Casella Waste Systems, Inc.

Good day, and thank you for standing by. Welcome to the Casella Waste Systems, Inc. First Quarter 2026 Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the 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 11 again. Please revise that today's conference has been recorded. I'll now like to hand the conference over to your first speaker today, Jason Mead, Senior Vice President of Finance and Treasurer. Please go ahead.

Good morning, and thank you for joining us on the call. Today, we'll be discussing our first quarter, 2026 results, which were released yesterday afternoon. This morning, I'm joined by Ned Coletta, President and Chief Executive Officer of Casella Waste Systems, and Brad Helgeson, our Chief Financial Officer. 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 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-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 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 any date subsequent to today, May 1st, 2026. Also during the call, we'll be referring to non-GAAP financial measures. These non-GAAP measures are 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'll now turn it over to Ned to begin today's discussion.

Good morning and thank you everyone for joining us today. We are very pleased with our performance in the first quarter and the strong start it provides for 2026. Our team executed well across the business delivering solid financial results and margin expansion that exceeded our budget while also advancing our strategic priorities. We combine disciplined positive pricing, steady core operations, and meaningful acquisition activity to position the business for a strong year. Importantly, the momentum we are seeing is broad-based. It reflects the consistency of our operating model and the continued focus of our teams on execution, safety, and customer service. Revenues for the quarter were $457.3 million, or up 9.6% year over year. Growth was driven by contributions from acquisitions and the base business, with strong pricing across our collection and disposal lines, and continued strength in our resource solution segment, particularly in national accounts. Pricing continues to perform well and remains a core driver of our results. Solid waste pricing was up 5.1% overall including 5.3% in the collection line of business and 4.7% in disposal. From a volume perspective, the quarter played out largely as we expected, with slightly negative volumes mainly due to the challenging winter weather across our footprint. Despite these headwinds, total landfill tons were up year over year, including increases in both MSW and C&D volumes, with C&D volumes actually up 13% year over year at the landfills. These results reflect the strength of our sales pipeline, all of our internalization efforts over the last year and a half, and our unique landfill asset positioning in the Northeast. Further, we are well positioned for the seasonal upswing in volumes that we see in the spring, and we've seen positive trends through April. On the cost side, our fuel recovery program worked effectively in a quarter. with floating fees fully offsetting the increase in fuel costs across our business. This continues to be an important component of our ability to manage risk and produce stable and predictable operating results. As we've emphasized, our focus remains on disciplined execution at the operating level. Our teams continue to make progress on route optimization, fleet efficiency, and automation, and we're seeing those efforts translate into our results. Adjusted EBITDA increased 12.3% year-over-year, and we delivered 50 basis points of margin expansion in the quarter. Safety is our first priority in our operations every day, and we continue to invest in safety initiatives, including the expansion of our triage programs to minimize the cost associated with workers' compensation claims and the implementation of the LITICS in-cab AI technology across our entire fleet in 2026. The LIDIC system is helping our drivers with real-time coaching to reduce unsafe behaviors. This leads to lower incidents and strengthens our overall safety culture. These efforts have resulted in better safety performance with our key OSHA metric, TRIR, improving by 20% year over year. We have also attracted several excellent new leaders to Casella, over the last several months, including Chris Raines as our new Chief Revenue Officer joining in March. We're excited to have these accomplished executives join our team, adding key skills to our already strong leadership team. In the Mid-Atlantic, we've made significant progress on our integration efforts. We've migrated nearly all customers to our new lead-to-cash system and integrated customer payment portal. And we are on track to complete the remaining migration by the end of next week. This is an important milestone as it allows us to shift our focus from systems migration to the exciting work of recognizing operational synergies through route consolidations, automations, and facility consolidations. As guided, we're on track to cut $5 million of operating costs in 2026 and another $10 million over the next two years. From a technology and efficiency standpoint, we