Casella Waste Systems, Inc. Q2 FY2025 earnings call

Anniversary Celebration

• Commemorated Casella's 50th anniversary, highlighting growth from a single truck operation in Vermont to a leading waste management provider across the Northeast and Mid-Atlantic.

Q2 Performance

• Delivered strong revenue and adjusted EBITDA growth, with record first half adjusted free cash flow over $70M. Solid waste pricing up 5% YOY. Mid-Atlantic facing transition challenges but executing plan to improve. Landfill volumes up 9.5% YOY. Resource Solutions performing well due to upgraded facilities.

Acquisitions

• 6 acquisitions YTD, representing about annualized revenues. Pending acquisition of Mountain State Waste to add $30M annualized revenues. Strong M&A pipeline and balance sheet support further deals.

Operational Efforts

• Completed 11 routing projects reducing route gates and driver headcount. Resource Solutions facilities upgraded. McKean Landfill expanding capabilities with new rail offload transfer building to be completed in first half of 2026.

Solid Waste: Revenues were $465.3 million, up $88.2 million or 23.4% YOY. Solid waste pricing up 5% YOY, with collection line price up 4.9% and disposal line price up 5.8%, though volume in collection was down 1.2% and up 0.6% in disposal. Landfill: Total tons up 9.5% YOY, including higher third-party MSW and C&D volumes and over 12% growth in internalized volumes. Resource Solutions: Revenues up 10.2% YOY, with recycling other processing revenue up 9.6% and national accounts up 10.6%, driven by improved efficiencies at upgraded recycling facilities.

• Raised full-year revenue guidance due to core pricing strength and acquisitions. - Reaffirmed adjusted EBITDA and adjusted free cash flow guidance ranges. - Raised bottom end of adjusted EBITDA, adjusted free cash flow, and cash flow from operating activities ranges. - Tax legislation's bonus depreciation will benefit future tax position but no immediate 2025 benefit.

• Mid-Atlantic transition challenges including system conversions, truck delays, and slower synergy realization. - Labor cost pressures in Mid-Atlantic due to lack of automation and route optimization. - Commodity price volatility impacting Resource Solutions revenues, though contract structures share risk with customers.

Q: Tyler Brown asked about Mid-Atlantic challenges and pricing opportunity.

A: Edmond R. Coletta said they moved to a legacy billing system but faced domino effects from different systems and truck delays, with pricing opportunity due to better visibility in legacy systems.

Q: Adam Bubes asked about Mid-Atlantic synergy realization and margin bridge.

A: Edmond R. Coletta said it's slower synergy realization due to system and truck issues, but they expect synergies to materialize over time.

Q: Trevor Romeo asked about volume performance and cyclical trends.

A: Sean M. Steves said roll off business recovered from first quarter softness, overall volume positive YOY, with landfill volume increase due to internalization and acquisition synergies.

Q: Jim Schumm asked about collection pricing dip and Resource Solutions outlook.

A: Bradford J. Helgeson said it's mix-related, and John W. Casella said Resource Solutions will continue to grow rapidly, especially in Mid-Atlantic.

Q: Stephanie Moore asked about M&A strategy and McKean Landfill update.

A: John W. Casella said M&A strategy remains focused on Eastern Seaboard, and Edmond R. Coletta said McKean Landfill's rail offload transfer building to be completed in first half of 2026, expanding capabilities for additional waste streams.