Republic Services, Inc. (RSG) Q3 2026 Earnings Report, Transcript and Summary

Good afternoon, and welcome to the Republic Services Third Quarter 2026 Investor Conference Call. Republic Services is traded on the New York Stock Exchange under the symbol RSG. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to John Weeks, Vice President of Investor Relations. Please go ahead.

Good afternoon. I would like to welcome everyone to Republic Services Third Quarter 2026 Conference Call. Jon Vander Ark, our CEO; and Brian DelGhiaccio, our CFO, are on the call today to discuss our performance. I'd 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 29, 2026. Please note that this call is the property of Republic Services, Inc. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed 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 a 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, John. Good afternoon, everyone, and thank you for joining us. We delivered another strong quarter of results, driven by disciplined pricing and improving volume trends while successfully overcoming elevated diesel fuel costs. Positive momentum across the business included profitable growth in Environmental Solutions, underscores the strength and resilience of our business model and our ability to capitalize on improving macroeconomic trends. Our results reflect our continued focus on pricing ahead of cost inflation and effective cost management while making strategic investments that strengthen our competitive advantages and position us to deliver sustainable growth and long-term shareholder value. During the quarter, we achieved revenue growth of 8.2%, increased adjusted EBITDA 4.8%, delivered adjusted earnings per share of $1.94 and generated year-to-date adjusted free cash flow of $2.28 billion. With respect to customer zeal, our commitment to deliver world-class essential services continues to drive organic growth and strengthen customer satisfaction. Customer retention remained high at more than 94%. Customers value the quality and breadth of our services, which extends continued loyalty and supports our ability to earn attractive returns for the value of the services we provide. Strong pricing across the business remained the primary driver of organic revenue growth during the third quarter. Core price on related revenues was 6.3%, which is relatively consistent with our second quarter performance. Combined with higher fuel recovery fees, the price increase is over 8%. Average yield on related revenues is 3.5% and continue to exceed our internal cost inflation. The sequential moderation in average yield was primarily due to better-than-expected volumes in our small and large container businesses, which included an increase in service levels. Service increases are profitable and increased route density, but typically have a dilutive impact on average yield. Organic volume decreased 70 basis points on related revenue and were positive 20 basis points after adjusting for onetime landfill event volumes received in the prior year. Importantly, volume in both small and large container businesses increased 50 basis points. This marks the first time in more than 3 years that both businesses generated positive volume growth at the same time. Organic revenue in the Environmental Solutions business increased 21% compared to the prior year and contributed 2.1% to total company revenue growth in the third quarter. Revenue growth in this business was driven by a few large emergency response jobs. Revenue grew in this segment by approximately 9%, excluding these jobs. We continue to see strong demand for our Environmental Solutions customers and expect positive revenue growth to continue through the rest of the year and into 2027. Turning to digital. We continue to advance our technology and AI initiatives to improve pricing effectiveness, extend customer retention and increase labor productivity. AI-enabled pricing technology is now deployed across the business, providing enhanced insights to support pricing decisions that reflect service requirements and market conditions. These enhanced capabilities are designed to better reflect customer needs and support long-term revenue retention. We continue to pilot our new AI-enhanced routing platform to improve service execution, gain route efficiencies and reduce disposal costs. This new technology combines AI capabilities with advanced routing algorithms to optimize every aspect of our routing logistics. Full-scale deployment is expected to begin early next year. And with respect to our call centers, digital tools are transforming how we manage 11 million inbound calls each year. We believe that over time, more than half of these calls can be eliminated or handled through a lower-cost channel. This enables faster resolution and a more seamless customer experience. Moving on to sustainability. Construction of our third Polymer Center in Allentown, Pennsylvania, remains on track with commissioning planned for early next year. Our renewable natural gas projects with our partners continue to make progress. We are on track to complete 2 additional RNG projects by year-end, which would bring the total project additions for the year to 4. We continue to electrify our fleet. During the quarter, we launched Florida's first fully electric residential recycling and waste collection fleet in the city of Coconut Creek. We ended the third quarter with more than 280 electric collection vehicles in operation across our business. We remain on track to finish the year with more than 300 EV trucks as we continue to grow this differentiated offering. We strive to be the employer where the best people want to work. Employee engagement remains high and turnover is at a record low. We were recently named one of 3BL's 100 Best Corporate Citizens and earned Great Place to Work certification for the 10th consecutive year. With respect to capital allocation, we invested $1.1 billion in value-creating acquisitions so far this year. We expect to finish 2026 with at least $1.2 billion in acquisition investments. Looking ahead, our acquisition pipeline remains active across both recycling and waste and environmental solutions. Year-to-date, we returned $1.43 billion to shareholders, including $884 million of share repurchases and $577 million of dividends. I will now turn the call over to Brian, who will provide more details on the quarter.

