Casella Waste Systems, Inc.

Good day. Thank you for standing by. Welcome to Casella Waste Systems Incorporated's third quarter 2022 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please advise that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Charles Woolheader. Director of Investor Relations. Please go ahead, sir.

Thank you, Norma, and thank you, everyone, for joining us this morning. With us today are John Casella, Chairman and Chief Executive Officer of Casella Waste Systems, Ned Coletta, our President and Chief Financial Officer, Jason Mead, our Senior Vice President of Finance and Treasurer, and Sean Steeves, our Senior Vice President and Chief Operating Officer of Solid Waste Operations. Today, we will be discussing our 2022 third 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, 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 State of Harvard provisions under the Private Securities Litigation Reform Act of 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. Reconciliation 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 under the heading Events and Presentations. And with that, I will now turn it over to John Casella, who will begin today's discussion.

Thanks, Charlie. That's a hell of a debut. I know Joe is probably out there smiling as he's listening. I'm sure he's listening to the call this morning as well. Good morning, everyone, and welcome to our third quarter 2022 conference call. This was another great quarter, and, of course, I'm really proud of our overall performance. Strong operational execution, robust pricing programs allow us to outpace inflation, as well as the recent sharp decline in recycling commodity values. We have good momentum carrying into the balance of 22 and looking ahead to 2023. We grew revenues by 22% year over year in the third quarter, while adjusted EBITDA grew by about 23% in the same period. Thus, we expanded margins, which is a notable accomplishment given the environment. We expect year-over-year margin growth in the fourth quarter and for the full year. At the same time, we continue to drive adjusted free cash flow growth. We are on track to achieve our multi-year goal of 10% to 15% adjusted free cash flow growth per year, which highlights not only our solid operating performance, but also our capital discipline and continued execution against our growth strategy. We have great balance between organic growth within our core business and inorganic growth through acquisitions. Roughly 50% of our revenue growth year to date has been driven by growth within the core business through new customer growth coupled with higher price and fuel recovery fees. The remaining 50% of revenue growth has been driven by acquisitions. To date this year, we have closed on 13 acquisitions with approximately $48 million of annualized revenue outpacing our target of $30 million. Our business model remains resilient and we are performing well. From a risk mitigation perspective, we ended the quarter at our lowest leverage ever. Further, we fully offset the higher impact of fuel prices through our fuel cost recovery program and expect to do so for the full year. We also have innovative recycling risk mitigation programs that will help offset most of the headwinds we will see from the global recycling markets. Ned and I will cover more on this topic, but all in all, we are well positioned. I'd like to provide a brief review of the execution against a few of our key strategies. We remain focused on improving returns at our landfill, and the positive volume in pricing growth we posted in the quarter reflects our performance. Landfill tonnages were up 6% year over year in the quarter due to our strategically placed in-market position of our disposal assets combined with great sales execution. It is our expectation volumes will remain positive as we close out the year. From a pricing perspective, Improving the quality of revenue in our inbound streams is a major focal point. We measure this through our average landfill price per ton, which was up 8% in the quarter, helping us offset inflationary cost pressures and manage through heightened regulatory costs. Aside from the operational and pricing programs we have in place, our first renewable gas project, which is expected to come online in the first quarter of 2023, provides a sustainable solution with a strong return profile. Moving to the collection business, we posted another strong quarter of year-over-year adjusted EBITDA growth and margin expansion above budgeted levels. Our investment in return-driven technology solutions, along with our business process, enable us to be nimble and drive additional productivity and improve performance. We took fast action early this year to address the inflationary environment by resetting our budgeted pricing programs. In the quarter, collection price was up over 7%. In addition to positive pricing combating inflation, our fuel recovery fee program fully recovered higher fuel costs in the quarter. From an operational perspective, Sean's work further deploying automated trucks and onboard computers across our fleet is also mitigating higher costs while driving improved margins. We are making return-driven investments across our collection fleet, and we see a runway of opportunity into the future. We believe these enhancements will continue to improve our safety profile, service, employee attraction and retention, sales growth, and operating efficiency. Next, on resource solutions, on Tuesday, We published our 2022 sustainability report, highlighting our vision and the progress we were making to achieve our sustainability goals. This was a collaboration, collaborative effort by many and demonstrates how sustainability is intertwined within all aspects of our business and strategy. Our resource solution segment is not only a key part of that focus, but a business segment that we continue to invest in. as we aim to drive economical and environmentally balanced solutions for our customers. We're making technological upgrades at several of our recycling facilities. The early results are quite positive with increased safety, throughput, and operating efficiencies. But the focus doesn't stop there. Customers continue to ask for ways to reduce their environmental footprint. In fact, I recently visited a large customer who was looking for solutions to reduce their Scope 3 emissions by driving higher recycling and materials management. This is just one example of a growing opportunity, and I believe we are very well positioned to support this trend going forward while generating solid financial returns. With regard to the recent performance of the recycling commodity prices, as you know, the team has done a fantastic job creating risk mitigation programs with the sustainability recycling adjustment fee. We implemented our SRA fee several years ago, and it shifts the vast majority of the recycling commodity price exposure to our customers. Finally, I'd like to highlight our capital allocation and growth strategy. We continue to have success executing against our growth strategy through our disciplined approach targeting strategic fit and follow-through on integration to achieve expected returns. Our pipeline remains robust over 500 million in revenues of identified opportunities of our existing operating footprint. We're currently working on several acquisitions, currently have approximately $30 million of annualized revenues under LOI. Clearly, we have a great opportunity to continue to drive value by way of growing the business through acquisitions. To wrap it up, I'm obviously very proud of the performance. thus far in 2022 from our team's execution against our key strategies. But before I turn it over to Ned for more details on the financials, I'd like to take a moment to recognize our team's tireless dedication and commitment to our core values, which is apparent day in and day out. They have weathered the worst of the pandemic and are working together to ensure exceptional service to our customers and the communities that we serve. In recognition of this, in early December, we're paying out a special bonus to our hourly employees as a thank you for contributing to the company's success. I'm exceptionally proud of the hard work and service of our entire team. And with that, Ned, the floor is yours.