just tax rate with kind of I for it. more in the that the you lower. earlier, XXXX with what may guidance. just thinking in could help wondering appreciate it

think, I XX% that. it confused wrong, before. XX% that it but I'm Just a little reading Maybe versus, was on like seemed

and just takes the So, puts trying there. understand to

Chuck Serianni

in tax from come making credits in our projects, reduce to investments to to able solar effective benefit both utilize but and cash to again, that that in going XXXX, also with rate taxes. so reduce we're these XXXX our that tax Yes, we're order we're

context effective you, those below So, our are included of a those that projects tax if rate we was XX.X%, together, certain solar XX.X%. rate, charges right? non-cash are then items net then just put closer to to So, including think income, tax had just with those, XXXX, both associated the operating that for in about two and you

tax about to As we effective we is our related XXXX, projects. those into then have XX.X% non-cash and solar go X.X% in rate charges

together, a two those put with XX.X%. you if about again, once you rate up end of So, tax

Brian Maguire

it. Got

you're EPS. So, include those going that in that you're non-cash -- in to charges,

Chuck Serianni

our in yes. included That's guide, EPS

Brian Maguire

Got it.

laying so Okay, XX%. to that out

Okay, just checking Thank that. on you.

Brian Maguire

Welcome.

Operator

The will next Mazari from Hamzah be Macquarie. go ahead. question of Please

Hamzah Mazari

Thank What's you evening. question the is My cost you. in to because labor guys labor but you around is cost lower shortage. employee baked guidance of managing there? Don for cost just driver wants Good are into any your specifically, for just work Slager, turnover realize side, every I inflation? terms how inflation, thoughts

Donald Slager

for think, Yes, is maybe shortage our two we've that. inflation, half got issues. we some just We little so local XXXX have Labor be there's labor will of do where range. pockets kind that overall because economic and a in than a higher

investments little flat and the a essentially hands. with still It's be the is sitting environment. rooms, some locker turnover year-over-year. around the improve bit We're Our expected. that's We're to up cetera. facilities, on hard mentioned facilities growing Chuck in our training et employee making economy, work specifically of rooms, working we're to not

dealing costs goals haven't impact waste with But job our with some got transporting historically pressure around doing we're team. we around landfills. our There spend in procurement labor great are will with They've some and looked trucking, year. to there's our our from in that categories that. this We're also which a So, long-haul and at. transportation

manage But retain attract and keeping we'll raise to is are that isn't year-over-year to public going and people, to we're I something there for. flat really of to because to works is treatment to a part working leachate year, the us But Landfill into be our all technology that so well. good about in the expense on disposal. affects driver that another and to people changing we track. be it's So, or and of prices The best find what think and leachate in think night. those, savings ops in That's it's can through business. their the shortage, changes on going that's something, we'll is price been I some and story. just speak, going at POTWs this up something related We're to can we starting dig as be again, leachate hard

of costs. And price so I those you'll more some see action companies likely, turning think, recover to than kind more to of some

Hamzah Mazari

Great. pricing or Clearly, so. that I this guided because XX you late pricing, space Don? don't And the versus question, the pricing this different since to price feels Anything that's environment you or prior are waste changes know, just the on downturn you you. lot like prior in to highest follow-up just downturn? see X.XX%. is my XXXX on Any It there's environment last, this of guys years thoughts different, a Thank over in how or cycle.

Donald Slager

guess, better when up this, I'll for say industry that. decent the look, I organic I've always said Well, that to environment. good, is pricing growth sets

decent So, before. reason think, didn't in intensity, The better. pricing organic increase the tends price I of there's to a cost, be business, capital they when that overall complexity have maybe people to gives capital growth,

moved our CPI derisking our that in up alternative a bit. us. and CPI to has So, indices work Certainly, portfolio. we're lifts for favor, little that us moving I'm

us benefit to going forward. that's So, going

question index, That's said alternative fee Tyler lift. has lot to processing help. the got to new that Moving and work contract going implemented. and million That's around hard a asked, been in we're recycling converted. that $XXX of recycling book with we've add that The doing to now going doing renegotiations pricing. we've some We've of we're

