Republic Services, Inc. (RSG) Earnings Call Transcript & Summary

Good afternoon. This is Michael Hoffman from Stifel. I'm the Group Head of Diversified Industrials Research coverage. I cover the solid industrial and medical wastes, pest control and specialty distribution. This is day 2 of CSI, and it's my pleasure to welcome Republic Services. We have with us, Jon Vander Ark, who's the incoming CEO; Brian DelGhiaccio, who's the Chief Financial Officer; and Stacey Matthews, who's Vice President of Finance and Investor Relations. Welcome, everyone. Thank you for doing this.

Thank you.

So I'm going to lead off with a long-held perception about the company -- the idea of being able to get to back to 40% gross margins or better than 30% EBITDA, you're going to need CPI to be better. And for a long time -- and yet you did that. You've done it this year coming into the first quarter. So can you talk about what has changed in your operating model that allowed you to extract that leverage without the benefit of CPI being in line with at least your internal cost of inflation? So you've managed to improve this and still overcome the margin and compression that happens from that.

Yes. I think it's 2 things. We'll talk about 4 things. We'll talk about cost side in a second, but I think there's 2 things on the top line that get overlooked. One is our movement away from CPI, so nearly 4% of our contracted book. Now it's on an escalator that's 3% fixed or above, water sewage trash or garbage trash. So that's giving us less exposure to CPI, giving us more pricing power on that side. I think what's very understated is we just improved the quality of revenue over the last 4, 5 years, right? Took a hard look at the national accounts book of business. We had shed some nonregrettable broker business. And so the quality of revenue we have, I think, is higher than it's ever been for our company. And then a couple of things on the cost side, of course, right, really good GOE management. So we've just done a great job with expense. And that's our risk cost. It's our labor costs. It's our maintenance costs. We pulled out our highest costs. Hours out of the system during the pandemic, so it took a lot of overtime out of the system, which was great, and digital ops and our RISE platform is certainly starting to bear fruit in terms of allowing us to squeeze dollars out of the system. And then we've been pretty disciplined on the G&A side as well. So not a single lever, pretty balanced across the board. And we think largely sustainable coming out of the pandemic, not a onetime event. We don't run the business for the short term, we run it for the long term. And so we feel really good about the new elevation that we found as a company.

Right. Well, so you've answered the part B of that. So this is structural. You have a new baseline in which you get to sort of move from here. So let's talk about that because the other question you used to get all the time is, so what could margins as a range get back to? And you'd say 30%, 31%. I have to presume we have a new base for where that target is. And are you sort of sharing that with the public at this point?

Yes. Listen, we -- first of all, we don't get overly obsessed on a single number because we are very intrinsic focused. So we think about return on invested capital and economic profit, that's where we start. So it's an important foundation. Because as we think about doing different things over time and the equation of the balance sheet versus the income statement look a little different, right? But we're not trying to pin ourselves into a number. That being said, we're confident in the underlying performance of the business. So we think 32% is the new 30%. And that we've got a real opportunity to stretch to that number over time. And we're going to see a few headwinds here as traffic patterns reemerge and things in urban areas get a little bit busier. We think that's going to be more than offset by our continued rollout of digital operations and just getting increasingly disciplined basically across every line item of the P&L.

Okay. So let's tease out some of that. And I think it's important that you mention intrinsic value, return on capital. So I would -- and that's not gratuitous compliment. Your proxy and the executive comp is one of the easiest one to actually read. It's actually written in English with good charts. But help everybody understand. You actually pay people, you pay -- senior leadership is paid to do this. And could you talk a little bit about the importance of that? And how that's influenced behavior, too?

Yes. I'll start, and then Del can jump in certainly. Yes, listen, one of the primary components we get paid on is a metric called cash value creation, which is basically economic profit, right? I mean that's what we think about. We want to earn our returns ahead of our cost of capital. And so I think the foundation, the fundamentals and hopefully, the simplicity of the plan comes across. And if you go back 10 years, I hope the consistency of the plan comes across, right? We don't kind of ying and yang and whipsaw. We think we've had a really good and stable plan. And if a plan is based on the long-term fundamentals, you shouldn't need to tweak it every year, right? It should be pretty stable and consistent because you're going for long-term planning, but I'll let Del jump in.

