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F500-2021-297-Republic Services

Republic Services is a solid waste and recycling solutions company headquartered in Phoenix.

This year's Fortune 500 marks the 66th running of the list.

F500 2020 305 Republic Services

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Republic Services Inc. is a provider of environmental services in the U.S., offering services for recycling, solid waste collection, hazardous waste disposal, and renewable energy projects. The company operates a network of over 1,000 locations, including 74 recycling centers and 207 landfills, serving approximately 13 million customers nationwide. Under its commitment to sustainability, Republic Services transforms landfill gas into renewable energy and invests in advanced recycling technologies to promote a circular economy. Its 42,000 employees work to provide reliable, efficient, and environmentally responsible waste management solutions.

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Republic Services (RSG): Company Profile, Stock Price, News, Rankings

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Republic Services

republic services

Good afternoon, welcome to the Republic Services second 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 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.

Good afternoon. I would like to welcome everyone to Republic Services 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 risk 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 6th, 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, our earnings press release, which includes GAAP reconciliation tables and a discussion of business activities, along with a recording of this call, are available on Republic's website at republicservices.com. 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 Jon.

Thanks, John. Good afternoon, everyone, 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. During the quarter, we achieved revenue growth of 4.6% and generated adjusted EBITDA growth of 4.5%. We maintained adjusted EBITDA margin at 32.1% and overcame headwinds associated with event-driven landfill volumes received in the prior year. We delivered adjusted earnings per share of $1.85 and produced $1.58 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. Average yield on total revenue was 3.4%, and average yield on related revenue was 4%. This level of pricing exceeded our cost inflation, which drove margin expansion in the underlying business. Organic volume was down 1.9% on related revenue or 1.6% on total revenue. This level of performance was expected, with 1.3% 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're 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 confirm 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 will 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. We expect to invest more than $1.2 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. Revenue is expected to be in the range of $17.2 billion to $17.3 billion.

Adjusted EBITDA is expected to be in a range of $5.525 billion to $5.55 billion. Adjusted earnings per share is expected to be in the range of $7.23 to $7.28. Adjusted free cash flow is expected to be in a range of $2.54 billion to $2.575 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.

Thanks, Jon. Core price on total revenue was 5.3%. Core price on related revenue was 6.4%, which included open market pricing of 7.8% and restricted pricing of 4.1%. The components of core price on related revenue included small container of 8.1%, large container of 6.9%, and residential of 6.3%. Average yield on total revenue was 3.4%, and average yield on related revenue was 4%. Additionally, fuel recovery fees increased total revenue by 1.8%, which offset higher fuel expense and related surcharges. Second quarter volume decreased total revenue by 1.6% and related revenue by 1.9%. Most of the decline was due to the event-driven landfill volumes in the prior year. Volume performance on related revenue also included a 1.1% increase in landfill MSW.

This was more than offset by large container volumes, which declined 2.2%, primarily due to continued softness in construction-related activity, residential volume, which declined 4.3% due to known contract losses, and landfill special waste, which declined 30 basis points. It's important to note that landfill special waste increased 10.7%, 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.

Total company adjusted EBITDA margin was 32.1%. 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. Adjusted EBITDA margin in the environmental solutions business was 20.2%, a sequential improvement of 100 basis points. Year to date, adjusted free cash flow was $1.58 billion. Our performance was driven primarily by EBITDA growth in the business. Total debt was $14.2 billion, and total liquidity was $2.8 billion. Our leverage ratio at the end of the quarter was approximately 2.6x.

With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 23.8% during the quarter. We now expect an equivalent tax impact of approximately 24.5% for the year. With that, operator, I would like to open the call to questions.

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 today. 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.

Hey, Brian. It looks like the EBITDA midpoint was up, call it, $40 million, I think, at the midpoint. Just curious if you could break that increase down between M&A and the core, is flat to slightly down margins in Q3 still a good placeholder?

When you look at the increase of the $40 million or so in EBITDA, majority of that is just due to increase in commodity prices. If you look at both the revenue and the related EBITDA, that's about $25 million, the rest is due to the contribution from incremental acquisitions. 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.

Yeah, Q3, think of it relatively flattish with the prior year with margin expansion in the fourth quarter.