XXXX. -- so anniversary frankly, yet, XXXX under into them through of build some them aren't got we some time we're things run implemented have And and to still these fully and

there's we there. of fair a upside think So, amount

at pricing it it. relates lot got customers, a us to better just We're smarter we've it. As about

customer's a history We're don't would on experience, so spending customer which again, of of can believe and tell the lowest the you just raise is overall I you lot in down Our a the sub-X%, that, price. time defection company. that's

I think raise you've got to a customer's to willingness pay.

on so our going we're to think, I products, things, we're levels, improving us continue work fleet, service business. give to front people working having All in the best of our our improving those things, power the certainly, meeting on. lines end, And pricing our on our improving the those further and service commitments,

again, So, as XXXX. can said, last in in been years Hamzah, these you XX pricing the quarters. through few pretty we best building It's achieve We're confident levels basically.

Hamzah Mazari

Thank Great. you.

Operator

be next Oppenheimer. The will go from Kaye Please Noah of question ahead.

Noah Kaye

Good afternoon. Thanks for you Always about ask taking the question project and outlooks. great electric wanted to and to the I hear about trucks. solar nice.

the You're you has on numbers assumptions, in or in volume, light final of your of situation. anything dynamic cost it's components [Indiscernible] the you. what reiterating sort side? whether expect And to the M&A months I But last macro changed ask still consistency of have within Investors in price, surprised and a the November by the outlook preliminary three be very The look from that is provided I same. think to some that.

Donald Slager

longer last the macro year; our no a changing wringing time on thing. we what's spent China. over to Well, China We're is, hands lot dependent this of

lot to Our opening team's moving lanes. a done of new ports, material new work

is All recycled our material ethically. collect handled and that of we

hurdle sort the model. we're a operational So, of that, of settling we've new now and overcome cost into

a we're always population there. with drives growth already So, described working doing From perspective, grow said business housing through that we we've I've formation. growth formation, right, what and that

and see us consumer we of long So, growth kind future. think we good, is that's generation, job good for wage to that's for spending there's sentiment the same continue and growth, start as growth as grow housing population number there's there's the to into enough waste and when right? So,

Chuck good of we described that. spending. capital the So, some about feel

trucks got with our the or -- tax $XXX our very, to the drive government managers the improve fix up staff. we and garbage is employee landfills. million, $XXX is guess, are when And for women morning very from trucks consistent. -- or Our customer who Other the in and and and to spend I we CapEx men This reform, not at and million improve at than facilities. offices for hard-working to frontline, garbage decided these gift so two general work show our

improving we're So, real concerned a we're those their so money about are people environment, for good spending most cause. the work really

So, but surprise because not that's you told we that. about -- a

one for predictable. said, So, a bad you very, the business a moving, because is it again, thing but which is as slow hand, it thing for on is moving, maybe slow makes you it's good you, which

headway customers our be the depend right move taking it great again, on guidance will on gave good It's how on a our that we How is in business. is sense depend we So, competitors well handle fast But customer examples can going a common frankly. are really outlook And resolve of other business? It'll what surprise on of got pretty XXXX it's written then example approach. and to making greater the to remarks. going the change good market anybody great shouldn't preliminary our sentiment. That's what to adjusts. and in on an top a where recycling forward? on And do than ever been, because I my we're restructuring some making going depend

the good to about really got feel business. team here and great solid a So, we're off a we We've start.

Noah Kaye

come suggests growth the containment. for obviously, struck deceleration first terms improved three year we XXXX Because, kind a cost that's to the that. in of just improvement back I Thank we of lot forward? a you you you and a your think benefits of of X% of line. significant quarters labor over Anything labor containing by what about were going of for those labor year-over-year. just Anything inflation. And an would saw in to kind question, the could success was suggesting up of to Expenses cost the costs? point are and really labor sort Obviously,

Donald Slager

labor that productivity, hand I'll They're to Employee engagement's off said. around really on on deal big kudos safety. focused our a and -- as look, here operating Well, efficiency -- to I leadership.

