Good afternoon, and welcome to the Republic Services Third Quarter 2025 Investor Conference Call. Republic Services is listed on the New York Stock Exchange as RSG. Please be aware that this event is being recorded. I will now hand the conference over to Mr. Aaron Evans, Vice President of Investor Relations. Please proceed, sir.

Good afternoon. I would like to welcome everyone to Republic Services Third Quarter 2025 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 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 October 30, 2025. 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. 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. Good afternoon, everyone, and thank you for joining us. We delivered strong third quarter results, which highlight the consistency of our business model, disciplined operational execution and the power of our portfolio. Even with persistent headwinds in construction and manufacturing end markets, we generated solid earnings growth and margin expansion. Continued investment in our differentiated capabilities positions us well to drive sustainable growth and enhance long-term shareholder value. During the quarter, we achieved revenue growth of 3.3%, generated adjusted EBITDA growth of 6.1%, expanded adjusted EBITDA margin by 80 basis points, delivered adjusted earnings per share of $1.90, and produced $2.19 billion of adjusted free cash flow on a year-to-date basis. Our commitment to delivering world-class service continues to support organic growth by reinforcing our position as a trusted partner for our 13 million customers. Our customer retention rate remained strong at 94%. We saw continued improvement in our Net Promoter Score. This reflects our team's commitment to delivering products and services that customers value. Organic revenue growth during the third quarter was driven by strong pricing across the business. Average yield on total revenue was 4% and average yield on related revenue was 4.9%. Organic volume decreased total revenue by 30 basis points and related revenue by 40 basis points in the quarter. Volume performance included outsized C&D and special waste landfill activity. The increase in C&D tons related to hurricane recovery efforts in the Carolinas. Special waste activity was driven by an increase in event-based volumes across many of our disposal assets primarily located in Sunbelt geographies. These volumes were offset by a decline in the collection business. The decrease in collection volumes related to continued softness in construction and manufacturing end markets and shedding underperforming contracts in the residential business. Organic revenue decline in the Environmental Solutions business created a 140 basis point headwind to total company revenue this quarter. Environmental Solutions performance was impacted by three primary factors: continued softness in manufacturing activity, lower event-driven volumes in our landfills, which includes E&P activity, and fewer emergency response jobs. Given the relatively fixed cost structure of these assets and services, the impact on Environmental Solutions' EBITDA and margin was more pronounced. While the Environmental Solutions business was down both sequentially and year-over-year, demand stabilized exiting the third quarter. Our pipeline for new business is now expanding, and we remain well positioned to capture growth opportunities as market conditions improve. Importantly, despite these headwinds in Environmental Solutions, we delivered over 6% growth in adjusted EBITDA and expanded adjusted EBITDA margin by 80 basis points at the enterprise level. These results reflect disciplined pricing above cost inflation, strong operational execution, and effective cost management. Moving on to sustainability. We are making progress on the development of our Polymer Centers and Blue Polymers joint venture facilities. In July, we commenced commercial production at our Indianapolis Polymer Center. This operation is co-located with a Blue Polymers production facility. We expect commercial production to begin at the Blue Polymers facility late in the fourth quarter. We are advancing renewable natural gas projects with our partners. One project came online during the third quarter. We have commenced operation at six RNG projects this year. We expect a total of seven RNG projects to commence operations in 2025. We continue to advance our commitment to fleet electrification. We had 137 collection vehicles in operation at the end of the third quarter. We expect to have more than 150 EVs in our fleet by the end of the year. We currently have 32 facilities with commercial scale EV charging infrastructure. This infrastructure investment will support continued growth of this differentiated service offering. As part of our approach to sustainability, we strive to be the employer where the best people want to work. We continue to have high employee engagement scores, and our turnover rate continues to trend lower compared to the prior year. With respect to capital allocation, we have invested more than $1 billion in strategic acquisitions on a year-to-date basis. Our acquisition pipeline remains supportive of continued activity in both the Recycling and Waste and Environmental Solutions businesses. Year-to-date, we have returned $1.13 billion to shareholders through dividends and share repurchases. I will now turn the call over to Brian, who will provide additional details on the quarter.