Yes. And the 2 components, right? It's that similar to an EVA concept, right, when we look at our capital value creation, but also the other leg is ROIC, right? So one, right, being that cash flow value creation promotes growth, right? It's expressed in dollars. So we need to grow the business, but we need to grow it smartly, right? So whether it be organic growth or whether it be inorganic growth, there's a capital charge against those investments made that really need to be recouped, and we need to earn a profit in excess of that in order to sit there and reach our targets. And at the same time, ROIC, which, again, right, the benefit of that is being good stewards and being very efficient with the capital that you deploy. But again, not just that one single metric because you wouldn't want to shrink to grades. So again, it's been balanced attack between the 2 on our long-term incentive plan. And then on the annual incentive plan, it's the metrics that, again, we provide annual guidance to being the free cash flow and the earnings per share. And I think to your point, Michael, it's the consistency of that, right? They've been in place for over a decade. And we think that, that aligns with the interest of our shareholders because we get very positive, say on pay votes every single year.

Well, and to close the loop on that, you also, if I remember correctly, engage in outside valuation organization to do an intrinsic value of the business on a periodic basis. So you're getting a third-party view looking at the data set and coming back and sharing with the Board what that looks like.

Yes. And we actually -- we share with our Board. We do our own calculation as well. And we have that conversation on a regular basis, in fact, quarterly. And then annually in the context of a capital allocation discussion is when we use third parties to give the perspective on what's happening more broadly from a capital allocation perspective in the marketplace. And then to your point, Michael, how do others, how would they value the stock as well? So a couple of different perspectives on the intrinsic value of our shares.

So I'd like to tease out a little bit on that. I do think the market has, over my 34 years, has moved from a PE focus to something different, more in line with an EV. And now today, I think it's more about a cash flow, both a conversion ratio, a cash flow yield and more triangulation. So talk about what the leverage is to your baseline. I mean you're sitting on $1.3 billion, $1.4 billion, I think, of as the baseline. What's the leverage to that on a sustainable basis? How should the market think about that?

Del, do you want to take that?

Yes. Go ahead. So what I would say, Michael, is one of the things, first of all, when I first came into the role a year ago was a laser focus on free cash flow and free cash flow conversion, okay? So again, when we think about what that leverage is, Jon already talked about the opportunities that we have on EBITDA margin, which helps your free cash flow conversion, certainly because besides the taxes that you pay on that, that falls to the bottom line. So that is accretive to overall conversion. When we think about the other opportunities, we think it's multifaceted, right? So we think there are further opportunities to be more efficient with our capital spending. So again, as we have more trucks that have been in our One Fleet maintenance initiative and more from cradle-to-grave, we think we can cost effectively extend the useful life of our fleet. And we think that, that will reduce our ongoing capital requirements over time. We're doing some things around our landfills to take more of a site-specific approach as we think about that periodic capping. Michael, you're very aware of the work we did on the balance sheet last year. When you take a look at the cash interest savings, over $60 million of reduction in cash interest over time, half of which was recognized in '20. We get the rollover benefit of that in '21. And even though we've got really good metrics around DSO and DPO, we think there's further improvement, in particular, on the DPO side to create value within working capital. So it really is, again, a multipronged approach, not just one single lever, but collectively, we think that improving free cash flow conversion, which had been running in circa the low 40% range to mid-40% plus in the very near term. And then we think there's opportunity even beyond that.

And when you think about that working capital relationship, you all had -- actually are best-in-class. You've had it relative to the peer group. If I compared you to best-in-class industrial companies, most of them pay their bills a lot slower than they collect their money by 3 to 5 days. Does that opportunity even exist for a garbage company? Could that gap move that way?

Yes. Listen, we're looking -- again, we're challenging every assumption, right? We're not getting there through any single lever. So that's certainly one that we challenged our procurement team. You also have to be mindful of where that's going to show up, right? Typically, you can get a lot of really interesting payment terms via supply base and push them out. But if it's going to show back up in unit costs and you're buying at a higher price, you're just fooling yourselves. And so we look at both the income side statement and the balance sheet side of that all the time to make sure that we're making the most value-creating decision. But listen, there's opportunities. We're looking -- and while we think we're best-in-class in the industry, it doesn't mean we can't get better.