I a that think respond, employees a is every our that year. employee we're does probably the only of engagement solid of world-class which XX% waste double nationwide company. survey company

high. are Our employment scores engagement

if or us best this give think. and that It's think we'll make respond. earnest place great that a are people us genuinely slogan. they a deal. really We trying to to I trust work people we best helps in to and their Our work, the listen come opinions, we'll what just really not that's And the

So, the echo organization. leaders that and our -- operating throughout again,

So, things it. do I we year, benefit a little part think that's Again, get the year. every from last of we

can we the fleet. to residential continue So, automate

what all continue makes do now They One efficient We to we more areas. about investment, the happier mean more it One improvements trucks Fleet time make other That and off. to mean Fleet reliable. us talk continues trucks. don't we part anymore. it's drivers. of in more Reliable pay But

So, on year-on-year-on-year, changer, keep for and them launched game the of launched itself really difference and while new three and combination the it's and sum just maybe years parts by Way of we things better two to one us. We not at things, going we're Republic is the of sort the building the that get ago. a make we a

to that. So, continue we're build just going on to

the think. I compliment appreciate So,

Noah Kaye

you. Thank That's right.

Operator

from And Please the of be Eastman question Markets. next ahead. go Sean will Capital KeyBanc

Sean Eastman

in investment front. I on to Hi Really The normalized wanted just questions. group That's a above to be $XXX touch to planned Thanks seems again, the guys. indicate my expected. lot excited million an joining year, here. M&A for taking the XXXX.

we of underway good upper with a So, usual and idea Or see in singles range the just your doubles? the discussions of might size? is terms end that it the the of targets. hoping probability of target something Is to an towards there get profile

Donald Slager

great with a team. wouldn't because it. Again, it, we got it it good We've while unless sellers for got unless we've now to place depends, you're and business. all a we've company, strongly don't we place a around pipeline buy. if you of likely you in and go Well, So, right? an got somebody again, pays really in a could pretty all we you that deliver a for and right? lot people the we arm felt got great been not $XXX who've a development And companies are we sell sending good these So, great tell leg look, million

know to they're sizes all of at our write to job to deals. part got that work And fruition that very and some companies their where be of a appetite personal know comes in have to our your the moment, time or in network. a and out event, life an you over to a cycle sort someday for check. consistently year. something the we've We're monetize comes to we've able love multiple to not able And to business matter really the done to some really plan overpaying keep for consistent it we reach your companies. cycle when -- happens, time buy it's is be be the to we've life And So, else owners, not there or that's or And of good and where opportunity kind time. when of you it's years, the lot life's nice that. built deals. been up your a some just over do momentum of companies whether are of few We've last we'd really our life our It's there, big

seller's integrating at And we're kind we're good ready. very of businesses. when it's like So, ready, the

look could the see in flow work over We're three so most first that very comfortable space, an right at acquisition we're doesn't or those foremost, into new use company going that. opportunity ROI And we're, at and deals. good and value compare our the to next at wouldn't best look create But be have very cash opportunity activity, mean again, and what time, or go to kind stock. look in tuck-ins buying we because intrinsic market some years. return, the about are, us you'll We at in with on these we always the market. If we're least always integration there value diligent there of brand-new would trade-off. contrast But lane. And vertical at. we'd look our quickest our we multiple the two and returns. and It that might better of focused and E&P buy the or to we've the in around cash more at risk, own over stay the We a with of a scale of and lowest got

buyback, and been to think a of be, kind formula. keeping structure, is acquisitions. cash more of needs dividend, our this keeping strong powder kind balanced allocation, approach having It's a of plenty where to So, it debt we of capital do our

Sean Eastman

the have just that. appreciate I on it. Got one next I And is the differentiation strategy.

