Republic Services Inc (RSG) — Q4 2023 Earnings Call Transcript

I would like to welcome everyone to Republic Services fourth quarter and full year 2023 conference call. Jon Vander Ark, our CEO; and Brian DelGhiaccio, our CFO, are on the call today to discuss our performance. I would like to take a moment to remind everyone that some of the information we discuss on today's call contains forward-looking statements, 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 February 27, 2024. 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. I want to point out that our SEC filings, our earnings press release, which includes GAAP reconciliation tables and a discussion of business activities, along with the recording of this call are available on Republic's website at republicservices.com. I want to remind you that Republic's management team routinely participates in investor conferences. When events are scheduled, the dates, times and presentations are posted on our website. With that, I'd like to turn the call over to Jon.

Thanks, Aaron. Good afternoon, everyone, and thank you for joining us. The Republic team finished the year strong by executing our strategy designed to profitably grow the business. We outpaced expectations throughout the year and delivered results that exceeded our full year guidance. During 2023, we achieved revenue growth of 11%, including 5% from acquisitions; generated adjusted EBITDA growth of 13%, expanded adjusted EBITDA margin by 60 basis points, including margin expansion in the underlying business of 100 basis points; reported adjusted earnings per share of $5.61; and produced $1.99 billion of adjusted free cash flow. We continue to believe that investing in value-creating acquisitions to further expand our business is the best use of our free cash flow. We invested $1.8 billion in acquisitions in 2023, including transactions in both the recycling and waste and Environmental Solutions businesses. As part of our balanced approach to capital allocation, we returned $900 million to shareholders through dividends and share repurchases. The results we are generating are made possible by executing our strategy, supported by our differentiated capabilities. Regarding customer zeal, our efforts to provide industry-leading service continue to drive sustained customer loyalty and organic growth in the business. Our customer retention rate remained high at over 94%, and we continue to see favorable trends in our Net Promoter Score due to the value of our offerings and quality of our service delivery. We delivered outsized organic revenue growth during the fourth quarter with simultaneous increases in price and volume. Core price and related revenue was 8.8%, and average yield on related revenue was 7.7%. Organic volume growth on related revenue was 40 basis points. Turning to our digital capabilities, the team continued to advance the implementation of digital tools that improve the experience for both customers and employees. Development of our new asset management system is underway, which is expected to increase maintenance technician productivity and enhance warranty recovery. We expect to begin utilizing the new system in late 2024. The continued operational enhancements supported by our RISE digital operations platform are expected to drive additional productivity through improved route optimization and safety performance and provide more predictable service delivery to our customers. We anticipate the RISE platform will drive approximately $100 million of total annual earnings contribution, of which approximately $65 million has been realized to date. We continue to implement advanced technology on recycling and waste collection routes. Our platform utilizes cameras to identify overfill containers and contamination in recycling containers. This technology is reducing contamination and driving incremental revenue. Moving on to sustainability, we believe that our sustainability innovation investments in plastic circularity and renewable natural gas are a platform for profitable growth. Development of our polymer centers and Blue Polymers joint venture facilities remain on track. We are finalizing commissioning at our Las Vegas Polymer Center this week. Delivery of plastic flake to our offtake partners is expected in the coming weeks. Construction is progressing on our Indianapolis Power Center. This development will be co-located with Blue Polymers production facility and construction at the site is expected to be completed in late 2024. The renewable gas projects being co-developed with our partners continue to advance. Five projects came online in 2023, and we expect at least eight additional projects to be completed in 2024. We continue to advance our efforts to support decarbonization, including our industry-leading commitment to fleet electrification. We currently have 11 electric collection vehicles in operation. We expect more than 50 additional EVs will be added to our recycling and waste collection fleet in 2024. We have six facilities with commercial EV charging infrastructure, with more than 40 additional sites in various stages of development. As part of our approach to sustainability, we continue to strive to be a workplace with the best people from all backgrounds who want to work. In 2023, employee engagement improved to a score of 86 with a 99% participation rate in the survey. Turnover rates continue to decline, with full-year turnover improving by 400 basis points compared to the prior year. As a result, we are better staffed to optimize our operations and capitalize on growth opportunities in the market. Our comprehensive sustainability performance continues to be widely recognized as Republic Services was named to the Dow Jones Sustainability Index for the eighth consecutive year. Our 2023 results clearly demonstrate our ability to create sustainable value and our ongoing investments to strengthen the foundation from which we will continue to grow our business. With respect to 2024, we expect to deliver outsized profitable growth while continuing to make investments in the business to drive lasting value creation. More specifically, we expect full-year revenue in a range of $16.1 billion to $16.2 billion. Adjusted EBITDA is expected to be in a range of $4.825 billion to $4.875 billion. We expect to deliver adjusted earnings per share in the range of $5.94 to $6, and generate adjusted free cash flow in a range of $2.1 billion to $2.15 billion. Our pipeline supports continued acquisition activity in both recycling and waste and environmental solutions. We are targeting at least $500 million of investment in value-creating acquisitions in 2024. Our 2024 financial guidance includes the rollover contribution from acquisitions that closed in 2023.