Thanks, Jon. Core price on total revenue was 5.3%. Core price on related revenue was 6.3%, which included open market pricing of 7.6% and restricted pricing of 4.1%. The components of core price on related revenue included small container of 8%, large container of 7% and residential of 5.8%. Average yield on total revenue was 2.9% and average yield on related revenue was 3.5%. The 50 basis point sequential decline in yield on related revenue was primarily driven by increased unit growth in our small and large container businesses. Fuel recovery fees increased total revenue by 1.8%, which offset higher fuel expense and related surcharges. Third quarter volume decreased total revenue by 60 basis points and related revenue by 70 basis points. The decline was driven by a 90 basis point headwind from event-driven landfill volumes received in the prior year. The rest of the business increased 20 basis points on a year-over-year basis. The details of volume performance during the quarter included a 50 basis point increase in small container volume, driven by net new business and increased service levels by our same-store customers, a 50 basis point increase in large container volume, primarily due to increased service levels and a 6.4% increase in special waste revenue. This was more than offset by residential volume, which declined 4.3%, primarily due to certain municipal contract losses and reduction in construction and demolition landfill volume, which related to the previously mentioned event work in the prior year. Moving on to recycling. Commodity prices were $142 per ton during the third quarter compared with $126 per ton in the prior year. Recycling processing and commodity sales increased $15 million during the quarter, driven by higher polymer center volumes and recycled commodity prices. With respect to Environmental Solutions, third quarter revenue increased $96 million compared to the prior year. Environmental Solutions revenue increased 21% compared to same-store revenue in the prior year and contributed 2.1% to total company revenue growth. Adjusted EBITDA margin in the Environmental Solutions business was 25.4%, which represented 440 basis points of margin expansion compared to the prior year. Total company adjusted EBITDA margin was 31.8%. Margin performance during the quarter included a 50 basis point decrease from net fuel, a 40 basis point decrease from landfill event volumes received in the prior year and a 60 basis point decrease from elevated health care costs. This was comprised of 20 basis points from a prior year rebate that did not repeat and 40 basis points from above-average large claims activity. Health care claims activity returned to more normal levels in the month of October. The rest of the business expanded margin by 50 basis points, which was in line with our expectations. Year-to-date adjusted free cash flow was $2.28 billion, driven primarily by EBITDA growth in the business. Total debt was approximately $14.2 billion and total liquidity was $2.3 billion. We ended the quarter with a leverage ratio of approximately 2.6x. With respect to taxes, our combined tax rate and impact from equity investments in renewable energy resulted in an equivalent tax impact of 21.7% during the quarter. For the full year, we expect an equivalent tax impact of approximately 24%. I will now turn the call back over to Jon.

Thanks, Brian. Based on results to date and our outlook for the remainder of the year, we updated our full year 2026 financial guidance as follows: Revenue is now expected to be in the range of $17.425 billion to $17.475 billion. Adjusted EBITDA is now expected to be in the range of $5.5 billion (sic) [ $5.550 billion ] to $5.575 billion. And adjusted free cash flow is expected to be in the range of $2.565 billion to $2.585 billion. Most of the revenue increase is due to higher fuel recovery fees related to elevated diesel fuel costs. As a reminder, our fuel recovery program is designed to offset the cash impact of changing diesel costs and is dilutive to margin when fuel costs are increasing. As we look to the year ahead, we remain confident in our ability to execute in a dynamic market and are encouraged by the momentum building across the business. We are still in the middle of our planning process and our initial perspective regarding 2027 is that our long-term growth algorithm is intact. This calls for consistently delivering mid-single-digit revenue growth while growing EBITDA, EPS and free cash flow even faster than revenue. This is designed to drive 30 to 50 basis points of annual EBITDA margin expansion. Our perspective is supported by continued disciplined pricing, improving volume trends and the momentum building in our Environmental Solutions business. Benefits from investments in digital capabilities and sustainability innovation should further support profitable growth and continued value creation. We plan to provide 2027 guidance on our earnings call in February. With that, operator, I would like to open the call to questions.

