Casella Waste Systems, Inc.

Good day, and thank you for standing by. Welcome to the Casella Waste Systems Inc. Q2 2025 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 will 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, Brian Butler, VP of Investor Relations. Please go ahead.

Thank you, Daniel. Good morning, and thank you for joining us on the call. Today, we'll be discussing our second quarter 2025 results, which were released yesterday afternoon. This morning, I'm joined with John Casella, Chairman and Chief Executive Officer of Casella Waste Systems, Ned Valletta, our President, Brad Helgeson, our Chief Financial Officer, and Sean Steeves, our 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. But first, please note that various remarks 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 Form 10-Q, which is on file with the FCC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views on 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, August 1st, 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 FDC. And with that, I will now turn over the call to John Casella to begin our discussion.

John? Thanks, Brian, and good morning, everyone. Welcome to our second quarter 2025 conference call. In June, we proudly rang the NASDAQ opening bell to commemorate Pasala's 50th anniversary. This milestone marks our evolution from a single truck operation in Vermont to a leading provider of waste recycling and resource management services across the Northeast and now into the Mid-Atlantic. Over five decades of growth, our dedicated team has consistently delivered exceptional service and industry leadership, all while staying true to our core values and working toward a cleaner, more sustainable future. I'd like to sincerely thank all of our employees for their grit, hard work, and commitment every day. The celebration was not only a reflection of our past, but also a reaffirmation of our vision for the future. It highlighted the strength of our culture, the resilience of our business model, and the deep trust we've built with our customers and communities. We're incredibly proud of the legacy we've created and energized by the opportunities ahead. Turning to the quarter, we delivered another strong performance in Q2, with robust growth in both revenue and adjusted EBITDA. Year to date, we've achieved record first half adjusted free cash flow over $70 million, more than $30 million above the same period last year. These results reflect solid execution, meaningful contributions from our recent acquisitions, Pricing remains healthy with solid waste pricing up 5% year over year. We continue to execute well on our operating plans, driving meaningful margin improvement across our legacy business. This performance has been partially offset by some growing pains in the Mid-Atlantic as we work through the transition to our systems and getting the acquired fleet up to our standards. We are executing on a plan to rapidly get this performance on track. Elsewhere, landfill volumes were up nicely year over year, and our resource solutions segment continued to perform very well, driven by improved performance at our upgraded recycling facilities. We've now completed six acquisitions year to date, representing about $90 million in annualized revenues, and we're excited about the pending acquisition of Mountain State Waste, which will expand our footprint in Pennsylvania and also into West Virginia, adding another $30 million in annualized revenues. Look forward to welcoming their employees and customers to the Casella family and integrating their operations into our broader network. Our M&A pipeline remains full of targets that align perfectly with our strategy, and our strong balance sheet positions us to continue to pursue and complete these deals opportunistically. Looking ahead, we raised our full year revenue guidance, reflecting on the continued strength of our core pricing and acquisition activity, and reaffirmed our adjusted EBITDA and adjusted free cash flow guidance ranges, representing another year of record financial results. And with that, I'll turn it over to Brad to walk through the financials in more detail.