Thanks, Jon. Core price on total revenue was 7.2% in the fourth quarter. Core price on related revenue was 8.8%, which included open market pricing of 10.6% and restricted pricing of 6%. The components of core price on related revenue included small container at 12.3%, large container at 8.6%, and residential at 8.2%. Average yield on total revenue was 6.3%, and average yield on related revenue was 7.7%. In 2024, we expect average yield on total revenue in a range of 5.5% to 6%. We expect average yield on related revenue in a range of 6.5% to 7%. Yield is expected to step down sequentially during 2024 due to relatively lower index-based pricing and certain fees implemented throughout 2023, which begin to anniversary. Fourth-quarter volume on total revenue increased by 30 basis points, while volume on related revenue increased by 40 basis points. The components of volume on related revenue included an increase in small containers of 20 basis points and an increase in landfill of 7.4%. Landfill was primarily driven by a 12.7% increase in special waste revenue. Volume growth was partially offset by a decrease in large containers of 1.4% and a decrease in landfill C&D volume of 2.1%, primarily due to a slowdown in construction-related activity. In 2024, we expect organic volume growth in a range of flat to positive 50 basis points. Moving on to recycling, commodity prices were $131 per ton during the fourth quarter. This compared to $88 per ton in the prior year. Recycling processing and commodity sales increased revenue by 50 basis points during the quarter. For the full year 2023, commodity prices averaged $117 per ton, compared to $170 per ton in the prior year. Current commodity prices are approximately $135 per ton, which is the baseline used in our 2024 guidance. Now turning to our Environmental Solutions business. Fourth-quarter Environmental Solutions revenue was flat compared to the prior year. Adjusted EBITDA margin for the Environmental Solutions business was 19.7%, an increase of 250 basis points compared to the prior year. Fourth-quarter total company adjusted EBITDA margin expanded 260 basis points to 29.9%, driven by margin expansion in the underlying business of 230 basis points. Other changes in margin performance during the quarter included a 30 basis point increase from recycled commodity prices and a 20 basis point increase from net fuel, which was partially offset by a 20 basis point decrease from acquisitions. Our full-year adjusted EBITDA margin was 29.7%, representing margin expansion of 60 basis points compared to the prior year. In 2024, we expect total company adjusted EBITDA margin to be approximately 30%. We expect to more than overcome a 30 basis point headwind from acquisitions. Depreciation, amortization, and accretion were 10.7% of revenue in 2023 and are expected to be approximately 11% of revenue in 2024. Full year 2023 adjusted free cash flow was $1.99 billion, an increase of 14% compared to the prior year. This was driven by EBITDA growth in the business and the positive contributions from changes in working capital. Total debt at the end of the year was $13 billion, and total liquidity was $2.7 billion. Our leverage ratio at the end of the year was 2.9 times. We expect net interest expense of approximately $545 million in 2024. Regarding taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 25.1% during the fourth quarter and 24.8% for the full year. We expect an equivalent tax impact of approximately 26% in 2024, made up of an adjusted tax rate of 20% and approximately $190 million of non-cash charges from equity investments in renewable energy. The expected increase in interest expense and taxes would result in a $0.20 EPS headwind in 2024. With that, operator, I would like to open the call to questions.

