Good afternoon, and welcome to the Republic Services First Quarter 2024 Investor Conference Call. Republic Services is traded on the New York Stock Exchange under the symbol RSG. Please note, this event is being recorded. I would now like to turn the conference over to Aaron Evans, Vice President of Investor Relations.

Thank you. I would like to welcome everyone to Republic Services First Quarter 2024 Conference Call. Jon Vander Ark, our CEO; and Brian DelGhiaccio, our CFO, are on the call today as we 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 April 30, 2024. Please note that this call is 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 a 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. Our strong first quarter results demonstrate our focus on profitably growing the business. We produced revenue growth, both organically and through acquisitions, while enhancing profitability across the enterprise. During the quarter, we achieved revenue growth of 8%, generated adjusted EBITDA growth of 12%, expanded adjusted EBITDA margin by 120 basis points, reported adjusted earnings per share of $1.45, and produced $535 million of adjusted free cash flow. The results we delivered are made possible by executing our strategy, supported by our differentiated capabilities. Regarding customer zeal, our efforts to provide best-in-class essential services and sustainability offerings continue to drive 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 as customers value our broad service offerings and the quality of our service delivery. Strong organic revenue growth during the first quarter was underpinned by core price on related revenue of 8.5% and average yield on related revenue of 7.3%. This level of pricing exceeded our internal cost inflation and resulted in over 100 basis points of EBITDA margin expansion. Organic volume on related revenue declined 1.1%. Large-container and disposal volumes were negatively impacted by severe weather across most of our geographies during the first quarter. Most of the weather impact occurred in January, and we saw a notable rebound in volume performance in February and March as weather conditions normalized. Turning to our digital capabilities, the team continues to advance the implementation of digital tools that improve the experience for both customers and our employees. Our RISE digital operations platform is driving improved route optimization and safety performance and providing more predictable service delivery to our customers. 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 deploying the new system later this year using a phased approach, which we estimate will result in $20 million of annual cost savings by 2026. We continue to benefit from advanced technology on recycling and waste collection routes. Our platform utilizes cameras to identify overfilled containers and contamination in recycling containers. This technology will reduce contamination in our recycling centers and is expected to generate approximately $60 million incremental annual revenue. To date, we have already achieved $30 million of annual benefit. 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 remains on track. Our Las Vegas polymer center is operational, and delivery of plastic flake to our offtake partners began in March. Construction is progressing on our Indianapolis polymer center, with equipment installation planned to begin in June. This operation will be co-located with a Blue Polymers production facility. The renewable natural gas projects being co-developed with our partners continue to advance. One project came online during the first quarter, and we expect at least seven 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 15 collection vehicles in operations. We expect to have more than 50 additional EVs added to our fleet in 2024. We now have seven facilities with commercial EV charging infrastructure. Development of 40 additional locations is underway with more than 10 new sites expected to be completed in 2024. As part of our approach to sustainability, we continually strive to be the employer of choice in the markets that we serve. Employee turnover continues to improve, with our first-quarter turnover rate improving 70 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 recently named to Barron's 100 Most Sustainable Companies List, Ethisphere's World's Most Ethical Companies List, and Fortune's Most Innovative Companies List. With respect to capital allocation, we invested $41 million in acquisitions during the first quarter. Our acquisition pipeline remains supportive of continued activity in both the recycling and waste and environmental solutions businesses. We continue to see opportunity for $500 million of investment in value-creating acquisitions in 2024. Additionally, we returned $168 million to shareholders through dividends in the first quarter.

