Republic Services, Inc.

Good afternoon and welcome to the Republic Services First Quarter 2026 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. 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 1 on your touchtone phone. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Aaron Evans, Vice President of Investor Relations.

Good afternoon. I would like to welcome everyone to Republic Services' first quarter 2026 conference call. John VanderArk, our CEO, and Brian DelGaccio, our CFO, are on the call today to discuss our performance. I'd like to remind everyone that some information discussed on today's call contains forward-looking statements, including forward-looking financial information, which 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 May 7, 2026. 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 express written consent of Republic Services is strictly prohibited. Our SEC filings, earnings press release, which includes gap reconciliation tables and a discussion of business activities, along with a recording of this call, are available on our website at republicservices.com. In addition, Republic's 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 John.

Thanks, Aaron. Good afternoon, everyone, and thank you for joining us. We are pleased with our first quarter results, which position us well to achieve the full year guidance that we provided in February. We delivered strong earnings growth and expanded margins. All were overcoming lower commodity prices and the impact of higher fuel prices during the quarter. Our results reflect our disciplined pricing execution, effective cost management, and the value created from ongoing investments in the business. During the quarter, we achieved revenue growth of 2.6%, generated adjusted EBITDA growth of 4.3%, expanded adjusted EBITDA margin by 50 basis points, delivered adjusted earnings per share of $1.70, and produced $984 million of adjusted free cash flow. We continue to secure new growth opportunities by leveraging our differentiating capabilities customer zeal, digital, and sustainability. With respect to customer zeal, our customer retention rate remained high at 94%. Our net promoter score remained strong, reflecting our team's commitment to delivering exceptional customer value. First quarter organic revenue growth was driven by solid pricing across the business. Average yield on related revenue was 4.1%, and average yield on total revenue was 3.4%. Organic volume decreased related revenue by 1% or total revenue by 80 basis points. Volume performance improved sequentially, most notably in the landfill, large container, and small container verticals. Importantly, we delivered year-over-year revenue growth in the temporary large container business this quarter for the first time in over two years. Combined average yield and volume growth grew 1.2%. Organic revenue in the environmental solutions business decreased total revenue by 1.3% in the first quarter, which was in line with our expectations. More than one-third of this decrease in the environmental solutions business related to an emergency response job in 2025 that did not repeat. Our environmental solutions sales pipeline continues to build with increased activity across multiple end markets. We expect year-over-year revenue growth in this business in the second half of the year. Turning to digital, our ongoing investments in technology and AI are strengthening how we operate and compete. Over time, these capabilities are expected to drive additional growth, expand margins, 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. 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. We believe that these investments in digital will deliver at least $100 billion of annual benefits by 2028. Within sustainability, we continue to believe that our sustainability innovation investments in the plastic circularity and decarbonization position us for growth and long-term value creation. Production volume has increased across our polymer center network as we optimize processing operations. Demand for our domestic post-consumer plastic remains strong. We continue to advance renewable natural gas projects with our partners. We brought nine projects online throughout 2025. We expect four additional RNG projects to begin operations in 2026, which would bring our total landfill gas-to-energy portfolio to 82 projects. We continue to execute against our industry-leading commitment to fleet electrification. We had more than 200 electric collection vehicles in operation at the end of the first quarter. We expect to exit this year with more than 300 EV collection trucks in our fleet to support the continued growth of this differentiated service offering. We recently celebrated with the City of San Pablo who partnered with us to become the first city in California to operate an all-electric recycling and waste collection fleet. As part of our commitment to sustainability, we strive to be the employer where the best people want to work. Our employee engagement score consistently exceeds national benchmarks, and we continue to experience record low turnover rates. Our comprehensive sustainability performance continues to be widely recognized as Republic Services was named to Fortune's World's Most Admired Companies list and Ethisphere's World's Most Ethical Companies list. Regarding capital allocation, we have invested more than $700 million in value-creating acquisitions to date, which includes $433 million in investment in the first quarter. Our acquisition pipeline remains supportive of continued activity in both the recycling and waste and environmental solutions businesses. We expect to exceed $1 billion of acquisition investment this year. As part of our balanced approach to capital allocation, we return $507 million to shareholders in the quarter, including $314 million of share repurchases. I will now turn the call over to Brian, who will provide additional details on the quarter. Thanks, John. Core price on total revenue was 5.7%. Core price on related revenue was 6.8%, which included open market pricing of 8.4% and restricted pricing of 4.4%. The components of core price on related revenue included small container of 8.2%, large container of 7.1%, and residential of 6.5%. Average yield on total revenue was 3.4%, and average yield on related revenue was 4.1%. First quarter volume decreased total revenue by 80 basis points and related revenue by 1%. Volume results on related revenue included a decrease in large container of 2.5%. This represents a sequential improvement of 130 basis points compared to our fourth quarter performance. Volume results also included a decrease in residential of 5.2%. The sequential change in residential volume was primarily due to known contract losses which was contemplated in our full-year guidance. Landfill volumes improved during the quarter, as MSW volumes increased 1.4%, and special waste revenue increased 9.9%. We estimate severe weather negatively impacted volume performance by approximately $30 million during the quarter, which was reflected in our full-year revenue guidance provided in February. Moving on to recycling. Commodity prices were $120 per ton during the first quarter. This compared to $155 per ton in the prior year. Recycling processing and commodity sales were flat compared to the prior year. Increased volumes at our polymer centers offset the revenue impact of lower recycled commodity prices. Current commodity prices are approximately $125 per ton. Total company adjusted EBITDA margin expanded 50 basis points to 32.1%. Margin performance during the quarter included margin expansion in the underlying business of 90 basis points and a net benefit of 20 basis points from non-recurring items, primarily due to a favorable legal settlement. This was partially offset by a 20 basis point decrease from net fuel, a 20 basis point decrease from recycled commodity prices, and a 20 basis point decrease from acquisitions. The sharp increase in diesel prices in March negatively impacted EBITDA performance by $8 million in the first quarter. Our fuel recovery fee tends to lag changes in fuel expense by approximately one month. We expect fuel recovery fees to offset higher fuel costs beginning in the second quarter. With respect to environmental solutions, First quarter revenue decreased $44 million compared to the prior year. Approximately $15 million of this decrease related to an emergency response job in 2025 that did not repeat. Adjusted EBITDA margin in the environmental solutions business was 19.2%. Adjusted free cash flow of $984 million, an increase of more than 35% compared to the prior year. This increase was driven by EBITDA growth in the business and the timing of working capital and capital expenditures. Year-to-date capital expenditures of $249 million represent 12% of our projected full year spent. Total debt was $14 billion, and total liquidity was $1.8 billion. Our leverage ratio at the end of the quarter was approximately 2.6 times. With respect to taxes, our combined tax rate and impact from equity investments and renewable energy resulted in an equivalent tax impact of 24.9% during the first quarter. With that, operator, I would like to open the call to questions.