Republic Services Inc (RSG) — Q4 2024 Earnings Call Transcript

I would like to welcome everyone to Republic Services' fourth quarter and full year 2024 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 information we discuss 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 discussed 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 13, 2025. 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 expressed 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 the recording of this call, are available on Republic's 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 Jon.

Thanks, Aaron. Afternoon, everyone, and thank you for joining us. The Republic team finished the year strong. We delivered world-class service and innovative solutions for our customers and executed our strategy to profitably grow the business. As a result of the team's efforts, we delivered adjusted EBITDA, EPS, and free cash flow that exceeded our full-year guidance. During 2024, we achieved revenue growth of 7%, generated adjusted EBITDA growth of 12%, expanded adjusted EBITDA margin by 140 basis points, delivered adjusted earnings per share of $6.46, and produced $2.18 billion of adjusted free cash flow. We continue to be well-positioned to capture new opportunities and create long-term value for our stakeholders through our differentiated capabilities, customer zeal, digital, and sustainability. Regarding customer zeal, our focus on delivering world-class essential services continues to support organic growth and enhanced customer loyalty. Our customer retention rate remains strong at more than 94%. We continue to see favorable trends in our net promoter score due to the value of the offerings and quality of our service delivery. Fourth-quarter organic revenue growth was driven by solid pricing across the business. Average yield on total revenue was 4.4% and average yield on related revenue was 5.3%. This level of pricing continued to exceed our cost inflation and helped drive 110 basis points of EBITDA margin expansion during the quarter. Organic volume on total revenue declined 1.2% in the quarter. Volume losses were concentrated on shedding underperforming contracts in the residential business and continued softness in construction and certain manufacturing end markets. Turning to our expanding digital capabilities, we continue to advance the implementation of digital tools to improve the experience for both customers and employees. Deployment of EMPower, our new fleet and equipment management system, is underway. EMPower is designed to increase maintenance technician productivity and enhance warranty recovery. Deployment of the new system is anticipated to be completed by the end of 2025. We estimate EMPower will deliver $20 million of annual cost savings once fully implemented. We continue to benefit from innovative technology on our recycling and waste collection routes. We utilize cameras to identify overfilled containers and recycling contamination, which is enabled by our RISE digital platform. This technology generated more than $60 million in incremental revenue in the first year of operation. Moving on to sustainability, we believe that our sustainability innovation investments in plastic circularity and renewable natural gas position us for continued growth and long-term value creation. Development of our polymer centers and Blue Polymers joint venture facilities continues to move forward. Construction is complete at our Indianapolis Polymer Center and equipment commissioning is underway. This operation is co-located with a Blue Polymers production facility that is expected to be completed by mid-2025. We expect earnings contribution from the Indianapolis Polymer Center in the second half of this year. Construction on the Blue Polymers production facility in Buckeye, Arizona is underway. This facility will complement our Las Vegas Polymer Center. We expect the completion of this facility in late 2025. We continue to bring decarbonization solutions to the market that will unlock value for our stakeholders, including the communities we serve. The renewable natural gas projects we're developing with our partners continue to advance. Two projects came online during the fourth quarter, and another project came online in January. We expect a total of seven new RNG projects to come online in 2025. We continue to advance our commitment to fleet electrification. We had 52 electric collection vehicles in operation at the end of 2024. We expect to have more than 150 EVs in our fleet by the end of this year. We now have 22 facilities with commercial-scale EV charging infrastructure. We expect to have approximately 30 facilities with charging capabilities by the end of 2025. As part of our approach to sustainability, we continually strive to be the employer where the best people want to work. In 2024, our employee engagement score remained high at 86. Internal rates continue to trend lower, with full-year turnover improving 150 basis points compared to the prior year. Our comprehensive sustainability performance continues to be widely recognized as Republic Services was named to the Dow Jones Sustainability Index for the ninth consecutive year. With respect to capital allocation in 2024, we invested $358 million in strategic acquisitions and returned $1.18 billion to shareholders, which includes $490 million of share repurchases. Our results clearly demonstrate our ability to create sustainable value, and our strategic investments strengthen the foundation to continue to grow our business. In 2025, we expect to deliver profitable growth while continuing to invest in the business to drive lasting value. More specifically, we expect full-year revenue in a range of $16.85 billion to $16.95 billion. Adjusted EBITDA is expected to be in the range of $5.275 billion to $5.325 billion. We expect to deliver adjusted earnings per share in a range of $6.82 to $6.90. Generate adjusted free cash flow in a range of $2.32 billion to $2.36 billion. Our pipeline supports continued acquisition activity in both recycling and waste and environmental solutions. We expect to deploy at least $1 billion of investment in value-creating acquisitions in 2025. Our 2025 guidance includes the financial contribution from acquisitions closed to date. I will now turn the call over to Brian, who will provide details on the quarter and year.