Thanks, Jon. Core price on total revenue was 7%. Core price on related revenue was 8.5%, which included open market pricing of 10.2% and restricted pricing of 5.7%. The components of core price on related revenue included small-container of 12.2%, large-container of 7.7%, and residential of 8.1%. Average yield on total revenue was 6% and average yield on related revenue was 7.3%. First-quarter volume on total revenue decreased 90 basis points, and volume on related revenue decreased 1.1%. The components of our volume performance included a decrease in large-container of 4.4%, primarily due to severe weather in January, along with continued softness in construction-related activity, and a decrease in residential of 2.6%. During the quarter, landfill MSW volume was up 1.6%, and small-container volume increased 30 basis points. Moving on to recycling, commodity prices were $153 per ton during the first quarter. This compared to $105 per ton in the prior year. Recycling processing and commodity sales increased revenue by 40 basis points during the quarter. Commodity prices are exceeding our initial expectations as current commodity prices are approximately $160 per ton. Now turning to our environmental solutions business. First-quarter environmental solutions revenue increased $15 million compared to the prior year. The growth was due to the rollover impact from an acquisition that closed in the fourth quarter of 2023. Adjusted EBITDA margin in the environmental solutions business was 20.5%, which compared to 21% in the prior year. After considering the dilutive impact from a recent acquisition of 110 basis points, EBITDA margin in the environmental solutions business increased 60 basis points. Total company adjusted EBITDA margin for the first quarter expanded 120 basis points to 30.2%, which was driven by margin expansion in the underlying business of 110 basis points. Other changes in margin performance during the quarter included a 20 basis point increase from recycled commodity prices and a 20 basis point increase from net fuel. This was partially offset by a 30 basis point decrease from acquisitions. Adjusted free cash flow was $535 million in the first quarter. Free cash flow conversion was 45.9%. Total debt was $13 billion and total liquidity was $2.8 billion. Our leverage ratio at the end of the quarter was approximately 2.8x. With respect to taxes, our combined tax rate and impact from equity investments and renewable energy resulted in an equivalent tax impact of 25.4% during the quarter, which was in line with our expectations. We also received a $12 million state grant associated with renewable energy investment. This benefit was recorded in other income and added $0.03 of EPS. This did not impact EBITDA or EBITDA margin during the quarter. With that, operator, I would like to open the call to questions.

Your first question comes from Jerry Revich with Goldman Sachs.

This is Adam on for Jerry today. So your first polymer center recently opened. Just wondering how that plan is tracking versus your initial expectations. Any surprises there?

No, it likely opened about a month later than we anticipated due to permitting and infrastructure challenges. However, the core operations are actually surpassing our expectations. Customers believe it is some of the cleanest recycled PET flake available. The facilities and team are performing exceptionally well. I am satisfied with our equipment providers and everything is running smoothly in Indianapolis. We should soon announce our third location on the East Coast.

Terrific. And then shifting to US Ecology. Just wondering if you can update us on how you're thinking about what level of margin upside is feasible for that business once you fully integrate the systems, just based on your experience of optimizing route profitability and pricing for your base business. What's the level of margin upside potential there?

Yes. We're targeting a 25% EBITDA margin there in the midterm, and it's really going to be a series of levers, right? We're going to think about customer mix and making sure that we have customers who are willing to pay. We'll obviously think about pricing for the value we deliver on that. We'll drive additional revenue through cross-sell, which we've talked about. The IT investments help there. They also help us manage the middle, just better labor utilization, more efficiency in terms of disposal, optimizing disposal assets and getting the material into the right spot. As we grow, we'll certainly get more leverage on our SG&A. So we've got a series of levers that we think can get us to 25% in the midterm.

The next question is from Toni Kaplan with Morgan Stanley.

You mentioned the weakness in volume related to weather. I was hoping that you could give the weather impact in the quarter?

We think, overall, that was about a 50 basis point drag on total volume performance. So you can think about that being down around 1%. Half of which was weather-related and then just half more in those cyclical volumes as we talked about, construction activity and the like.

Yes. Okay. That makes a lot of sense. And then just wanted to ask about pricing. Strong core price again this quarter, maybe a little bit above expectation. I think you mentioned it exceeded your expectation as well. I think last quarter, you talked about the trajectory of 1Q being the high point, 4Q likely being the low end. Is that still your expectation? And has anything in the inflationary backdrop changed your view on how price plays out or how good price was in the first quarter?

Yes, I think it modestly exceeded our expectations. And I think that cadence we laid out is still right as we see it will sort of come down. Could we extend that a little higher as the interest rates remain high and I think inflation has been a little stickier than people expected? Yes, I think there's certainly potential for that.

The next question is from Michael Hoffman with Stifel.

One aspect regarding ES would be the cross-sell. When you acquired it, you didn't anticipate this in your plan, but it has proven to be a positive contributor. How do we measure our current progress in that cross-sell? What is the total incremental revenue we have gained?

Yes. I think we're making great progress on that, Michael. Listen, that ES was a little softer in the quarter, where certainly, weather impacted them. They also were coming off a pretty tough comp because we had a great first quarter last year. But that pipeline remains strong. I think we stopped talking about the pipeline at $150 million. That pipeline has grown from there. Now that pipeline is over a couple of years. It builds out as these opportunities develop. So we feel really good about that. And frankly, there's another wave of upside as we get integrated on the IT side and then we get our sales organization kind of optimized against those customer lists and that information. We think there's strong pull-through.