Thanks, John. Good morning, everyone. Revenues in the second quarter were $465.3 million, up $88.2 million or 23.4% year-over-year with $67.1 million from acquisitions including rollover and $21 million from organic growth or 5.6%. Solid waste revenues were up 27.1% year-over-year with price up 5% and volume down 0.8%. Within solid waste, price in the collection line of business was up 4.9% in the quarter, led by 5.9% price in front-load commercial, and volume was down 1.2%. However, year-over-year volume trends improved from the first quarter with indications of a stable economy in our markets. Price in the disposal line of business was up 5.8%, and volume up 0.6% year-over-year. Results in the landfill business were strong, with total tons up 9.5%, including higher third-party MSW and C&D volumes, and over 12% growth in internalized volumes. We feel that we have meaningful opportunities to grow volumes further at our sites, but it's safe to say that the persistent market headwinds that we experienced last year are behind us. We drove price 8.2% at the transfer stations with flat volume in the quarters. Resource Solutions revenues were up 10.2% year-over-year, with recycling and other processing revenue up 9.6% and national accounts up 10.6%. Within Resource Solutions processing operations, our average recycled commodity sales price was down 16% year-over-year, with software markets across the board and most commodities now selling below five-year averages. Notwithstanding market pressures, our contract structures share this risk with our customers by adjusting tip fees in down markets. So the net impact of lower prices on our revenue was just 1.6%, or less than a million dollars. Processing volume in revenue terms was up 8.6%, driven by higher volumes at the Boston and Willimantic recycling facilities. Within national accounts revenue, price was up 5.9%, and volume up 1.9 percent. Adjusted EBITDA was $109.5 million in the quarter, up 17.9 million or 19.5 percent year-over-year, with contribution from acquisitions, including rollover, and organic growth. Adjusted EBITDA margin was 23.5 percent in the quarter, down approximately 75 basis points year-over-year. Bridging the year-over-year change in adjusted EBITDA margin, acquisitions contributing at lower initial margins than our overall business presented a headwind of 85 basis points. The base business on a same-store basis expanded margins by 10 basis points overall, with legacy footprint operations growing margins by over 100 basis points, with the Mid-Atlantic region representing a near-term headwind as we continue to work through business integration and synergy execution impacted by ongoing system conversions and delays in truck deliveries. I should note that these headwinds are transitory and represent margin expansion opportunity in the future, which we expect to see in 2026. Cost of operations were $308.1 million in the quarter, up $64.3 million year over year, with $48.2 million of the increase from acquisitions and $16.1 million in the base business. General and administrative costs were $54.5 million in the quarter, up $7.3 million year over year. Depreciation and amortization costs were up $21.7 million year over year, with $16.1 million resulting from the recent acquisition activity, including the amortization of acquired intangibles. As a reference, DNA associated with acquisitions was approximately 24% of acquired revenues in the quarter, as compared to 15% for our base business. Adjusted net income was $23 million in the quarter, or $0.36 per diluted share, up $1.3 million and down $0.01 per share. Gap net income was $5.2 million in the quarter, impacted by a $6.9 million increase in amortization of acquired intangibles. Net cash provided by operating activities was $139.6 million in the first six months of 2025, up $59.9 million year over year, driven by EBITDA growth and more normalized seasonal working capital flows as compared to 2024. DSO was 34 days, down two days from year end, and four days year over year. Adjusted free cash flow was $70.8 million, a record for the first six months, and representing approximately 40% of our full year guidance. Capital expenditures were $121.9 million, up $47 million year over year, including $40 million of upfront one-time investment in recent acquisitions. As of June 30, we had $1.16 billion of debt and $218 million of cash. Our consolidated net leverage ratio for purposes of our bank covenants was 2.39 times, and our $700 million revolver remained undrawn. Our liquidity and leverage profile will enable us to be optimistic in continuing to execute on our growth strategy and robust M&A pipeline. As announced in our press release yesterday, we updated some of our guidance ranges for 2025. We raised our revenue guidance to a midpoint of $1.83 billion in light of acquisition activity to date However, we reaffirmed our range on adjusted EBITDA as the contribution from our announced acquisition activity since establishing guidance has not yet exceeded the original range, and we remain cautious on the pace of synergy execution this year in the Mid-Atlantic region. We also raised the bottom end of our ranges on adjusted EBITDA, adjusted free cash flow, sorry, and cash flow from operating activities based on the strength of cash flow year-to-date and our confidence in the second half. Regarding cash flow, I should note that we will not see a benefit from the recent tax legislation in 2025, as we would not have been a federal cash taxpayer in any event. However, the provisions of the tax bill, most significantly the reinstatement of bonus depreciation, will certainly benefit our tax position in the future, deferring and ultimately reducing our eventual federal cash tax burden. With that, I'll turn it over to Ned.