You power -- guys hoping some finding customer that want getting a you're understand customer that were additional about I better. been to to experience, speaking maybe you have talk bit anecdotally you where through the I pricing strategy. willingness to pay. just could just guys was

Donald Slager

Well, effort. we've a lot had of

effort know than customer Our of a to probably more gaining for lot insights what us really those things. to competitors customer marketing of want think, they groups what on spend and into We money prioritize insight. they getting our in put any

Some on the surface pretty of don't. of them them obvious some seem and

a there's So, learning lot of there.

we're for business easier well. at business digital we digital a We worked at to price subscription going door-to-door. a in looking if to looking opportunities. at it are were that company. do into new quite the actually We We're higher comes And coming ways do channel with has -- than make that business channel have residential

So, people convenience pay reliability. willing are and to for

safer and you'll their more digital pay customers. the we talk that it digital so but not only make more trucks, time, because to we in lives want to to more the for through customers willing makes more digital to go connect and we more us easier. operations as hear in us And digital as and efficient about are And think and

pretty safely that that. we're day day it on do hour, then one, ground off continue in right good the a the to job good do right is So, the to every the at environmental and too. And partner, we'll though, get and be garbage

Sean Eastman

and really Okay, Thanks the very appreciate great. much. I time insights.

Operator

will next Please go Michael of be the Stifel. And from Hoffman question ahead.

Michael Hoffman

Thank to XX as SG&A or you work us of we're we and operating this see leverage? basis of this with business Is OpEx for going OpEx through model mostly taking operating share leverage? questions. in effect the the of be to can mixture going the to points you the Don where that XX

Donald Slager

look, the so into say, me I people put to much that We got for cash We the XX,XXX We're we've on hear we on reason XX,XXX mostly we're just the that OpEx, a getting right? two Michael, them and and Yes, all to But constraints. only you and plan. savings on it's still flow. I got every year say, always a trying lead mean, have SG&A this, cash say will to to mean, so take horizon. One in direction to don't we I is want some work buy can is initiatives much at time. employees. to change

right? years as then we can't to that overload them our so side do many couldn't going on beat well. momentum got where to mean, too now new we're benefit pricing, And there's we Years and price and with things. I inflation. But we do to and that

hand those So, happier go hand. -- mean customers, things pricing. Better better mean but in operations

Michael Hoffman

growth starting base. million, And then years on cash that flow, $XX spending working over talks I'm to invest about, thoughts what's I what's the million, If with? capital the the flow. into at that And of so $XXX sustainable $XX something rate? that is we employee strip timing growth flow cash in about quarter. think the do in get Your and sort appreciate how away free $XXX about baseline million million the $XXX three million I free rate sustainable one, cash things, I

Chuck Serianni

it Okay, this let Michael. me way, explain

billion for -- to one-time reform that in back reported million, I capital and which we about baseline. billion end take would then nature. tax you million that $X.XXX you mentioned of $XX flow our then free investment XXXX, and I working that out And $X.XXX believe a If would from you cash capital, be so was with up $XX consider

gave that X% guide year-over-year. about cash flow free at that's XXXX, that look you if then a in So, for growth relative to we the

Michael Hoffman

what I get talking at, is X% relationship. a is If I'm cash sustainable was top, of That's X% to at kind probably getting good good the about a the that's trying Okay. the number. at a

Donald Slager

Yes, right. that's

Michael Hoffman

Okay. housekeeping. EPS -- What's a your maybe more go And share ahead, count thing in just guidance? or And from your sorry. -- one then two just

Chuck Serianni

million program. of during decrease about by for of year the Yes, so executing then the because this we'd repurchase is X.X% count shares. share end to on the XXXX expect that share -- XXX And is the

Michael Hoffman

in to total is then that the all so for And growth, X.XX% Okay. is X% rollover? X.XX% acquisition,

Nicole Giandinoto

it's rollover. in Michael, year and both

going So, year have the little we're $XXX benefit million this is we of to that us a investing do this bit year.

Michael Hoffman

Right.

the kind I that's done to those upside is So, get number, that if what at. earlier, getting was of

Nicole Giandinoto

Sure.

Michael Hoffman

you. Thank okay. Yes,

Donald Slager

Michael. Thanks

Operator

Silber be Jeff question ahead. of Capital Please BMO next will Markets. from The go

Henry Chien

Henry calling It's Jeff. Hey, for Chien good evening.

margin thinking any business that follow-up earlier just and there make natural areas of you to about on sort on the you wanted question leverage, the similar Just you're maybe in could was where thinking the cost your I mentioned are remarks opportunities are how operating that that in of beyond prior technology that your structure higher. structure long-term --

Donald Slager

long-term? your What's of definition

Henry Chien

The beyond so next years, few next year.