Yes. And Michael, to your comment, too, I would sit there and say is that I wouldn't look at the -- when you're doing that comparison, I wouldn't look at your gross DSO. I would look at the net.

Net of -- yes, net of deferred revenue.

Net of the deferred. And when you actually look at net of the deferred, we're collecting our -- the [ caps ] for what we've already provided service well in advance of when we're actually paying our vendors. So we've already achieved that plus. And I would sit there and say that gap is well more than that, that 3 or 4 days, you mentioned.

Right. Okay. And that's a good point, and I should have noted that. So coming back to the business, do you have a perception of -- and I'd be curious of your view, do you think there's things either are overlooked about your business model or maybe not as well understood that if you hadn't -- this is an opportunity to let's clear that misperception, what would that be?

Well, the starting point has to be how much do you know about the business. So for you, there's probably not much because you had time looking at our business. But I think for the average investor, we're probably -- people think of us -- firstly, they think of the industry as a duopoly, and that couldn't be further from the truth, right? Top 3 players still have less than 50% share. So there's plenty of fragmentation. There's plenty of M&A opportunity left in the business more broadly. And then I think in terms of our own mix, sometimes we're seen identical to our largest competitor. And listen, there's certainly similarities, so I understand that, but we have a different mix geographically. So we've got more exposure to the Sunbelt, clearly, right? We don't have exposure to Canada. We have a very -- a smaller portion of our business, relatively speaking, in the Northeast and particularly in New York City. So there are certainly some differences there. And then I would just say the balance of our business across urban, suburban, rural, across open market franchise and in markets in between that are more mixed. We're very, very balanced geographically in that capacity. And so we feel like that's part -- and even from a market vertical standpoint, we serve everybody: individual homes, national accounts, industrial, small business, municipal. So a, we're a good barometer on the economy; and b, we're very, very stable because we're not overly concentrated in any one spot.

All right. I'd like to shift gears and talk about price and volume. And one, Brian, can you remind everybody how to think about your yields? Because you all are very good and visible about it, but it doesn't necessarily always compare. And where that's going is, I think of you as about a 3% reported yield consistently. And the question would be, what does it take, either in your control or on a macro, to turn that 3% into a 3.5%?

Yes, sure. So to your point, we disclose 2 different pricing metrics. So we have average yield, which is essentially a change in price per unit. So what it further takes into consideration beyond just the effectiveness of your pricing is the impact that churn has on that reported statistics. So the impact of losing business, generally speaking, above the average and then replacing that work at the new market rate, which tends to be below your corporate average. And the reason we do that is that we think that, that is the overall best predictor of profitability. That is the amount that falls to the bottom line. Now what we further disclose is core price, and core prices to that same-store customer base and what it represents is the effectiveness of our pricing programs. So to that customer base that was there, right, for the last 12 months, what was the average price increase, right, that we levied to them during that 12-month period. And that tends to run 150 to 200 basis points higher than the average yield metric. So to your point, what needs to happen in order to sit there and have that 2.5% or 3% average yield move north? Well, the easiest thing to do is to just shrink that delta between core price and yield, right? And the way that you do that is you retain those customers longer. And that's why when we take a look at what we've done when we talk about last year, achieving record levels of retention at 93% and then further improving that to 94% in the first quarter of this year. And then we look at improving NPS scores, right? Those are the opportunities as we retain those units and those customers longer, that will shrink the delta between the 2.

So there's a certain amount of that, let's take the 6%, that's structural. They move. They close the business. You can't control. Where has that number gone? So we understand what's left in your control to leverage your digital tools and your customer optimization and Net Promoter Scores to improve that.

Simply stated, it's about half and half, right? So figure, they're still about 3% that's within our control.

Okay. And then is -- I'm oversimplifying the algebra formula, which is restricted core price times a retention rate, plus open market core price times the retention rate. You add those 2 together and get the average of it and that's your yield oversimplified?