Okay, perfect. This is a big picture question. First, congrats to the team for getting the sustainability report out. I know those are big undertakings. But Jon, one of the things that caught my eye in there, was your total TRIR safety numbers. I think those are at 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?

Yeah. Thank you for noticing. That's our number one priority and value, 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. It's not just the camera, the technology, it's also the coaching and training around it. That system has really been encouraging. 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. 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, we're making great progress.

The next question will come from Adam Bubes with Goldman Sachs. Please go ahead.

Hi, good afternoon. I'm 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. Nice to see that sequential seasonal step up. Just how are you thinking about potential magnitude of growth in the balance of the year?

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 tons. Again, we are just slightly down on a year-over-year basis, but we saw sequential improvement each of the month throughout the second quarter. 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.

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?

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. 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. 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 2027.

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. If we need to continue to slightly prune in order to find more value there, we're going to do it.

The next question will come from Sabahat Khan with RBC Capital Markets. Please go ahead.

Great. Thanks, Dan. Good afternoon. Maybe hoping to get some additional color on the commentary on the increased use of AI. I guess based on your learning so far, are you being pointed into direction of, look, these are customers that previously weren't pushing on price, but you can? Or is it kind of same customers, higher magnitudes? Maybe what are the learnings and how much more runway do you think there is on that front? Thanks.

Yeah. I think AI is going to transform us broadly across the business. We're using, experimenting with it, I'd say almost everywhere. We talked about the three major areas that we're going deep. There's a few other ones that we'll add to the list over time in terms of investing at scale across the enterprise. On pricing specifically, it's understanding the specific price that you want to give to a customer that both maximizes value in the short term but also the long term. Right? You could price more, if you're going to drive defection, that's not a very good long-term trade-off. This now takes in dozens of variables about the customer. Each customer has their own fingerprint in terms of the service history and background and size and scale and location.

We're able to put all of those variables in to really get a precise, optimized price that maximizes long-term value. We've always done analytics, this is a totally, I would say, an order of magnitude different level of sophistication.

Great. Just the second one on M&A. It sounds like about $1 billion and change for this year. Is this a pipeline that's building up where you think it could kind of seep into next year, next year could also be an outsized year? Are most of these closing this year, or these transactions closing this year, maybe not as much momentum into next year? Any color there? Thanks.

Yeah. The pipeline is certainly strong and how many of those things close in the back half of the year versus pushing to the first part of next year. We'll expect to have another strong year next year. We'll probably give a relatively conservative guide because I never want the team to chase an M&A number because you can easily hit that and not get the returns that we expect. Everything we see going forward, that pipeline looks strong and continues to build both in the short and the medium term.

The next question will come from Bryan Burgmeier with Citi. Please go ahead.

Hi. Good afternoon. Thanks for taking the question. Maybe just following up on Tyler's question on the revision to 2026 EBITDA guidance. Are there any changes to your underlying assumptions for the core solid waste business? Specifically just thinking about volume or cost inflation for some key buckets.

I would say, the components of organic growth, the price, the volume, and then obviously, the related inflationary costs are all coming relatively in line with our initial expectations. Most of the update to the guide, again, was due to, as I mentioned earlier, the increase in fuel recovery fees due to just increased diesel costs, the incremental acquisitions. We came into the year thinking we had about 70 basis points of contribution to top-line growth due to both rollover as well as the in-year deals. Now that's 100. The increase in commodity prices, moving from $115 per ton to $135.

Got it. Really appreciate that detail. Maybe just on the kind of margin outlook or the margin cadence that you described for the second half of the year. Waste and recycling margins were up like 40 bips in 2Q. I guess, commodities will maybe be more helpful in 3Q, but it sounds like you're maybe expecting flattish kind of year-over-year. Just help us kind of frame that or maybe some headwinds I might not be thinking of. Thank you. I'll turn it over.

We still have the continuation of the landfill event volumes in the prior year, that's about a 40 basis point headwind. We also, just because of the timing of the acquisitions themselves, when we look at the integration cost that we expect to incur, most of that's going to happen in the third and fourth quarter, which is a headwind. Again, when you take a look at the overall performance, we expect the underlying business to continue to remain strong and the margin expansion in the underlying business, such that when you take a look at what we expect for the full year, we're looking at 60 to 70 basis points of margin expansion in the underlying business.