Thank you so much. I wanted to ask about margins. In the fourth quarter, I know you mentioned a couple of factors, the commodities and fuel costs. But maybe just talk about how margins were so far ahead of the guide and what factors could continue into 2024 that could provide upside to the guidance there? Thanks.

Sure. Yes. The team had a really strong fourth quarter. Lots of things went in our favor, managed the middle of the P&L well. There were some one-time opportunities both on MSW and a very strong special waste fourth quarter that we felt good about. Weather was actually very positive in the fourth quarter, which has slipped here in the first quarter of the year. So I feel great about that. And then, we've got a lot of momentum headed into 2023. Some of the event-based work, you can't build a budget against that, right? You've got to look at that as potential upside, which we're going to go after those opportunities. But oftentimes in an election year, some of those jobs end up pushing and rolling forward. So we're not going to build a plan based on that outsized performance that we got in Q4, but we're still looking at a very positive year in 2024.

Yes. And Toni, we had mentioned all year long that we expected margin expansion to sequentially improve quarter-on-quarter, ending the year with the highest level of margin expansion compared to the prior year. So, that played out exactly as we thought. Now, the margin expansion itself was a little bit stronger than we originally anticipated. But ending the year with that type of performance and the type of margin expansion of over 200 basis points was in line with the way we thought it would end.

Perfect. Wanted to ask about environmental services. Maybe just talk about what you're seeing in the different pieces there. And I think there's a little bit flattish in the quarter. So, does that turn around next year? Thanks.

Most of the flatness is due to the comparison with a very strong Q4 in 2022. There is some slowdown in certain parts of the business, leading to a decrease in rig counts, which has affected that segment of the opportunity. We are planning to reopen a facility that was closed for a turnaround earlier this year, which should provide some additional benefits. We are also focusing on trading price for volume where necessary, and we have chosen to move away from some less profitable customers. Overall, we are optimistic about our current book and the pipeline ahead.

Perfect. Thanks so much.

Hey, thanks for taking my question and congrats on a strong end of the year there. Maybe just on the 2024 guidance, the implied kind of 30 to 40 basis points of margin expansion, reported market expansion you're guiding to. Is there a way to think about how that splits between solid waste and ES? Is it pretty balanced between the two? Or would you expect one to maybe outperform the other as you look into 2024 here?

Overall, we expect margin expansion in both types of business. We're anticipating a bit more expansion on the Environmental Solutions side, but it remains relatively balanced between the two. Given the size of the recycling and waste business compared to the Environmental Solutions business, it will contribute most significantly to the overall expansion when considering the entire enterprise.

That's helpful. I have a follow-up question regarding the yield volume table you provided in your disclosure. I noticed that the yield in residential volumes is strong, although it appears slightly worse than in recent terms. Could you share some insights into what's happening there? Also, as you mentioned earlier, are you being more intentional about shedding lower-quality volume to enhance good yield in the fourth quarter?

Yes, we're always purposeful in trading our price versus volume. I'd say in this quarter, there were a couple of contracts that went out to bid that we decided not to pursue at a rate that we thought was going to cover our costs and give us a fair return. We lost those opportunities. And then in previous quarters, we've had some nice wins, right? And these things come in fits and spurts. So we didn't have anything in that quarter. That's really the combination of those two things that drives the volume picture. On the pricing side, this is the manifestation of high CPI and the alternative indices over the last couple of years really flowing through our pricing, which is great to see. That's challenged part of the yield story historically and to see that number, we were really pleased with.

Excellent. I'll leave it there. Again, congrats on a good set of results there.

Great. Thanks.

Good afternoon. Thank you for taking the question. Maybe just following up on Tony's question. I think margins typically expect kind of quarter-over-quarter from 4Q to 1Q. I imagine that will be a little bit more flattish this year. Just if you can identify maybe some of the factors weighing on 1Q margins or more broadly like why historical seasonality might not apply?