Thanks, Jon. Core price on total revenue was 5.9%. Core price on related revenue was 7.2%, which included open market pricing of 8.6% and restricted pricing of 4.8%. The components of core price on related revenue included small container of 9.2%, large container of 7.1%, and residential of 6.8%. Average yield on total revenue was 4% and average yield on related revenue was 4.9%. Third quarter volume decreased total revenue by 30 basis points and decreased related revenue by 40 basis points. Volume results on related revenue included a 45% increase in landfill construction and demolition or C&D volume, driven by $35 million of hurricane cleanup activity in the Carolinas, and an 18% increase in landfill special waste revenue, driven by volume growth across many of our disposal assets. Year-to-date, we recorded approximately $100 million of event-driven revenue associated with hurricane and wildfire cleanups. We estimate these volumes will result in a full year adjusted EBITDA margin benefit of 30 basis points. Large container volumes declined 3.9%, primarily due to continued softness in construction-related activity in most manufacturing end markets, and residential volume declined 2.4% due to shedding underperforming contracts. Moving on to recycling. Commodity prices were $126 per ton during the quarter. This compared to $177 per ton in the prior year. Recycling processing and commodity sales decreased organic revenue growth by 20 basis points. Increased volumes at our Polymer Centers and reopening a recycling center on the West Coast partially offset the impact of lower recycled commodity prices. Current commodity prices are approximately $120 per ton. Total company adjusted EBITDA margin expanded 80 basis points to 32.8%. Margin performance during the quarter included a 40 basis point increase from previously noted event-driven landfill volumes and margin expansion in the underlying business of 90 basis points. This was partially offset by a 20 basis point decrease from net fuel, a 20 basis point decrease from recycled commodity prices, and a 10 basis point decrease from acquisitions. Adjusted EBITDA margin in the Recycling & Waste business was 34.3%, which was up 150 basis points compared to the prior year. With respect to Environmental Solutions, third quarter revenue decreased $32 million compared to the prior year, driven by softness in manufacturing end markets, lower event activity, and softer E&P volumes in the Gulf. Adjusted EBITDA margin in the Environmental Solutions business was 20.3%. Year-to-date adjusted free cash flow was $2.19 billion. Our strong performance reflects EBITDA growth in the business and the timing of capital expenditures. Year-to-date capital expenditures of $1.18 billion represents 62% of our projected full year spend. Total debt was $13.4 billion, and total liquidity was $2.7 billion. Our leverage ratio at the end of the quarter was approximately 2.5x. With respect to taxes, our combined tax rate and the impact from equity investments in renewable energy resulted in an equivalent tax impact of 21.2% during the quarter. I will now hand the call back to Jon.

Thanks, Brian. Through the cycle, we believe our business can consistently deliver mid-single-digit revenue growth and grow EBITDA, EPS, and free cash flow even faster. This generally produces 30 to 50 basis points of EBITDA margin expansion per year. This growth assumption is supported by pricing ahead of underlying costs, selling our comprehensive set of products and services, and capitalizing on value-creating acquisition opportunities. We also expect financial contributions from investments made in sustainability innovation, including plastic circularity and our renewable natural gas projects. Our initial perspective regarding 2026 is that the long-term growth algorithm is intact. As a reminder, we reported approximately $100 million of revenue at an 80% incremental margin related to landfill volumes, except in 2025, that will not repeat in 2026. This should be reflected in year-over-year growth assumptions. We plan to provide full year 2026 guidance on our earnings call in February. With that, we can now open the call to questions.

And today's first question will come from Tyler Brown with Raymond James.

Jon, I just want to make sure I have it big picture. I appreciate the color right there at the end of the prepared remarks. So the long-term algorithm, mid-single-digit revenue hopefully, EBITDA free cash flow faster than that. So when you think about as we go into '26, and I think you kind of alluded to that, is that including the headwinds with the special, with the event-driven volumes? And then we also are going to have a fairly sizable commodity headwind if we snap the line today. So can you just talk a little bit about the puts and takes into '26.