Thanks, Brad, and good morning, everyone. As highlighted in earnings release yesterday, we delivered another strong quarter of growth, with solid performance across key financial metrics. Organic trends remained positive in the second quarter, with solid waste pricing up 5% year-over-year, and total company volumes up 30 basis points, with particular strength in resource solutions and landfill lines. Collection operations made meaningful improvements. We completed 11 routing projects that reduced both route days and driver headcount requirements. Operational productivity in our eastern and western regions remained strong, with direct labor and overtime costs flat on a trailing 12-month basis. This helped to offset cost pressures in our mid-Atlantic region, where labor costs are currently running hundreds of basis points higher than in other regions. As John mentioned, truck delivery delays and system conversions in the Mid-Atlantic had a domino impact in the quarter, delaying route optimization, automation, and other cost synergies from being recognized as quickly as expected. We do expect 55 additional trucks to deliver in late 2025 to the Mid-Atlantic region, with nearly 40 of these trucks being automated. In our resource solution segment, adjusted EBITDA increased $1.8 million in the second quarter, mainly driven by improved efficiencies at our recently upgraded Willimantic in Boston recycling processing facilities. This operational strength, along with our floating processing and SRA fees, more than offset the impact of weaker commodity prices, which declined roughly $20 a ton or 16% year over year. Landfill volumes were up significantly, with total volumes of 88,000 tons year over year, or 9.5%, with increased internalization driving a 55,000-ton increase, or roughly 13%. We also continued to source more construction and demolition tons, mainly due to the previously announced competitor landfill closure in Long Island, which had been a headwind throughout 2024. Since opening in mid-2024, our McKean landfill has successfully accepted over 400 rail cars and processed close to 2,000 containers of waste. We're building out a new rail offload transfer building at the site to expand the range of materials that can be handled from the current containerized MSW to also include gondolas of MSW, C&D, and soils. We expect these upgrades to be completed in the first half of 2026. And at that time, we'll work to drive additional internalization to the site and also selectively attract new customers and material streams. We also continue to execute well against our acquisition strategy, as John mentioned, closing three additional deals in the second quarter, totaling over $40 million of annualized revenues. Additionally, we're really excited about the agreement to acquire Mountain State Waste, which will expand our geographic footprint and add an incremental $30 million of annualized revenues after it closes. As we enter the second half of 2025, our acquisition pipeline remains robust, with over $500 million of annualized revenue opportunities. Our balance sheet remains strong with leverage under 2.4 times and total liquidity of approximately $900 million. Our outlook for the remainder of 2025 remains positive, supported by continued execution of our acquisition strategy in a resilient, sustainable organic growth model. Our limited exposure to commodity prices and tariffs further reinforces our confidence in delivering consistent results. With that, I'll turn it back to the operator for questions. Thank you.

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Tyler Brown with Raymond James. Your line is open.

hey good morning guys can you all hear me sure can yeah good morning tyler hey morning um so ned can we just kind of start with the mid-atlantic so it seems like maybe that group is lagging a little bit maybe can you talk about some of the reasons why and i think you're implementing an erp there but big picture once that new system is in place won't there be a substantial pricing opportunity in that market in 26 because I was under the impression that pushing price was kind of call it logistically difficult and cash collections were kind of slow on that legacy system.

Yeah, great question, Tyler. So if we flashback in time, there's always those moments where you make a R&D decision and we maybe made one that's been a little bit painful. When we acquired the businesses originally from GFL, we decided to actually stay in the same billing operating system they had been operating. And it was more of an R&D decision for us to see how it would work and if it was something that would work for the rest of our business. Flash forward, it's not a great system. There's not great analytics. There's not great routing capabilities. There's a lot of issues. So about nine months ago, eight months ago, we decided to move to our legacy billing system, which has stood to test the time. It's been amazing, called SoftPak. but upgrading to the latest version. So we're very rapidly doing so in the mid-Atlantic, but as I mentioned, it is a bit of a domino effect because not all those businesses are running in the exact same billing system today. We haven't been able to move all newly acquired businesses onto that system. And then the truck delays just compounds the whole thing where we haven't been able to get automation, routing synergies, So we're not feeling bad about our plans or our synergy expectations. It's just taking longer. So your question about pricing, you're 100% right about that. There's not the same level of visibility around elasticity, around pricing that we have in our legacy system. So there is opportunity there as well.

