Core Insights - TimesSquare Capital Management's "U.S. Small Cap Growth Strategy" reported a gross return of 2.26% and a net return of 2.01% for Q3 2025, significantly underperforming the Russell 2000 Growth Index, which returned 12.19% [1] - The fund's top five holdings include notable stocks, with a focus on companies providing essential services and infrastructure [1] Company Performance - Casella Waste Systems, Inc. (NASDAQ:CWST) is highlighted as a key stock, with a one-month return of 3.62% but a 52-week decline of 5.03% [2] - As of January 5, 2026, Casella Waste Systems, Inc. had a market capitalization of $6.357 billion, with shares closing at $100.12 [2] - The company reported revenues of $485.4 million for Q3 2025, reflecting a year-over-year increase of $73.7 million or 17.9% [4] Operational Challenges - Casella Waste Systems faced operational challenges due to slower-than-expected systems integration in newly acquired territories and the implementation of a new enterprise resource planning system, which impacted earnings [3] - Despite these challenges, the company has a history of quickly improving margins from acquisitions, and the new ERP system is expected to facilitate this improvement [3] Market Position - Casella Waste Systems is not among the top 30 most popular stocks among hedge funds, although it saw an increase in hedge fund holdings from 24 to 26 in the last quarter [4] - The investment community acknowledges the potential of Casella Waste Systems but suggests that certain AI stocks may offer greater upside potential with less downside risk [4]

Core Viewpoint - Casella Waste Systems, Inc. has successfully completed its CEO succession plan, appointing Edmond R. "Ned" Coletta as the new CEO, marking a significant milestone as he becomes only the second CEO in the company's 50-year history [1] Group 1: Leadership Transition - Ned Coletta officially assumed the role of Chief Executive Officer and joined the Board of Directors effective January 1, 2026 [1] - Former CEO John W. Casella will continue as Executive Chairman of the Board, collaborating with Coletta on strategic development and organizational culture [3] Group 2: Strategic Focus - Coletta emphasized a clear focus on executing the long-term strategy and strengthening the foundation for future growth, with an emphasis on investing in people and fostering a culture of safety, innovation, and accountability [2] - The company aims to drive continued growth and deliver lasting value for customers, shareholders, and communities [2] Group 3: Leadership Experience - Coletta brings over two decades of experience with Casella, having joined in 2004 and served in key roles such as Chief Financial Officer and President [2] - He has a strong track record in financial discipline, operational excellence, and strategic expansion, positioning Casella as an industry leader in resource recovery [2]

Company Overview - Casella Waste is a Vermont-based waste management company founded in 1975, growing from a one-truck operation to a $6.37 billion enterprise over fifty years, specializing in resource renewal and sustainability through recycling services [2] - The company operates in nine states, providing services such as trash collection, organics disposal, compressed natural gas collection, landfill operations, and specialized waste management [1] Financial Performance - In Q3, Casella reported revenue of $485.4 million, reflecting an 18% year-over-year increase and exceeding forecasts by $9 million [7] - The non-GAAP EPS for Q3 was 42 cents, up 2 cents from the previous year and beating expectations by 10 cents [7] Analyst Insights - Raymond James analyst Patrick Brown views the post-Q2 stock pullback of Casella as overdone, expecting a rebound as the company completes its systems integration and realizes synergies from recent acquisitions [8] - Brown has assigned a Strong Buy rating to Casella with a price target of $120, indicating a potential upside of 22.5% [8] Market Context - The current bull market, which began in fall 2022, has seen the S&P 500 advance approximately 16.5% in 2025, with the tech-heavy Nasdaq rising about 20.5% [5] - The macroeconomic environment is characterized by resilient growth, fiscal tailwinds, and robust corporate earnings, suggesting continued support for the bull market [4] Competitive Landscape - Casella's versatility allows it to serve a wide range of industries, including agriculture, retail, construction, and municipalities, highlighting its adaptability in waste management [6]

Group 1 - The article does not provide any relevant content regarding the company or industry [1]