Thanks, Jon. Core price on total revenue was 6.1% in the fourth quarter, core price on related revenue was 7.3%, which included open market pricing of 9.1% and restricted pricing of 4.5%. The components of core price on related revenue included small container of 9.6%, large container of 7.4%, and residential of 6.8%. Average yield on total revenue was 4.4% and average yield on related revenue was 5.3%. As expected, average yields stepped down sequentially as we fully anniversary the impact of new fees implemented in late 2023. The fees relate to overfilled containers and recycling contamination and were enabled by our digital platform. In 2025, we expect average yield on total revenue of approximately 4% and average yield on related revenue of approximately 5%. Fourth-quarter volume on total revenue decreased 1.2% and volume on related revenue decreased 1.5%. Volume results included a decrease in large container of 4.6%, primarily due to continued softness in construction-related activity and certain manufacturing end markets, and a 2.8% decrease in residential due to intentionally shedding underperforming contracts. In 2025, we expect organic volume growth in the recycling and waste business in a range of negative 25 basis points to positive 25 basis points. Moving on to recycling, commodity prices were $153 per ton during the fourth quarter. This compared to $131 per ton in the prior year. Recycling processing and commodity sales increased revenue by 20 basis points during the quarter. Full-year 2024 commodity prices were $164 per ton. This compared to $117 per ton in the prior year. Current commodity prices are approximately $145 per ton, which is the baseline used in our 2025 guide. Fourth-quarter total company adjusted EBITDA margin expanded 110 basis points to 31%. Margin performance during the quarter included margin expansion in the underlying business of 110 basis points, a 10 basis point increase from net fuel, and a 10 basis point increase from recycled commodity prices. This was partially offset by a 20 basis point decrease from acquisitions completed in the prior year. Our full-year adjusted EBITDA margin was 31.1%, which represents margin expansion of 140 basis points compared to the prior year. Margin expansion in the recycling and waste business was 130 basis points and margin expansion in the Environmental Solutions business was 230 basis points. With respect to environmental solutions, fourth-quarter revenue increased nearly $70 million compared to the prior year, driven by organic growth in the business and the rollover contribution of prior year acquisitions. Adjusted EBITDA margin in the Environmental Solutions business expanded more than 500 basis points to 24.7% in the fourth quarter. Total company depreciation, amortization, and accretion was 11% of revenue in 2024 and is expected to be 11.2% of revenue in 2025. Full-year 2024 adjusted free cash flow was $2.18 billion, an increase of 10% compared to the prior year. This was driven primarily by EBITDA growth in the business. Total debt at the end of the year was $12.8 billion and total liquidity was $2.5 billion. Our leverage ratio at the end of the year was approximately 2.6 times. We expect net interest expense of approximately $565 million in 2025. With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 23.4% and 23.9% for the full year. The favorable tax rate in the fourth quarter was supported by tax credits related to investments in RNG projects with our development partners. We expect an equivalent tax impact of approximately 25% in 2025, made up of an adjusted effective tax rate of 20% and approximately $170 million of non-cash charges from equity investments in renewable energy. With that, operator, I would like to open the call to questions.

Good afternoon. Thanks for taking the questions. So, ES was obviously really strong last year, and I think you've said ERP implementation was kind of ongoing throughout the year. So with that now completed, is it fair to say there's almost another sort of leg up for this business since it's fully integrated? Or could you maybe just help me frame what comes next for ES? Having hit, you know, 24% margins and seemingly cleared a bit of a hurdle.

Yeah. Onward and upward with the business. We continue to remain very positive on our prospects there. Great year last year and you're right, lots of heavy lifting by the team in terms of IT integration. We certainly have most of that behind us. There's certainly some work we're gonna work on the rest of the year. But we will mostly pause M&A in that area last year just to give the team time to breathe and integrate. And so, you know, we see opportunities certainly for M&A growth coming in that space in 2025, as well as more organic growth. Right? This a lot of the IT work enables us to do more cross-sell, better visibility, more clarity on product line profitability. And so we will see that ramping up throughout the year in 2025 and certainly beyond as well.

