Casella Waste Systems, Inc.

Today we will be discussing our first quarter of 2025 results, which were released yesterday afternoon. I am joined by John Casella, Chairman and Chief Executive Officer, Ned Coletta, our President, and Sean Steeves, Senior Vice President and Chief Operating Officer of Solid Waste Operations. After a review of these results and an update on the company's activities and business environment, we'll be happy to take your questions. Please be aware that various remarks we 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 recently filed 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 in 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, May 2nd, 2025. Also, during this call, we'll 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 included in our press release filed on Form 8K with the SEC. And with that, I will now turn the call over to John Casella to begin today's discussions.

Thanks, Brian. First, a quick update. Brad came down with a fever this morning and is out sick. So I asked Ned to come out of CFO retirement for a few hours today. I just wanted to bring that to your attention. Welcome to our first quarter 2025 conference call. Before I review the highlights of the quarter, I'd like to take a minute to recognize several of our team members who exemplify core values and put service to our communities first while operating in a safe and responsible manner. We're proud to have three drivers recognized under the National Waste and Recycling Association's Driver of the Year program through their focus on safety, operational excellence, and being strong representatives of the solid waste industry. They are Frank Correll, Juan Carvalho, and Daniel Hale. In addition, Julia Parter, our Director of Business Transformation, was named to Waste 360's 40 Under 40, an annual award recognizing professionals under 40 whose work has made significant contributions to the industry. These employees will all be recognized at Waste Expo next week. At a company level, Casella was recognized on the Forbes 2025 America's Best Midsize Employers list. As I often discuss, Our core values and culture are very important to us and are essential to everything we do, so it's gratifying to be acknowledged externally. Shifting to the results. As you saw in our earnings press release yesterday, we started the year strong with revenues adjusted a bit and adjusted free cash flow all up over 20% year over year in all records for the first quarter. The winter was particularly challenging in the Northeast this year, but we exceeded planned and delivered results, which was a function of great effort and execution across the organization. Operationally, we continue to make excellent progress on initiatives to expand fleet automation, onboard computing, internalize incremental volume into our landfills, and improve employee retention. Each are yielding results. These advancements are occurring at the same time as our ongoing integration efforts which are successfully working through two years of record M&A. It's impressive and speaks very well of our entire team who are truly going above and beyond. In the landfill business, we reported organic growth exceeding 7% with positive contributions from both price and volume. We have focused on internalizing more of our own tons, which Ned will discuss in more detail in a few minutes. On the collection side of the solid waste business, pricing momentum was positive at 5.8%, more than offsetting a volume decrease of 1.7%, which included slower roll-off volumes during a challenging winter. Pricing continued to exceed internal inflation, which, combined with operating initiatives, expanded margins by 140 basis points in our legacy collection operations. Resource Solutions continues to perform well, With the first quarter results benefiting from the ramp up at the recently upgraded Willimantic recycling facility and strong organic growth of over 10% in our national accounts business. As that group continues to gain traction with larger accounts in our new geographies. We also continue to execute our acquisition strategy having closed four deals year to date with approximately 50 million in annualized revenues. Looking ahead to the remainder of 2025, our active M&A pipeline is full. Our strong balance sheet positions us to continue to complete deals opportunistically. The first quarter was a nice start to 2025 and a product of hard work with our core operating strategies working well. While tariff and macro uncertainties have been recent topics of investor concerns, the nature of our solid waste business reduces the impact of economic swings and our domestic focus limits exposure to tariffs. We remain confident in our 2025 outlook and continue to see opportunities for future value creation. With that, I'll turn it over to Ned to go through the financial details.

