Yehuda Silverman

Yehuda Silverman asked about Republic Services' M&A strategy concerning landfills, referencing recent acquisitions in Kansas and Montana, and noting the industry trend towards landfill closures. He inquired about the environment for landfill expansions or new openings and whether the M&A strategy has shifted towards acquiring more landfill assets. He also asked about the levers used on the cost side to manage the price-cost spread as pricing moderately steps down.

Answer

CEO Jon Vander Ark stated that Republic Services has always been interested in acquiring post-collection infrastructure, including landfills, which are difficult to obtain. He noted that siting new landfills is challenging, while expansions are geography-dependent, but the company feels comfortable with its airspace capacity across its 200+ landfills, anticipating more waste movement by rail in the future. Regarding the price-cost spread, Mr. Vander Ark explained that as the rate of price increases moderates from peak inflation, so do cost increases for wages, parts, and landfill expansions, allowing the company to maintain the spread. He also highlighted productivity initiatives like RISE and AI as tools to compress the underlying cost structure, enabling investments in future growth areas like Polymer Centers and electrification.

Yehuda Silverman asked about the landfill focus within the M&A strategy, referencing recent acquisitions and the industry trend towards landfill closures. He inquired about the environment for landfill expansions or new openings and whether the M&A strategy has shifted towards acquiring more landfill assets. He also asked about the levers on the cost side to manage the price-cost spread as pricing moderately steps down.

Answer

CEO Jon Vander Ark stated that Republic Services has always sought post-collection infrastructure like landfills, which are hard to acquire. He noted that siting new landfills is challenging, while expansions are geography-dependent, but the company feels comfortable with its airspace capacity across its network. He also mentioned that waste movement by rail will become a larger part of the equation. Regarding the price-cost spread, Mr. Vander Ark explained that while price increases are moderating from peak inflation, cost inflation (wages, parts, landfill expansion) is also coming down, helping maintain the spread. He also highlighted productivity initiatives like RISE and AI as drivers of underlying cost structure efficiency.

Yehuda Silverman with Morgan Stanley asked about the strategy implications of Chiquita Canyon's challenges in California, specifically whether it changes the company's approach to operating in more politically friendly areas.

Answer

Ron Mittelstaedt (President and CEO) acknowledged a preference for politically friendly jurisdictions but stated it doesn't change their overall strategy across 45 states. He explicitly said he 'certainly wouldn't pursue owning an additional landfill in California in the next 200 years.'

Yehuda Silverman asked if the Chiquita Canyon situation in California, and its unique regulatory challenges, changes Waste Connections' strategy regarding where it operates (e.g., favoring more politically friendly areas), or if it's considered a one-off situation.

Answer

Ron Mittelstaedt (President and CEO) acknowledged that they would prefer to operate in more business-friendly jurisdictions, but their presence in 45 states is established. He explicitly stated he 'certainly wouldn't pursue owning an additional landfill in California in the next 200 years' but confirmed it doesn't change their overall strategy beyond that specific context.

Yehuda Silverman asked for an update on the World Cup contract, specifically if it's a single contract covering all games and how it impacts stadiums operated by different providers. He also inquired about potential tailwinds from March Madness in Q2 and headwinds from fewer NFL playoff home games or MLB games.

Answer

CEO John Zillmer clarified that there isn't one single World Cup contract or operator; Aramark will service games in stadiums they already manage (e.g., Lincoln Financial Field, NRG Stadium, Kansas City). He anticipates positive revenue but expects the overall impact to be revenue and profit neutral due to the inability to host other events during that time. Regarding Q2 events, Zillmer stated that scheduled events like March Madness are already factored into plans. He noted that Q1 experienced a headwind from fewer MLB games compared to the prior year, but overall sports year expectations are consistent with plans, with no significant windfalls or downsides.

Yehuda Silverman asked for an update on the World Cup contract, specifically if it's a single contract across all games and its impact on stadiums operated by different providers. He also inquired about potential tailwinds from March Madness in Q2 and headwinds from fewer NFL playoff home games or MLB games compared to last year.

Answer

CEO John Zillmer clarified that World Cup contracts are per stadium, not a single operator, and expects it to be revenue and profit neutral due to offsets from other events. He noted NCAA events are pre-scheduled and baked into plans. CFO Jim Tarangelo added that Q1 experienced a headwind from fewer MLB games compared to the prior year, with a return to normalized growth expected in Q2.

Yehuda Silverman (Morgan Stanley), on behalf of Toni Kaplan, inquired about the snow business's shift towards more fixed-fee contracts and how this change is expected to impact the business heading into and through fiscal 2026.