The next question will come from Faiza Alwy with Deutsche Bank. Please go ahead.

Yes. Hi. Thank you. I wanted to follow up on volumes because some of your peers in the waste space have talked about their changing views around volumes and kind of talked about maybe fuel surcharges impacting some volumes. It sounds like you're not changing your view on that and not seeing anything different. I'm just curious if you have a perspective on why that might be and what your interpretation is of what's going on around from a macro perspective on volumes.

I think like I talked about, that this has been a negative market in recycling waste for almost four years, driven by construction and industrial activity. What's changing is, I'd say commercial construction, we're starting to see slight rebound. I'd still say it's depressed overall, but slight rebound. Residential construction is still very challenged. On the industrial activity, that's where you're starting to see more momentum, and you can see that with the PMI prints that are over 50 for the last five months and starting to accelerate. We just see that with service changes with our large container customers. That's where we're seeing some volume lift. Special waste, take out the comp from last year and the wildfire, and that looks good. Again, it's a market that is slightly improving.

I think there's still plenty of caution from a geopolitical environment with oil prices and other things. We have a positive outlook, but we're still waiting and seeing for this economy, I would say fully fire.

Okay. Makes sense. Just to clarify on the guidance change, is the incremental M&A that's in the guide, is that for the $1.2 billion or I think it's $860 that's closed so far? Could you just confirm that it's only what's closed so far? Secondly, I think you said that the fuel surcharge that was included in the guide is only through July. I'm assuming that represents some upside to revenues and possibly EBITDA because I think diesel prices are still ahead of last year. Just, those two quick clarifying things.

Yeah, you are correct. On the fuel recovery fees, we took what we knew through the month of July, right? Fuel prices have been highly volatile, so we didn't want to assume that they would remain elevated than to just have them come down, and now you're talking about a revenue change because of that assumption. We took August through the end of the year back to our original assumption, which was just below $4 a gallon from a cost per gallon perspective on diesel. I'm sorry, on your first question, one point.

Yeah, that was just the confirmation of the M&A, because I think you're saying you're expecting $1.2 billion of M&A. Just want to make sure that that entire EBITDA impact of that is not in the guide. It's just what's closed so far.

Yeah. Through today, we've closed just shy of $1.2 billion of investment in acquisitions.

all of which is included in the guidance for the full year.

The next question will come from Toni Kaplan with Morgan Stanley. Please go ahead.

Thanks so much. I wanted to ask on pricing. Core price stepped down a little bit this quarter. Just wanted to know your thoughts on how you see that trending through the rest of the year. Maybe also as sort of a follow-up on pricing, if you think about you're doing AI initiatives to sort of optimize your pricing, and I imagine that others are as well, how do you think that that changes the industry's pricing dynamics in the long term? Do you sort of have even more stickiness and things like that because everyone's sort of charging the optimal price for the business that's maybe geographically advantaged, et cetera?

Yeah. Listen, fuel skyrocketed and that becomes a meaningful portion of our customers' bills. This is where AI helps us to think about the optimization of that and making sure we're playing a long-term game. Probably went out with balancing for a couple of months, a little less gross price than it would have in another environment. I don't see the pricing environment changing broadly, which is we're pricing ahead of our cost structure. I think even in a challenge industry period, I think industry conduct around certain structure around price, has maintained pretty good discipline from my seat in the park, and now you see units starting to come back that will be very positive. With respect to AI, I think this is true of almost any AI investment. It's almost always a scale investment.

When you do routing, whether you roll that across 100 routes, 1,000 routes or 10,000 routes, you've got to do the same underlying work. Same thing with customers. Whether you do that across 2,000 customers or 2 million customers, you've got to do the same underlying work. I think it will favor scale players who are able to invest in these tools. Again, on the core price, we would expect it to stay near what we posted here in the second quarter. In a range, call it 62 to 64 in that ZIP code.

The next question will come from Trevor Romeo with William Blair. Please go ahead.

Hi, guys. This is Melissa in for Trevor Romeo. Thanks so much for taking the questions. Maybe just turning to environmental solutions, can you guys speak to what the PFAS business is running at on a revenue dollar and year-over-year growth basis? What kind of opportunities you're seeing on the disposal, wastewater treatment, and remediation or service side of that?