Yes. As you know, we're not giving guidance for '26, but I'll give you some markers in the spirit of your question. Look, the long-term growth algorithm of mid-single-digit growing EBITDA growth or EBITDA faster than revenue and free cash flow faster than EBITDA, we think, holds. We're coming over a tougher comp. So that probably just takes each of those down a click going into '26. And that's predicated on remaining pretty conservative on the macro, but also understanding what our pipeline looks like and how well performing we are in the fundamentals of the business, I think that shapes our perspective into 2026, and that certainly includes overcoming that commodity headwind as well.

Okay. Helpful. And then, Brian, just on the event-driven volumes. I just want to make sure I have it kind of by quarter. Was it something like $10 million of revenue in Q1 and then $55 million in Q2 and $35 million in Q3? Is that roughly right?

Yes. So it's roughly $12 million of revenue in Q1, $53 million in Q2, $36 million in Q3, for a total of $100 million.

Okay. Perfect. And then just my last question. You have been realistic about the volume environment. It appears that ES has slowed down and worsened. What are you observing in the market? Is this mainly connected to project work? Also, regarding the EBITDA flow-through, it seems almost like a 1:1 ratio of revenue to EBITDA flow-through. I understand that hazardous waste landfills have very high flow-through, but was there anything else contributing to that margin?

Yes. I think it's a confluence of events. Like the macro manufacturing continues to be very slow, and we see that in the Recycling & Waste business too, when large container hauls, again, we're gaining share in that area, but volume is slowing down just because plant output is down in that space. So that's part of it. We're seeing delayed project-based work, a lot of recurring work like turnarounds or tank cleanouts. People are just pushing those. And the good news is those come back, those will get delayed forever. And then good news for the macro society, bad news for us, it's just been a very slow emergency response here across the board. Activities have been pretty low across the board. So all of those things are feeding into it.

Yes. And Tyler, to your question just on the margin, you're right, it is falling through almost at the amount of the revenue decline. That is not just due to the revenue itself, there were some unique costs. We called out last year that we had a bad debt recovery, about $4 million that was somewhat out of period. This year, we had a legal settlement, which added a couple of million dollars worth of cost. So that added $6 million spread between the two years, about a 140 basis point impact on margin year-over-year.

The next question will come from Noah Kaye with Oppenheimer & Company.

The open market pricing strength looked good again this quarter. Maybe just update us on how you see price cost spread heading into year-end here and kind of the runway for '26.

Yes, positive. I mean we'll think about cost inflation kind of roughly in line with what you think about CPI. Broadly speaking, there's a few puts and takes underneath that. But at the aggregate, that's fair. And then we'll think about kind of a yield number that's 75, 100 basis points above that.

That's a great place to model from. I guess switching gears, there was one competitor this week that took an impairment charge related to a plastics facility. I know it's different technology. But as you look at what's happened with commodity pricing, how do you think about return expectations for the Polymer Centers?

Yes. We're excited. Listen, these projects typically have challenges on two ends. One is the supply end, and I'm sure we have an advantage because we get something up the ground five million times every day. And the other is on the demand end. And the demand from both a pricing and a volume standpoint has been very strong. And the spread between the input and the output on this side has been really consistent. In fairness, it's taken us a little longer on the ramp-up of these projects to get to full capacity and full output. And that's just the normal learning curve of new facilities starting up plants is challenging, but feel really good about our long-term assumptions there and excited to see Indy come up the curve and Allentown open up next year.

Your next question will come from Sabahat Khan with RBC Capital Markets.

Great. I guess just as you think about 2026 and you called out acquisitions as one of the areas that generally contribute here. How is the pipeline looking relative to this year, obviously a big year this year? Can you just talk about kind of the magnitude or how full that is and then mix across your different silos? Historically, you've talked about just keeping it more balanced, but just how is that looking right now?

Yes, pipeline looks very strong. We expect to finish the year strong and start out next year strong. The exact balance of when things close end of the year or into the first half of next year, we'll see. And then the pipeline behind that, things that would be more likely to close in the second half is still very full. And that will be a balance across both recycling and waste and ES, tilted toward recycling and waste, but we'll look for opportunities on all ends.

Great. And then you provided some benchmarks around 2026. Is it really just going to be on the environmental services side, kind of the magnitude of the event-driven volumes that really swing how that segment performs? Or do you have any sort of visibility on how the next year could evolve relative to this year? Just some high-level perspective on what you're seeing.