Okay. So I'll try to ask this question. We'll see what you give me. what would you say the Synergy EBITDA benefit could be from that group of assets in 26? I mean, is this a couple million bucks or is this 10 million or more, just any color?

Yeah, so we haven't fully built out our budget for next year, and we're still working through the steps here. But on the routing side, This will come in over the course of a couple of years, as you're aware, and we had said there was ultimately as much as, you know, six, five, six, seven million dollars of benefit over several years as we automate that fleet. On the back office side, there's millions of dollars of benefit over, you know, I wouldn't say it's all at once, but as we get the systems issues resolved. So you're looking at, you know, five to $10 million over a couple of years. We'll give a better idea of the pacing of that when we get our budget pulled together.

Okay. Yeah, that's very helpful. And then can we turn to Mountain State? So I'm just kind of curious about what some of the dynamics are in West Virginia. Is that a disposal neutral market? Can you internalize that through a transfer station? Just what's the market structure there? And then it looks like they have a really nice set of assets. Will that kind of serve as a mini platform in that region?

It will, you know, the majority of a good portion of the assets are in Pennsylvania and the expansion into West Virginia, the expansion into West Virginia is through into Morgantown, which is a very, it's a terrific MSA in West Virginia, a lot of growth there because of the university. So it's a secondary, tertiary market that we're similar to some of our other markets. I think that there is an opportunity for us to continue to build off of that platform. There are operations. We do go into Ohio and Kentucky with the West Virginia assets. So there is an opportunity for us to add to that platform on a go-forward basis.

Yeah, as you may be aware, it's a franchise market, so they have these lifetime franchise agreements that come with part of that position. And in those markets, we would either be the sole provider or there might be several providers, but you have a franchise agreement where you're picking up customers within a defined rate structure. But, you know, it's a very nice, well-run, profitable business with great assets.

Yeah, definitely looks like it. My last one here, just, Brad, this is a minutiae modeling question. But why did the interest expense guidance drop so much? Was that, I mean, it doesn't look like the debt balance really moved, and I'm doubting the coupon moved that much. Just what was going on there?

I think just as the year progresses, you know, we're just refining our view and letting some of the conservatism on that line out. is really the bottom line.

Okay. Yeah, I just wanted to go over that. All right. Thank you, guys. Thank you. Thank you.

Thank you. Our next question comes from Adam Gubes with Goldman Sachs. Your line is open.

Hi. Good morning. I just had a follow-up on the mid-Atlantic dynamic. Just to put a finer point on it, is this a case where it's slower than expected for synergy realization, or are we also realizing incremental costs in the mid-Atlantic year-over-year that's impacting that margin bridge associated with integration?

It's just slower synergy realization. We expected trucks to deliver sooner, which would have allowed us to do more automation, taking other trucks' labor off the road. You know, we've also, as I mentioned with Tyler, We really are having to move back to a legacy Casella order to cash system with an upgrade. The system we took over from GFL just isn't allowing us the flexibility to achieve our business model in the way we expected. So it's a little bit more of a delay there. The first half of the year, truck delivery was a significant issue.

A good portion of the trucks that are coming in, the 55 that are coming in before the end of the year, a good portion of those go to the mid-Atlantic. So that will allow Sean and his team to really go after some of the synergies that we weren't able to capture.

Understood. And then I think you closed on $40 million annualized revenues incremental into a quarter. Can you just expand on the details of those transactions in terms of geographic and business mix? Any other details?