[Operator Instructions] Your first question today comes from Sabahat Khan with RBC Capital Markets.

I'm hoping you provide a little bit more color on the ES segment and the evolution there. I think last quarter, you alluded to sort of the incrementals getting better and some upside momentum through H2. Maybe just talk about what materialized through Q3 in that silo on the top line and the margin progression and sort of what's embedded for Q4?

Yes. I think we talked about at the outset of the year that the first half was going to be tougher, and we saw an inflection point and momentum into the second half of the year, and that's what we're seeing. And we're calling that shot because the sales pipeline was building, and we saw a number of jobs that were confirmed but hadn't started yet, and we saw a lot of that momentum in Q3. Obviously, there were a couple of big ER jobs that helped create an outsized outcome. But I think we mentioned you strip that away, we're still up 9%. And so a very broad-based growth geographically and across verticals. So I think that's a function of the underlying industrial economy continuing to improve. And then I think our team executing at a high level.

Great. And then just want to follow-up the commentary around volumes getting a little bit better, not asking for guidance on '27. But as you think about the mid-single digits, do you expect at least year-over-year volume trends just sort of across your platform based on what you're seeing that to be a bit more positive sequentially? Just maybe if you can break out some of the puts and takes you're seeing on the volume front across your business.

Yes. I think the industry, recycling and waste, is coming out of a 4-year period of really negative growth. And Environmental Solutions is coming out of an 18-month period where I think it was kind of in an air pocket in volume. I think both markets are now trending in a good direction. I think recycling and waste will tip to positive growth in 2027 across the industry, and we'll certainly try to match that or do a little better than that performance. And Environmental Solutions will be on a nice growth trajectory. And again, we'll try to match market or do a little bit better than that from a volume standpoint.

The next question comes from Bryan Burgmeier with Citi.

Maybe just on the updated EBITDA outlook for 2026. Just curious if you could help us bridge that a little bit. I guess you're going to have a little bit of help from commodities, a little bit of M&A. I'm not sure if ES beat in the quarter versus your model or if it was in line. Just any detail on the improved outlook there.

Yes, I'll give you both pieces when you take a look at our guide that we updated in July compared to the guide that we just recently updated. So at the midpoint, revenue is up about $200 million on the revenue and $150 million of that or so is related to fuel fees. $50 million is related to Environmental Solutions. Most of that has already occurred with those handful of large emergency response jobs that we called out. With respect to the EBITDA, we're expecting some contribution from fuel fees, call it, in the $10 million ZIP code, in part just because we saw the big spike in fuel costs in the month of September that moved from the kind of mid-$5 a gallon up to $6.50 or so in September. So we expect our fuel recovery fee to catch up early in the fourth quarter and about $15 million of the contribution from that $50 million on Environmental Solutions will positively impact EBITDA. And that's how you go from the previous guidance to approximately $25 million of incremental EBITDA at the midpoint.

Got it. Got it. Really appreciate that detail. And then one follow-up for me. Just going back to ES. I suppose it will always be a bit of a lumpy business, just given the nature of the work. But I'm just curious if you could try to frame what you think is maybe a sustainable level of margins. We've covered a lot of ground this year from high teens to mid-20s. And just, yes, curious about how you think about the sustainability of the 3Q performance and a sustainable margin level.