Okay. Now returning to the solid waste business. What is the process for converting the opportunity to capture surcharges and overages through the digital platform into permanent revenue? Eventually, a salesperson comes in to address the issue of overflowing containers and proposes a permanent upgrade. What does that process look like? How should we approach this?

Michael, to your point, the obvious solution to that is to sit there and either get an increased level of service, whether it be the size of the container or just the frequency that we're providing that service. But when you take a look just at those incremental revenues, they've been fairly sticky, meaning even though we've had these, because they're not consistent, they tend to be somewhat episodic as well. So again, when we're providing the service based on a certain amount of volume within that container, if there are those overages, we're going to charge for that and same with the contamination. Ultimately, could that change behavior over time? Yes, and we would want that. And at which point then, that probably just results in increased frequency, which positively impacts the top line as well.

And that is the protocol, right? If somebody's got multiple overages, right, the protocol is it's pushed through Salesforce, and the salesperson calls on that customer and says, hey, it's time to go from twice a week to three times a week or a larger container or whatever the right solution is. To Brian's point, I think it's still early days, and we've seen it's across a variety of customers, right? It's not like we're getting all this from the same small set of customers. It's kind of one-off on that front, so it's a little early to tell in terms of what that conversion looks like in the kind of permanent upgrades.

The next question comes from Bryan Burgmeier with Citi.

In the prepared remarks, you touched on a revenue opportunity in recycling. I guess, just what's driving the biggest tailwinds there right now? Is it capturing different materials such as plastic? Are you increasing the throughput speed? And is there any opportunity on the labor side as well?

Well, I think what we talked about, Bryan, on the recycling side a little bit was on those fees. We were just talking about more on the contamination side. So again, when you take a look at how we're deploying AI into the business, we're doing it on overages, right, on the traditional waste. And then on the recycling, it's more about contamination. So that's what we're talking about there. When you just talk about where you saw the uplift in recycling, that was really a function of just the recycled commodity prices and the lift in the overall basket. So our overall basket was $153 per ton in the first quarter. We exited the year at around $130, so that's that uplift, which is really what's driving that increase in recycled commodities.

Got it. That makes sense. Yes, I was inquiring about the $60 million opportunity there. And then maybe just on solid waste, like really nice margin performance in 1Q. What are your expectations for cost now versus the start of the year? Based on the public data, maybe wages are cooling a little bit. I'm not sure if that's really accurate for you guys. And any view on kind of M&R costs? I'll turn it over.

Sure. Yes, I believe the team is performing well in the middle. The outlook is positive regarding costs. However, on the wage side, that is already set. We provide our employees with their annual raises at the end of February, and even if inflation decreases, we don't go back and ask for some of that back in September. This creates a more fixed cost structure. The same applies to third-party transportation. I would say the most variable cost components are landfill operations and maintenance. Regarding maintenance, the team is executing effectively. We are increasing the number of truck deliveries, which will positively impact us as we retire older trucks and replace them with newer ones. The maintenance costs are significantly lower for the newer trucks, so this should yield a nice advantage in the second half of the year.

The next question comes from Noah Kaye with Oppenheimer.

Really nice OpEx leverage here as others have alluded to. And at this point, 30 bps margin expansion at midpoint for the full year looks pretty conservative to us, at least in light of 1Q results and the trends. So can you kind of comment on margin expectations and at least how we should be thinking about the typical step-up in margins as we get into the stronger seasonal quarters?

Yes, we certainly feel comfortable with how the team is executing in our plan for the rest of the year on that front. And look, for the overall environment, keep in mind we're in a pretty much a zero-growth volume environment on recycling and waste over the last couple of years, if you think about housing starts and the correlation of that to volume on that front. Certain parts of the economy are a little slower like construction for sure, with interest rates remaining elevated, both commercial and residential construction has been softer on that front. Manufacturing has certainly been soft as well. Now there are some certainly positive signs that that activity is picking up at the plant level, which is encouraging. So we remain pretty confident in our plan, but also mindful of the external environment. Election years, sometimes, special waste volume can push out a little bit on that front. So we'll update you more as we get into the seasonal upswing here after Q2.

Absolutely. I think the spirit of the question is that despite volumes being down more than expected, I mean, margin performance in 1Q was definitely stronger, I think, perhaps, maybe even in your internal forecast, certainly, than the Street. Is there any reason why some of the underlying tailwinds to margins, excluding volumes, shouldn't continue into future quarters? So as you said, you have pretty good visibility on things like labor costs. Is there anything on the cost side of the equation that should give us pause?

