Casella Waste Systems, Inc.

Good day, and thank you for standing by. Welcome to the Casella Waste Systems Incorporated's fourth quarter 2022 earnings conference call. 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 ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Charlie Woolhutter, 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 Meade, 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 full year and fourth 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. But first, I 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 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 SEC. 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 investors 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. Good morning, everyone, and welcome to our fourth quarter 2022 conference call. This was a great, great year for our company, marked by strong execution during a period of historically high inflation volatile recycling commodity market. I'd like to spend a few minutes highlighting our performance in 22 and our forward look to 23 and our strategies. Ned will provide some color on the quarter. I'd like to begin by saying that I'm extremely proud of the performance at all levels of the company during the year. Our entire team stepped up and executed well against our key strategies, which led us to achievement of several notable milestones. In a year, we surpassed $1 billion in revenue and also generated over $100 million in adjusted free cash flow for the first time in the company's history. This reflects the focus and determination of our culture that our employees demonstrate every day and carry forward into 2023. Looking more closely at 2022, strong operating and pricing programs worked well to offset inflation. We grew revenues by 22%. adjusted a bit by nearly 21%. I'm also proud of our continued capital discipline execution against our growth strategies, which helped drive adjusted free cash flow growth of approximately 17% in a year, exceeding our long-term 2024 plan of 10% to 15% growth per year. We laid out our 2024 plan last year. a target to optimistically grow revenues by $30 million or more per year through acquisitions or development activity. In 2022, we outperformed the goal and acquired 14 businesses with roughly $51 million of annualized revenues. We currently have two potential acquisitions under LOI that we expect to close by sometime in the second quarter with total annual revenues of approximately $30 million. This reflects the continued strength of our acquisition pipeline. As I look at 2023, we remain well positioned to continue to grow the business in a disciplined manner while generating strong returns. With a strong balance sheet, low leverage, and ample liquidity, we're in excellent position to support the further growth in our business. In terms of the base business, the fundamentals are strong. However, in the fourth quarter, we experienced a headwind from commodities that was slightly greater than anticipated. This was mainly driven by several recycling contracts that we have acquired through acquisitions over the last couple of years, which do not yet have our modern risk mitigation features. Over time, as these contracts reset, we intend to incorporate these mechanisms. As it relates to early 2023, we have rolled out another robust pricing program for the year to stay ahead of inflation. I'd now like to provide a brief review related to the execution against a few of our key strategies and the performance of our operations. We remain focused on improving the returns at our landfills through a combination of operating programs, pricing ahead of inflation, and key permitting initiatives that support the future disposal capacity needs of our customers and the markets in which we operate. Improving the mix of our inbound customers is a key area we are focused on. This year is measured through our average landfill price per ton statistic, which is up 7.4% in a year, helping us offset winds from cost inflation and heightened regulatory costs. In addition to price, volume, and operational strategies we have in place, We're excited to have two renewable natural gas operations coming online in 2023 through partnerships with third parties. These facilities further enhance our sustainability profile and present no financial risk as our partners invested 100% of the RNG capital at our site. We will benefit from the sharing of cash flows related to these projects. The first facility is expected to begin operations in the second quarter this year, followed by an anticipated start date at our second facility in the fourth quarter. Further, we are very excited about our McKean landfill rail project. We received our wetlands permits and are moving forward with plans for rail service at the landfill beginning in 2024. This rail service site provides much-needed long-term disposal outlet for our customers and for the Northeast. Moving on to the collections business, 2022 marked an exceptional year for Sean and his team from an operating standpoint and for our collection line of business. We posted another strong year and exceeded our budget in both adjusted EBITDA growth and margin expansion. Our flexible pricing and operating programs worked well to offset inflation. As inflation began ramping early in 2022, we took quick action to address rising costs. we reported 7 percent collection price for the year. Our fuel cost recovery program worked well in the year and fully offset over $27 million of year-over-year increased fuel costs. This risk mitigation program is working as intended, but higher fuel costs did result in 40 basis points of margin headwind in the year. Our ongoing investments across the collection fleet are making positive contributions to productivity. Replacing rear load trucks with automated trucks and deploying onboard computers is driving value while improving safety and employee engagement. Nearly 50% of our addressable fleet is automated and equipped with computers. We expect the success of this operational strategy will continue as further investments are made in 2023. Resource solutions. Our business model is naturally has a natural alignment to sustainability. We continue to create additional value for our stakeholders by having measurable goals that enhance our focus on areas such as safety, turnover, resource solutions, tonnage, and so on. As our execution against these key metrics improve, so does our performance as a company. Last week, we closed on an amendment to our credit facility that leaks borrowing costs progress in achieving our safety and resource solutions goals outlined in our recent sustainability report. The sustainability linked loan further strengthens our accountability and our alignment to these areas. And our resource solutions segment is important to achieving these goals. Ongoing technological investments at our recycling facilities are aimed at improving safety, recovery quality, increasing throughput and reducing labor. In 2022, we invested in and installed robotics and optical sorters at several of our facilities. Further, our most significant upgrade is taking place at our Boston facility, which is one of the largest in the country. Over the last two or so years, we've invested approximately $20 million in new equipment and technology for this facility. The plant will be offline for several months this year, as we expect the installation to being completed by mid-year 2023. And 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 on targeting acquisitions and pursuing development projects that have strong return profiles. Our pipeline remains very robust with over $500 million in revenues of identified opportunities across our existing operating footprint. We are currently in the late stages for several acquisitions to inspect another year of strong activity. On the project development side, as I mentioned, in 2023, we are looking forward to two RNG facilities coming online in addition to the finalization of equipment upgrade at our Boston recycling facility. And on the heels of these projects, we expect our rail operations at our McKean landfill to be operational sometime in 2024. Wrapping up, I'm proud of the success that we had in executing in 2022 against our key strategies. And we have started 2023 on solid footing. The building blocks are in place for us to continue to drive value while growing the business. And with that, I'll turn it over to Ned.