Yeah. Strong. I think, again, we did over $100 million last year. We're going to exceed that number this year. We're well ahead of that pace. We're seeing it across the full suite of our assets. It's certainly utilizing our hazardous landfills and our water treatment capabilities, but it's also utilizing our solid waste landfills. Some of that special waste growth you see are jobs initiated through our environmental solutions team that are actually flowing through the recycling and waste P&L. That's one of our advantages, given that we have a broad set of offerings for clients that different levels of PFAS require different solutions. For low levels, a Subtitle D landfill is the most cost-effective solution. We're taking advantage of that, and we think that pipeline is building. We would expect to comfortably beat our number again next year.

Great. Maybe just a quick follow-up on that end as well. On the reshoring trend, realize this could be a multi-year opportunity, but are you seeing any tangible near-term lift with clients that are building out their presence in the U.S.?

Yeah. We're starting to see that with some construction projects. I think it's mostly been

First it was talk and policy, and now then it was planning, and I think we're now starting to see shovels in the ground, and that will be good for us on both sides of the business, certainly in that construction activity, whether it's remediating the dirt to prepare the construction site or the construction process itself, and then the ongoing service of those facilities across a range of end markets in the manufacturing space will be good. That will be, I think, a tailwind for this business for 5+ years.

The next question will come from Konark Gupta with Scotia Capital. Please go ahead.

Thanks. Maybe just to start on the pricing discussion. The spread between open market pricing and restricted pricing this quarter was perhaps one of the smallest we have seen, I think, in the last many years. What are you seeing in terms of competitive dynamics? Is there anything specific to macro or fuel that's influencing that?

Yeah, some of this is just That's a natural effect of a declining inflationary environment, which we've seen over the last year, obviously spiking because of oil in the last couple of months. There's typically a 12-month lag between when inflation, a CPI would print, and then when you see that in a restricted business. The open market, we think about pricing relative to that context overall. That's why we talked about gross prices coming down, but our cost structure is also coming down, so we're maintaining that spread over time. In terms of price activity in markets, there are a handful of markets where you see low-cost players come in and try to build up a book of revenue almost exclusively to sell that over time.

That's distracting in a handful of markets, but that's really been true for the last 30 years in this business. We do a good job of fiercely defending and making good price volume decisions there over time. Those players who then don't end up transacting pretty quickly figure out that their set of assumptions around cost to serve is higher than they expected, and those decisions oftentimes are not very profitable in the end.

Okay. No, understood. Thanks. If I can follow up on the RNG business. BP is looking to sell the Archaea Energy business they have. You guys have some good relationships with them, I guess. Do you anticipate any changes as part of the sale process with the future owners? Obviously, you don't know who that could be, but what are some of the kind of guardrails in your contracts with them which can protect you in terms of any changes potentially that may happen?

Yeah, we feel very comfortable. That business is very well contracted, we will have a seat in the table in that process, and we'll be assured that our contract rights are going to live going forward with whoever they transact that business to.

The next question will come from Jerry Revich with Wells Fargo. Please go ahead.

Yes, hi. Good afternoon. I'm wondering if we could just talk about environmental services. Nice to see the sequential margin improvement. Can you just update us on how you're thinking about the margin opportunity on a multi-year basis? At one point, I think we were talking about margins potentially in the high twenties as being feasible. Is that off the table at this point, or what are the significant opportunities and the levers that you can pull to drive margin upside here over time, and what's a reasonable expectation?

Yeah, that long-term aspiration certainly hasn't changed. We've got to operate in a broader context and market, so we're going to make the right price volume trade-offs. We talked about probably didn't get it perfect as demand dropped at the end of 2024 and into 2025. We probably were pursuing price more aggressively than we would have in retrospect. I think as we go forward and build from here, you'll see us, I think ahead of our enterprise, 30-50 basis points of margin expansion as you talk about a year. I think you'll see environmental solutions expand at a faster pace than that. Exactly how fast, I think it'll be a little bit dictated by both competitive environment, but also the demand environment, right?

If industrial activity really starts to take another step up here, I think that will be very good for margin performance as well as growth.