Answer

CEO Dale Asplund explained that the strategy focuses on providing full-year service to existing land customers and moving away from riskier time-and-material contracts. This shift has led to an increase in fixed contracts, providing confidence in the 2026 guidance. He acknowledged that some markets will remain variable but emphasized that the strategy is making the snow business more predictable, with a commitment to delivering the bottom line regardless of snow levels.

Yehuda Silverman asked about customer conversations regarding pricing for next year, their willingness to accept increases, and any segment-specific differences. He also inquired about lead conversion, strategies for targeting younger demographics, and whether new staff are converting leads faster than typical seasonal expectations.

Answer

Ken Krause (EVP and CFO) stated that Rollins' pricing strategy is working, targeting CPI-plus (3-4% this year) and evaluating similar levels for 2026, expecting it to contribute to margins. Jerry Gahlhoff (President and CEO) reported that lead closure rates are up due to improved sales processes, training, and new teammate ramp-up. He highlighted Orkin's marketing efforts on platforms like TikTok and Facebook, specifically targeting 30-45 year-old homebuyers who prefer professional services.

Yehuda Silverman of Morgan Stanley asked if the transaction declines in April represented recoverable bookings or permanent cancellations. He also requested more specifics on the drivers behind the reductions in G&A and cost of revenue during challenging periods.

Answer

CEO Paul Abbott clarified that the April softness was a temporary dip driven by heightened macroeconomic uncertainty at the time, rather than recoverable transactions. CFO Karen Williams attributed the expense reductions to the company's ongoing $110 million cost savings program, which is driving productivity and efficiency gains in traveler care operations and across the enterprise.

Yehuda Silverman, on for Toni Kaplan at Morgan Stanley, asked if the number of customers implementing new budget restrictions is expected to rise, what scenarios would lead to the high or low end of guidance, and for clarification on the reduction in incremental investment spend.

Answer

CEO Paul Abbott explained that future budget restrictions depend on macro conditions, with the guidance midpoint assuming the current 'weaker but stable' environment persists. The high end of guidance could be reached if confidence returns. CFO Karen Williams clarified that the planned investment spend was reduced from $65M to $50M due to productivity gains and spend phasing, which is distinct from the company's cost-saving actions that were actually increased.

Yehuda Silverman of Morgan Stanley inquired about the slight decrease in new business wins, asking for reasons why some companies delayed decisions into 2025. He also asked if recent economic trends have altered sentiment or travel budgets for small and midsized businesses (SMEs).

Answer

CEO Paul Abbott explained that the new wins figure can be lumpy due to the timing of large deals and that SME wins actually increased. Regarding SME sentiment, he noted that growth has been stable but muted due to higher prices and macroeconomic pressures, a trend consistent with broader spending data. He anticipates moderate improvement in the second half of 2025.

Yehuda Silverman from Morgan Stanley asked about subscriber growth strategies beyond bulk purchases to gain market share. He also inquired about any shifts in target demographics or key product themes shaping the security industry.

Answer

CEO Jim DeVries expressed confidence in the core 'do-it-for-me' business, a retooled DIY strategy launching by early 2026, and a renewed focus on the small business channel. CFO Jeff Likosar added that the proprietary ADT+ platform is a key enabler for feature-led growth, allowing for new offerings like Trusted Neighbor and biometric locks to attract customers with specific needs.

Yehuda Silverman of Morgan Stanley asked about the record-low attrition rate, questioning how much further it could improve and what an ideal target would be. He also followed up on whether the company's guidance assumes moderating inflation.

Answer

CEO Jim DeVries attributed the record 12.6% attrition to improvements in relocation and voluntary losses, supported by rising NPS scores and new retention initiatives. While his long-term goal is an attrition rate starting with '11', the immediate focus is on continued incremental progress. CFO Jeff Likosar added that the rate is reported on a gross basis. Regarding inflation, he stated that beyond the potential impact of tariffs, the company's guidance already considers factors like price escalations.

Yehuda Silverman from Morgan Stanley, on for Toni Kaplan, asked about the primary reasons customers switch providers and which products or services are most effective in attracting new business.

Answer

President & CEO Todd Schneider explained that the initial product is less important than simply starting a relationship, which can then be expanded through cross-selling. EVP & COO James Rozakis clarified that the main focus is on converting businesses that currently self-serve their needs, stating that about two-thirds of new business comes from these 'no-programmers,' a strategy that has proven highly successful.

Yehuda Silverman of Morgan Stanley asked about the primary drivers that cause a customer to switch service providers and which Cintas products or services are typically the most attractive entry points.

Answer

President & CEO Todd Schneider explained that the initial entry point is less important than simply starting a relationship, which often leads to cross-selling. EVP & COO James Rozakis elaborated that approximately two-thirds of new business comes from converting 'no programmers'—businesses that currently handle their needs in-house or through retail—which is a core part of Cintas's long-term strategy.