Yes, we expect to grow that business next year, even though we will stay cautious about the sluggish macro environment. The pipeline is developing, as Brian mentioned in our prepared remarks. Most of our challenges have stemmed from macro factors. Last quarter, we noted that we haven't always managed the price volume trade-off effectively. We've implemented significant price increases over the last three years and will continue to apply upward pressure on prices. However, for some opportunities, it's important to find the right market balance, and our team is working diligently on this, which is why the pipeline is growing to ensure we get the pricing right.

Next question will come from Bryan Burgmeier with Citi.

Yes. I mean just following up on some of the questions on ES. Can you maybe give us a sense of your expectations for the fourth quarter for that business? Should we continue to expect kind of those mid-single-digit declines in the top line or just the pipeline that you're mentioning and building sort of start to come through? And then I guess on a sequential basis, margins kind of stepped down from 3Q to 4Q normally. I'm just not sure if that's generally how you're thinking about it.

We believe we have reached the lowest point, and we are overcoming a challenging comparison from the fourth quarter of last year. We had a significant ER job that yielded a high incremental margin. I expect margin performance to remain consistent, and we will work on improving it in 2026.

Got it. And then just one follow-up is you mentioned you acquired a recycling facility in California during the quarter. I think that's a little bit different than your Polymer Centers, is maybe more of a reclaimer, I think does that kind of fit between your Polymer Centers and your MRF? I'm just sort of curious what the incremental opportunity is there? And is there more opportunities like that as Republic tries to build out their national kind of plastic cycling network, just overall thoughts on the M&A environment around plastics.

Yes. That was quite an opportunistic and unique move. It is associated with the West Coast Polymer Center and connects us to the bottling value chain in that region. In the long run, we will seek more mergers and acquisitions in this area. However, in the short term, it is unlikely that we will find additional opportunities as we will focus on executing the Polymer Center, ensuring Allentown meets its targets, and progressing with the Blue Palmer joint ventures. Looking ahead, we see potential for M&A, but I would anticipate more developments in 2027 and beyond rather than in 2026.

Your next question will come from Kevin Chiang with CIBC.

In the second quarter, you mentioned approximately $56 million in labor disruption costs for the first half of the year. I'm curious if there will be any lingering effects as we look toward Q4 and next year, particularly regarding credits or revenue adjustments as you work on rebuilding relationships with customers who experienced that disruption. How do you see revenue trends developing in the next few quarters?

Yes. Kevin, we think we mostly captured the impact of that, including the revenue credits themselves. So we think at this point, the $56 million that we recorded in the third quarter will be it at this point. So yes, we think we're done.

Oh, perfect. And just on the EV targets, you provide us with the update every quarter here. It does feel like OEMs are deprioritizing the production of their electrification strategy. Just I guess, how do you think that impacts these longer-term targets you have? It feels like you still feel pretty confident that you can get the vehicles you want despite maybe OEMs deprioritizing this propulsion system.

Yes. No, we feel really good about our partners in the space and customer demand for it. And we think it provides really unique benefits of a zero-emission vehicle and cities and communities are excited about it. At the same time, we're going to do it in an economic fashion, right? This isn't just a sustainability investment. This is also a business investment. And so we lost a little bit of incentive here in the federal legislation. And that might slow our pace on the margin. But there's other state and local incentives and there's certainly customers who are willing to pay the most important part of the equation that will allow us to continue. So we're going to continue to march it out in communities where it makes sense.

Your next question will come from Trevor Romeo with William Blair.

I had one kind of follow up on, I guess, the overall kind of manufacturing industrial volume activity as it relates to both solid waste and ES. Just kind of wondering, was the softness in this quarter kind of about what you expected last quarter when you lowered the guidance? Or you talked about demand stabilizing exiting the quarter. Maybe you could just walk us through kind of the monthly trends a little bit more? Or just any more color on that would be great.