Yes. We talked about expanding the business 30 to 50 basis points, so we'll try to kind of match that or beat that margin expansion within ES. We think there's a lot of upside over the long term in that margin. I would tell you that if you measure it exactly by the quarter, right, you might not get the exact results you want. I think you've got to look at the trend across years. And when you measure that trend, it's to the upper or the right. I think given the nature of this business, assets that are impossible to permit, the waste that moves long distances gets priced by the pound or the yard versus the ton, I think there's a lot of opportunity to price for the value we deliver over time. And I think you're going to see steady progress on that in the years to come.

The next question comes from Noah Kaye with Oppenheimer.

Getting some questions on the yield dynamics you called out as relates to volume. Can you maybe just give us a little bit more of an explanation? Because it sounds like you're picking up new business, you're seeing volume growth, your same-store price is good, but there's just some business coming on at sort of a lower starting price. So is there any more nuance to it than that? Or is this something that we should be expecting in coming quarters if we continue to see volumes improve?

I'd say that when the business expands, that's either through service increases at existing customers or taking on new customers, you are almost always going to take on those units that are profitable, but they're below the average rate. That's the nature of our subscription-based business and the recurring revenue elements of the business. And so that arithmetically puts downward pressure on yield, but it's profitable business. And so normally, you see margin expansion. I think this we got caught a little unique circumstance this quarter with a comp in the landfills with a spike in diesel price, which that increase hurts us. We're fine at the level, but the increase hurts us. And then some onetime health care costs that Brian mentioned that have already receded and come back down in October. Outside of that, you see margin expansion. So we'd expect that yield number going forward to probably trend slightly up, but certainly the margin expansion to flow through because those units certainly contribute and are profitable when they come into the system.

Yes. Makes sense. And look, I mean, all things considered, for the business your size, whatever it is, $18 million to $20 million higher is not a massive number. But the health care cost spike was noticeable enough for you to call it out. I guess, are there any other elements that maybe you call out as unusual for the balance of the year? You mentioned absent rebate. I know that there have been some true-ups in the industry around risk management accruals. Just anything we should be thinking about for 4Q?

Nothing significant. When you take a look at our prior period results, it was fairly straightforward, and that's what we're anticipating for this fourth quarter, and that's what's included in the guide.

The next question comes from Toni Kaplan with Morgan Stanley.

This is Yehuda Silverman on for Toni Kaplan. Just a quick one on the end market health. I think I heard you mention earlier in the call that combined price and higher fuel recovery fee was about over 8%. Just curious if you could discuss the customer receptivity to pricing and how that's evolved, particularly in an environment with -- it seems that this elevated fuel price and broader inflationary pressure might be here for a bit longer.

Yes, we certainly look at what the bill of a customer is going to receive, and affordability is a very popular term right now. We're mindful of that. This is where our tools really help us to understand kind of the lifetime value of that customer, and we want to run the business forever, not maximize any type of in-year pricing or in-year return on that. So I'd say on the margin, that probably caused us to back off slightly on pricing, which we would have otherwise priced. But in terms of the core price and what you're seeing in the metrics, really positive in terms of receptivity. Again, I think the benefit of our tools is we're getting that price right and that customer is staying with us.

Got it. And just one quick one on the cost side, that labor and related benefit increased year-over-year a bit. Is that where the health care onetime came in there or some of the costs you saw a step up?

Yes, that's where most of it would be is in that labor category.

The next question comes from Jerry Revich with Wells Fargo.

I wanted to ask on the AI part of the conversation in your prepared remarks, you folks spoke about some interesting pricing tools and opportunity to reduce the phone operator costs. Can we just talk about over what period of time do you think we'll see a meaningful impact on numbers? How long will some of these initiatives take to play out? And can you just size for us, if we're talking about phone service, how meaningful of a bucket is that as we think about the margin upside?

Yes. Pricing, we're already seeing right now, and you're seeing that in the numbers and the impact, especially in the fuel-related environment. Customer service, you're starting to see just small bits of that, but most of that impact will come in next year. And then on the routing, which is the biggest opportunity, most of that will be rolled out next year. So you'll see some impact towards the back end of next year, but that will really be a 2028 story in terms of getting the full benefit of that. I think we mentioned $100 million run rate EBITDA by the end of 2028, and we still feel like we're on track for that number.

