Republic Services: Waste Management's More Efficient Little Brother
Despite having 56 fewer landfills, Republic only has ~3% less capacity than WM, and both companies generate roughly the same free cash flow.
Republic Services is the second largest waste disposal company in North America after Waste Management. As of the time of this writing, Republic has a market capitalization of $58 billion, 207 landfills, and 5.1 billion cubic yards of capacity. By contrast, WM has a market capitalization of $83 billion, 263 landfills, and 5.2 billion cubic yards of capacity.
Despite having 56 fewer landfills, Republic only has ~3% less capacity than WM, and both companies generate roughly the same free cash flow. Between 2009 and 2023, Republic’s FCF/cubic yard grew almost 200%. WM’s grew 60%.
Republic groups its customers into three categories: commercial (small container), industrial (large container), and residential. Between 2009 and 2023, the company’s industrial collections business grew the most with that segment’s revenue up 90%. Commercial collection revenue grew 74%. Residential was the slowest of the three, growing only 29% during that timeframe. These numbers are roughly the same as WM’s.
Republic has recently started reporting environmental solutions revenue. That business includes water treatment and disposal services; hazardous waste services; and field services like industrial cleaning, maintenance, and remediation for refineries, chemical plants, and manufacturing plants. The company has six hazardous waste landfills, nine energy waste landfills, waste storage facilities, salt water disposal wells, and deep injection wells. This business now accounts for 11% of the company’s revenue and grew 29% between 2022 and 2023.
Republic also acquired US Ecology in 2022 which puts the company in a position to benefit from PFAS cleanup activity. The CEO sees PFAS-related services eventually bringing in at least a billion dollars in additional revenue each year.
And like WM, Republic has been working on its renewable energy business by harnessing landfill gas (a byproduct of decomposing waste) and converting it into energy. Gas collection systems cover 87% of Republic’s landfill acreage. A third party develops and owns these gas collection systems, and Republic earns royalties on the energy sold. Republic also has a joint venture with Archaea Energy (which BP bought in 2023) to develop projects that convert gas to renewable natural gas (RNG). That RNG can be sold to third parties and used to fuel Republic’s fleet of trucks, turning a cost center (fuel) into a potential profit center.
Republic and WM have each reduced their shares outstanding by 17% between 2009 and 2023. Over that timeframe, Republic increased free cash flow per share by almost 300% compared to WM’s 90%. In 2023, Republic converted almost 14% of revenue to free cash flow. By contrast, WM converted about 9% of its revenue to free cash flow.
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