No, to your question, right, we got off to a nice strong start, but it's the first quarter, right? So again, we like to see that continue, that seasonal uptick. We've got some strength right now in recycled commodity prices, but we're a quarter of the way through. So to your observation, we've gotten us to a really good start to the year, which would suggest there's some modest upside. But we've got to sit there and see it play through the remainder of the year. But we're very pleased with our results in the first quarter.

Yes. Very fair. And then just a quick housekeeping item. The release and your comments mentioned $41 million spend on acquisitions in the period. The line item in the cash flow statement, obviously, well north of that. And I assume that delta is primarily related to the sustainability investments, maybe some renewable energy projects. Can you maybe just help us with that bridge and how to think about full-year spending, even excluding the M&A that you hope to do in the balance of the year?

Yes. Most of that is the investments that we're making in those joint ventures. So we would expect between what we're doing on the landfill gas to energy as well as the investments in Blue Polymers to be about $230 million of investments in those joint ventures in '24.

Okay, $230 million. And so it sounds like you spent a good chunk of that then already, just doing some quick math here. So that tapers off as we move to the back half?

It does. Yes.

The next question comes from David Manthey with Baird.

Could you provide us with some details on the timing, size, and type of acquisition that you did in environmental solutions? It looks like volume growth was about 3.2% this quarter. I'm wondering how much of that was the acquisition.

Well, the acquisition that we completed was in the fourth quarter of '23. So most of what you're seeing there on the environmental solutions side is the rollover impact of a company that we bought out on the West Coast. And we talked about that in our fourth-quarter release. But when you think about the total rollover impact right now of acquisitions, so that which closed in '23, together with the deals that closed in the first quarter, it's about 220 basis points of rollover impact to revenue in '24.

Okay. And this enterprise asset management initiative you have, you talked about maintenance productivity and warranty recovery. Could you explain to me what that means and maybe size the opportunity there?

Yes. Well, now you've got a system that is going to be seamlessly integrated. So when you think about the platform that we put on both the financial and the procurement side, now being seamlessly integrated with an asset management system, our ability to track parts and to be able to make sure that we're getting warranty recovery on every single part that we take off a truck is greatly enhanced. Right now, it's a very manual exercise to get those warranty dollars, as well as greater efficiency for the technician. So what that means is with that extra time and that capacity created, we can in-source more of those repairs. So instead of outsourcing at a multiple, we can do those in-house.

The next question comes from Sabahat Khan with RBC Capital Markets.

Great. Just maybe if we could get a little bit of color on the volume cadence you expect for the rest of the year. A couple of your peers have called out a bit of a softer Q2 there. Maybe just your expectation on cadence and if that's changed versus what you might have expected at Q4 reporting a bit earlier.

Yes, we would expect obviously a sequential improvement from what we saw in Q1 just because we don't expect the weather impact again. Q2, yes, we would expect it to be a little bit negative, given what we're seeing with some of the construction-related activity. We're not seeing a rebound there yet. As we get into the second half of the year, we start to anniversary some of those construction-related declines. So we would expect that to be flat to even potentially slightly positive.

Okay. Great. And then on the PFAS front, you guys have obviously a bit of a unique exposure with the environmental business. Maybe if you look at the puts and the takes across your entire business, obviously, it's a bit early. But just curious how you're sort of approaching that opportunity and kind of the net impact of any additional costs? Just how do you view that entire opportunity given your two business lines?

Yes, it's a net positive for sure. We talked about around $70 million to $90 million last year of PFAS-related revenue. We'll have that number better this year with the pipeline that's building. We offer a very unique set of products and services to our customers to help them remediate, all the way from service to multiple opportunities for disposal, solid waste, and landfill, obviously. For low levels of PFAS in landfills, deep well, and that solution is certainly resonating with our customers. But on the other side of the business, that's a multi-year opportunity that's going to play out over time. The size and scale of that opportunity is hard to size yet because it depends a bit on the regulatory environment. On the waste and recycling side, there could be some headwinds if this thing is poorly executed. I think the industry is doing a good job of pushing back and making sure that we don't get penalized as being a passive receiver. I would say, from a litigation standpoint and more broadly, as regulation increases in the industry, if you think about the last 25, 30 years, we've done a really good job of passing on that cost of regulation and not making it hurt returns. Over time, given the nature and complexity, it favors the larger players. We want regulation to be thoughtful and intelligent. But we see that, again, over time, we're in that cycle through PFAS.