Okay. Great. And then for about '27 in about 3 months, but putting the pieces together, we've got good momentum on ES for the first time in 18 months. And if we're thinking about good core margin improvement in the base business on top of it, it could be in total a year of outsized margin expansion, '27 versus '26. Brian, anything that we need to keep in mind given that setup? And obviously, we'll talk more detail in 3 months, but would love to get your initial thoughts on the high-level opportunity.

Yes. Remember, I mean, we didn't provide guidance, but we did talk about our long-term growth algorithm. And we feel that '27 is laying into the construct of what we talk about that long-term growth algorithm, which calls for 30 to 50 basis points of margin expansion.

The next question comes from Adam Bubes with Goldman Sachs.

I think organic growth ex event-related volumes in ES was 9%. Can you just help us understand the drivers of the strength there? How much is volume versus price? Which business lines are you seeing the strongest growth?

Yes. You balance across both more volume and price, but certainly got our fair share on price. I think what you're seeing is just all the factors driving the industrial economy. PMI now has been over 50 for a number of months. You're starting to see the reshoring activity. Obviously, a big build-out in all parts of the technology sector and semiconductors and data centers and everything else. And all of those things are contributing to our performance.

Yes. And to Jon's point, it was broad-based. We saw increases at our hazardous waste landfills. We saw increase in E&P volumes. We saw it in our TSDFs and our field and industrial services. So it was a very broad-based increase.

And then on the residential side, I think you cited some municipal contract losses. Were those new in 3Q? Or was that already in the base? And then I think last quarter on the call, you might have talked about potential to get closer to a down 2% number sometime in 2027. Does that still hold? Or should we think about this as incremental shedding?

No, all these were actions that are decisions that were taken last year that we were living with the effect through the course of this year and that we will certainly move up in our trend. And I think that roughly 2% is probably about where we'll end up landing next year.

The next question comes from Trevor Romeo with William Blair.

Just a couple more for me on ES just because it was nice to see the improvement there. I mean, one, I appreciate the comments about the sort of long-term growth algorithm in '27. And I know you don't want to be getting into detailed guidance, but just thinking you're already kind of organically ex events growing 9%, got kind of an easier comp in the first half next year and you've got the manufacturing backdrop improving and all kind of the other secular factors there. So I mean, how are you thinking about the potential for '27 for ES to just be kind of an above-average growth year and kind of what needs to happen for it to get there?

We'll continue to build the pipeline and have high aspirations for our team. I think we gave you the long kind of the broad markers of how the business does. Keep in mind, we're still in the sub-15% of the overall business. So when we give you the overall markers for how we're going to do next year, you could still have outsized performance in ES and could fit within the envelope that Brian talked about.

Okay. I appreciate that, Jon. And just a quick follow-up on ES as well. I mean, on the ER projects overall, I guess, how has this year kind of been trending relative to a normal year? And then I know pricing on the ER work is something you've talked about maybe the past several quarters. Do you feel like that's kind of gotten back to an equilibrium at this point now that you're kind of winning more jobs?

Yes. I think we're getting better and smarter every day. We do thousands of ER jobs every year. Most of them are very small. It's the outsized jobs that can kind of drive the economics. And really, the last 18 to 24 months prior to this quarter, it's been the dearth of those larger jobs. And so typically, you see 1, 2 or 3 of these bigger jobs every year. We had a couple of them this quarter. Team did a great job, and we leverage the full capabilities of our offering. So it wasn't just the Environmental Solutions field services team and post-collection group, but it was also our recycling and waste landfills that played a pretty big part in providing the right solutions for our customers.

The next question comes from Tami Zakaria from JPMorgan.

I wanted to understand the mid-single-digit growth algo that you have for the long term a little bit better. So you've been able to achieve that despite residential construction and housing formation being very weak the last few years. So if and when that begins to recover, how should we think about a lift to that mid-single-digit percent number? Or what kind of improvement have you seen -- did you see in the past when prior resi upcycles began?

