Casella Waste Systems, Inc.

Good day, and thank you for standing by. Welcome to Casella Waste Systems' second quarter 2021 earnings conference. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate on that portion of the call, simply press star 1 on your telephone, and please be advised that today's conference is being recorded. I would now like to hand the conference over to Joe Fusco, Vice President of Communications. Please go ahead.

Thank you, everyone, for joining us this morning and welcome. With us today are John Casella, Chairman and Chief Executive Officer of Casella Way Systems, Ed Johnson, our President and Chief Operating Officer, Ned Coletta, our Senior Vice President and Chief Financial Officer, and Jason Mead, our Vice President of Finance. Today we will be discussing our 2021 second quarter results. These results were released yesterday afternoon. Along with a brief review of those results and an update on the company's activities and business environment, we will be answering your questions as well. But first, as you know, I must remind everyone that various remarks that we may make about the company's future expectations, plans, and prospects constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in the risk factors section of our most recent annual report on Form 10-K, which is on file with the SEC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today. Also during this call, we will be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures, to the extent they are available without unreasonable effort, are available in the appendix in our investor slide presentation, which is available in the investor section of our website at ir.cosella.com. Whoa, and with that, I'll turn it over to John Casella, who will begin today's discussion. John.

Thanks, Joe. Good morning, everyone, and welcome to our second quarter 2021 conference call. As evidenced by our results, our team continues to perform at a high level. We are executing very well against our key strategies. Through this period of economic recovery and growth, we've maintained focus on our customers' service and sustainability needs, quickly reacting to increased service levels. At the same time, we've prudently managed variable costs coming back into the business with the uptick in activity. As expected, solid waste volumes were up over 7 percent in the quarter compared to the second quarter of 2020, which was our hardest hit period of the pandemic. In the second quarter, we grew revenues by over 14 percent and adjusted EBITDA improved over 18 percent with margin expansion as compared to the same period in 2020. We also continue to drive adjusted free cash flow growth with year-to-date improvement of 45 percent. As announced earlier this week, we acquired Connecticut-based Willimantic Waste Paper. Before I dive into the details of the operation, I'd like to mention that I've had the pleasure this week to meet with some of the hardworking men and women of Willimantic that are joining our team. I welcome you all aboard as we look forward to working with you to provide great service to cover the 30,000 customers in Connecticut. This is truly an exciting acquisition for the company as we expand our operations into eastern Connecticut. The business is well run and has an established market presence with decades of experience providing integrated solid waste and recycling services to its customers. As I said, Tim and Tom DeVivo have built a terrific company and have a terrific number of hardworking men and women that have really done a terrific job of taking care of their customers, and it's a great platform for Casella in Connecticut. Collection operations include residential, municipal, commercial, roll-off services. Other operations consist of several recycling operations, solid waste transfer, and a rail-serve transfer with C&D processing. Given the supply and demand dynamics in the Northeast, we are working to bring our McKean landfill rail online. We will look to internalize volumes from Woolimantic and other Casella operations as long-term stable sources of tonnage into the site. I will now provide a brief review related to further execution against our key strategies and recent performance highlights. First, as it relates to disposal, as expected, volumes were up in the second quarter. While many of our customers are fully back online, the volumes from the New York City area have been the slowest to recover. We do not have collection operations in and around the city, but several of our landfills accept waste from third-party transfer stations. We are seeing modest improved trends across these volumes. However, slightly lower activity levels combined with labor shortages impacting third-party truckers has resulted in some of these volumes not coming back into our sites as yet. From a pricing perspective, we advanced positive landfill price of 4.3% in the quarter, which was a sequential improvement from the first quarter. We also continue to focus on various operational initiatives and permitting efforts to help drive further value and higher returns across our disposable assets. Moving to the collection business, Ed and Ned will provide details on the recent performance of our operations along with what we're seeing with price and volume trends. I wanted to take this opportunity to talk about labor and how we've positioned the company to mitigate the challenges many employers are facing in today's environment. Throughout the history of the company, we've created a culture of being of service, not only to our customers, but to one another. In 2020, through the pandemic, this was evident. Not only did we take exceptional care of our customers, but we also prioritized keeping our people safe, especially those working in our front lines. We supplied protective gear, established COVID-related guidelines, and overall we helped each other get through an unprecedented time, emphasizing first and foremost the health and safety of our employees and their families. While this meant a lot to our workforce, we also recognized our frontline operators and hourly employees with a special heroes bonus around Labor Day. This is much well deserved and well received. These actions are playing dividends in 2021 through increased loyalty across the organization. Over the last several years, we've also focused significantly on improving the quality of our fleet. We recognize that our drivers, mechanics, and operational team take great pride in our trucks. Poor equipment leads to lower levels of employee satisfaction, execution against our multi-year fleet plan initiative has driven organization in this area by prioritizing when each truck is to be replaced, creating standardization of body and chassis based on application, and provide enhanced visibility and alignment to the budgeting and capital allocation process. Ultimately, this is resulting in lower average fleet age, lower maintenance, less downtime, and highly reliable fleet, which all very much positively impacts employee morale and retention. Further, we've invested more in automation across our fleet. Automated trucks and routes ultimately reduce safety incidents, improve productivity, require a higher skill set, and broaden the labor pool. The more innovation and technology inside the trucks, the easier the trucks are to operate, the broader the labor pool for those applications, which is absolutely terrific. These factors have all helped to mitigate turnover within the markets where we have enhanced automation. Success in these areas, coupled with other operational and HR initiatives, have greatly helped to limit labor challenges. We have not had to drastically change labor rates, and we are not experiencing significant levels of labor shortages. Next, our resource solutions business continues to perform very well. Our recycling processing operations have benefited from improved operational performance, coupled with higher recycling commodity prices. As commodity prices increase, we have shared a portion of the upside with our customers, lowering tipping fees, higher rebates, and lower SRA fees. Our risk mitigation fee programs protect us very well from the downside recycling commodity risk with exposure on only about 10 percent of our recycling volumes. So, our risk balance structure is working well as intended and has allowed us to create a model that is both economically and environmentally sustainable. Our non-processing operations are also performing well as we continue to focus on providing resource management services to large customers who often have high level of sustainability-related needs. As we envision, combining our recycling, organics, and customer solutions under resource solutions is bringing enhanced alignment across our sales, operating, and back office teams, which is driving higher value to the organization. Finally, I would like to further highlight our capital allocation and growth strategy. Through the last several months, The acquisition activity continues to heat up. We've had many productive conversations with potential sellers and we're working on several opportunities that could close over the balance of 2021 or into next year. We believe that certain factors such as labor challenges and tax reform are driving further acceleration of the pipeline. Our pipeline remains robust and our balance sheet is well positioned to continue to grow the business. Wrapping up, We are executing well against our key strategies. We expect continued strength across the business. And we have, again, raised 2021 guidance. Further, we are enthusiastic about our acquisition pipeline and our ability to continue to drive adjusted free cash flow growth. And with that, I'll turn it over to Ned. amongst the torrential downpour here in Vermont, which is what we've had for the entire month of July. So it's very green in Vermont.