Yes. Bryan, what I would say is that when you talk about historical seasonality, I think you have to go back before just the last several years post-pandemic. I think you have to look at a broader data set there. So when we came into this year, we said this year, we thought it was going to have what we would call a normal level of seasonality. And when you take a look at what that means, typically, when you look at margin performance, you would have peak margin performance in Q2 and Q3 during the summer months where you're getting some more of those seasonal volumes, in particular on the landfill side, followed by Q4. And then finally, the first quarter would seasonally be your lowest margin performance, and that's what we've seen for decades. And so we said that at the beginning of the year, that's kind of what played out. And that's what I would say we would also expect going into 2024 based on what we see right now. So, we would expect a sequential step down in margin from Q4 to Q1, in part, you've got more winter months when you're dealing with the first quarter, as well as when you just think about some of the taxes, you have your highest burden from a labor perspective in the first quarter, and those tend to max out as you move through the balance of the year, again, more of those state and local taxes, then those basically reach their max in the first quarter.

We experienced mild weather in the fourth quarter of last year, followed by quite severe weather in January, which resulted in some loss of haulage and tons. Some of that will return, but some will be deferred into the rest of the year. This will contribute to a first quarter number that is likely to appear more stable than it typically would.

Got it. Thanks for all that detail. And then just following up on M&A, with the deals you completed in 4Q, did you provide a rough split for how that is divided up between the two segments? And did you provide a rollover contribution to 2024 revenue in guidance? Thanks.

Yes. The rollover contribution will be about 200 basis points from deals closed in 2023 that will have a rollover impact into 2024. Just on the split from a revenue perspective, it was about $200 million on the Environmental Solutions side of the annualized revenue acquired in the fourth quarter, and about $140 million on the recycling waste side.

Yes. Thanks very much. Good afternoon, everyone. So I wanted to follow up on M&A here. A big year for you in terms of deals done, I think, $1.86 billion acquired. And I was wondering if you could give us an update on, first of all, what the pipeline looks like going forward, particularly relative to such a large year this past year. And then second, in terms of integration, will you be focusing a bit more on given how big the year was in 2023 on integration and perhaps touch a little bit on how that integration is going? Or do you see room and capacity to continue at a fairly heavy pace here in terms of M&A for 2024?

We evaluate two key factors: the strategic fit and the financial return of any deal, and we will maintain discipline in both areas. We assess whether we are the appropriate owner and if the deal meets our expectations regarding cash and returns. Additionally, we consider our capacity to absorb new acquisitions; we would avoid multiple significant deals in the same region simultaneously because local teams play a vital role in day-to-day integration. Last year, we focused on our usual smaller acquisitions, which have consistently been value-creating due to our extensive experience in completing them. We also have plans for medium-sized deals; however, the timing for these can be uncertain. This contributes to a reduced expectation for this year’s performance, not due to a weak pipeline—our pipeline remains robust—but because we can't predict the exact deals we will close, and we will continue to exercise discipline.

Got it. That's great information. For my follow-up, can you discuss the build-out of the Las Vegas Polymer Center that opened in December? I’m curious if you've had enough time to evaluate it and how you view this investment compared to EPR projects in terms of its return profile.

Yes. We're very satisfied with both the execution and the return. We're pretty conservative in terms of our financial modeling leaving ourselves room, and we feel very good about the demand in the marketplace; we could have sold out Las Vegas five times over upfront. The pricing expectations are ahead of what we modeled. So the returns are going to come in, again, ahead of our expectations on that front. That's certainly given us confidence, as we talked about in the prepared remarks, to go to Indy, and then we're planning on at least two more across the country.

Thanks for taking my question. Maybe just a quick one on pricing. Could you just remind us how the restricted book will layer through 2024 especially with sort of the lag effects in CPI? Thanks.

Yes, one of the things I mentioned with respect to the cadence from a pricing perspective in my prepared remarks is we do expect a sequential step down in the level of pricing throughout the year, primarily due to the impact that index pricing will have. So again, we expect to report the highest level of average yield in Q1 and the lowest level in Q4 with a step down in between. Just to give you a little bit of perspective, when you take a look at the two primary components that may make up our basket that are related to some sort of index, one being headline CPI and then the other being the alternative indices. When you take a look at headline CPI, right, it saw its peak in June of 2022 and has been stepping down sequentially since. Water, sewer, trash, and garbage trash saw peak levels in August of 2023 and have been stepping down since then. Now, that said, the water sewer trash and garbage trash still remain at elevated levels; water sewer trash the recent print was 5.5% and garbage trash was 6.4%. So we're still pretty pleased about the level, but it is going to sit there and step down just due to the math.