Yes. It's not just quite on the retention because, again, what you need is that a little bit of that delta between the market rate for the new in loss. But broadly speaking, yes, it...

Yes. Yes. And Michael, who you lose has a huge issue on that front, right? So as we've lost -- didn't have quite the same growth that we might have wanted to over the last few years, what we were losing was the national account business and it's a broker business. Again, intentional, right? Very poor yield profile, right? So that's moving out at a low-cost unit average. And so again, one of the reasons you're seeing margins expand is that underlying quality of revenue underneath. So who you lose becomes a big issue. And so why we focus on customer and customer zeal, now our customers are equal, we want to go after the best customers who are willing to pay more and ultimately stay longer.

Part about that optimization, Michael, to further that point is that we can redeploy those trucks, right? So we can actually get a more profitable customer without having to deploy any additional capital.

Right, right. All right. So now let's talk about volume. And there's a couple of perspectives I'd like to take. One, can we frame, say, your disposal activity today versus, I think, the right comparison would be 2019. Are we at or better than 2019 if we look at -- and I think what matters is MSW and C&D as special waste bounces around. But MSW really is indicative of the consumer engagement, and C&D ties back to the housing and sort of a construction cycle. So where are we on that comparison of that -- the landfill side?

Yes. We're actually slightly ahead of pre-pandemic levels on that MSW and C&D. The one that's lagging a bit is that special waste, but that pipeline remains strong. And again, as you think about a precursor to a construction project, that's when you tend to see that special waste move. And so there was some discretion over the last 12 months on moving some of those projects. They weren't canceled, right? They were just pushed out a little bit, but we're starting to see those jobs go.

And candidly, on the macro side, well before the pandemic, the ABI data was suggesting that we were getting a maturing of the non-res construction environment. And so it wouldn't have surprised me if the special waste had started to settle out anyway. And now it will be interesting to see if post the pandemic, will there be an uptick in any kind of the non-res construction, particularly the private sector was slowing.

Yes, I don't know, Mike. I think we're still cautiously optimistic that in spite of all our momentum here, special waste hasn't really been a driver. I mean, that's still been a little bit of a laggard. And kind of jobs that we close versus the size of the pipeline, right, that gap is getting bigger, which, again, we have pretty good science and pretty good data on what's real and what isn't. And the vast majority of those jobs will get done. It's just a question of when. So I think we're cautiously optimistic that second half of the year and into 2022, there's going to be a nice tailwind on special waste as well.

And would you say it's a public dollar spend or a private dollar spend that's driving that?

I think it's a mix. I mean there's a lot of public in there, and you definitely see in 2020, kind of election year and middle of the pandemic, those jobs certainly were sitting out, kind of waiting to see. And so lots of those jobs will clear. But there's plenty on the private side as well. It's a pretty robust and it's pretty geographically robust as well, which gives me confidence.

Okay. Well, that's a good data point to know. And then how should the market think about the underlying volume of your model? [ I'm tasked ] but I'm supposed to build a multiyear model. And what's the good baseline assumption about what that number ought to be? And let's set the stage, it's a 2.5%, 3% GDP kind of world.

Yes. I think you've got to first start with price. I know we already covered that, but that's where we start when we think about revenue. We'll never trade off price for volume. We always start with price, right? We've got to be able to give our people a raise every year, to reinvest in the business, right, and be a leader in the marketplace. So we're always going to start with price. Now against that backdrop, and being a price leader, listen, 1% plus, right, we think we can achieve from an organic volume standpoint, right, not including M&A that we tucked in over time.

Okay. That's helpful. And I get that point that if you move volume at a greater pace than that, you are basically giving up price to do that. And then everybody has the same amount of volume at a lower price when we're all done.

Correct.

Inflation, can we talk a little bit about that? I mean I think the world is agreeing we've got an inflationary environment. But how is that playing out relative, one, to your plan? And two, I think inflation, when we talk about it in garbage, really about labor. And so how is the labor inflation sort of tracking versus your plan? And if it's tracking in line but or more, are you able to pass it through into the pricing? Are we getting real-time catch-up on price related to inflation?

