Republic Services Raises 2026 Guidance After Q2 Results

Republic Servs (NYSE: RSG ) reported second-quarter financial results on Thursday. The transcript from the company's second-quarter earnings call has been provided below. This content is powered APIs. 1%.

28. Strategic initiatives include investments in technology and AI to enhance pricing and routing, progress in sustainability projects such as a third polymer center in Pennsylvania, and fleet electrification with over 250 electric collection vehicles in operation. 2 billion in acquisitions for the year, and returned over $1 billion to shareholders via dividends and share repurchases. Management highlighted strong customer retention rates above 94%, ongoing improvements in safety and employee engagement, and a positive outlook for volume and margin improvements in the Environmental Solutions business.

Full Transcript OPERATOR Good afternoon and welcome to the Republic Servs second quarter 2026 investor conference call. Republic Servs is traded on the New York Stock Exchange under the symbol RSG. All participants in today's call will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star and then two. Please note this event is being recorded.

I would now like to turn the conference over to John Weeks, Vice President of Investor Relations. John Weeks, Vice President of Investor Relations Good afternoon. I would like to welcome everyone to Republic Servs second quarter 2026 conference call. Jon Vander Ark, our CEO, and Brian DelGhiaccio, our CFO, are on the call today to discuss our performance.

I'd like to take a moment to remind everyone that some information we discuss on today's call contains forward-looking statements, including forward-looking financial information which may involve risks and uncertainties and may be materially different from 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. If in the future you listen to a rebroadcast or recording of this conference call, you should be sensitive to the date of the original call which is August 6, 2026.

Please note that this call is the property of Republic Servs, Inc. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Republic Servs is strictly prohibited. com. In addition, Republic Servs' management team routinely participates in investor conferences.

When events are scheduled, the dates, times and presentations are posted on our investor website. With that, I'd like to turn the call over to Jon. Jon Vander Ark, President Thanks, John. Good afternoon everyone and thank you for joining us.

Our strong second quarter results reflect the resilience of our business model and consistent operational execution. We delivered solid growth on both the top and bottom lines. At the same time, we continued investing in technology, automation and customer-focused solutions that strengthen our competitive position, improve the customer experience and enhance long-term profitability. 5%.

1% and overcame headwinds associated with event-driven landfill volumes received in the prior year. 58 billion of adjusted free cash flow on a year-to-date basis. Our focus on delivering world-class essential services continues to support organic growth and enhance customer loyalty. With respect to customer zeal, our customer retention rate remains strong at more than 94%.

We continue to see favorable net promoter scores due to the value of our offerings and quality of our service delivery. Organic revenue growth during the second quarter was driven by strong pricing across the business. 4% and average yield on related revenue was 4%. This level of pricing exceeded our cost inflation which drove margin expansion in the underlying business.

6% on total revenue. 3% of the decline in total revenue associated with landfill event volumes received in the prior year. Aside from the tough prior-year comp, volume performance improved 50 basis points from the first quarter. Organic revenue in the Environmental Solutions business decreased total revenue by 20 basis points in the second quarter which was in line with our expectations.

Our Environmental Solutions sales pipeline continues to build with increased activity across multiple end markets. We continue to expect year-over-year revenue growth in this business in the second half of the year. Turning to Digital, our investments in technology and AI are advancing over time. These capabilities are expected to drive additional growth and support continued operating leverage.

We are actively deploying AI-based predictive technology that supports optimized pricing decisions across markets with varying customer and competitive dynamics. This approach is expected to reinforce price retention and reduce customer attrition over time. Enhancements to our RISE digital platform are progressing with initial deployment focused on the large container business. The integration of AI and advanced routing algorithms is expected to improve safety outcomes, strengthen service execution and increase route efficiency.

Early pilots confirmed the expected value from this initiative. Activation of digital tools in our call centers are enhancing the customer experience and unlocking value in our business by optimizing the 11 million inbound calls we receive each year. Moving on to Sustainability, last week we released our latest sustainability report highlighting the meaningful progress we are making toward our 2030 goals and the positive impact we are delivering for our customers and communities. Our suite of sustainability reports and materials is available on our website.

We continue to believe that our investments in plastic circularity and decarbonization position us for profitable growth and long-term value creation. Production volume continues to increase across our polymer center network as we optimize processing operations. Construction at a third polymer center in Allentown, Pennsylvania is progressing. Facility commissioning is planned to begin early next year.

We continue to advance renewable natural gas projects with our partners. We commenced operations at two RNG projects during the second quarter and expect two additional projects to begin operations by year end. We made further progress on our commitment to fleet electrification. We had more than 250 electric collection vehicles in operation at the end of the second quarter.

We expect to exit this year with more than 300 EV collection trucks in our fleet and we'll continue to grow this differentiated service offering as part of our approach to sustainability. We strive to be the employer where the best people want to work. We continue to see high employee engagement scores and our turnover rate is the lowest on record. With respect to capital allocation, we invested $860 million in strategic acquisitions in the first half of the year.

Our acquisition pipeline remains supportive of continued activity in both the Recycling and Waste and Environmental Solutions businesses. 2 billion in value-creating acquisitions in 2026. During the first half of the year, we returned more than $1 billion to shareholders through dividends and the repurchase of approximately 1% of our outstanding shares. Additionally, we recently announced an increase to the dividend for the 23rd consecutive year.

Building on the strong results delivered through the first half of the year and continued momentum we see across the business, we raised our full-year 2026 guidance as follows. 3 billion. 55 billion. 575 billion.

Our full-year guidance incorporates higher-than-expected fuel recovery fee revenue through July, increased recycling commodity revenue based on current prices and the contribution of acquisitions closed to date. I will now turn the call over to Brian who will provide details on the quarter. Brian DelGhiaccio, EVP, Chief Financial Officer Thanks, Jon. 3%.

