America’s trash flow isn't signaling a recession, CEO explains

Jon Vander Ark, Republic Services CEO & President, joins Yahoo Finance Live to discuss capturing landfill methane for power, different kinds of recycling, and the demand for trash management.

Video Transcript

JULIE HYMAN: Welcome back. Taking a look at shares of Republic Services over the last six months, the shares are actually higher as the company continues to make big investments in renewable natural gas, as well as spending big on acquisitions in general. The biggest, a $2.2 billion deal to acquire US Ecology that closed earlier this year. Joining us now is the President and CEO of Republic Services, Jon Vander Ark.

You guys also recently reported earnings that came in ahead of estimates. Jon, I want to start sort of big picture here about the trash business. Because over the last, I don't know, decade, maybe even longer, we've seen a shift here to sort of monetize the business in a different way. So how are you guys sort of capitalizing on that monetization of trash, not just to, like, put it somewhere, but to actually get useful things out of it?

JON VANDER ARK: Yeah, thank you. Good morning. Thanks for having me. Yeah, the business has really changed over the last decade. We've gone from being a garbage company to, really, an environmental services and a sustainability company.

So when you put garbage into a landfill, it produces leachate, which is a gray water, and also methane. And so we've now taken on 75 projects today, and we've got another almost 60 in the pipeline to harness that methane and produce either electricity or renewable natural gas, which then goes right back to power fleets, and vehicles, and homes, and is a great circularity and renewable story for us.

BRAD SMITH: As energy costs have risen, how much does that also meant that you also need to take that into account on your side in even transitioning trash into something that is renewable?

JON VANDER ARK: Yeah. We first think about recycling and reuse. That's where we start. And we've invested heavily. We're one of the largest recycler in the United States, and recently announced a polymer center which is taking one step further into plastics recycling.

So that water bottle you have today, most of that actually gets downcycled into a pipe or a park bench. And so it's good it gets reused. But then at the end of the life of that product, it's going to go into the landfill. But we're forward integrating to take that product, clean it, and flake it that will allow us then to drive it right back into the plastic water bottle manufacturing.

And that polymer can then get turned six, seven, eight times-- so a true circularity story. So we're innovating in every part of our business to think about, how do we drive reuse and recycling?

JULIE HYMAN: I mean, Jon, while you're talking about recycling, I got to ask you-- I mean, we hear these reports periodically about municipalities where you think your stuff is being recycled, but it's not actually being recycled. It's going into a landfill. How much is that happening? And what percentage of the trash and recycling that's being discarded in the US is actually going into the processes that you're describing?

JON VANDER ARK: I think very little is actually getting landfilled. There's been cases in the pandemic for a week or two or in a crisis where people have had to divert into a landfill. But those are really one-off cases. So you should feel good that if you're putting it into the container, that it's going to end up in the right place.

Now, I think the more important topic is not all recycling is equal. An aluminum can, right, requires an enormous amount of energy and has an enormous amount of value to be recycled. On the other end, glass is basically sand and has very limited value. So we really think about aluminum, fiber, and cardboard, and plastics is the primary things that have a really big value in the end market that we want to use to drive circularity.

And to your second question, there's more room to move, right? About 85% of US households have access to a curbside program. But recycling rates, even for small business, are still kind of hovering in the 50% zone. So we're out-- our 1,000-plus salespeople are out every day trying to drive a recycling and sustainability story with our customers. And our take rates have gone up. We've grown that category faster than solid waste for the last decade.

JULIE HYMAN: So you guys have been-- as you mentioned, you've been growing. You grew big earlier this year with that acquisition of US Ecology. And you said in your latest earnings report and in the call, you're not done, right? I believe you said you have $600 million still to deploy to make some acquisitions. So where are you looking to add on?

JON VANDER ARK: Yeah. Really, we're growing in all areas. We've expanded into environmental services. And the US Ecology acquisition was really a platform acquisition to allow us to do that. And so we're bolting on and adding on tuck-in deals in that space. And then in our traditional recycling and solid waste space, we're both adding new geographies and then tucking in smaller acquisitions in existing geographies-- so really, on all three fronts, we see a positive M&A story. And as we've made our business better, our ability to take on companies and drive really a lot of value post-synergy in those companies never been higher.

BRIAN SOZZI: Jon, does our trash trends in this country say, recession?

JON VANDER ARK: I would say, no. And again, I read all the things that you do and look at all the signs. But we are supply constrained right now. Our demand is incredibly strong across all markets.

And we see that from the consumer all the way to industrial and large national accounts. The demand is very, very strong. And so we hear about a recession-- and, again, we may be in one. It's always backward-looking. But from what we see, we've never grown as fast as we have from a volume standpoint. And our outlook for the remainder of the year is very, very positive.

BRAD SMITH: Jon Vander Ark, who is the Republic Services CEO and President, thanks so much for joining us and breaking down some of the company's latest results. Appreciate it.

JON VANDER ARK: Thank you. Have a great day.