Yes. I think, listen, broadly speaking, inflation is good for the business, as you know, because that puts upward pressure on price. And we've always paid our people that have been the 2%, 2.25%, 2.5% range because we want to give them a fair price increase every year, wage increase, because we know that their life is getting more expensive with health care and everything else. Even in a low-CPI environment, we did that. So as CPI goes up, right, and our inflation goes up, that's great for us because on the index and the contract side of the business, that just puts upward pressure on not only core CPI, but water sewage trash, garbage trash, any other derivative that we might have as an index. So that's great for that side of the business. And then that also just creates even more fertile environment in the open market world where if everything else is inflating at a pretty fast rate, that just gives us more opportunity to pass on price through on that side of the business. Now there can be a little bit of a short-term squeeze potentially on that front because on the contracted side, we lag about 12 months with most of those pricing indices. They kind of look back. Listen, we've seen limited wage inflation thus far. Certainly have -- the economy is certainly heating up, and there's certainly labor shortages in certain markets. So we've had to get creative in a few markets around referral bonus or signing bonus. But on balance, we're getting all of our customer service, we are staffing up for growth, right, and handling that growth. And again thinking really creatively about how we do that, but no major pressures. Now I don't know where the world goes over the next 12 to 15 months, if the government puts another $2 trillion into the economy, right? Keep subsidizing things, I think that's going to create a more structural problem for us and will take up wages. I don't necessarily see that happening given that many of the states are starting to push back in terms of the timing of those subsidies. And then again, short term, more of a short-term pinch we have on our customer service agents. That would be a workforce that would be in the $15 to $18 an hour zone, so they would be competing with government subsidies on that front. But those are, we think, are more short-term challenges for us. So we feel pretty good about the inflationary environment in terms of what it's going to do for the business and help us get to that 32%.

And Michael, to your point on the ability to pass those costs through as well, right? Is that back in 2016, early '17, we completed the deployment of our capture to digitize pricing tool. And so as we're seeing increased cost of steel, which impacts the cost of containers for new customers, we were able to go in, and we were able to update that cost input. And any quote from that point forward across our platform reflected the higher cost of steel. And so because we have that centralized pricing team with that digital tool, we're able to do that on a very real-time basis.

Well, and is it also accurate to point to the spring of '18, you had labor, transportation inflation, and then you had margin pressure from recycling. And the whole industry did this, but you all did as well. And I'm forgetting your starting number. I want to say it was 2.5% was the price growth forecasted in February of '18. By the time you close the year, you're over 3% because you would actually pushed open market pricing to capture this inflation and margin pressure from recycling.

Yes. And a lot of that was on the recycling side that we made major moves and with very, very, very few customer defections, which reflects back that your customers are willing to pay for recycling and if we have the ability to pass on price when we get cost pressure.

And you can be nimble about doing it, too. So it's not -- there is a real-time aspect part of it. I guess the next piece I want to talk about is on the M&A side. And for a long time, Republic was a very moderate player in what I would think of -- when I compare it. You might buy $70 million to $75 million to $100 million of revenue. In the last 4 years, the pace of that's picked up. You've been more like a 2 75 to 7 75 annual buy of revs. And admittedly, there's 2 outsized deals in there, one in '17 and again, the one in '21. How should our market think about you as part of the market consolidation, not only in garbage, but in your environmental solutions business? How should we think about how that's going to be part of the long-term growth story from this point forward and particularly under your leadership, Jon?