Core Viewpoint - Casella Waste Systems (CWST) has been under observation, with shares declining approximately 9% since the last analysis in December 2024, which maintained a 'hold' rating on the stock [1] Company Analysis - The company is recognized for its high-quality stock and strong business fundamentals, particularly in capital allocation and return on capital [1] Investment Philosophy - The investment approach emphasizes acquiring stocks from businesses that demonstrate disciplined capital allocation, exceptional returns on capital, and the ability to compound invested capital over extended periods [1]

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Financial Highlights - The company's revenue in 2025E is projected to be $1.8 billion[9] - The company projects year-over-year revenue growth of $278 million, a 17.8% increase at the midpoint[56] - Adjusted EBITDA for 2025 is guided to be between $415 million and $425 million, representing a $59 million increase, or 16.5% at the midpoint[56] - Adjusted Free Cash Flow is expected to be between $170 million and $180 million, an increase of $16.7 million, or 10.5% at the midpoint[56] - Net cash provided by operating activities is projected to be between $325 million and $335 million, up $48.6 million, or 17.3% at the midpoint[56] Business Operations - Collection services account for 64.7% of the company's revenue[6] - Disposal services contribute 14.6% to the company's revenue[6] - National Accounts represent 12.1% of the company's revenue[6] - Resource Solutions Processing accounts for 7.5% of the company's revenue[6] - Energy & Processing contributes 1.0% to the company's revenue[6] Strategic Initiatives - The company has completed 66 acquisitions since 2019, deploying approximately $2 billion of capital to acquire approximately $850 million of annual revenue[27]