Got it. Thanks for that detail. And then was just wondering, Jon, if you could touch on the margin bridge year over year for 2025. I think we're looking like a 20 to 30 basis points increase year on year, and I think you saw in the last call, you know, long term, you're trying to get to maybe 30 to 50 as opposed to 20 to 30. So just a little bit of detail on your margin expansion would be great, and I'll turn it over. Good luck on the quarter.

Yeah. Thanks. Looking across the cycle, we generally aim for kind of 30 to 50 basis points a year. In any given year, it could be a little more outsized or a little more muted on that front. Obviously, coming off an incredibly strong year in 2024 of 140 basis points of margin expansion. As you get into 2025, listen, the end market, particularly construction and parts of manufacturing, are still pretty soft. So we're looking for those to come back. Manufacturing is showing some very good early signs on that front. Construction where interest rates are in terms of the impact on mortgage rates in the ten-year is likely to delay progress. So that certainly feeds into that. I know it Dell had in. Yeah. Brian, you know, in terms of the midpoint, you're looking at approximately 30 basis points of margin expansion. But if you unpack that, we took the current price of commodities and we held that flat for the entire year, so that's approximately $145 per ton. If you compare that to the $165 average we had in 2024, that's about a 10 basis point headwind year over year. Additionally, some deal and integration costs we have on the acquisition front are about a 10 basis point headwind as well. So the underlying business is growing approximately 50 basis points plus. That 50 basis points is also overcoming some unique items. We're not assuming that CNG tax credits are renewed, which would cost us about $20 million or 10 basis points year on year. So if you really look at the strength of the underlying business, you're in a 60 to 70 basis points margin expansion as compared to the headline which would suggest something closer to 30.

Hey. Good afternoon, guys.

Hey, Todd.

Hey, Ron. Great detail on the bridge. But hey, Jon. I'm interested in the billion dollars in acquisition commentary. I know that's not included in the guidance. It's probably just a placeholder, but you must feel pretty good. So what do you see out there on the M&A front? Are you looking at traditional solid waste, or could there be some more specialty hazardous waste type stuff in the pipeline as well?

Yeah. I think for the last few years, we've put a marker out there around $500 million. And we're typically, let's get an indicator. We're always gonna look at deals that pass due screens, our strategic filter, and our financial filter. The outsized number this year is predicated off a really strong start already. So we feel really good about the momentum the team has with things that are either closed or nearly closed on that front. So we've got a big head start and that gives you a better indication of where we're gonna end up. In terms of pipeline, I would expect that pipeline looks a little heavier slanted in the first half toward Environmental Solutions. The back half will be more heavily slanted toward recycling and waste, but we'll see all of those things play out.

Okay. So, Ron, is there a material M&A benefit in 2025 based on what has been closed today in Q1? I'm more confused on that.

Well, let’s consider it in terms of revenue. If you look at rollover, which was pretty insignificant from deals in 2024, including what's closed to date, we’ve got about a full point of revenue growth from those deals.

Okay. That's helpful. And then back on the flattish volume, is there any benefit from wildfires or hurricane cleanup here? Is that just not material, or would that be upside, or how should we think about that?

We didn't bake it in. Right? I think there will be over time. I think it's too early to determine how that plays out. We are certainly on the ground right now with our Environmental Solutions teams, supporting those communities and managing household hazardous waste cleanup. That will ultimately convert into some forms of hazardous waste and a lot of special waste that ends up in the landfills; exactly where and how that ends up, we don't know yet, so that's not built in.

Okay. That's very helpful. Thanks, guys.

Great quarter, guys. Thanks for taking the questions. The 5% yield and related revenue in the guide, can you comp that to cost inflation expectations on related? Are you looking for the 3.5 and maybe 150 of spread? Right way to think about it?

Yeah. I think we're probably closer to 4% on the cost side. If you layer in employee wage increases, benefits, inflation on maintenance, that takes us right about 4 and then 5 on related.

Okay. Great. And then I just had to think about seasonality for the year. I think there are certainly on things like commodities, more favorable comps within the year. It's not that big of a headwind for you. But you also have, as you mentioned, some M&A benefits. So just give us some rough guidelines on how you think about at least sort of EBITDA cadence for the year.