Yes. And probably since our last call, in the first couple of months after that, it was certainly more to the negative than our outlook was and we've mentioned, started to stabilize, and we think we found the bottom of rebounding from here. There's a ton of uncertainty out there for manufacturers and trade policy is top of the list. And I think you're just seeing the rebound effect of those tariffs and people prebuilding and prebuying to get ahead of the tariffs. And then we've seen a slowdown in economic activity in a lot of sectors, pretty dramatically in June, July, August, and starting to see that pick back up. And so that's really what we're facing in both sides of the business.

Got it. And then I guess, on capital allocation, the buyback ramped up quite a bit in Q3. I think all the solid waste stocks have been trading kind of weaker since the quarter closed even. Should we think about buybacks continuing to be maybe a bigger driver with the stock at these levels? Or how are you thinking about that versus other uses of capital in the kind of near term?

Yes, I would say we've always been opportunistic, and we looked at it as a great opportunity to create value for our shareholders. So we were a buyer, and I would expect us to be a buyer going forward.

Your next question will come from Tobey Sommer with Truist.

Jasper Bibb on for Tobey. I just wanted to ask about expense inflation trends. Any early indication on what you're anticipating for price/cost spread in '26. Noticed your labor COGS actually declined year-over-year this quarter, so maybe a favorable indicator there.

Yes. As mentioned earlier, we think about pricing coming down relative but also cost coming down, but maintaining a price cost spread in the Recycling & Waste business of 75 to 100 basis points. And have pretty good outlook and confidence of that going into 2026.

Got it. And then maybe following up on ES, have you seen any retention impacts at your customers based on the pricing increases you've taken over the past couple of years?

There's certainly been some churn, and we observe that regularly in the Recycling & Waste business as we have improved margins in that area. We have also noticed the return of customers, realizing that a low price doesn’t always equate to the best value upfront. I would say the slight miscalculation in the price-volume balance is primarily related to event-based work where we've missed some opportunities. It's not that we're pricing recurring revenue customers out; rather, it's about event-based opportunities where we believe we will be more competitive moving forward.

The next question will come from Toni Kaplan with Morgan Stanley.

This is Yehuda Silverman on the line for Toni Kaplan. Just had a quick question about some of the cost uptick, specifically for fuel and landfill operating costs in the quarter. I'm just wondering if this was tied to anything specific or if it's nothing really to focus too much on.

Yes. Look, if you're looking just at a year-over-year basis, yes, some of that, again, it's a combination of both. You've got price, but you also have volume due to acquisitions. So I would say neither of which are going to be anything significant or out of the norm. Because if you look as a percent of revenue, for example, fuel is relatively flat.

Got it. And just had a question on commodities in general. So were the commodity headwinds this quarter worse than expected? And is there any way to sort of hedge or counteract weaker price in commodities?

Commodity prices decreased steadily throughout the quarter. At the end of Q2, they were around $140, dropping to an average of $126 in Q3 and exiting at about $120. This sequential decline creates challenges in the thin market for third-party hedging. Instead, we have adapted our model to charge a fee for services, which includes the collection and processing of materials at third-party facilities. We then share the revenue from the eventual sale of the commodity with our customers. This approach allows us to secure a solid return on the services we provide, while recognizing that some price volatility in commodity sales is a normal aspect of our business.

The next question will come from Rob Wertheimer with Melius Research.

You just touched on this a minute ago, but ex the labor one-offs, labor productivity actually looked pretty good in one of your better quarters. Is there anything to call out there? Or is that normal variability?

Well, no, labor productivity, I would say, if you take a look at labor as a percent of revenue, just in the quarter, we've seen an improvement of 70 basis points, right, on that front. So that's going to be a continuation of the benefits that we're getting from a RISE platform where we're producing productivity benefits within our collection business. But also just as we've said, when you think of the margin expansion, a lot of that is the price in excess of your cost inflation. So with labor being one of your largest cost inputs, the place where you're going to see that the most is labor improving as a percent of revenue.

That's a valid point. You mentioned manufacturing and some developments we've observed in the industrial sector. Considering the various factors affecting construction, including interest rate cuts and large projects, have you noticed any trends throughout the quarter? I'm curious if there has been any significant movement in one direction or another.

No, not yet. I haven't really seen signs of life. Again, we remain in the longer term very bullish, medium to longer term on construction. In terms of single-family, multifamily, I feel that there's a lot of pent-up demand in most of the markets across our 1,000 dots on the map in the U.S. and Canada. I think we probably need just a little more time before we start to see that take off.