Jon, in terms of just to shift the conversation to the AI opportunities, you had sized it as $100 million three months ago. Can you just talk about has that estimate changed at all, and how are you thinking about the cadence, the 30 to 50 basis point of margin expansion? Could we be ahead of that in 2027 because of potential AI benefits?

Yeah, I don't think we'll be ahead of it in 2027. Over the long term, we certainly could. I think what we've learned both in pricing and in routing have confirmed our assumptions that that $100 million is on the table. The exact pace of rollout, I think we'll certainly be trending toward that number in the end of 2027. The exact pace which we get it, we're going to make sure we get it and we stick it, right? Not make it an event, but make it an ongoing capability. The tool part I don't worry about. It's for routing, for example, you've got to get drivers to drive a different route that's optimized, and that change is easier said than done. You don't send out a memo and make that happen.

You've got to work site by site, and that's a leadership opportunity that I'm confident we'll capture, but that will take us a little bit of time to make sure it's durable.

The next question will come from Seth Weber with BNP Paribas. Please go ahead.

Hey, guys. Good afternoon. Sorry, another look back on the ES business. The flattish revenue and lower margin, I just want to confirm that that's really just a mix issue and there's nothing weird going on with pricing. You feel like pricing in ES is kind of stabilized or settled out in a good spot here. Is that fair, accurate?

Yeah, very much. This is kind of how we've forecasted and talked about it, that we would see this leveling out in the second quarter. That would be a base to build from. This pipeline, some things happen right away, like ER, but most of these things, you get a longer sales pipeline. We can see into the fact that we'll have momentum into the second half, just like we saw in the back half of last year, what the results will be in the first half of this year.

Got it. Okay. Then just on, if on free cash flow, if my math is right, it looks like free cash conversion goes a lot lower in the second half. Is that just a timing issue relative, some stuff got pulled into the first half or something? Perhaps my math is wrong, but it looks like free cash conversion goes lower.

Yeah. It's the normal seasonality of the business. If you take a look, all years are somewhat like this. We pay proportionately less cash taxes in the first half of the year, and our CapEx tends to be more back-end loaded. This is consistent with what you've seen in prior periods, and it's right on top of our plan.

Got it. Okay. Thanks, guys. Appreciate it.

The next question will come from Will Grippin with Barclays. Please go ahead.

Thanks for the time here. Wanted to just come back to your fuel recovery fee assumptions in the second half. Sounds like you're assuming, I think you said $4 diesel, and kind of a neutral EBITDA impact. I would've thought, just based on your disclosed sensitivity and assuming diesel's either stable from here or perhaps coming down a bit, that we should see actually a net margin uplift in the second half. Is that correct? Are you sort of just being conservative here, or what am I missing in that?

That sensitivity was the fuel recovery fees, and it was the direct impact of diesel fuel. We've talked about this, talked about it in the last quarter. There are other costs that we incur, transportation surcharges and other indirect expense charges that we get, as well as from an overall cash perspective, increased CapEx when you've got the increased oil prices for landfill liner, for example. We try and recover from a comprehensive or a holistic perspective, the cash impact of changes in diesel prices. We've expanded, and you'll see them when you see the 10-Q expanded to include some of those other cost increases, so that you get to a relatively neutral EBITDA impact from changes in diesel prices.

Okay. There wouldn't be any sort of like margin catch-up or anything because you have the lagged effect in the first half. if-

You do see that there is a lag, right? Again, we actually wound up having a net negative from a net fuel perspective in the first quarter, as you saw diesel prices rise in the month of March, and we didn't start recovering those costs until April. If you see fuel costs come down precipitously in the second half of the year, we could get that back. It's really just a timing issue. It's not something that's sustained.

Okay. Last one from me. Within the ES business, I would be curious to hear what you've been seeing in terms of recent emergency response trends. We've been hearing that this year's maybe been historically low, sort of below baseline levels for emergency response activity. Is that consistent with what you've been seeing?

It was pretty slow for us last year, actually, and I'd say it's slightly on the pickup this year, but versus historic norm, yes. If you think about many years, there's kind of large, big jobs you can point to across a number of different providers, and we're just not seeing that level of kind of transformational type or big jobs that you would call out.

Republic Services (RSG) Q2 2026 Earnings Call Transcript

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