Yeah, we don't typically give out the names, but we had one acquisition that was into our western region. It's an existing market. We'll be able to develop tuck-in synergies with that. We'll ultimately be able to consolidate routes. Good, solid acquisition. We had two other acquisitions in the mid-Atlantic. One is a very direct overlay, which will have nice synergies over the next couple, next year plus. It's in Delaware to southern PA. And then a second acquisition in PA that is a bridge between two operations. It's right in between, has some overlay, but it expands territory slightly. So it's all really nice acquisitions. fits and acquisitions we've been working on for a period of time and have good synergy value.

And then last one for me, you know, thinking back to the second half of last year, I think you had some margin headwinds from insurance events, incentive comp, and lower landfill volumes were also headwinds. With landfill volumes having recovered now and lapping some of those headwinds from last year, is it fair to think margins could expand at or better than the sort of 50 basis points of underlying margin expansion trend? Or how should we think about the sequential margin expansion in the back half of the year?

Thanks. Yeah, good question. And certainly the, this is Brad, certainly the landfill business flipping from a headwind to a tailwind, you know, will be a nice driver of margin expansion year over year in the second half. I would say, though, that the margins implied by the fact that we raised our revenue guidance, we held our guidance range on adjusted EBITDA, that implies slightly softer margins than we had expected for the second half. And that's really, again, not to keep harping on it, but it's the mid-Atlantic. So I think what we're seeing is 50, 60 basis point of kind of same store margin improvement In the first half, the legacy operations have exceeded that. And then the mid-Atlantic was a bit of a drag. So I think the pace at which we can execute on the synergies, get trucks delivered, et cetera, that's really going to tell the tale for the second half on margins. But you have those different factors that are going to be impacting it.

Great. Thanks so much. Thank you. Our next question comes from Trevor Romeo with William Blair. Your line is open.

Hey, good morning guys. Thanks for taking the questions. I was just hoping you could maybe speak morning. I'm hoping you could speak to the volume performance in the quarter and the outlook. I think Brad, you mentioned, you know, indications of stable economy in your markets and clearly some good trends in the landfill. You've also got some of the, you know, the Brookhaven factors and your own internalization. initiatives, I guess. So I'm hoping you can maybe just talk to what you're seeing in the cyclical areas of volume and help us parse out the underlying trends in your markets versus the more Casella-specific trends.

Sure. Hey, Trevor. So if you recall, in the first quarter, we talked in particular about a really soft environment for roll-offs. And at the time, we weren't really sure was that weather, and it was a difficult weather quarter in the Northeast. Was it weather or was there some underlying economic weakness at play as well? That business has recovered nicely. I don't think we're seeing a booming economy by any respect, but things have stabilized. And so the year-over-year numbers from a volume perspective, really across the board, are stronger in the second quarter than they were in the first quarter. Ned mentioned something in his prepared remarks that I don't want to necessarily let it go unnoticed. Our volume overall across solid waste and resource solutions was actually positive year over year. We tend to break up how we talk about volume between those two business lines. but overall, including recyclables, including our national accounts business, our collection business, and of course, landfills, it's actually a pretty good volume story.

Yeah, and it doesn't get reflected in our bond staff, Brad, but it is important to note that a good degree of the volume increase at the landfills was internalized volume, you know, almost 60,000 tons. And that really reflects, one, you know getting synergies derived from acquisitions that we've done over the last two years as we've rolled off contracts and also just our efforts over the last year to put new transportation lanes in place and and ensure that transfer stations are getting to our landfills to create that value so you know another strong order there by our team of getting that job done and delivering those benefits okay thank you both that's really helpful there

And then, um, you know, sorry, just wanted to go back one more time to take us to mid Atlantic. I think you talked about the systems and the fleet, I think in detail already, but I think one comment I caught from, from Ned was labor running much hotter. And if I look at your expense details and I think direct labor costs were up. Like 170 basis points year over year as a percentage of revenue. So maybe just a little more detail on what's going in there. Is it primarily just not having the automated trucks yet or something else going on with labor there?

