Casella(CWST) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q3 2024 reached $411.6 million, an increase of$ 58.9 million or 16.7% year-over-year, with $37.5 million from acquisitions and$ 21.3 million from organic growth [18][29] - Adjusted EBITDA was $102.9 million, up$ 13.3 million or 14.9% year-over-year, with adjusted EBITDA margins at 25%, down 40 basis points year-over-year [22][23] - GAAP net income was $5.8 million, down$ 12.4 million compared to the prior year, primarily due to an $8.5 million closure charge at the Southbridge Landfill [26] Business Line Data and Key Metrics Changes - Solid waste revenues increased by 17.3% year-over-year, with acquisition growth of 13% and price up 5.5%, while volumes decreased by 1% [18] - Resource Solutions revenues rose by 14.5% year-over-year, with recycling and processing revenue up 25.8% [20] - Adjusted EBITDA margins in the collection and resource solutions lines increased by 130 and 90 basis points respectively on a same-store basis [24] Market Data and Key Metrics Changes - C&D tons were down 16% year-over-year, with continued weakness expected to persist through the end of the year [20] - The average price per ton at landfills increased by 7.1% year-over-year, reflecting a mix shift away from lower price streams [20] - The company anticipates a return of landfill volumes in 2025 as the Brookhaven Landfill closure impacts the market [58][94] Company Strategy and Development Direction - The company completed its 6th acquisition of the year with the purchase of Royal, focusing on integration and leveraging synergies for growth [9][35] - Strategic investments in automation and technology are expected to enhance operational efficiency and safety [11][16] - The company is focused on sustainability and has published its 2024 Sustainability Report, highlighting its commitment to creating value for customers and communities [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong growth opportunities and a solid foundation for continued expansion [17] - The company expects to achieve revenue growth in the range of 12% to 15% on adjusted EBITDA for 2025, driven by improved landfill volumes and pricing [35] - Management acknowledged challenges in the C&D market but expects normalization in 2025 to positively impact results [60] Other Important Information - The company reaffirmed its guidance for revenue, adjusted EBITDA, cash flow from operations, and adjusted free cash flow for 2024, while revising GAAP net income guidance due to the Southbridge Landfill closure charge [31] - Net cash provided by operating activities for the first nine months of 2024 was$ 171.6 million, up $13.8 million year-over-year [28] Q&A Session Summary Question: Update on landfill development and expansion initiatives - Management provided positive updates on the Juniper Ridge facility's permit and the McKean facility's operational testing, indicating a cautious ramp-up in volumes [43][45] Question: Details on the Royal acquisition - The Royal acquisition is strategically important for expanding into the Hudson Valley, with expectations of mid-teens EBITDA margins and potential for improvement through operational efficiencies [47][50] Question: Clarification on Q3 performance and guidance - Management confirmed that unexpected insurance accruals offset the Royal acquisition's impact, leading to unchanged guidance [55][56] Question: C&D market headwinds - Management acknowledged significant C&D volume declines but expects a return of volumes post-Brookhaven Landfill closure, contributing positively in 2025 [58][60] Question: Internalization strategy and logistics - The company is focused on increasing landfill internalization through new transportation lanes and additional long-haul trucks, with a long-term strategy for waste management [64][66] Question: Insurance expense accruals - Management explained the unusual insurance accruals related to two discrete events, indicating they are one-time occurrences [68][70] Question: 2025 margin expansion potential - Management expressed optimism for margin expansion in 2025, driven by improved landfill volumes and operational efficiencies [72][90] Question: M&A activity outlook - Management indicated a continued focus on smaller tuck-in acquisitions while prioritizing integration of recent acquisitions [73][80]