Great. Thank you. And maybe for a quick follow-up. Could you just talk to the strength in small container, especially with the 11.2% yield? It seems like that's kind of updated the average? And any other thing you're seeing within that kind of end market and any other commentary around anything different that you've done compared to peers? Thank you.

Sure. Yes, we rolled out some new technology around AI, which helps us spot contamination and also helps us assess overages when the containers are overfilled. That certainly contributed to the small container performance. Again, underlying pricing was great, but that put it on top. And that's why we talked about our 2024 number. We expect to anniversary that in the second half of the year, so that will come down a bit.

Great. Thank you.

Hey, guys. I've always challenged for that full cycle, people, whatever. So free cash flow and the guide is at about 7% in the midpoint versus the top line at 7.9% and EBITDA is at $9.1 million. I'm presuming we've got higher interest expense and probably higher cash taxes because you're not counting on bonus depreciation being retroactively reverted back to 100%. Is that how I think about the bridge between the growth rates through the P&L?

That's correct, Michael. If you just take taxes alone, when you take a look at two components. So one, we are assuming that the current loss stays in place, which means bonus depreciation will sit there and have a further headwind in 2024 compared to 2023. Combined with the settlement we had with the IRS in 2023, where we received $20 million of cash back to a matter that dates back to 2017. Combined, those two create a $45 million headwind in cash taxes, that alone is a 2.3% headwind to year-over-year growth on free cash flow. So you just take taxes alone and you'd sit there and say you'd be kind of 9.5% growth in free cash flow or not for the impact of taxes. Interest, to your point, would just be going to be a further. And Michael, to that point, from an underlying business perspective, the growth in free cash flow is double-digit.

Right. Okay. That's, I think, important. And then on margin…

Just to give you a perspective, if you look across, right, both business types, we're expecting 30 basis points of dilution from acquisitions. And we would expect dilution from an acquisition perspective in both recycling and waste and Environmental Solutions. If you're looking at the underlying business itself within ES, we're expecting over 100 basis points of margin expansion in the Environmental Solutions business due to the underlying business itself.

Right. And about 30 in solid waste and then a net in the total company dilution, but it's greater in ES than it is in solid waste. It's just one size of the deal relative to the base?

That's correct.

Yes. Okay. I think that's important to draw that, you're still on that track of 25% or better margins at ES, excluding acquisitions and the acquisitions will then contribute to that as you integrate them?

Yes.

Thanks Jon. Can you talk to us about this new asset management system that you're putting in place? What are you functionally doing? And where does that ultimately show up in the P&L? Is it maintenance and repairs? What kind of savings are we talking about with the system?

Yes. It's really the RISE platform. Think about digitizing our operations from our logistic operation all the way through our fleet and how our drivers operate every day. But this brings this to the maintenance shop. And so, now rather than moving paper around, right, when the driver does their vehicle condition report before they take off in the morning, that digitally flows and is recorded into the maintenance organization. So they're dealing with tablets as well. So they're getting out of the paper-based business. A big driver of that is the productivity benefit for sure, but then there's also the warranty recovery element of that. Because when you're chasing paper that becomes a very manual process, when you could do this digitally, it allows you to quickly understand what warranties are available and whether you are fully claiming all the parts that are warranty-eligible, thus allowing us to get full recovery.

Yes. When you think about the linkage, so a couple of years ago, we started on our journey of modernizing our core systems, and that started with our general ledger and procurement systems. This is an extension of that. So the asset management system will be directly linked and integrated on a common platform with our procurement system. So now you can sit there and say, from the point of PO all the way to putting something on a truck, you can track that part. So to Jon's point about warranty management, this is something we had to do very manually before, which means that we had a lot of leakage in the system. Now, we feel very confident that we're going to get every single portion of that warranty that we're entitled to.

Very nice. Just a quick housekeeping one. You've already detailed the expectations for yield through 2024. But just your comments around weather, tough volume comps for 1Q, and you just mentioned the weather flipped to be a little bit of a drag here to start. We all felt that cold. So how do we think about kind of the volume trends quarter-to-date and how that trends through the year?

