Casella Waste Systems, Inc. Q3 FY2025 earnings call

• John Casella noted Q3 was a strong quarter with revenue and adjusted EBITDA at quarterly records, driven by solid waste pricing strength, healthy landfill volumes, and acquisitions. - Solid waste operations showed strong performance with pricing and landfill volumes driving margin expansion on a same-store basis, and Mid-Atlantic businesses integration progressing well. - Resource Solutions segment managed commodity price headwinds and third-party disruptions. - Completed 8 acquisitions year-to-date, with Mountain State Waste transaction expected to close end of 2025 adding $30M annualized revenue. - Announced Casella's Sustainability Leadership Awards in Q3.

In Q3, solid waste revenues were up 20.6% year-over-year, with price up 4.6% and volume essentially flat. Within solid waste, collection line of business price was up 4.7% in the quarter, volume essentially flat; disposal line of business price was up 4.6% and volume flat year-over-year. Landfill business had same-store price up 3% and total tons up 11.7%, including higher third-party MSW and C&D volumes, nearly 20% growth in internalized volumes. Resource solutions revenues were up 7.8% year-over-year, with recycling and other processing revenue down 5% impacted by lower commodity prices but national accounts up 16.5%. Revenue contribution: Solid waste and landfill operations contributed significantly, with resource solutions also making a notable contribution.

• Raised the lower end of revenue and adjusted EBITDA guidance for 2025, increasing midpoints to $11.835 billion and $420 million respectively. - For 2026, anticipate overall organic growth in the range of 4% to 5%, with incremental 3% or $60 million of rollover acquisition revenue including Mountain State Waste. Total revenue growth excluding future acquisitions in range of 7% to 8%. - Target 25 to 50 basis points of overall margin improvement for adjusted EBITDA in 2026. - Aim to generate leverage on adjusted free cash flow, targeting growth in typical long-term range of 10% to 15%.

Potential risks include market fluctuations affecting commodity prices, challenges in integrating acquisitions smoothly, and regulatory changes that could impact operations and margins.

Q: Conceptually, concerns about longer-term trajectory of margins, how to think about impact of M&A on margins?

A: Brad Helgeson said acquired businesses come in at lower EBITDA margins on average, but there's significant multiyear margin expansion opportunity as they implement strategies and operating programs, so acquisitions initially may weigh on margins but fuel long-term margin growth.

Q: Trevor Romeo asked about landfill internalized volumes success and M&A integration team?

A: Ned Coletta said internalized volumes harvesting from acquisitions completed over past couple years, great value creation; on M&A integration, built great team, standardized collaborative tool, and have best practices to manage risk and gain efficiency in process.

Q: Adam Bubes asked about landfill pricing and Mid-Atlantic billing system timeline?

A: Brad Helgeson said landfill price on third-party basis was 3% same store; Ned Coletta said Mid-Atlantic about 50% through customers, system work should be done by early Q1, then move to latest customer payment portal.