Republic Services sees financial growth from acquisitions

Republic Services Inc., Phoenix, has released its fourth-quarter and full-year financial results for 2022. The company says it saw a boost in revenue from the acquisition of companies like U.S. Ecology Inc., an environmental solutions provider based in Boise, Idaho.  

"We finished the year strong by executing our strategy designed to profitably grow the business," says Jon Vander Ark, president and CEO of Republic." During 2022, we delivered double-digit growth in revenue, EBITDA [earnings before interest, taxes and amortization], earnings and free cash flow that exceeded our full-year expectations.   

Fourth quarter results  

For the fourth quarter, the company reported total revenue growth of 19.5 percent. This includes 8.3 percent of organic growth and 11.2 percent of growth from acquisitions.  

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Core price on total revenue increased revenue by 7.4 percent. Core price on related business revenue increased revenue by 8.4 percent, which consists of 10.4 percent in the open market and 5.1 percent in the restricted portion of the business.  

Revenue growth from average yield on total revenue was 5.9 percent, and volume increased revenue by 1.5 percent. Revenue growth from the average yield on related business revenue was 6.7 percent.  

The company is reporting a net income of $346.8 million, or $1.09 per diluted share, for the three months ending December 31, 2022, compared with $313.1 million, or 98 cents per diluted share, for the comparable 2021 period. The company says this represented 9.8 percent of revenue for this period.  

Excluding certain benefits and expenses, on an adjusted basis, net income in Q4 was $358.1 million, or $1.13 per diluted share, compared with $325.5 million, or $1.02 per diluted share, for the comparable 2021 period.  

Republic says earnings per share (EPS) was $1.09 per share, an increase of 11.2 percent over the prior year. Adjusted EPS, a non-generally accepted accounting principle (GAAP) measure, was $1.13 per share, an increase of 10.8 percent over the prior year.  

Adjusted EBITDA, a non-GAAP measure, was $965 million and the adjusted EBITDA margin was 27.3 percent of revenue.  

The company says the average recycled commodity price per ton sold during Q4 was $88. This represents a decrease from the third quarter of 2022 of $74 per ton and a decrease of $130 per ton over the prior year.  

Full-year results  

For the full year, the company's total revenue growth of 19.6 percent includes 10 percent of organic growth and 9.6 percent of growth from acquisitions. Core price on total revenue increased revenue by 6.7 percent. Core price on related business revenue increased revenue by 7.3 percent, which consisted of 9.2 percent in the open market and 4.3 percent in the restricted portion of the business.  

Revenue growth from average yield on total revenue was 5.2 percent, and volume increased revenue by 2.4 percent. Revenue growth from the average yield on related business revenue was 5.7 percent.  

For the year, net income was $1,487.6 million, or $4.69 per diluted share compared with $1,290.4 million, or $4.04 per diluted share, for the comparable 2021 period. Excluding certain benefits and expenses, on an adjusted basis, net income for the year was $1,562.8 million, or $4.93 per diluted share, versus $1,330.6 million, or $4.17 per diluted share, for the comparable 2021 period. Net income was $1.5 billion, or 11 percent of revenue.  

EPS were $4.69 per share, an increase of 16.1 percent over the prior year. Adjusted EPS totaled $4.93 per share, an increase of 18.2 percent over 2021. Adjusted EPS exceeded the company's upwardly revised guidance.  

Adjusted EBITDA was $3.9 billion, and the adjusted EBITDA margin was 29.1 percent of revenue.  

Cash provided by operating activities was $3,190 million, an increase of 14.5 percent over the prior year. Adjusted free cash flow, a non-GAAP measure, was $1,742.4 million, an increase of 15 percent compared with 2021. Adjusted free cash flow exceeded the company's upwardly revised guidance.  

Cash invested in acquisitions was $2.7 billion, $2.2 billion of which is related to the acquisition of U.S. Ecology. Cash returned to shareholders was $796.4 million, which included $203.5 million of share repurchases and $592.9 million of dividends paid.  

The company's average recycled commodity price per ton sold during the year was $170, a decrease from the prior year of $17 per ton.  

“Our initiatives that support our differentiated capabilities are driving tangible results, and we continue to successfully integrate the acquisition of U.S. Ecology,” Vander Ark says. “I am proud of what the Republic Services team accomplished during the year, which keeps us well-positioned to produce outsized growth in 2023."    

2023 financial guidance  

In 2023, Republic expects revenue to be in the range of $14.650 billion to $14.800 billion. The company says it expects growth in an average yield on total revenue of approximately 5.5 percent and volume growth to be in the range of 0.5 percent to 1 percent. The average yield on related business revenue is expected to be 6.5 percent.  

Republic expects adjusted EBITDA to be in the range of $4.275 billion to $4.325 billion. For adjusted diluted earnings per share, the company expects to be in the range of $5.15 to $5.23. Adjusted free cash flow is expected to be in the range of $1.86 billion to $1.90 billion.  

The company says it expects to receive between $1.65 billion to $1.67 billion of property and equipment, net of proceeds from the sale of property and equipment.  

Republic says it expects to invest at least $500 million in acquisitions in 2023. The 2023 financial guidance only includes the expected contribution from acquisitions that closed through 2022.  

"We expect to deliver high single-digit growth in revenue, EBITDA and free cash flow in 2023, even with the headwinds from lower recycled commodity prices and higher interest rates," Vander Ark says. "Our strong financial guidance is underpinned by pricing in excess of cost inflation, leveraging digital tools to drive productivity improvements and increase customer retention and continuing to invest in sustainability initiatives to produce value-creating growth."