Tobey O'Brien Sommer

Tobey O'Brien Sommer asked about the healthcare vertical, seeking visibility into hospital and healthcare activity. He also inquired about opportunities to invest further in technology, including AI, to restrain expense growth and contribute to greater margin spread expansion, focusing on the expense side.

Answer

CEO Jon Vander Ark stated that Republic Services competes on the margin in healthcare, servicing hospitals with recycling and waste, which has been a growth driver but not a meaningful one overall, as they do not have a dedicated medical waste business. Regarding technology, Mr. Vander Ark reiterated significant investments in AI and system modernization, expecting cost improvements in the nine figures over time. He highlighted productivity gains from routing optimization, pricing strategies, and efficiencies in back-office operations and call centers as powerful tools to compress inflation and expand margins.

Tobey O'Brien Sommer asked about client sentiment amidst economic uncertainty, recent BLS job creation revisions, and potential Fed rate cuts. Sommer also inquired about Korn Ferry's participation in M&A and divestiture consulting services, and the firm's capacity to handle an appreciable uptick in demand without impacting margins.

Answer

CEO Gary Burnison noted varying client optimism by region, with strong performance in Europe and Asia, but challenges in the Americas due to pricing power issues and escalating costs. He highlighted AI's long-term impact on workforce strategy and strong activity in industrial and private equity sectors. Burnison confirmed participation in some M&A/divestiture consulting, particularly on the private equity side. Regarding capacity, Burnison stated there is existing capacity, but a significant economic turnaround requires substantial Fed rate cuts. CFO Robert Rozek added that AI/GenAI initiatives are expected to help manage any rapid rebound in demand.