Yeah, so we've mentioned this a few times, where the labor cost is a percentage of revenue or net revenue in the Mid-Atlantic. It's much higher than our legacy hauling businesses in the Northeast. And that's because there's a lack of automation, a lack of optimization of routes. And it won't get all solved at once. This is going to take years to solve as we get new trucks into the fleet, as we look to automate certain municipal contracts. But right now, we have a much higher degree of labor servicing the same revenue base in that market, which is a great opportunity. As we've mentioned a few times, we thought we were going to yield that opportunity a little bit faster in 2025, and now with truck delays, it's coming a little slower. But the opportunity is there. So we expect that to start coming down and we expect that to be a real tailwind into the future where we can start taking that labor out of that business model.

More broadly across the business, Trevor, we are seeing labor costs at sort of the upper end of our cost stack from an inflation standpoint. Overall, we think we're comfortably covering cost inflation with our pricing programs as we as we aim to do. But labor has been one of the higher running line items, candidly, from an inflation standpoint.

Got it. All right. Thank you all. Really appreciate it.

Thank you.

Thank you. Our next question comes from Jim Shum with TD Callen. Your line is open.

Hey, good morning. Thanks, guys. Yeah, just on the collection pricing, looks like a fairly significant dip in the second quarter sequentially. You went from 5.8% in Q1 to 4.9%, which seems pretty unusual quarter to quarter sequentially there. What's driving that?

So part of the issue is mixed. So across the lines of business, front-end commercial has been our strongest line of business from a pricing standpoint. Roll-off has been the relative weakest. And, of course, in the first quarter, there's much less roll-off activity than there is in the second quarter. So the best I could explain it is it's sort of a re-weighting of the business line rather than a same-store decline in pricing trends.

Yeah, we also, we had great pricing in the front-loaded line of business in the Port-au-Prince, you laid out, and very strong pricing in the residential line of business as well. Our pricing was a bit weaker in the roll-off, and we've been, you know, as we exited this spring, and volumes were a bit weaker than we expected, we didn't test market last 50 as much as we may in certain years. We were looking for those volumes, and it really isn't into June, into July that we really were able to start pushing price a bit more in the roll-off line of business, and we're starting to see that come more now.

Okay, great. Thanks. And then what's the longer-term outlook for resource solutions? I mean, can this grow as quickly as solid waste, or does it become proportionally smaller over time?

I think that the evolution of resource solutions in terms of providing the services that our customers are looking for, whether it's colleges and universities, municipalities, industrial customers. I think that the resource solutions part of the business or materials management, as we call it, is going to continue to grow at a fairly rapid pace. We have tremendous opportunity in the Mid-Atlantic as an example. We're just beginning to scratch the surface. We put the sales team in place, obviously. We're beginning to work that at this point in time. But when you think about Mid-Atlantic as an example, from a resource solution standpoint, we've got tremendous opportunities from an industrial standpoint to really add a lot of value to the business on a go forward. So I think that we're going to continue to see resource solutions grow at a fairly rapid pace. Okay.

Got it. Thanks. And if I could just squeeze one more, and if you don't mind. Thank you. CapEx as a percent of sales has sort of been running 12% to 13% over the past few years. It seems kind of high relative to maybe your landfill composition to me. So how do you see that evolving over time? What's the right sort of capital intensity? Where do we land in, I don't know, three, four years?

Yeah, it's Jim, it's going to go up and down, of course, as you know, based on our schedule for landfill cell development. The collection business, just trucks and containers, that tends to be 6% to 7% of revenue. Landfill could bring that number up significantly, depending on how busy the construction schedule is for a particular year. I'd also point out kind of a unique factor given the relative significance of our acquisition activity, is that when we acquire businesses, we tend to, not in all cases, but generally we tend to have pretty significant upfront capex as we try and in one shot bring their asset base up to our standards in terms of the fleet, in terms of the facilities. So certainly that is a factor as well, and one that, you know, again, for us, given the relative importance of acquisition activity, you know, is probably a bit different from our competitors.