1%. 3%. 4% and average yield on related revenue was 4%. 8% which offset higher fuel expense and related surcharges.

9%. Most of the decline was due to the event-driven landfill volumes in the prior year. 1% increase in landfill MSW. 3% due to known contract losses and landfill special waste which declined 30 basis points.

7% excluding the tough comp from wildfire volumes received in the prior year. Moving on to recycling, commodity prices were $136 per ton during the second quarter. This compared to $149 per ton in the prior year. Recycling, processing and commodity sales increased by $8 million during the quarter.

Increased volumes at our polymer centers offset lower recycled commodity prices. Current commodity prices are approximately $140 per ton. This is the basis used for the second half of the year in our updated guidance. This would imply a full-year average commodity price of approximately $135 per ton.

1%. Margin performance during the quarter included margin expansion in the underlying business of 90 basis points which was offset by a 50 basis point decrease from landfill event volumes, a 30 basis point decrease from net fuel and a 10 basis point decrease from recycled commodity prices. With respect to Environmental Solutions, second quarter revenue increased $53 million sequentially driven by higher event volumes and additional seasonal activity across the business. 2%, a sequential improvement of 100 basis points.

58 billion. Our performance was driven primarily by EBITDA growth in the business. 8 billion. 6 times.

8% during the quarter. 5% for the year. With that, operator, I would like to open the call to questions. OPERATOR Thank you.

We will now begin the question and answer session. To ask a question you may press star, then one on your touchtone phone. In the interest of time, we ask that you limit yourself to one question and one follow-up question. If your question has been answered and you would like to withdraw your request, you may do so by pressing star then two.

If you are using a speakerphone, please pick up your handset before pressing the keys. Your first question today comes from Tyler Brown with Raymond James. Please go ahead. Tyler Brown, Analyst Hey, good afternoon, guys.

Hey. Hey, Brian. Hey. It looks like the EBITDA midpoint was up, call it 40 million, I think at the midpoint.

Curious if you could break that increase down between M&A and the core. And then is flat to slightly down margins in Q3 still a good placeholder? Brian DelGhiaccio, EVP, Chief Financial Officer Yes. When you look at the increase of the 40 million or so in EBITDA, majority of that is just due to increasing commodity prices.

So if you look at both the revenue and the related EBITDA, that's about 25 million. And then the rest is due to the contribution from incremental acquisitions. So if you look at the revenue that's increasing, you've also got the increase from fuel recovery fees, but that is mostly offset by fuel costs as well as related surcharges. Tyler Brown, Analyst Okay, and then on the Q3 margins.

Brian DelGhiaccio, EVP, Chief Financial Officer Yeah. So Q3, think of it relatively flattish with the prior year with margin expansion in the fourth quarter. Tyler Brown, Analyst Okay, perfect. And then this is a big picture question.

So first, congrats to the team for getting the sustainability report out. I know those are big undertakings. But, John, one of the things that caught my eye in there was your total TRIR safety numbers. I think those are a decade low.

I know that zero is the goal, but can you kind of talk about what you think the top one or two items that are really driving that success are? Jon Vander Ark, President Yeah, thank you for noticing. That's our number one priority and value. And I think it's a mix of things.

We've always had a very good safety culture and very good at training, prioritizing on the front line. I think the big increases have really been technology. We put a lot of equipment into vehicles. And it's not just the camera, the technology, it's also the coaching and training around it.

That system has really been encouraging. And I'd say our next frontier is really to use AI in that capacity to think about analytics and understand what types of environments create unsafe opportunities and how do you then create management actions and systems and tools and processes around it. So I think we've got more room to run on that. We don't take it for granted.

We wake up every day and try to keep all 42,000 colleagues safe. But we're making great progress. Tyler Brown, Analyst Okay. All right, thank you guys.

OPERATOR The next question will come from Adam Bubas with Goldman Sachs. Please go ahead. Adam Bubas, Analyst at Goldman Sachs Hi, good afternoon. Wondering if you could just break the performance out across the major lines in Environmental Solutions because I know there's a lot of moving pieces there.

And then nice to see that sequential seasonal step up. Just how are you thinking about potential magnitude of growth in the balance of the year? Brian DelGhiaccio, EVP, Chief Financial Officer Yeah, so if you take a look at the performance in Environmental Solutions, we saw an increase in emergency response jobs year over year which was partially offset by a reduction in landfill times. And again, we are just slightly down on a year over year basis.

But we saw sequential improvement each of the months throughout the second quarter and we're optimistic. And again we project that we're going to grow from a top line perspective as well as related margin expansion in the second half of the year. Adam Bubas, Analyst at Goldman Sachs And then on the volume side, I think this year's residential volume trends reflected the loss of a few larger residential contracts that you called out last quarter. How are you thinking about volume trends beyond 2026 as you lap those contracts?

Is low to mid single digit volume declines the right framework over the medium term or is there a path towards stabilization in residential? Jon Vander Ark, President Yeah, maybe start with market. We're coming out of a period of nearly four years of negative growth in recycling and waste that's really been driven by industrial and construction or lack thereof in terms of activity. And I think we're now in a market that's sequentially improving.

I would think of it more flat with encouraging signs month over month. And in that context, we're obviously losing a little bit of share in residential and we're gaining some share in industrial and small container, which we'll take all day long. If we can make that mix change, you'll see residential, the rate of decline certainly start to narrow as we get into 27. And listen, we don't aspire to lose or shrink in that category, but we're always going to take price over volume and we're going to continue to get a fair return on the hard work that our people do and the assets we invest.

And if we need to continue to, you know, slightly prune in order to find more value there, we're going to do it.