Yes. I'm very optimistic about the U.S. housing market over time. I'm very pessimistic about it in the short to medium term. I think we're going to need to get the 10-year down and the interest rate down to unlock both people to move and investment in the new housing construction, which the country badly needs. It will have a nice steady positive tailwind to the industry. And it will start large container temp because that will be the work we do. We'll add then some residential units and then the knock-on effect is adding some small container units around that as you see business formation happen around households. So that will be a steady -- it's not points and points of growth to the top line, but there'll be certainly some basis points of tailwind, and those will be profitable units we'll add to the system.

And if you want to sensitize it, direct construction-related activity is about 6% to 7% of our total revenue base.

Next question comes from Seth Weber from BNP Paribas.

A couple more on ES. The 9%, excluding the emergency business, do you feel like that's a catch-up of just stuff that has been delayed? Or do you feel like you're taking market share here?

I think I would encourage you to not overinterpret a given quarter, right? In this business, there's always puts and takes on event job where recycling and waste, given the predominantly recurring revenue nature of that business, right, very repeatable, predictable and you can start to spot trends easier in that business. I think we're seeing a reignition of growth in the sector, and we're certainly getting our fair share, and we feel probably more than our fair share right now. That could change over the quarter. But we'll -- again, over the cycle, we'll look to get growth slightly ahead of market and certainly lead with price and then take volume behind that. And I think we're very encouraged by the efforts the team has made in that business.

Okay. And then just as this business turns, would you expect outsized incremental margins in this business for, say, 2027?

I think it depends a lot on mix and the nature of that work. In general, yes, you get leverage on your post-collection assets. You get leverage on your labor. So there's some fixed cost nature of that work on the field services as well. But the nature of that work and the mix of the work could determine it, but on balance, yes.

The next question comes from Shlomo Rosenbaum with Stifel.

First question, just a little bit about operational landfill costs. I think you're the first company reporting this quarter that has not mentioned that they're going up. And I'm just wondering, are you noticing that happening recently? And is there a way to contextualize it if it is? And if not, why do you think you're not seeing it versus some of the other ones that are talking about it now?

Yes. Some of it depends on weather and rain and the mix of where your landfills are located. And again, in any given quarter or year, you might be slightly more elevated than others on that. Landfills are certainly getting more expensive to operate, but our team has done a really good job of managing those costs, getting in front of it and most importantly, protecting the health of those landfills across the cycle.

You're not see anything regulatory-wise, particularly where your landfills are located that's making a bigger difference now versus some of the other ones?

We're working every day across multiple state capitals, shaping regulation or sometimes working against regulation if we think it's really bad for the customer, but most of the times shaping regulation to help improve the environment and manage those assets.

Great. Just to follow-up, Brian, can you just talk about the price of diesel that's expected in your 4Q '26 numbers?

Yes. We've seen diesel modulate a little bit. The high point in September was approximately $6.50. As we sit here today, we're, call it, $6.35. We expect that to taper down a little bit and approach the $6 mark by the time we exit the year.

The next question comes from Stephanie Moore with Jefferies.

Okay. So maybe first question, I do want to touch a bit on M&A. Maybe if you could talk about how you're just viewing the M&A environment today, where you're seeing the most attractive opportunities across, obviously, MSW, ES or anything else? And then what should we expect maybe your focus to remain? Is it more so tuck-ins? Is there an appetite for maybe a larger, more strategic deal? I'd love to hear your thoughts.

The balance of our pipeline is always going to be smaller tuck-ins. We'll probably end up doing somewhere around 25 acquisitions this year, most of which will be small tuck-ins. It will be balanced across recycling and waste and ES. Most of it will be recycling and waste just given the size and the nature of those opportunities. There were certainly some medium-sized deals this year, and there'll be some more next year. The pipeline remains very, very strong. In terms of anything larger, we remain and take a perspective on everything, but I wouldn't anticipate something in that stage or that size to happen to be in our wheelhouse here in the short to medium term.

Understood. And just a quick follow-up on the volume piece. Can you just remind us where you are in just the residential shedding journey? When we should expect to see maybe that optimal mix? And then also any color you can give in terms of what this has implied from just a margin standpoint as well?