Thanks, John. Good morning, everyone. Before I get into the numbers, I'd like to take a moment to welcome Brian Butler to our team as Vice President of Investor Relations. Brian joins us from Cecil. where he was most recently the lead equity research analyst for the waste sector. And as Michael Hoffman's longtime partner, he was one of the most tenured waste analysts on Wall Street. He brings deep corporate finance skills, industry knowledge, and investment perspective to our team. We're very excited to have Brian join the Casella team. Now onto the financial results for the quarter. Revenues in the first quarter were $417.1 million. up $76.1 million year-over-year, or 22.3%, with $57.3 million from acquisitions, including the rollover, and $18.4 million of growth from organic growth, or 5.4% year-over-year. Solid waste revenues were up 25.9% year-over-year, with price up 5.6% and volume slightly down, down 1.7%. Within solid waste, price in the collection line of business was up 5.8% with volumes down 1.7%. Price was strong across the board, led by positive 6.5% price in the front-load commercial business. From a volume standpoint, we saw softness in the roll-off line of business across our footprint this quarter. Some of this can certainly be attributed to the challenging winter weather in the Northeast. but we also observed some slower economic activity in several of our markets. However, it's hard to draw firm conclusions from the first quarter roll-off volumes, as we're seeing nice strength in seasonal uptake into April and early May. Price in the disposal line of business was up 5.5% year-over-year, and volumes were down 2.2%, with softness in third-party transfer station volumes, which is really related to soft roll-off volumes in the quarter. Results in the landfill business were strong, with price up 3.3% and tons up 3.9%, including volumes across all major waste streams. The average price per ton was up 4.8% in a quarter. Resource solutions revenues were up 9.5% year-over-year, with recycling and other processing revenue up 7.4% and national accounts up 10.9%. Within the processing operations, price was up 3% with average commodity revenue per ton relatively flat year over year. Commodity prices overall remained stable this year with recent softness in the fiber market largely offset by strength in plastics and aluminum. Processing volume in revenue terms was up 2.6% with growth in both recycling and municipal biosolids processing. Within national accounts revenue, prices up 3.9% and volume was up 7.4%. Adjusted EBITDA was $86.4 million in the quarter, up $15.4 million, or 21.7% year over year, with positive contribution from acquisitions and organic growth. Adjusted EBITDA margins were 20.7% in the quarter, down 10 basis points year over year, but in line with our budget. Bridging the year-over-year change in adjusted EBITDA margins in the quarter, an adjustment to long-term stock-based compensation expense driven by our improving outlook against long-term targets impacted EBITDA in the quarter by approximately $2.6 million, which represents about 60 basis points of margin headwind. Excluding this adjustment, margins were up approximately 50 basis points year-over-year, with margin expansion in the base business and the net tailwind from acquired operations. Cost of operations were $280.5 million in the quarter, up $49.7 million year over year, with $44.4 million of the increase from acquisitions and $5.3 million in the base business. Cost of operations in the base business were down approximately 200 basis points as a percentage of revenue in the quarter, primarily reflecting the continued operating leverage and benefits from our key strategies in the collection line of business. General and administrative costs were $56.5 million in a quarter, up $12.2 million year over year. Excluding the stock comp adjustments I just mentioned, G&A costs were down 10 basis points as a percentage of revenues. Depreciation and amortization costs were up $17.5 million year over year, with $15.5 million resulting from the recent acquisition activity, including the amortization of acquired intangibles. As a reference, DNA associated with acquisitions was approximately 27% of acquired revenues in the quarter, as compared to about 16% in our base business. Adjusted net income was $12.2 million in the quarter, or $0.19 per diluted share, up $3.5 million, or about $0.04 a share. GAAP net loss was $4.8 million in the quarter, impacted by about $6.9 million of increase in amortization of acquired intangibles year over year. Net cash provided by operating activities was $50.1 million in the first quarter, up $42.4 million year over year, driven by strong EBITDA growth and a more normalized seasonal working capital outflow as compared to last year. Our DSO was steady at 36 days from December 31st. As you may have noted last night in the press release, adjusted free cash flow was $29.1 million, a record for the first quarter. Capital expenditures were $55.5 million, up $25.2 million year-over-year, but included $25 million of upfront investments in recent acquisitions in line with our full-year plan and the pro formas for each transaction. As of March 31st, we had $1.15 billion of debt and $268 million of cash, and our consolidated net leverage ratio for purposes of our bank covenants was 2.45 times, As of today, after the recent acquisitions completed thus far in 2025, we maintain approximately $900 million of availability between excess cash and our undrawn revolver. Our liquidity and leverage profile will enable us to be opportunistic in continuing to execute our growth strategy and robust M&A pipeline. As announced in our press release yesterday, We reaffirmed our financial guidance for 2025. We started a year strong, but it would be premature to reconsider our initial guidance ranges, particularly in light of the heightened macroeconomic uncertainty. Regarding the economic outlook, we believe that our exposure to tariffs is low, as John mentioned. Given the nature of our cost structure, we've seen virtually no efforts by vendors to date to pass on tariff-related increases. But we're closely monitoring the situation and we're in dialogue with key vendors to understand potential impacts as the situation evolves. In the event that we do face tariff-related cost increases, we have multiple options to offset such tariffs on the revenue side. Now moving on to the operations highlights for the quarter. As discussed, by John earlier and in the financial dialogue, organic operating trends were very positive in the first quarter, as mid single digit pricing combined with new business wins in our resource solutions group and cost efficiency gains from operational initiatives offset headwinds from lower collection and transfer station volumes in the quarter. From an operating standpoint, we continue to execute well on our core programs, including automated truck conversions, route optimizations, and extra revenues generated through onboard computing. Our 2025 plan includes adding approximately 40 more automated trucks, eliminating over 50 rear load trucks. As a comparison, in 2024, we added 17 automated trucks, which eliminated 22 rear loaders. After completing a full technology retrofit during the second half of 2024, we brought our Willimantic recycling facility back online in January. The facility is performing well and is on track to deliver $4 million of targeted incremental adjusted EBITDA in 2025. We continue to evaluate other opportunities to advance our recycling and resource management infrastructure with several additional facilities that could potentially benefit from conversions in the coming years. Our sales team remained diligent in the first quarter, successfully winning $22 million in new annualized revenues with premier customers in key market segments, including municipal, industrial, multi-site retail, and high institutional and higher education. Overall, new business growth remained strong in the first quarter, slightly ahead of our 2025 goals. Our resource solutions business also delivered strong revenue growth with first quarter national accounts volumes increasing 7.4% year-over-year, given the strong sales efforts. Landfill volumes showed improvement in the first quarter, up 3.9% year-over-year, as the C&D market headwinds that we experienced in 2024 have subsided, and we've begun to see the benefits of a revamped landfill sales process and our efforts to increase internalization of volumes. We expect that these positive tailwinds will remain throughout the remainder of 2025. Acquisitions remain a strategic priority for our team, with a focus on opportunities that have great operational fit, allowing us to advance densification of our routes, drive margin improvement through application of our key operating strategies, and establishing new adjacent markets that support future growth. Our active M&A pipeline is over 500 million of revenues in various stages of engagement. As we look ahead, we remain very well positioned to deliver attractive organic growth combined with strategic acquisitions. We have limited exposure to tariffs and a resilient business model in the event that the economy does slow. With that, I'd like to turn it back to the operator for questions.