continue to make steady progress. On the customer side, we've been investing in key platforms to improve customer experience, including the launch of our new payment portal last month and the planned rollout of the new Casella app in the second quarter. We also continue to develop our e-commerce capabilities. These efforts are focused on improving the customer experience while also yielding cost efficiencies. At the same time, we remain focused on reducing G&A costs, and we are on track with our previously announced $15 million in targeted G&A savings over the next three years. As mentioned last quarter, these savings will come in three phases, with the first phase yielding in the second half of 2026 as we implement credit card convenience fees. The second phase will come in 2027 as we eliminate redundant systems costs. And the last phase will come throughout 27 and 28 as we automate back office functions and take out costs. Across these initiatives, we're also focusing on AI-enabled tools and investing in data infrastructure to support further capabilities. Over time, we expect these investments to generate additional leverage across our back office and yield additional efficiency gains. We continue to make great permitting progress on our expansion efforts at the Hakes and Highland landfills in New York. With the Hakes permit expected by the third quarter of 2026 and the Highland permit expected by the first quarter of 2027. As we've previously mentioned, we're working to more than double the annual permit at Highland from 460,000 tons a year to a million tons a year, while also working to add 60 years of capacity. At the Hakes C&D landfill, we're permitting a 10-plus year expansion. Additionally, we completed the new rail transfer station at the McKean landfill in the last month, allowing us now to accept materials from both gondolas and intermodal containers, including internalized MSW volumes from Massachusetts later this year. Our McKean landfill is a great rail option for the Northeastern waste that does not have access to local disposal. As a reminder of how 30% of the waste that's generated in the Northeast needs to be exported given the lack of disposal capacity in our markets. The McKean landfill is proximate to dense populations in the Northeast and is one of only a few rail surf landfills that can service the market given the capital intensity and logistical complexity. Acquisitions remain an important component of our growth strategy, and we've had a strong start to the year. We have completed four acquisitions so far in 2026, representing approximately $150 million of annualized revenues. This includes the Star Waste acquisition, which closed on April 1st and adds approximately $100 million of annualized revenues. These transactions continue to align well with our strategy of building density within our existing footprint. Star Waste is an excellent example of that approach, with strong overlap in Massachusetts and clear opportunities for integration and operational improvements. Our teams are making great progress on integration with an early focus on safety, onboarding our new team members, and aligning integration plans. At the same time, our acquisition pipeline remains very strong, and we have a number of tuck-in opportunities in later stages that fit well within our existing markets. Overall, we feel very good about our execution year to date, and we believe we have a solid outlook for the remainder of the year, including adjusted free cash flow growth of roughly 14% at the midpoint of guidance. Our business proved its resiliency in the quarter as we beat our budget expanded margins by 65 basis points in the base business, and fully recovered rapidly rising fuel costs. I want to thank our employees for their continued focus on safety, service, and execution. With that, I'll turn it over to Brad to walk through the financials in more detail.

Thanks, Ned. Good morning, everyone. Revenues in the first quarter were $457.3 million, up $40.2 million, or 9.6% year-over-year. with $23.9 million from acquisitions, including rollover, and $16.2 million from same-store growth, or 3.9%. Solid waste revenues were up 10% year over year, with price up 5.1% and volume down 2.5%. Within solid waste, price in the collection line of business was up 5.3% in the quarter, led by 6.5% price in roll-off and 6% price in front-load commercials. As a reminder, our reported price figure represents realized price net of rollbacks, not gross price increases, and is more comparable to what several of our peers report as yield. Collection volume was down 2.1%, with softer roll-off volumes in particular during a quarter of difficult weather. Price in the disposal line of business was up 4.7%, including 4.3% third-party price at the landfills. Landfill volumes overall were up 19,000 tons, or 2.3% in the quarter, with internalized volume up 13,000 tons and third-party volume up 6,000 tons. The landfill business is strong coming out of the winter months, and we anticipate improved year-over-year third-party pricing in 2026 of 4% to 5%, consistent with our guidance expectation for 5% price growth overall in the solid waste business. You'll note that we are providing additional detail