The next question is from Tony Bancroft with Gabelli Funds.

Regarding plastics, let's look at the long-term view. With the new regulations implemented on plastics, such as those in Canada and California, it seems that similar measures will spread elsewhere. How do you perceive these stricter regulations on production and waste disposal, considering the need for recycling and associated restrictions? What is the long-term impact on your polymer centers, and do you anticipate any changes in production behavior among manufacturers? Additionally, how might this affect your long-term return on investment for these facilities?

Yes. Listen, consumer packaged goods companies for a long time have talked about minimum content goals. I think when the regulatory environment came online with California, other states have followed, that's really what's driven different activity in the marketplace. So we had pretty clear expectations for returns when we built the Las Vegas polymer center. As we always do, we're going to be good stewards of capital, and we've certainly exceeded our expectations there. I think there's more upward opportunity as we go. We could sell out that facility five times over. The same will be true in Indianapolis and the other centers. The market is structurally short-supplied of recycled PET, and we've got the unique capability of collecting something five million times a day. So we can be the anchor tenant of our own facility on that front. Over time, I think we'll think about innovating on collection. So how do we get more PET and more olefins into the system? And then that might spark the opportunity to create a fifth or sixth polymer center, and we'll take that on as we go.

The next question is from Tobey Sommer with Truist Securities.

A question for you on the hazardous side. How is the pipeline and overall demand? And do you think it's sufficient to easily absorb new incinerator capacity coming towards the end of this calendar year?

Yes. The pipeline is strong. The activity, like I said, was certainly weather-related impact in the first quarter. The pipeline is strong. We got a number of attractive things, again, both on recurring streams and some event work in the pipeline. The market is structurally short-supplied on incineration. Even with new capacity coming online, I think it's likely to be tight for the foreseeable future on that front. Any kind of medium to even a bearish case on PFAS is going to push more volume in liquid side into incineration. So we see that, again, market being tight supplied for the foreseeable future.

Appreciate that. And then if I could ask a question on the expense side beyond wages. In terms of hiring, training, and the safety events that tend to happen more frequently with new employees, are those other elements around direct compensation also sort of seeing less growth and sort of a benefit to margins this year?

Yes. We're seeing certainly great trucking safety numbers. We talked about turnover. We talked about NPS. All these things are connected. We've done this a long time, and we know that when you are fully staffed and you've got trained and tenured drivers, they provide great customer service. It lowers your risk costs. Those customers are happy with the product offering, and they're willing to pay more and stay longer. So we're certainly seeing some of the benefits of a reduced turnover as well.

The next question comes from James Schumm with TD Cowen.

Just curious if you guys are seeing any trends in the residential business with respect to competition or pricing?

Yes. I think we've discussed this quite a bit. Over the past decade, as the business has improved and changed in many ways, this particular area hasn't seen as much progress. We strongly believe that we need to increase returns in this segment. Overall, I would say that competitive behavior is getting better regarding fair returns for the efforts made, but there is still room for improvement. We will be disciplined in this area and will not engage in work that yields low returns. If a city opts for a different provider who may be less expensive but offers fewer benefits, that's their choice. We will focus our resources on opportunities that provide attractive returns. No problem. We haven't talked about it probably. It's sub-20%. There’s a seasonal curve to turnover, obviously. Again, it goes up in Q2 and Q3, just like volumes do, and comes down in Q4 and Q1. Listen, running the business sub-20% gets very attractive in terms of all the operating metrics I talked about earlier, including the financial performance of the business.

The next question is from Stephanie Moore with Jefferies.

This is Harold Antor standing in for Stephanie Moore. Regarding M&A, do you anticipate this year to have above-average activity? We've heard some of your competitors mention that M&A might be more active this year. In terms of your verticals, which ones do you expect to achieve the most significant gains in M&A?

We have recently completed significant M&A activities, amounting to $5.5 billion over the past three years. This process often has its ups and downs. Last year, we executed two major transactions in the fourth quarter, with a total spend of $1.8 billion, of which $1.4 billion was in recycling and waste. The timing of these deals is dictated by when sellers are ready, rather than aligning with specific quarters or years. Our pipeline in recycling, waste, and environmental solutions remains robust. The only area where we face some limitations is in environmental solutions field services, as we are heavily focused on IT integration. We are currently building our pipeline and could pursue more opportunities, but we plan to pause until 2025 to ensure we have a strong foundation for integrating new companies, which will help us realize the full potential of those acquisitions.