From a margin expansion perspective, we would see it more balanced, you know, this year than what you've seen over the last couple of years. Maybe a little more heavily slanted towards the first half of the year than the second. But, you can think of it relatively consistent for the year, with margin expansion in all quarters across all business types.

That's super clear. I'll turn it over. Thank you.

Yes. Hi. Good afternoon, everyone. I'm wondering if you could just talk about how the polymer centers are performing, Jon. Are you hitting the efficiency rates that you had targeted? And, Brian, what's the level of contribution that you are embedding in the guide from the polymer centers plus the RNG plants? Can you calibrate us on that?

I'd say, there are some learning and start-up costs in terms of uptime on equipment and getting that dialed in. Certainly, some learnings on getting the specification right with each of the individual customers. There's some uniqueness there and learning associated with that. The good news is, all our assumptions on run rate in terms of price, cost, volume, and willingness to pay are really strong and positive. So feeling good about the place that Las Vegas is right now, we're taking all those learnings and feeding those into Indianapolis. And so, on our marks, I'll let Brian cover the specifics.

So for next year, across our portfolio of sustainability investments, we're looking at incremental revenue around $70 million and incremental EBITDA of $35 million.

That is clear. Thank you. And then, Brian, I just wanna go back to your comment on the weighting of margins; the downside of having a really good performance in 2024 and a really good fourth quarter is maybe a bit of a tough comp. If we were to apply normal seasonality to the fourth quarter margin run rate, it would imply first-quarter margins that are up 150 to 200 basis points year over year, and it sounds like you're guiding to just more modest margin improvement on a year-over-year basis in the first quarter. Is there anything lumpy in the fourth quarter? Can you expand on that? Because it felt like you've built momentum across the businesses over the course of 2024.

If you think about a normal level of seasonality, Q1 is seasonally your lowest quarter due to the winter months. You also have the highest percentage of employee-related taxes, so that tends to be your low watermark. Generally followed by Q4. Q2 and Q3 are relatively similar, but I would see Q2 as third and Q3 as the highest level of margin expansion for the year. So, transitioning from 31% in the fourth quarter to something that steps down modestly is not gonna generate 100 basis points of margin expansion year over year. If you recall, margin was 30.2% in Q1 of 2024.

Hi. Good afternoon. Thanks so much for taking the question. I wanted to ask to follow up on the environmental solutions business. Really nice quarter of growth there. Just in terms of revenue performance, could you talk about the pricing environment for hazardous waste? And then just kind of maybe split out what you're seeing between treatment and disposal versus the field services business and how you're thinking about each of those pieces moving into 2025?

There’s been a lot of positive impact on margin performance overall over the last two and a half years since we did the US Ecology acquisition. That's come through various levers, like customer mix, getting attractive customers who are willing to pay more and shedding work that's less profitable. That's come from pricing the work that we do. It's come from cost management and being more efficient. If you consider our movement going forward, we're not gonna expand margins at the same rate as we have over time, but we'll continue to expand margins in that space. We think there's value in the work that we deliver. As we build out that offering further, we will have a more differentiated set of products and services. So you'll see pricing on both post-collection assets and field services. Expect to see more of a single price increase a year, more ratable like we do in recycling and waste, versus multiple price increases throughout the year. But we expect continued momentum and contribution in 2025.

Okay. Great. Thanks for that, Jon. And then I wanted to follow up on the labor environment a little bit. I think you mentioned turnover was 150 basis points lower in 2024. I was just wondering, one, where does that place you relative to your historical averages? And then, two, any new initiatives you're implementing in 2025, and how much runway you think you have to decrease turnover further? It would be great.

I don't have 30-year numbers on turnover, but this is a decade low. We are performing at a high level from a turnover standpoint. It starts with leadership, employee engagement is very strong, and a lot of good things happen when turnover gets to that level, which means you're servicing customers effectively. Those customers are happy with the service, they pay more, and they stay longer. We certainly look for opportunities to improve turnover. Unlike other sectors where the goal might be zero, the goal in turnover is not zero. Some level of turnover is always natural and healthy. I don't think we'll see the same leap and improvement in 2025, but we can continue to grind out a few more basis points of improvement.

Great. Thanks so much.