Donald Slager

we have Fleet, out moment a be mentioned there, we much So Okay. measure Fleet about right? of we a standards. Look, come upside bit. fleet a we there'll business, a when just anymore. like One I something today, right? we'll better day the trucks talk quite Every under where of into sort that been Obviously, is in But term. lot there's than don't long even new do left it One the it situation have Internally, against we have and brought banner, will in. is all that truck life but have the

of of but the effort this technology going We we've that's Some on thing this like yet on that, on in to testing. this Plano because has we're facility. and robotics with recycling the technology things excited talked technology, little we're future. technology our new we're bit beyond about in that, spending place But next-gen why a that got Mack early a tell, of sort There's sort time right? too about EV real some and

this. tell you So, will I

as in and going operations initiative, the of sort to our get where a point, on you there's at is involved talk too be layering and We're because a working comes strategy. kind we'll involved technology with conversations. to digital away evolving soon is lot tests. it and we're have there's yet that it run formula, for we right there'll to magic We're with of it's digital we the in it, what that know it. do a in pilots more talking and moment to about can. involved of and And be I we'll platform guidance. more sort upside But And But more it. then lot realization, you our future think want I of into our we're wouldn't when of here, we're of opportunity be pillar that about fifth now

Henry Chien

Okay, great.

Sounds much. so Thanks good.

Operator

of First Please The from Steve ahead. next Analysis. go will question Schwartz be

Steven Schwartz

Good afternoon everyone.

Donald Slager

Hi there Steve.

Steven Schwartz

decline If typically to looks you, in here fuel noted pretty past fees, first there's several remarks, that is sequential continue I quarters. faced think which know costs something of fuel quarter. a cost, between in respect recovery significant the your the I could that a over on I certainly your like And in just prepared question with you that lag recovery increasing

So, look some for as color versus your and XXXX give us fees, we you cost those can there?

Donald Slager

the at story of a -- have in some volatile. pretty of I recovery de-risk is because think don't somewhat to of the fuel a is Well, prices. fuel sort start. fair let Fuel our against isn't a history me equitable built-in itself times It's create hedge fee fuel been our much recovery vehicle frankly and of that to purpose by fee

with the long-term, So, while a of us. doesn't offsets for up hurt and doesn't at It just volatility. our it help much really of It the go and that That's a havoc little mindset. does over times because net-net negates it lag, doesn't and It down of do play us. margin the us. can sort

Chuck Serianni

tax fee of couple up a really then that we is add to would CNG One to I And credit. Yes. fuel that's that the due XXXX. anticipate And what in things. is

in a that ended about rolling we $X.XX $X.XX that XXXX you us up a goes -- XXXX away. OpEx so of hedges also, place providing tax, in then had if that off. and benefit benefit then for during So had think some And in

in expecting So, because it a than of in little that, bit higher we're to fuel XXXX. be XXXX was

Steven Schwartz

Okay.

that words, wouldn't XX basis difference significant the you your from you any have into guidance revenue for So, other points in expect fuel. that built cost,

Nicole Giandinoto

because that basis XX have I correct. cost if about corresponding the the increase, you the And might up; bit only isn't Yes, that's have CNG tied that's it, the mean, credit you'd think a a in to the fee. points little disconnection recovery fuel maybe you there. tax more revenue goes

Steven Schwartz

follow-up I with then extension, the again, on is just, had discussion my my your essentially, second think, volume. an question, declined. XXXX, Tyler Through you once Okay. And of that volume

happened do comp through a in from guess, going opposite kind to XXXX, of volume standpoint, you or in in I expect your quarters, through what So, play out to mirror the XXXX?

Chuck Serianni

Yes, say I skew numbers to would quarters we that the I in little relatively bit. volumes some close would thing say would That could of it special waste coming of cognizant and only that are happened would heavy we C&D the landfill. The XXXX. be had need a what especially where to into volumes be our

Steven Schwartz

Yes, yes, XXXX. of first Got. quarter

Nicole Giandinoto

Exactly.