And I believe that you said recycled commodities are trending at $160 per ton. Is that what you're baking in for 2Q? And if not, I guess, what are you baking in there? And I guess one housekeeping is, what is internal inflation running right now?

Yes. I mean right now, we're just pegging to what we see, which is running right around that $160 per ton. But back to my earlier comment, we want to see that stay for a longer period of time before we sit there and say that's where it's going to be for the remainder of the year.

The next question is from Mike Feniger with Bank of America.

Just a quick one, I apologize if you already addressed it. But I think EBITDA was a little bit down in environmental solutions or environmental services. Margin was down a little bit. You might have addressed it earlier, but apologies if there was something you would want to call out of why that happened and how we kind of think about how that plays through the full year.

Most of the decline is due to the acquisition we made in the fourth quarter, ACT. As you know, we tend to make significant investments in the first year after an acquisition to facilitate integration. That's the reason for the current drag. However, we are optimistic about the margin outlook for Environmental Solutions this year.

Yes. And we would expect that margin headwind on the acquisition to abate, and we ultimately expect to see margin expansion in that business on a full-year basis.

And would it be probably above what you would expect for the solid waste business?

Well, look, solid waste ran at 120 basis points in our first quarter. As we say again, we talked about that cadence on environmental solutions moving in that 75 to 100 basis points per year. We see that on a sustained basis in the medium term until we hit that medium-term target of around 25%. So I think you can think of it in that range.

And lastly, guys, just to wrap up, Brian, obviously, there's a lot of focus on CPI, whether inflation staying sticky, rolling over, moderating. Can you just remind us when we think of CPI, there's obviously the headline CPI. There's what you guys have kind of converted over time. Can you just remind us where we are in that process? That would be helpful.

Yes. So if you just take a look, again, if you look at our entire revenue stream, about 45% of our revenue has some sort of contractual pricing restriction, 55% in the open market. Of that 45% that has that contractual pricing mechanism, 23% is directly linked to CPI, headline CPI, 27% are alternative indices like water, sewer, trash, garbage, and the remaining 50% are either a fixed rate increase, some sort of rate review, things of that nature. We've continued to move the book away from headline CPI to alternative indices, where now we have more on alternative indices than we do on the headline.

The next question is a follow-up from Michael Hoffman with Stifel.

I just wanted to play a little cleanup. So one, to roll off this temporary container business, is it not correct that you would park equipment pretty quickly, reposition drivers, raise price? So while this may show up as a volume calculation, it's not that big of an impact to profitability because you can pivot so quickly?

Yes, certainly, Michael. I mean, we're dynamic in that in the market. If you look at the quarter, volume was down 10.8%, but price was up 7.1%. I think that speaks to the strength of the execution and the strength of the industry, in an environment where volume is declining. If you go back a decade or two, you might see behavior change and pricing be flat or even pricing go negative. People understand the value of the products and services they're delivering. The ability to flex and scale in that business is quicker than almost any other, and certainly, our team has done a great job of that.

I agree with the comment about incineration. This will remain tight for some time. US Ecology primarily focuses on inorganic chemistry in disposal, while the incineration sector is mainly organic, making it less relevant to you. Although you do have some organic materials, your operations are largely centered around inorganic activities.

Historically, that was true, Michael. But as we provide a broader set of products and services, we've certainly expanded the offering. We're a significant player in that place, in that space in terms of liquids because we're going to recurring revenue generators and handling multiple products in their facilities. It can certainly be on the organic and inorganic side.

Thank you. At this time, there appear to be no further questions. Mr. Vander Ark, I'll turn the call back over to you for closing remarks.

Thank you, MJ. I would like to thank the entire Republic Services team for their efforts and commitment to driving lasting value for all of our stakeholders. I'd also like to make a special acknowledgment to Michael Hoffman, a senior statesman on the call. He's been with the industry for decades. As he announced, he's starting a new chapter, certainly supporting the industry in a different capacity. But over the last number of decades, he's certainly seen a lot of transformation in the industry and has handled this environment and this community with a lot of excellence and professionalism. So congratulations, Michael, in your next chapter. Have a good evening, everyone, and be safe.

Ladies and gentlemen, this concludes the conference call. Thank you for attending. You may now disconnect your lines.