Great. Thanks, and good afternoon. Just a question similar to the ES pricing and margin question earlier. I guess on solid waste, as you look across your portfolio, how is the pricing discussion with clients going? Is there more pushback, less pushback at this point in the cycle? Are you getting feedback on that front? Just wondering, after fears of higher pricing, things do seem to be moderating. Are customers still okay with the spread? Just any feedback would be great.

Our pricing has come down from an average, but when you look at our yield over the past couple of years, our cost inflation is also coming down, which we mentioned. We are maintaining that spread. I think there was some fear that if price came down, and costs didn’t, we would have a price cost squeeze, but we haven’t seen that. A 3% inflationary environment is a good spot for us to operate. We're measuring how much of our price sticks or retention rate, and that's remaining very healthy. We have many tools and sophistication in pricing. The team is doing a great job in ensuring we give customers a price that they'll accept while also maintaining our high level of customer loyalty. Going forward, we have an opportunity on pricing in the municipal space. That's an area of the business where customers aren't paying their fair share overall. We've invested significantly in innovation, capital, and labor, and not all customers meet our standards. You'll continue to see us optimize that portfolio.

Just one on the RNG facilities. I think we’re looking for four to come online. I think two came online. Is that just a timing thing, or how are you thinking about the rest of the RNG facilities?

Yeah. It's more of a timing thing. There's a bit of rollover. We expect those two to come online in the first quarter. So, from a contribution perspective, think of it like a 90-day delay.

Great. Very much. I'll pass the line.

Thank you very much. Regarding employee attrition levels, you mentioned a decade low. How much improvement do you think is left to squeeze out? I'm curious about leading indicators that would signal we might be nearing the end of that as a tailwind to margin.

You generally see improvements in a high unemployment environment where employees have a hard time finding jobs externally, so they keep the jobs they have. But we're at 4% unemployment, meaning the labor market is still tight relative to a 20 or 30-year period. A lot of it has to do with engagement. It's about how we compensate our general managers, paying them for achieving financial outcomes and employee outcomes. Thus, there’s a lot of energy dedicated to making Republic a great workplace. The rate of improvement won’t be 150 basis points this year. I think it will be narrower than that, but we believe we can continue to make progress.

Sorry. This is Harold Antonoff, Stephanie Warren. You guys talked about how to finish from overflowing bins. I just want to get a sense of how far you are through that process, implementing those additional fees. How are conversations going with customers as you move from fixed rate contracts to alternative indices?

Let me start with the latter regarding alternative indices. Since we began this initiative, we’ve moved 63% of those contracts to an alternative index, like water, sewer, or a fixed rate that we consider favorable.

Got it. Thank you for that color. Regarding the regulatory side, given your administration, are you looking at any regulations?

On written prices, we assume very conservative assumptions on our project moving forward. RIN prices have come down, but they are trending back up over the last couple of weeks. We remain enthusiastic about our landfill gas energy pipeline and the set of projects coming online this year and in the future. PFAS is a broad issue society wants to address, and we feel good about our capabilities in helping customers remediate facilities and find final disposal for materials.

Thank you. I'll turn it over.

Hey. Thanks for taking the question. Regarding RNG and sustainability adding kind of the $35 million in EBITDA in 2025, what's the capital spend associated with that? Beyond 2025, what's remaining from a capital and EBITDA contribution from future projects?

For 2025, we look to spend another $75 million on polymer centers, consistent with previous baseline spending levels. Other investments we’re making are more in the JVs and landfill gas to energy projects, where combined we'd look to spend about $100 million in the investments for next year.

Okay. That's helpful. A lot of fixed stuff on many of your internal programs. What risks do you see strategically going forward from where we are today?

I think the broader macro environment is a risk. We've experienced a pandemic, high inflation, and geopolitical instability. A macro slowdown in the economy poses considerations regarding tariffs and inflation impact. While those factors don't keep us up at night, we remain watchful of the environment we operate in. In terms of what we can control, safety is our number one priority, so we focus on that. Beyond that, we feel confident about our prospects.

Hey, gentlemen. Congratulations. Very well done. Just this runs along the lines of your environmental solutions acquisition. Is there anything out there that could be a transformational type of acquisition either in your space or perhaps something different, maybe more on the sustainability side that could happen over the next three to five years?

We maintain a perspective on everything and everyone; any deal or opportunity of significance, we will have a viewpoint on. That being said, those opportunities are often opportunistic and uncertain, so we don’t hinge our strategy on waiting for a big deal. Over the last five years, we’ve created a lot of value in the business through small and medium-sized deals, alongside strong organic execution. We plan to continue this approach but will keep our eyes open for larger opportunities if they arise.

