10-QPeriod: Q1 FY2018

REPUBLIC SERVICES, INC. Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 3, 2018For Securities:RSG

Summary

Republic Services, Inc. (RSG) reported solid financial results for the first quarter of 2018. The company demonstrated revenue growth and improved profitability compared to the same period in the prior year. Revenue increased by 1.4% to $2.43 billion, driven by positive pricing ("average yield") and increased volume across key service lines. Net income attributable to Republic Services, Inc. rose significantly to $237.7 million, or $0.72 per diluted share, up from $187.8 million, or $0.55 per diluted share, in Q1 2017. This performance reflects effective operational management and a favorable impact from the Tax Cuts and Jobs Act, which reduced the effective tax rate. Key drivers for the quarter included growth in average yield across all lines of business and increased volume, particularly in large-container collection, landfill, and transfer station services. The company also saw growth in its energy services segment. Despite a decline in revenue from recycled commodities due to lower market prices, the overall revenue growth and profitability improvement highlight the company's resilience and ability to manage costs effectively. The company continued its active share repurchase program, demonstrating a commitment to returning value to shareholders.

Financial Highlights

53 data points
Beta

Revenue

$2.43B

39.5% Gross Margin

Net Income

$237.90M

9.8% Net Margin

EPS (Diluted)

$0.72

Total Assets

$21.11B

Cash & Equivalents

$62.60M

Free Cash Flow

$318.10M

Financial Statements
Beta
Revenue$2.43B
Cost of Revenue$1.47B
Gross Profit$957.70M
SG&A Expenses$261.20M
Operating Income$404.20M
Interest Expense$94.80M
Net Income$237.90M
EPS (Basic)$0.72
EPS (Diluted)$0.72
Shares Outstanding (Basic)330.65M
Shares Outstanding (Diluted)332.21M

Key Highlights

  • 1Revenue increased by 1.4% to $2.43 billion in Q1 2018 compared to Q1 2017.
  • 2Net income attributable to Republic Services, Inc. grew to $237.7 million, or $0.72 per diluted share, from $187.8 million, or $0.55 per diluted share, year-over-year.
  • 3The effective tax rate decreased to 23.4% in Q1 2018 from 36.6% in Q1 2017, benefiting from the Tax Cuts and Jobs Act.
  • 4Volume growth in large-container collection, landfill, and transfer station services contributed positively to revenue.
  • 5Energy services revenue saw an increase, driven by higher drilling activity.
  • 6The company repurchased $254.5 million of its common stock in Q1 2018, a significant increase from $98.9 million in Q1 2017.
  • 7The adoption of new revenue recognition standards (ASC 606) had a noticeable impact on reported revenue and cost of operations, reclassifying certain items.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in average yield (revenue growth from changes in average price per unit of service) across all lines of business, alongside increased volume in key segments like large-container collection, landfill, and transfer stations. Energy services also contributed positively due to increased drilling activity.

The adoption of ASC 606, effective January 1, 2018, led to a reclassification of certain items. Municipal franchise fees and costs paid to suppliers for recycled commodities, previously recorded as cost of operations, were presented as a reduction of revenue in Q1 2018. This reclassification impacted reported revenue and cost of operations, with the adoption of the new standard contributing a (4.2)% effect on total revenue compared to the prior period's presentation.

Republic Services demonstrated a strong commitment to shareholder returns in the first quarter of 2018. The company significantly increased its share repurchases, spending $254.5 million on buybacks, compared to $98.9 million in the prior year's quarter. Additionally, the board of directors approved a quarterly dividend of $0.345 per share, totaling $113.3 million in cash dividends declared for the quarter.

The company is involved in ongoing legal proceedings and environmental matters, including those related to the Bridgeton Landfill and West Lake Landfill Superfund site. While the company has accrued liabilities for these matters, it notes that future changes in estimates for remediation costs could materially affect its financial position. The company also received notices of violation and potential penalties related to other landfill operations, which it is actively managing and negotiating.