Casella Waste Systems, Inc.

Ladies and gentlemen, welcome to the Casella Ways Systems, Inc. Q1 2022 conference call. At this time, all participants are in the listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press the star, then zero, on your touchtone telephone. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host. Mr. Joe Fusco, Vice President of Communications. Sir, please go ahead.

Thank you for joining us this morning and welcome. With us today are John Casella, Chairman and Chief Executive Officer of Casella Waste 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 2022 first 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 1995. Actual results may differ materially from those indicated by these 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 to our investor slide presentation, which is available in the investor section of our website at ir.cosella.com. And with that, I will turn it over to John Casella, who will begin today's discussion.

Thanks, Joe. Good morning, everyone, and welcome to our first quarter 22 conference call. Needless to say, we're really pleased with the results for the beginning of the year, and myself, Ed, Ned, Jason, the entire senior team, we're really proud of the work that our entire team has done to offset really significant inflation that everyone is you know, faced with, unfortunately, in business today. So, again, couldn't be more excited about the work that our entire team has done to offset that inflation. We continue to grow the business meaningfully. On a year-over-year basis in the first quarter, revenues were up 23%. Adjusted EBITDA improved by over 17%. And we continue to grow adjusted free cash flow. Our pricing programs are working well to offset inflation. We've advanced strong price ahead of budgeted levels as we aim to pass through heightened operating costs to our customer base. This is reflected within the solid waste pricing stats in the quarter, which was up 5.6%, notably collection price was up 6.5% in the quarter. And we exited the first quarter with pricing momentum as our solid waste price improved sequentially each month through March. We're also taking a proactive stance with our fuel recovery fees that are offsetting rising fuel costs, albeit a lag in a rising price environment. Overall, our core pricing and operating programs outpaced inflation, but several unique items weighed on margins this quarter that Ned will go through in greater detail. We are optimistic that our efforts within the first quarter will benefit our execution through the balance of the year. We also continue to have success executing against our growth strategy. We closed six acquisitions year to date with approximately $30 million in analyzed revenues. The team continues to do a great job maintaining a disciplined approach in terms of focusing on deals with the right strategic fit and return profile. I'd like to provide a brief review related to the execution against a few of our key strategies and recent performance of our operations. First on the landfills, we've advanced positive price and in fact, our average price per ton was up nearly 9% year over year and a quarter. This is a result of our team's effort to offset significant inflation, including heightened regulatory costs. We have focused on improving customer mix at our sites through our sourcing efforts, along with executing pricing across our customer base inclusive of our own intercompany volumes. In the quarter, harsh winter weather resulted in lower volumes both year over year and versus our budget. The weather not only resulted in lower activity levels than anticipated, but we also had to take action to keep our people and customers safe by temporarily closing operations on several different occasions due to high winds or heavy snowfall. We also experienced construction delays at key landfill facilities, which is now resolved, and we're again accepting volumes at our anticipated run rate. Our expectation is that landfill volumes will be positive through the remainder of the year, and we will recover without any meaningful help from the waste that is generated in the New York City area as we don't believe it's going to return quickly back to the pre-pandemic levels. Moving to the collection business, as I mentioned, we've been nimble with our pricing programs and we're off to a great start this year. Budgeted pricing plans were increased for inflation and we continue to monitor the effectiveness of our programs. Our team has a high degree of adaptability and our customer base presents us with further flexibility that enhances our ability to, again, modify our pricing. But the hard work doesn't stop there. Ed and his team continue to make substantial investment of time and capital within key areas, including increasing the use of automated trucks, route conversion, implementing new technology for route optimization. These return-driven investments aim to further offset inflation by lowering our cost profile through improved safety, lower turnover, and increased operational efficiencies. We are also highly focused on service excellence and new customer integration. As we grow the business and onboard new customers, we aim to provide great service and high levels of customer satisfaction. Within resource solutions, performance in this segment was strong in the quarter with year-over-year adjusted EBITDA improvement. We continue to make investments in this area of the business that further our commitment to environmental stewardship while driving positive economic returns. Last month's purchase of Northstar Pulp and Paper in Springfield is an example of this. This business will integrate well and provide us with opportunity to further improve our resource management service offerings, like again, to welcome aboard our new customers and all of the hardworking employees of Northstar, a terrific addition both in customers and the employees to our team. In February, we announced investment plans across our recycling facilities to strengthen our sustainability efforts while increasing our throughput, enhancing the quality of our end product, and improving returns. A key project is the complete replacement and modernization of our Boston recycling facility, which is one of the largest in the country. With ongoing supply chain challenges, the upgrade of this location will be delayed until 2023, but the expected margin and return profiles remain firmly intact. There's no material operating income, excuse me, operating impact in 2022 with this revised timeline. Finally, I would like to highlight our capital allocation and growth strategy. Overall, our acquisition pipeline remains very robust with over $500 million of addressable opportunities and annualized revenue over the top of our existing footprint in the Northeast. we remain well positioned to continue to execute against our growth strategy given the strength of our balance sheet and that we are focused on opportunistically putting capital to work on deals that meet our criteria that drive further value. In wrapping up, I'd like to take a minute to thank Ed Johnson for his outstanding contributions in helping to shape and build the company to where it is today. As announced last week, Ed is retiring on June 30th. Ed's 12 years will leave a lasting impact as he's made instrumental improvements to the organization that have become core principles to the way we operate on a day-to-day basis. Myself and the rest of the company will miss his guidance, but I know we're in good hands. Management and the Board have invested significant time over the last several years on our succession planning. And with Ed's retirement, I'm confident that we have a seamless transition as we have the right people in-house to continue to drive value and execute. I'm excited to promote NET into the President's role effective July 1 and maintaining his role as CFO. Also at that time, Sean Steeves and Jason Mead will take on new leadership positions. Sean will be named Senior Vice President and Chief Operating Officer of the Solid Waste Operations, while Jason steps into the position of Senior Vice President of Finance and Treasurer. These are well-deserved promotions across the board. We couldn't be more excited for all of those individuals, and as I said, well-deserved promotions. With that, thank you again, Ed, and I'd like to personally wish you well in the next chapter on the intercoastal fishing. And now I'll turn it over to Ed. I'll turn it over to Ned for some more financial details. Thanks, John.