Donald Slager

Yes.

Steven Schwartz

you. Thank Okay.

Donald Slager

some add just to that. I'll color

some not fair to We don't well going we business. no that at going no a the same municipal going all from there away we're than there's number, away maintain good That's That's in out the have or this We continue. of was return that, reasonable baked to good it to time, for walk from contracts. share incumbent, perform that got great So, know the contracts for the we're very we've think our to different team. a the into sales and when in winning know these some XXXX. us. new that's tools probably some discipline costs do efforts things, and business. pressures. walk right? frankly, a have we're the and And our sales on, We're a growth incumbent And year know again, outlook with so our handle good we're all we profit We and we sales

of behind got on to you net. that. That's understand net sure going you So, make the scenes

the the So, back and we're utilization assets in the looking into parts these business. move contracts for equipment bring our either of other around profitability teams to or to

we that's So, guide the have.

Steven Schwartz

color. you Yes, Thank the for okay.

Operator

ahead. of Bank question next be The of Michael Please from America. Feniger will go

Michael Feniger

my Hey guys. question. taking Thanks for

in with about XX the backend-loaded? still the Is this can comps there to should pretty me you basis tough how think with quarter? XX cadence we help the Just points in Is XXXX? -- recycling margin quarterly first expansion

Chuck Serianni

it's I the well entire pretty year. Yes, that distributed say throughout would

right. You're

of We have associated a bit a headwind in recycling little with the QX.

well we other mind, it's that, I So, would spread. pretty that evenly keep to but than need say in

Michael Feniger

then-- And Okay.

Nicole Giandinoto

as because -- a of talks headwind Michael, price when more municipal Yes, the that, just we about little get in we agree Michael, exactly and have and last our right, the you so of we year. so then more most to comp, difficult you're a our put as finer renegotiate as pricing, highest forward, of and in QX Don That will quarter bit customers priced build. point to will build just recycling we increases. pricing momentum that commodity to was the mentioned, go And on look Chuck still

build do strongest you expansion bit. see you think of quarter of a that's and Think in little you about kind kind where can our about distribution. the up that's So, as QX in of how kind And QX.

Michael Feniger

say that helpful. comments quarter? margin had And did basis of That's you Okay. the XX points waste expansion then solid you in your in earlier of

Donald Slager

That's right. That's right.

Michael Feniger

business, point to non-regrettable would away best the expect I'm if I which can we this at contracts, Yes. margin, XX cycle? we just these pricing shedding with the wouldn't from of -- of of higher seeing number resi be years we contracts, talking that the you're about low some know and walking mix be in mean, curious. the

Chuck Serianni

right? headwind operated. cost higher one had the couple little with a mind. we One in And is talked had a of other from as bit is special had Yes, about, our -- associated we keep we things that waste, that landfill a

that out. or growth that called that's So, masking we diminishing

Michael Feniger

Okay. And just lastly, that makes sense.

much the average just is from that like just is pushing from open of then automatic is side? XXXX, the On automatic on on much how uplift? yield, CPI X.XX%, And how the that of

Chuck Serianni

XX is points XX about coming CPI. off to of basis Yes,

Michael Feniger

Okay. Thanks guys.

Chuck Serianni

welcome. You're

Donald Slager

you. Thank

Operator

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

Donald Slager

the closing, like of to dedication Way. you, Republic I Denise. would excellence, employees hard and In and for thank commitment, Thank their operational all Republic work, course, creating to

all have an opportunity for our to day. be spending this part Thanks, evening. create few and with today and a us this encourage minutes Have how take and good and time safe a out to to recyclingsimplified.com. We It'd be a environment. do for what to visit there. everyone very cleaner healthier to recycle call everyone to I'd listening everybody, learn Additionally, good

Operator

Ladies sir. Thank may you lines. At for conference disconnect concluded. gentlemen, this time, you, you Thank today's and the presentation. your has attending

Republic Services (RSG) 8 Feb 192018 Q4 Earnings call transcript