Yes. I think you got to look back before you look forward. Listen, we are certainly acquisitive within our history, right? We have a history of 1,000 acquisitions. We're the grandchild of 1,000 acquisition. So that's in our bones and DNA. I think we spent a lot of years of being probably a little more selective in that we were just integrating a lot of things. And we were creating this common operating platform, a common culture to run the business. And that certainly paid dividends. If you look at the last 4 to 10 -- or 8 to 10 quarters, I mean, our performance has been on a really steady uptick. And even in the pandemic, we just plowed right through that and continued to expand margins and operate the business well, partly because that we had a very stable, strong foundation to the business. And so it's -- I'm really a beneficiary of that and Don's leadership to now have the opportunity for us to grow in a different way. And one, we're still back to returns and back to discipline, right, that's the starting point for any individual deal. So there is no target for M&A because we look at every opportunity. One, does it fit the strategy? M&A isn't a strategy, it's a means to execute a strategy, right? And two, does it meet our financial returns requirement? That being said, we think there's a lot more opportunities that do meet that going forward. And you know that about 3 or 4 years ago, we put 10 people out into the field. So we basically tripled our capacity around deal flow generation. And so we're very disciplined in terms of building pipelines. And those teams don't have targets in terms of what they close, but they have targets in terms of their pipeline, what they build, who they have the relationships with on that front. And that's allowed us -- again, we did 600 last year. We said we're going to do 600 this year. I thought we'd do just a bit more than that. And I think our pipeline going forward is very, very strong. And to your earlier question, it's not just in the traditional solid waste recycling space. We think there's a broader set of environmental services businesses that we're the natural owner of. These are businesses where we're in the flow, customers. We serve these customers, right? They're asking us to do it. It's a very fragmented space. It's a little bit like solid waste did 25 years ago. And these are easy tuck-ins for us to start to build additional capabilities, both from a product standpoint as well as to scale geographically to serve customers in an even broader way.

Okay. So I'm going to shift gears completely and talk about scope 1 emissions in the landfill versus the fleet. Increasingly, the ESG topic is on the front of mind for lots of investors. And one of the things that's starting to happen is I've been asked this concept of a warming score, which is basically rank ordering scope 1s. And I'm very quick to say to the investor, hey, be careful because -- just because they're a high generator, doesn't mean they're not doing good things. So can we talk about the plan here to show a natural reduction in your scope 1 over time through your sustainability plan, some of the initiatives that you have underway that will achieve that, including the ongoing rollout of natural landfill gas systems. And you've historically outsourced that. Will you continue to outsource it, but continue to have them developed? Can we sort of frame some of that for the market? So they understand you can't just start with scope 1 and stop.

Yes. Sure. So we're -- our stated goal, where we signed up for the 2030 Paris accord goals, our stated goal is to reduce our scope 1 and scope 2 emissions from 2017 by 2030 by 35%, right? So this isn't just holding water, we're going to take this thing down. That's our stated goal, and my aspirations are much higher than that. Our carbon footprint is pretty simple actually. It's 90% landfill, about 9% fleet and 1% everything else. Like that's how we break down. And the primary lever we've historically had on landfill gas around the landfills -- landfill gas to energy projects, where we capture the methane and harness that. And we've got about 70 projects today. We've got another dozen or so plus into the pipeline and more to come on that front. That isn't the only way we're going to innovate around the landfill because that alone won't be enough. So thinking about things like carbon sequestration and, again, we're on the early, early stages of some of those ideas but we're, I would say, increasingly connected with lots of players who are on the front edge of those technologies. And just really challenging ourselves and brainstorming how could we do it differently, right? What would it be like to say landfill is carbon neutral, right? And someday, I think that is -- I mean, that's a huge aspiration, but that's where we're challenging the team. And on the fleet side, as you know, we're bullish on electrification. That is the only 0 emissions technology out there. One is it's going to take a little time. On the other hand, we are a perfect application for it. And we're not that far away. So we've got multiple pilots running, multiple discussions with vendors in terms of doing things at an even larger scale and think that over the next 3 or 4 years, you're going to see us move past pilots and start to buy kind of in our normal course to electrify the fleet.

So let me touch on the landfill gas side. Would it be prudent to think that you'll continue to let that be outsourced as far as who does it for you? Because there's better uses of your capital than you doing it internally, but you'll continue to develop them, that's part of the strategy, but use a third-party as you have historically. Is that the right way to think about it?