Look, I mean, the good news is that while January, we did experience quite a bit of weather, we have seen most of that volume return, not a total recovery, but we saw what we would expect in February so far to-date. We're guiding to flat to 50 basis points positive Q1, maybe kind of the low point of that because of the weather. But I would think of it relatively ratable that type of cadence throughout the year.

Okay. And in an environment where your yield is decelerating year-over-year at a pretty shallow step down, you can get the market expansion that we're looking for without a lot of volume contribution. So, you let the value of the upside to where margins came from? So, that's the basic takeaway.

Correct.

Hi, good afternoon. Thank you.

Hi, Stephanie.

Hey, there. I wanted to touch a bit on maybe the underlying macro environment. Probably a decent follow-up to the prior question. You called out some weakness in the quarter on landfill C&D volumes. I don't think any of us would be surprised to hear that. But maybe any other areas you might be seeing weakness or other levels of strength of the opposite? And then what is the kind of the underlying macro assumption embedded in the 2024 guidance? Thanks.

Yes, I think the picture is mixed. So again, we're planning on having a strong year. If you think about the direct things, we talked about weather, certainly housing, interest rates being high, mortgage rates being high, and housing activity is certainly a byproduct of depressed housing activity. We would have hoped for a quicker recovery there, both for our business and because we need more homes in the United States, but we think that will be more delayed towards the later end of the year. So we're not planning a robust recovery on that front. And then if you think about the other macros, the manufacturing, I think it is a mixed picture. We see pockets where while we're winning business, there's some service declines in certain subsectors of manufacturing, but other places in terms of remediation projects and other things have been very strong. PFAS is a nice contributor to the business in 2023, and we've got a good pipeline in 2024. The macro has two wars going on, right, one in Israel and one on the doorstep of Europe. Credit card debt is high with consumers. So we have a cautious macro perspective on that but the underlying demand signals for our business are largely positive.

Great. No, that's helpful. And then you touched on this a little bit, but if you could kind of walk through what you've seen from the cost inflation standpoint, clearly getting better, but some of those clear headwinds that we saw through most of 2023, how those are trending now to start 2024? Thanks.

Yes, certainly stepping down operating labor, clearly stepping down year-over-year. Transportation is stepping down. Maintenance has been a little bit stickier and most of that is the fact that we're growing and we're driving a fleet that's aging just because the supply chain is still a little congested and we're not getting all the trucks that we wanted. It's really been a three-year phenomenon in that front. So we're going to catch up some in this year, but we're not going to fully catch up on that. And all that is when you're driving a 12, 13-year-old truck, right, with a kind of a peak cycle in terms of its maintenance versus a new truck that has relatively high warranty recovery, and so therefore very low maintenance cost, that's going to show up in the underlying maintenance bucket. So that spend will be, we think, elevated throughout the year. We hope we do a little better, but we'll see.

Yes. Hi. Good afternoon, everyone. I would just love to continue the conversation on the cost side. I mean, really impressive in the quarter, your cost per unit were up just 1% year-over-year. So, I'm wondering where you are starting to see deflation. It sounds like the tailwind from better equipment availability still in front of us. So I'm wondering what's gotten better for you guys already in the fourth-quarter numbers? And then Brian, I'm wondering if you just put a finer point on the comments that you made about yield slowing over the course of the year on comps. Do you expect to exit the year with price/cost spread still favorable fourth quarter versus fourth quarter? Thanks.

Yes. Yes, Jerry. So Jon mentioned one of them already is our labor has continued to improve, right, really throughout the year. In part, that's just due to a reduction in turnover that we've seen. And so again, when you just take a look at the impact that turnover has, there's a hiring cost of bringing someone else, and this is a productivity impact. A newer driver just tends not to be as productive as those that have some tenure. And so we're starting to see as the turnover rates have come down. We're seeing that kind of come through that labor line item, which has had a positive impact. Together, we mentioned throughout the year some of the impact that transportation costs had, these were things where we had multiyear agreements. They came up for renewal in the second half of 2022. We said that we took some pretty big price increases and that they were going to comp out in the second half of 2023. We've certainly seen that. So I would say those are some of the tailwinds we've seen from a cost perspective. The maintenance has stayed relatively sticky in kind of that 7% to 8% type cost increase range year-over-year. To your question just on the price/cost spread, I would say we expect the biggest or the most positive impact between that in the first quarter. We expect that to modulate throughout the year, but still price exceeding cost by the time we exit 2024.