Great. Well, great job. Thank you.

Thanks, Tony.

Thanks for taking my question. There are a lot of questions already asked here, but there’s some sensitivity regarding the commodity price environment, right? The way you are assuming your commodity price for 2025 could present a decent headwind. If the commodity prices begin to move higher than anticipated, how might we think about the sensitivity of earnings from that?

A $10 move in recycled commodity prices on our basket of goods is approximately a $10 million annual EBITDA impact. Even when considering prices currently around $145 per ton and holding that flat throughout 2025 compared to the $165 average in 2024, would amount to about a $20 million impact on EBITDA. While that is notable, it isn't overly material. From both revenue and EBITDA perspectives, you can expect that sensitivity based on our basket of goods.

Okay. That's great. Thanks. If I can follow-up quickly on CNG tax credits, I assume you're not assuming those credits for this year. If they do come through, what would be a realistic scenario?

On the CNG tax credit, we did not assume their renewal. That represents about $20 million per year for us.

Hey. Thanks. Good afternoon, and thanks for taking my questions. Congrats on a strong end of the year here. You noted earlier about your unique strategy, with your fleet growing. However, I think California withdrew its waiver to the EPA regarding stricter zero-emission vehicle policies. Does that change your thinking on EV spending? I know some of these vehicles have already been deployed in California. Are you throttling that back? Or are you just adapting to the changing regulatory environment?

No, it has not slowed down our pace there. There's significant customer interest and demand. There are incentives at the state and local levels to support us in that direction, and we'll continue to deploy there. We'll be mindful in our approach but have no locked-in EV strategy concerning the exact number of vehicles to purchase each year. It’s vital that any vehicle we deploy is a superior product; a quiet, safe, zero-emission vehicle, which is beneficial for our employees. So, we’ll continue responding to customer demand on EVs, and we are confident that even with changes in administration, there is a path forward on electrification.

And then just on turnover, great job there. Although I wonder about the implications of changes to US immigration policy. We hear about certain companies seeing some impact. Are you foreseeing any downstream impacts? While I can see your direct employee base isn't affected, in tighter labor markets there might be a downstream impact overall. Just wondering if you're observing any of this or if you're keeping an eye out for regions that might become problematic in terms of labor availability?

In terms of our labor force and compliance, we've always taken that seriously, so we don't see it as a threat. More broadly, in the markets we serve, there's been significant discussion around construction. The top driver there, in my opinion, would be mortgage rates. Labor supply could also be an issue, but we are monitoring this situation closely. I don't expect it to be a major concern for us.

That's great color. Thanks. Best of luck as you execute on 2025 here.

Thanks.

Hey. Thanks. Good quarter, guys. Can you just provide an update on the truck supply chain? Is that fully resolved, or are you still experiencing issues in getting trucks? Also, where are you now in terms of your ASL conversions and CNG truck conversions? How do you think about margin expansion opportunities over the next couple of years?

The supply chain is caught up in terms of deliveries. We're hitting our replacement philosophy with vehicles over the course of this year and certainly by year-end, hitting our optimal point. I’m thankful for our suppliers who have been able to help us over the last 18 months in that respect. We are about 77% automated. There are some opportunities in that area, which will come with specific contracts as we look to upgrade more in the one-off environment. But that won’t be a major driver of performance. Regarding CNG, we’ve retained CNG vehicles over the last five years, but we see electrification as a superior product. CNG is better than diesel for the environment, but it is not zero-emission. Electrification is the key direction where we see customer demand, and that's where our focus will be.

Okay. Great. Understood. Thanks, guys.

Yes. Thanks. Good afternoon. Just one clarification from me; of the $1 billion plus M&A spending target in 2025, it seems the deals completed in the first six weeks of the year are included in the guide. Is that correct? If so, could you provide a sense of how much of that $1 billion has been deployed already?

Yes, any deals closed through today are embedded in our guidance. So a significant portion of that billion-dollar spend has already been deployed, and we feel confident about hitting that target. More details will be provided in April after our Q1 results.

Alright. Sounds good. Thank you.

Thank you. I want to thank the Republic Services team for their great work in 2024. Their focus on safety, sustainability, and exceeding customer expectations led to another year of great results and positions us well for continued growth. Have a good evening, and be safe.