Revenue Growth - Total revenues for the three months ended September 30, 2025, were $485.4 million, a 17.9% increase from $411.6 million in the same period of 2024[120] - Solid waste revenues increased by $67.0 million, or 20.6%, for the three months ended September 30, 2025, compared to the same period in 2024, driven by acquisitions and price increases[121] - Collection revenues for the three months ended September 30, 2025, were $314.0 million, representing 64.7% of total revenues, up from $252.6 million, or 61.4%, in the same period of 2024[120] - The company completed eight acquisitions in the nine months ended September 30, 2025, contributing $175.9 million, or 19.9%, to solid waste revenues[121] - The Western segment saw a revenue increase of $93.7 million (23.2%) to $497.6 million for the nine months ended September 30, 2025, compared to $403.9 million in 2024[141] - Solid waste revenues in the Eastern region grew by $8.5 million (7.2%) for the three months and $20.3 million (6.1%) for the nine months ended September 30, 2025, primarily driven by acquisitions and higher collection pricing[143] - Solid waste revenues in the Western region increased by $32.2 million (22.5%) for the three months and $93.7 million (23.2%) for the nine months ended September 30, 2025, due to acquisitions and higher collection pricing[147] - Solid waste revenues in the Mid-Atlantic region increased by $26.4 million (40.7%) for the three months and $101.6 million (67.7%) for the nine months ended September 30, 2025, driven by acquisitions and higher collection pricing[150] - Resource Solutions revenues increased by $6.7 million (7.8%) for the three months and $22.4 million (9.1%) for the nine months ended September 30, 2025, primarily due to higher tipping fees and National Accounts business growth[153] Operating Expenses - Operating expenses for the three months ended September 30, 2025, were $315.3 million, accounting for 65.0% of total revenues, compared to $267.1 million, or 64.9%, in the same period of 2024[124] - General and administrative expenses increased to $57.3 million, or 11.8% of total revenues, for the three months ended September 30, 2025, from $47.0 million, or 11.4%, in the same period of 2024[124] - Depreciation and amortization expenses rose to $78.8 million, or 16.2% of total revenues, for the three months ended September 30, 2025, compared to $59.2 million, or 14.4%, in the same period of 2024[124] - Direct costs for the three months ended September 30, 2025, were $315.3 million, representing 65.0% of total revenues, an increase of $48.2 million (18.0%) from $267.1 million in 2024[126] - Direct labor costs increased to $76.9 million (15.8% of revenues) in Q3 2025, up $13.8 million (21.9%) from $63.1 million (15.3%) in Q3 2024[126] - General and administration expenses rose to $57.3 million (11.8% of revenues) in Q3 2025, an increase of $10.3 million (21.9%) from $47.0 million (11.4%) in Q3 2024[129] - Depreciation and amortization expense for the three months ended September 30, 2025, was $78.8 million, up $19.6 million (24.9%) from $59.2 million in the same period of 2024[132] - Inflationary cost increases have materially affected operating margins, but the company has implemented flexible pricing structures to recover certain costs[177] Income and Taxation - Operating income for the three months ended September 30, 2025, was $29.4 million, up $5.0 million or 20.5% from $24.4 million in 2024[142] - The provision for income taxes for the nine months ended September 30, 2025, was $4.3 million, a decrease of $2.4 million from $6.7 million in the same period of 2024[136] - The effective tax rate for the nine months ended September 30, 2025, was 29.1%, lower than the 43.5% effective rate for the same period in 2024[136] - Federal net operating losses carried forward to 2025 total $83.2 million, which can offset up to 80% of taxable income earned in a tax year[138] - The company projects to carry no pre-2018 net operating losses into 2025 due to changes in tax laws[138] Cash Flow and Financing - As of September 30, 2025, the company had $673.4 million available under its $700.0 million revolving credit facility and $192.7 million in cash and cash equivalents[161] - Net cash provided by operating activities increased by $61.6 million to $233.2 million for the nine months ended September 30, 2025, compared to $171.6 million for the same period in 2024[165] - The company acquired eight businesses in the nine months ended September 30, 2025, with cash consideration of $217.5 million, compared to five businesses acquired for $261.2 million in the same period of 2024[166] - Capital expenditures increased by $61.4 million in the nine months ended September 30, 2025, primarily due to acquisition activity and investments in fleet and facilities[167] - Net cash used in financing activities was $(19.1) million for the nine months ended September 30, 2025, a decrease of $530.2 million compared to the same period in 2024[168] - The company expects existing cash and cash equivalents, along with available cash flows, to be sufficient to fund operating activities and cash commitments for at least the next 12 months[161] - As of September 30, 2025, the company has an outstanding long-term debt of $800.0 million in term loan A and $700.0 million in revolving credit facility[171] - The maximum consolidated net leverage ratio is 2.34, well below the covenant requirement of 4.00, and the minimum interest coverage ratio is 7.54, exceeding the requirement of 3.00[172] - The company has $273.5 million in tax-exempt bonds, $86.9 million in finance leases, and $1.1 million in notes payable as of September 30, 2025[176] Operational Efficiency and Challenges - The company is focused on integrating acquired businesses to achieve expected benefits and enhance operational efficiency[114] - The company has implemented operating efficiency programs to improve productivity and reduce service costs[177] - The company’s operations are susceptible to regional economic conditions, including labor availability and severe weather, which can impact waste volumes and operational efficiency[179] - Seasonality affects the company’s revenues, with higher revenues typically seen in late spring, summer, and early fall months[180] - The company is subject to seasonal fluctuations, with lower revenues typically in late fall, winter, and early spring months[180] - Severe weather can adversely affect operations, potentially increasing costs and delaying waste collection and disposal[181] - Management's estimates and judgments in financial statements are based on historical experience and may differ from actual results[182]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was approximately $485 million, representing a year-over-year increase of 17.9% or $73.7 million, driven by solid waste pricing strength and acquisitions [5][10] - Adjusted EBITDA reached a record $120 million, up 16.4% year-over-year, with an adjusted EBITDA margin of 24.7%, down approximately 30 basis points year-over-year [5][12] - Year-to-date adjusted free cash flow totaled $119 million, up 21% year-over-year, supported by EBITDA growth and stronger working capital performance [5][15] - The company raised the lower end of its revenue and adjusted EBITDA guidance for 2025, increasing midpoints to $1.835 billion and $420 million, respectively [15] Business Line Data and Key Metrics Changes - Solid waste operations saw a revenue increase of 20.6% year-over-year, with pricing up 4.6% and volume essentially flat [10] - Resource solutions revenues increased by 7.8% year-over-year, although recycling and processing revenue decreased by 5% due to lower commodity prices [11] - The integration of Mid-Atlantic businesses is progressing well, with expectations for further gains in Q4 and into 2026 [6][19] Market Data and Key Metrics Changes - Landfill volumes increased by 11.7% year-over-year, with internalized volumes growing nearly 20% [10][19] - The average recycled commodity revenue per ton decreased by 29% year-over-year due to softer markets [11] - The company is working on expanding landfill capacity in New York, with permits expected in the coming quarters [19][102] Company Strategy and Development Direction - The company’s M&A strategy focuses on a balanced mix of smaller tuck-in acquisitions and larger opportunities to expand geographic footprint [6] - The company has an active acquisition pipeline representing approximately $500 million in annualized revenues [7] - The transition to a new Executive Chairman role for John W. Casella at the end of 2025, with Ned Coletta stepping into the CEO role, indicates a strategic leadership shift [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving enhanced 2025 guidance, citing sustained operating and acquisition momentum [7] - The company anticipates another year of strong growth in 2026, with organic growth expected in the range of 4 to 5% and an additional 3% from rollover acquisition revenue [16] - Management highlighted the importance of integrating acquisitions quickly to realize margin expansion opportunities [30][95] Other Important Information - The company completed eight acquisitions year-to-date, adding approximately $105 million in annualized revenue, with a pending acquisition expected to close at the beginning of 2026 [6][21] - The company is focused on improving operational efficiencies through automation and system consolidation [20][41] Q&A Session Summary Question: Concerns about long-term margin trajectory - Management indicated that while margins are down slightly year-to-date, they expect significant multi-year margin expansion opportunities from acquisitions [30][32] Question: Clarification on synergy capture in the Mid-Atlantic - Management confirmed that the $5 million savings expected in 2026 does not include pricing or margin lift, as they are still in the budgeting process [36][38] Question: Internalization of landfill volumes - Management noted that internalization of volumes from acquisitions is a key focus and has been yielding positive results [48] Question: Timeline for Mid-Atlantic billing system - Management expects to complete the billing system integration by the end of Q1 2026, which will enable better pricing and operational efficiencies [66][68] Question: Pricing evolution in the Mid-Atlantic - Management stated that pricing strategies will evolve as they integrate systems and optimize routes, but it may take several years to fully realize the potential [80] Question: Impact of Mountain State Waste acquisition timing - Management clarified that the delay in the Mountain State Waste acquisition is due to normal regulatory processes and does not indicate any issues [83] Question: Confidence in landfill permitting processes - Management expressed confidence in successfully obtaining permits for landfill expansions, citing their strong track record in the Northeast [101][102]