Your next question will come from David Manthey with Baird.

Back to Environmental Solutions. When you talk about stabilization, just trying to understand definitionally, are you saying that the decline should start lessening here? Or are you talking about absolute revenue sort of flattening sequentially from 3Q to 4Q?

Yes, I would say it's a bit of both. From an overall revenue standpoint, September improved compared to August, and we are observing a similar trend for October. This hints that the year-over-year decline might start to moderate. However, it's important to note that last year we generated nearly $50 million in revenue in this quarter from a single emergency response project, which creates a challenging comparison. Additionally, around $15 million from that revenue carried over into the first quarter, meaning we won't see significant changes in the year-over-year numbers until we reach the second quarter of 2026.

Right. Okay. That's great color sequentially. And then looking back to the ECO data back in 2021, has the data changed much in terms of the top verticals in Environmental Solutions. So is it still chemicals, metals and general manufacturing making up, I don't know, 40%, 45% of the total?

It's a very diversified set of end markets, and we don't probably cut it exactly the same way that the legacy company did. But manufacturing will likely be the largest, probably defined by chemicals, oil and gas, general continuous slow production. However, there is a broad mix of end markets that we serve, including utilities and government.

Your next question will come from Stephanie Moore with Jefferies.

I wanted to ask maybe a high-level question on the solid waste business. As it relates to pricing, I think you guys as well as the industry continue to execute well on pricing and getting good pricing, obviously, in the open market as well. As you think about the success that you've had in the open market, what would you attribute the major drivers of that be? Do you think it just general rationality? I mean, obviously, inflationary, but we also hear a lot from general customers with price fatigue and inflation fatigue. So I'd love to get your updated thoughts. I mean, is it your ability to capture price because of your technology investments, but I think just can any updated thoughts on that would be helpful.

Yes. I think there's a lot of elements to the equation. I'd say the most important one from a macro level, we're a very, very small percentage of most customers' cost structure. And in a macro sense, I think the industry is underpriced, right? You think about a resident, their bill is less than their Starbucks delivery month. And we're taking a $400,000 truck and driving it, taking it to a recycling center that costs $50 million, $60 million to build or a landfill where we're going to rent you piece of real estate forever and probably produce electricity or gas on the back end of that. So I think the value proposition across the industry is phenomenal, and we're, again, a very small portion of people's cost structure, so that creates a lot of pricing opportunity. I think if you kind of come down a level and look at our company, we focused really hard on customer mix. Some customers are very price sensitive, and we are underpenetrated in that part of the market, overpenetrated with customers who are willing to pay more for the value and then have a lot of tools and sophistication in terms of how we price customers to make sure that they not only take the price, but they stay forever.

Got it. I appreciate it. And then just one follow-up on the M&A commentary. I appreciate the look into 2026. I wanted to also gauge your appetite and maybe doing a larger deal M&A at this time, whether in solid waste or within ES?

Yes. We will maintain a perspective on everything, all right, as fiduciaries of the business on that front. And I wouldn't say anything is impossible. I'd also say our focus is on small- and medium-sized deals as we look into the rest of 2025, but even in 2026 and 2027, and feel like we've got a very strong pipeline both in Recycling & Waste and ES.

The next question will come from Shlomo Rosenbaum with Stifel.

I want to clarify your comments about improvements in ES towards the end of the quarter. How much of this is due to resolving pricing issues in certain areas, and how much is it about hitting a low point before starting to improve? Additionally, regarding pricing in general, do you believe you've identified where you're missing the mark? Do you think we've moved past the period of excessive pricing, or are emergency response situations really the only areas where you feel pricing has been pushed too far?

Yes, let me begin by saying that we have significantly improved our margins since completing the US Ecology acquisition. We've made great strides, and while not all of that was due to pricing, a considerable portion was. We believe there is still room for further improvement. We're currently navigating a very tough demand environment, which requires careful balancing, particularly in event-based work. This presents an opportunity for us and our team. Additionally, the industry is at a different stage of evolution and maturity compared to Recycling & Waste, where we have more experience in terms of tools, sophistication, and the commercial capabilities of our sales team. We are still progressing in the Environmental Solutions sector. As for market momentum, we're seeing a stabilization, although not a vigorous recovery. Adding to this, we are becoming more focused on specific opportunities and this combination leads us to a positive outlook.