Yes. Historically, they've been more opportunistic in one-offs and largely third party. I think as we go forward, we're going to be more intentional. But that likely looks like going with a 2 or 3 suppliers who take on a set of projects, not just a one-off. And again, our mindset here is largely work with third parties to do that. And it's got a little bit of benefit from a volatility standpoint. Certainly, you don't capture all the upside, but you've -- you have a nice royalty stream, and there's a little volatility in terms of RINs credits or other things. But for me, it's far more about capital deployment. If we fully invest here, right, fully invest in kind of the entire fleet of landfills that would make sense, the small ones don't, but medium, large, you're talking about broad strokes kind of $100 million opportunity. And again, it's great for the environment, right thing to do, but I want to put capital in places where there's limitless growth, right? I don't want to put capital in an opportunity where when fully defined and fully built out, it's $100 million because now I've tied up my people and the capital into a place that doesn't have an encore, doesn't have a second act. Where when we think about then versus growing and broader, more broadly in environmental services, like, that's got lots of opportunity. We think there's a $20 billion market that really is right ours. We're in it all over the place, right? We're just not in it in a concentrated way. And then that market more broadly is probably $200 billion. So there's just -- there's tons of headroom, and that's where we think about spending our time and energy.

Right. And just to be clear, the $100 million, so $100 million of incremental profit or cash. You'd spent $100 million of investment?

Correct. Yes. That's $100 million.

Of return. Okay. And then on the truck side, you have shared with me in the past that the tallest pole in the tent is the battery as an issue, and you have some investments in battery technologies as well. What's your perspective on solving the hours of service, trade-off with weight sooner than later, right? The long-term plan I get is electric for 0 emission, but we do have an hour of service challenge here versus the trade-off on weight. Where are we on that?

Well, I'm not -- why don't we take a shot at it, then you come back to me and answer it? Because we've got applications today, pilots that are ready to -- on recycling trucks. You don't weigh out on recycling, you cube out, right? Weight is not an issue on that front. And I'm actually relatively positive, and therefore, not that concerned on the weight issue more broadly. I think we're going to get exemptions. Where we roll this out, states will be easily ready to trade-off an exemption to the motor vehicle laws. Are there ways to have laws for motor vehicles in order to have a clean vehicle running through those streets? There's no question on that front. We'll get that in California. We'll get that in Massachusetts. We'll get that -- Oregon launched it. We'll -- Nevada, Arizona will get that going forward. It's the range issue that's the long pole in the tent, right? And the range issue is the truck needs to run the route the full day. So you need a 10.5-hour run on that battery. If you have to park it for an hour, you think, well, I could do it over lunch at the landfill and they could be -- I could charge the truck through the landfill gas energy product. That's great the 1% of the time that works, but reality says that most of our trucks are out somewhere else, and so they need to move going forward. And listen, we think if we can get into the 80-mile to 100-mile an hour range, that's a huge breakpoint for us that allows us to not electrify every truck, but more than half of our fleet could be electrified at that range.

Okay. All right. Last question, this one you're probably not expecting. So you published a book about 10 years ago called Sales Growth, Five Proven Strategies from the World's Sales Leaders. So when I read that, what am I going to learn about you that I'm going to see coming through as the CEO at Republic?

I would say that's a perfect cure for insomnia. So if you're having trouble sleeping at night...

No, no, that's excluding my research. I already got that market cornered. Go ahead.

Okay, tune in. Tune in. Listen, one of the things we've talked about there is there's 1,000 books that were written on sales tactics, and we certainly weren't going to add to that in terms of the sales and much everything else. This was -- that book was really more around sales strategy, which is what we're talking about, which is look 3 or 4 or 5 quarters ahead, right? Sales typically looks here, right? They're very focused on the day, week, month and the quarter. Winning sales organizations over time, right, they look 3, 4, 5 quarters ahead, and that's where we're spending time with the team, right? Where is the world going? Who are the customers who want longer term, back to our philosophy, right? Again, you've got to win the day, a week, month. We're not a -- I mean we're a public company, and we're very attuned to that. But most of our energy for this team, most of our team is spent on what's going to really create differential results a year, 2 years, 3 years from now.

All right. Thank you very much for your time. Appreciate it. Look forward to seeing you guys in 2 weeks at Waste Expo at the Investor Summit, and have a good rest of your day.

Right. Thank you, Michael.

Thank you.

Appreciate it.