Okay. Great. Can you provide an update on your $100 million efficiency program, specifically the progress made in 2023 and what improvement you anticipate for the remaining $35 million in productivity for 2024?

Approximately about $10 million or the main $35 million.

Yes. Good evening. This is Jack Wilson on for Tobey. Can we double-click on sort of the state of the fleet and specifically fleet electrification in the long-term and sort of where you see that going?

Sure. We mentioned in the prepared remarks that we will have 50 electric collection vehicles this year. We'll be in the several hundreds next year and continue to grow from there. Our approach will start with residential and gradually move to small containers over time. We have a well-thought-out strategy for how we will implement this. I also mentioned the importance of infrastructure; it's not just about the trucks, it’s a complete system. It's essential to understand the infrastructure, the incentives, and the customers' willingness to pay for these vehicles. The trucks we have received from our partnership with Oshkosh are performing very well, so we are excited to see the next 50 join the fleet.

Okay. Thank you for that color there. And then just as a follow-up, can we sort of dig into the moving parts of volume? Are there any sort of specific geographies or market segments that are especially volatile or changing?

No, I mentioned the housing piece, large-container temp which has been certainly soft, as we're not putting up as many new houses as we need. Even for movement, people are kind of keeping their existing mortgage rates and are reluctant to move. Oftentimes, we see move we see remodeling activity or other ancillary opportunities in large container temp, and that's been muted. We don't think that will last forever here, but we're planning on a relatively benign year this year, looking to 2025 to see that accelerate.

Thank you very much.

Thanks for the question. Nice job on the quarter. Just some more color maybe you mentioned PFAS remediation. Could you just talk about what is going on currently at your landfills or whatever you're doing regarding PFAS and what could that be just a general idea of what the business opportunity could look like going forward?

We believe we have an attractive offering for customers with a comprehensive solution. We manage the entire process, from assessment to frontline remediation through our field services, and we provide various disposal options at the end. This includes hazardous landfilling, deep well disposal, and some waste that can be profiled for solid waste landfilling. We're currently seeing a significant flow in our special waste segment, measured in the tens of millions. Compared to last year, this year's figures could reach the high end of tens of millions or even approach nine digits in revenue. This represents a substantial growth opportunity for us. Much of this is driven by customers proactively engaging ahead of new EPA regulations and accelerated initiatives from the Department of Defense. We believe our national presence enables us to effectively address this issue for our customers.

That's great. Now, regarding trucks, you mentioned the developments with EVs and the volume of deliveries, which sounds promising. Are there any challenges related to supply chain issues for traditional trucks and EVs concerning those deliveries? Additionally, I'm curious about any surprises in EV performance. There's a lot of discussion about their performance, and given your strong positioning due to the routing system, I'd appreciate some insights on how things are progressing, especially since there are currently only a few models but that number is set to increase, and I'm sure extensive testing has been conducted.

Yes. The supply chain situation has improved; we are receiving about 80% of the trucks we need over the past couple of years, including those carried over from the previous year. While we haven't fully caught up yet, we are not significantly falling behind either. It's important to note that we've achieved substantial growth, marking our third consecutive year of double-digit revenue increases. As we continue to grow and make acquisitions, this generates more demand for new trucks. We anticipate some improvement in this area, and I believe we will start reducing the gap as we complete 2024, though I don't foresee closing it until 2025. As for electric vehicles, the McNeilus truck represents the first ever purpose-built electrified refuse truck, and it is capable of completing a full route. Many other EVs we've tested initially face software issues for the first two months, but we have been pleasantly surprised by the performance and uptime of this vehicle. We are addressing some bugs and remain in a testing phase, but the prospects for operating at scale with electric vehicles are very encouraging.

Thank you so much. Great job.

Thank you, Debbie. I would like to recognize and thank our more than 40,000 employees for their great work and commitment to serving our customers. Their efforts enabled our strong 2023 results and the continued growth of our company. Have a good evening and be safe.