Okay. And then just overall on the pricing, you said you've taken a lot over there. Would you say you're still in early innings, mid-innings, where do you feel you are in terms of that opportunity ex the area where you're kind of recalibrating right now?

Yes. Long term, we believe these assets are still undervalued. These assets, especially on the post-collection side, are unique and cannot be duplicated. We often price our products not by the ton but by the pound or even the ounce. Therefore, we see significant potential for growth. However, we have noted that progress will not be linear; there will be ups and downs along the way. In any given quarter, like the recent one we experienced, there may be slight pullbacks. If you evaluate our performance solely on a quarter-by-quarter basis, you may miss the overall trend. Assessing our progress on a year-over-year basis will provide a clearer perspective on the direction of our business.

Next question will come from William Grippin with Barclays.

Just wanted to come back to the union contract settlement here. Was there any impact, I guess, from the strikes on revenue in the quarter? I know you made the adjustment to EBITDA, but just wondering if there was any impact on the revenue side. And then any sort of outlook in terms of cost inflation in '26 related to that contract sort of relative to your expectations and your commentary?

Let me take the first part there. So there was an impact on revenue. There was a recognition of about $16 million worth of credits, which reduced the reported revenue. Now when you look at adjusted EBITDA, while we didn't adjust the revenue, we did include those credits in the adjusted EBITDA. So the add back of $56 million includes those $16 million worth of revenue credits in order to drive adjusted EBITDA. In terms of the longer-term impact on labor, we think the answer is no. We work very hard, whether our frontline people are represented by union contract or not that we're keeping them in line, and we want our people to be amongst the best paid in the local markets in which they operate. But it's very critical for us to make sure that they're not out of market. And when people get out of market, right, it hurts everybody. We lose work, and we ultimately have to let go of drivers and technicians. So getting that number right is important to us, and that's why we took the stand we did this past year on the set of contracts. But going forward, we feel like we're in a very good position to maintain our price cost spread, as we talked about before.

Appreciate that. And then just coming to the ES business. You mentioned in your pipeline, possibly having some opportunities related to M&A for ES. Any additional color you could provide there on what types of assets or services that you might be looking at?

Sure. I certainly look for certain verticals that we're in. We'd like to get in further to life sciences and biopharma and high-tech are certainly attractive to us, and we've got great positions regionally but not in every region. There's 20 field services locations geographically, where we have really strong footprints in Recycling & Waste but don't have a field services location. That creates an immediate cross-sell opportunity for us. And then we're always interested in any post-collection assets. Anything with infrastructure, we feel is very attractive to the network as well.

The next question will come from Tony Bancroft with Gabelli Funds.

Great job on the quarter. I know I'm sort of beating a dead horse here. But with M&A game plan, maybe another way to look at it, it's obviously a huge draw of energy demand with data centers. Any thoughts maybe just a longer-term view or vision of M&A in sort of in that space with E&P or energy based? Or is it more the traditional stuff. Maybe you could talk about that a little bit.

Yes, that will definitely enhance our margins. There are opportunities in earthmoving, soil, and remediation. Currently, less than half of our landfills have energy projects, and it is possible that these projects could be based on electricity, revisiting earlier methods. Recently, our focus has been on renewable natural gas. We are exploring technologies aimed at lower flow sites and smaller landfills, which may include electricity projects that could connect to the grid. From a broader perspective, these facilities don’t generate significant ongoing waste, recycling, or environmental solution opportunities once established. However, we will engage during the construction phase.

At this time, there are no further questions. I would like to turn the call back over to Mr. Vander Ark for closing remarks. Please go ahead, sir.

Thank you, Chuck. Before we conclude today's call, I want to take a moment to recognize the great work of the entire Republic Services team. The team's commitment to safety, sustainability, and providing outstanding service continues to drive our performance. We are confident in our strategy, our people, and our ability to continue delivering value to our customers, communities, and shareholders. Have a good evening and be safe.

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