Dive Brief:

• Advanced Disposal Services reported $392.7 million in revenue for the third quarter of 2017, a company-best 8.9% increase compared to last year. This was supported by organic price and volume growth of 3.6%, among other factors. Based on these results, the company is raising its full-year revenue guidance for the second quarter in a row to between $1.49 and $1.505 billion.
• According to CEO Richard Burke, fostering deeper customer relationships and locking down longer-term contracts is a big sales focus in the primary urban markets that comprise about 20% of the company's revenue. Tactics include offering more e-commerce or online solutions to reduce churn and stay competitive with other companies.
• In addition to various operational headwinds such as healthcare, landfill and labor expenses, Advanced also felt the effects of recycling markets and the recent hurricanes. The company expects that commodity prices will reduce EBITDA by $3 million next quarter. The two mainland hurricanes are also expected to take a $2 million toll on EBITDA for the full year.

Dive Insight:

Because Advanced has about 40% of its business in the South, the company was particularly affected by Harvey and Irma. While the company doesn't have operations in Texas, the decreased refinery production after Harvey led to higher fuel costs. Irma, on the other hand, affected their main offices directly and disrupted operations throughout the Southeast. The storm also presented an opportunity for Advanced to start working on a new contract in Polk County early, as part of a more complicated dispute between the county and previous service provider Republic Services. Since then, Advanced has also seen higher volumes of vegetative debris in its regular pick-ups. It doesn't expect to see the same long-term profit potential as some other competitors because of how their business is structured and the fact that the storm won't require as much rebuilding as Harvey flooding.

"It wasn't that kind of storm. It was basically a wind storm," said Burke during the call. "...Where you make money in a hurricane that's a wind-type hurricane is owning the disposal spikes, and unfortunately that's not our model and not our platform in Florida. We are disposal neutral here except for one C&D landfill and one small one in Ocala and one in Jacksonville. So that's why the storm hasn't had the same offsetting revenue that some of our peers have had with us."

As for recycling, the effects were mixed because that portion of the business is relatively small compared to other companies. Revenue from commodity sales was up on a year-over-year basis, but Advanced also felt the effects of a 40% drop in OCC prices in early fall, like everyone else. Much of the material they collect is processed domestically, but still affected by global market pricing. Burke said this had put "significant pressure" on the U.S. market and he was less optimistic about a short-term resurgence than some other companies have been.

None of these factors appear to be stifling the company's ongoing expansion and future plans. So far this year, Advanced has completed one large acquisition of CGS Services, 12 tuck-ins and one market swap. All of that activity contributed a 4.8% year-over-year increase in growth from acquisitions. Heading into 2018, the company isn't expecting to spend quite as much — more in the $30-50 million range — but will be "opportunistic" if the right large deal comes along. As Burke said, "it's not the number of deals, it's more about having the right deals that fit our criteria."