Well, I think there's always going to be some underlying shedding because as we acquire companies, we know part of their portfolio are municipal contracts that we'll either upgrade or exit. They just don't meet our returns threshold. And so again, across 25 deals, we don't pay for that portion of the deal when we buy those contracts. And we retain some of them, but we know some of them, we would be unlikely to retain. And then going forward, we don't aspire to shrink that business. We would like to grow that business over time, but we're going to make sure that we get attractive returns on the hard work that our people do. And so we're going to continue to look for customers that are willing to pay for a differentiated offering and to get that market to move over time. But we're -- when forced to choose, we're going to take price over volume.

And the margin implications of that, to your question is, if you're shedding lower profitable work within the residential business, but gaining on the more profitable small and large container work, you're going to mix up from a margin perspective.

The next question comes from Tobey Sommer with Truist. Tobey, your line may be muted. We will take the next question from Kevin Chiang with CIBC.

Maybe just on Environmental Services, again, good results in the quarter. I appreciate, as you called out, mix can play a role here and maybe just the underlying cyclicality of the business. But I guess when I look further out, it feels like your incremental margin in this business can be kind of like 30% to 50%, I guess, depending on mix as that revenue comes through. Is that kind of the right ballpark to think about how that incremental revenue flows through to the bottom line? And then mix is maybe a 20-point variance around that goalpost?

Yes. To Jon's earlier point, it depends on the type of work that you're getting. So certainly, if you're getting it through your post-collection infrastructure, the TSDFs, the landfills, the E&P work, certainly, it can be those levels. Field and industrial services, it's going to be accretive to those lines of business, but not to that level. So certainly, what we saw in this period given the large emergency response jobs as well as increases in both the haz waste landfills and E&P, that's why you saw the incrementals that we produced this quarter.

That's helpful. And just my follow-up question. If I look back the last 5 years or so. I don't think we've seen a quarter where small container, large container and special waste all put up positive volume. I guess the last time we saw it was coming out of the pandemic. I guess, does this foretell how volume trends in 2027 ex the intentional shedding? Like could you have, let's say, positive volumes next year ex some of the purposeful shedding you're pursuing in your resi book?

Yes. I think the market is starting to expand. Again, the market is not taking off. I don't want to oversell it. But the market is absolutely trending up and trending to a positive period. And the one caveat in all that is there's a lot of things going on geopolitically and with AI and big investment cycles and other things. So the macro would have to be supportive of that. But if the macro hangs in there, we would absolutely expect to see positive volume next year.

The next question comes from Tobey Sommer with Truist.

Sorry about that. Trick or treating came early this year. I wanted to ask a question about -- if you look over the horizon sort of around the corner, we've had a couple of 2, 3 years where landfill natural gas provided a little bit of kind of new opportunity and spice for profit and revenue and cash flow growth. What do you see over the next 3 -- 7, 8 years that might provide another spicy period with a minor but interesting catalyst to spur those growth rates a little higher?

We're certainly looking at everything that goes into the landfill and challenging all of those tons. Landfills, while they're profitable, they're also a cost, right? You've already collected the money from somebody, and they're a cost to us. So is there something else we could do with that material? And some of that, we get a little bit of diversion out of that, out of our sustainability investments around advanced recycling. Most of that is upcycling, but there is some opportunity of taking things and diverting them out of the landfill. The biggest opportunity we're pursuing right now is organic material, which is 20% to 25% of what shows up in a landfill. And we have a lot of those projects today. Are there more different things that we can do with those over time? That's not a kind of near-term 1- to 2-year opportunity. But over 3 to 5 years, I think that could provide a -- start to be an interesting and meaningful revenue stream.

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

Thank you, Chloe. I want to thank the entire Republic Services team for their continued great work and dedication to exceeding our customers' expectations. We've accomplished a lot already this year, and I'm confident we will carry this momentum through the end of the year and into 2027 as we continue creating long-term value for our customers, employees and shareholders. I would also like to say congratulations to Jim Fish on a terrific career at WM, and I wish him the best in retirement. Have a good evening and be safe.

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