Understood. Great. Thanks for the answers, guys. Appreciate it.

Yep. Thank you. As a reminder, to ask a question, please press star 11 on your telephone. Again, that is star 11 to ask a question. Our next question comes from Stephanie Moore with Jefferies. Your line is open.

Hi, good morning. Thank you.

Good morning.

I wanted to maybe touch on a bigger picture question here. And, you know, given the current administration does appear to be a bit more amenable to larger scale M&A, if that changes your acquisition strategy at all or if there's anything you can call out from a pipeline standpoint. Thank you.

Yeah, I don't think that it really changes our strategy at all, Stephanie. I think that we've indicated that, you know, we see great opportunity on the eastern seaboard. You know, there are some larger companies there, but we're still focused on, you know, solidifying the investment that we have in the northeast, solidifying the investment that we've just made in the mid-Atlantic in terms of taking advantage of those platforms, continuing to add tuck-ins to those platforms as well, and then obviously looking for additional platforms down the eastern seaboard. So I don't think that it changes our strategy from a M&A standpoint at all.

Thank you.

I appreciate it. I think it's certainly beneficial in terms of the tax depreciation, et cetera. It's very positive in terms of how we look at that with regard to the M&A activity on a go-forward basis from a tax perspective. Very positive.

Excellent. And then I was hoping if maybe you could give us a bit more of an update on McKean. I know you called out some good investments and opportunities there, but as we think about just the timing of maybe some of those investments starting to come due, to fruition here and, you know, any potential impact we can expect to see over the course of the next, you know, 24 months or so. Thank you.

Yeah, so McKean first became operational late last spring, and we started off very slowly. And we started to ramp the site more this spring. But to date, we're only taking containerized MSWs. So like in 12 high boxes, we offload, gantry train, run them up to the face of the landfill. Our permit at the site stipulates that we're going to offload any gondolas, so loose MSW, loose CMD, or contaminated soils, we need to do so inside a building. So we've always had plans to add a transfer station, transfer building at the site. We had all the rail track outlaid to do that, and we're starting to build that building now. We'll expect that to be completed into the first quarter. that will allow us actually to complete some vertical integration initially with one of our transfer stations we'll look to move there but it also opens up some additional streams of waste from third parties that we may consider as we've said for a long time you know we've never opened mckean to just become a big third-party commercial site it's really a lot of it is defense for the northeast for the next you know five to ten years as there's a lot of risk around disposal capacity but we want to make money at the site we want to have great returns so getting this building completed ramping up vines a bit more all part of that strategy so we expect mckean to be a positive volume contributor through 2026 and we'll let you know as we get that volume ranch scheduled together yeah i think it's fair to say that um is a really nice opportunity for us to open up mckean

for some select customers, two or three select customers that could be a base on a go-forward basis, particularly, as Ned said, after we get completion of the building, then we'll be able to take the gondolas, which really opens up our opportunity. Meanwhile, the team has really done a great job of getting up to speed operationally. They're moving the containers. They're really getting the experience and the operating wherewithal to be able to you know, perform at a high level there. So we're pretty excited about that. And once we're able to broaden what we can take there with the building, it's going to be a positive in 2026.

And just as a footnote to what Ned mentioned about the investment to bring on the capability to accept gondola waste, you'll notice in the reconciliation of our guidance numbers in the press release, This quarter we have a line for McKean Rail. That was a lot of spend, of course, last year. It hadn't really factored into our forecasting for this year until we decided to add this capability. So that's why there's that additional number in the reconciliation to pre-cash flow.

Understood. Thank you.

You're welcome. Thank you. I'm showing no further questions at this time. I would now like to turn it back to John Casella for closing remarks.

Thanks, everyone, for joining us this morning, and look forward to all of you joining us for our third quarter call in October. Thanks, everybody, and have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.