T2 benefits

Returned $ 2.813 billion
Change from year to year 14.6%??
Net revenue $ 331.1M

The services of the Republic announced it increases the financial forecast for the year during its earnings call Thursday, noting an 8.1% increase in volumes during the quarter and MSW and C&D landfill volumes which both exceeded their pre-pandemic baselines.

Executives highlighted a pipeline of mergers and acquisitions and landfill gas-to-energy projects, likely investments to modernize and expand their recycling facilities, and a growing focus on its environmental solutions business. in the future. At the same time, they recognized the uncertainties posed by the burgeoning delta variant of the coronavirus and their inability to hire enough drivers to take full advantage of some growing markets.

Pandemic recovery and performance

  • Volume increases occurred in the Small Container (8.6%) and Large Container (13.7%) business segments. These overall volumes almost matched the pre-pandemic 2019 benchmarks.
  • In recycling, commodity prices were $ 170 per tonne in the quarter, compared to $ 101 year-on-year. Revenue from processing, recycling and raw material sales totaled $ 103 million, up approximately 40% from the second quarter of 2020.
  • The company also presented the specific performance of its environmental solutions business. Revenue totaled $ 29.3 million in the quarter. CFO Brian DelGhiaccio said that company’s petrochemical and industrial manufacturing portions (which account for about 70% of the unit) grew 8% year-over-year.

Despite the recovery seen in the second quarter, CEO Jon Vander Ark recognized the potential for reversing some positive trends. “With the delta variant and the third wave happening, and the pockets of the country starting to pull back a bit, we are very aware that we don’t know exactly what’s going to happen in the next six months, we don’t have not surpassed that thing, ”he said. “In the short term, there is just some uncertainty.” These comments deviate slightly from the views of competitors on the pandemic shared in other recent earnings calls, who have expressed confidence in the continuation of positive trends in the future.

So far, the pandemic environment has not significantly disrupted supply chains for Republic equipment orders this year. Vander Ark said the company is adding 1,200 trucks this year and has already received 700, with “good visibility of the 500” that remain unresolved.

“We would definitely take more pilots if we could get them now,” Vander Ark said. “We are certainly forgoing some growth opportunities in certain markets where the economy is booming.” He said additional hiring would be particularly beneficial in the large industrial container business lines. Alternatively, while Waste Management recently acknowledged on its recent earnings call that hiring issues are affecting service for current clients, the company doesn’t think it is holding back expansion to new clients.

Areas of Opportunity

  • In line with its sustainability goals, Republic said it expanded a landfill gas-to-energy conversion plant this year and has 15 more projects underway, which Vander Ark then developed as a $ 200 million opportunity under of a shared agreement. the Republic will probably be work with partners on these projects to save capital for other investments.
  • Regarding the potential for investment in the recycling sector, Vander Ark said the Republic will spend on upgrading and modernizing facilities. He noted that as the labor market is tight and MRF the jobs being “very difficult”, that “the more automation we put in these facilities, the better we think we are going to be in the long term”. In new markets, Vander Ark said the company is more likely to establish new facilities than to purchase them, although both are on the table. DelGhiaccio said the company has historically spent between $ 30 million and $ 40 million per year on such investments; Vander Ark has said he might be willing to spend more than that as well.
  • The company continues its efforts to digitize its operations, as Vander Ark highlighted at the WasteExpo in June. During the second quarter, Republic implemented in-cabin tablets in nearly half of its fleet of large and small containers that enable automated notifications to customers. “We expect to be mostly complete by the end of this year, with plans for further deployment to the residential fleet starting in 2022, ”Vander Ark said in prepared remarks.

Look ahead

  • Almost three months have passed since Republic closed its long acquisition of Santek. Asked about his attitude towards M&A for the rest of the year, Vander Ark said there would be “no pause”, touting the pipeline and adding: “We expect to have a really strong year. on this front “. The company said it would spend “well over $ 600 million” on acquisitions this year. By the midpoint of 2021, Republic had spent $ 567 million, or $ 521 million net of disposals.
  • Based on comments from WasteExpo Investor Summit, Republic has declared its intention to develop the environmental solutions business in response to customer demand for services. Vander Ark said growth will occur organically as well as through acquisitions, and the company is on a “stable sequential path.”
  • The company has officially raised its full-year adjusted free cash flow expectations to a range of $ 1.45 billion to $ 1.475 billion. This is an increase from the increase in forecast from the previous quarter, which is between $ 1.35 billion and $ 1.4 billion.