Core Insights - Casella Waste Systems, Inc. (CWST) is a significant player in the waste removal services industry, offering waste collection, recycling, and disposal services [1] - The company reported an earnings per share (EPS) of $0.15 for the quarter, which was below the estimated $0.33, although it has a history of exceeding expectations in previous quarters [2][6] - CWST's revenue for the quarter was $485.4 million, surpassing the estimated $476.9 million, and showing a significant increase from $411.63 million in the same period last year [3][6] Financial Performance - The EPS of $0.15 fell short of the estimated $0.33, indicating a potential area of concern for investors [2][6] - Revenue exceeded expectations at $485.4 million, reflecting a positive trend in revenue performance [3][6] - The company achieved a revenue of $485.35 million in the third quarter, beating the Zacks Consensus Estimate by 1.66% [3] Valuation Metrics - CWST has a high price-to-earnings (P/E) ratio of approximately 344.49, indicating that investors are willing to pay a premium for its earnings [4] - The price-to-sales ratio is about 2.88, and the enterprise value to sales ratio is approximately 2.84, further reflecting the company's valuation relative to its sales [4] Financial Stability - The company maintains a low debt-to-equity ratio of approximately 0.07, suggesting strong financial health and low debt levels [5][6] - A current ratio of about 1.51 indicates that CWST has sufficient liquidity to cover its short-term liabilities [5][6]