in our press release starting this quarter to break out disposal price and volume between landfills and transfer stations. These metrics for transfer stations give visibility to disposal market trends generally across our footprint, but do not represent significant EBITDA contribution on a line of business basis in the same way that landfills do. Resource solutions revenues were up 8% year-over-year, with recycling and other processing revenue down 2.7%, impacted by lower commodity prices, and national accounts up 20.7%. Within resource solutions processing operations, our average recycled commodity revenue per ton was down 22% year-over-year, though the market has stabilized, and we expect the negative year-over-year comparisons to moderate as we move through the year. Notwithstanding market pressures, our contract structures share this risk with our customers by adjusting tip fees and down markets so the net impact of lower commodity prices on our revenue was only about $1 million. Note that this full picture is not reflected in our process and price statistic because further offset is generated by our floating SRA fee, which shares risk with our collection customers at the curb and is passed back to the recycling facilities intercompany. Processing volume in revenue terms was up 6%. National accounts continues to grow nicely, with volume growth of 11.2% and price of 4.4%. It's worth noting the contribution of national accounts to our overall collection business. As I mentioned, we reported a volume decline in third-party collection revenue in our solid waste business in the quarter, but this does not reflect the work that we do to service our national account sales with our own trucks, which is intercompany. Including this new business coming via national accounts, we would have added 1% to the collection volume statistic for the solid waste segment. We generated $3.6 million in additional revenue in the quarter from higher fees, including our floating fee programs for recycled commodity and fuel risk. As Ned mentioned, we successfully covered all of the increase in fuel costs in the quarter with minimal lag as diesel prices rose quickly. Adjusted EBITDA was $97.1 million in the quarter, up 10.7 million or 12.3% year-over-year, with $4.4 million of contribution from acquisitions, including rollover, and over 7% organic growth. Adjusted EBITDA margin was 21.2% in the quarter, up approximately 50 basis points year-over-year overall. Bridging the year-over-year change in adjusted EBITDA margin, New acquisitions contributing at lower initial EBITDA margins than our overall business diluted margins by 15 basis points in the quarter. The base business, excluding new acquisitions completed in the past 12 months, expanded margins on a same-store basis by 65 basis points. Recall the privately held businesses that we acquire typically operate at lower margins, which can create short-term margin dilutions. As we integrate these businesses, capture synergies, and apply our operating model, they become margin expansion opportunities over time, creating a regenerative benefit as we continue to execute on our acquisition strategy. Cost of operations were $308.9 million a quarter, up $28.5 million year-over-year, with $17.2 million of the increase from acquisitions and $11.3 million in the base business, including $1.9 million from higher fuel costs, which we covered with our fuel recovery program. General and administrative costs were $58.1 million in the quarter, up $1.6 million year over year. As I said last quarter, 2026 will be a pivotal year as we lay the groundwork with better systems and process for becoming more efficient in our back office and generating better scale as we continue to grow transitioning to lower G&A as a percentage of revenue beginning in 2027. Depreciation and amortization costs were up $6.5 million year-over-year, with $5 million resulting from acquisition activity in the past 12 months, including the amortization of acquired intangibles. Adjusted net income was $12.8 million in the quarter, or 20 cents per diluted share, up $.6 million and one cent per share. GAAP net income was lower by $0.7 million in the quarter on higher acquisition expenses and additional costs associated with the organics facility closure in the quarter. Net cash provided by operating activities was $62.3 million in the quarter, up $12.1 million year-over-year, or 24%, driven by EBITDA growth. ESO was 34 days at March 31. Adjusted free cash flow was $30.7 million, up 5% year over year. Capital expenditures were $50 million, down $5.5 million year over year, with $9.2 million of upfront investment in recent acquisitions. As of March 31, we had $1.16 billion of debt and $127 million of cash, with our consolidated net leverage ratio for purposes of our bank covenants at 2.29 times. On a pro forma basis for the acquisitions closed on April 1, including star waste, our leverage ticked up to approximately 2.75. We still have approximately $500 million in available liquidity, which will enable us to be opportunistic in continuing to execute our growth strategy and robust acquisition pipeline. As laid out in our press release yesterday, we updated financial guidance for 2026 to reflect acquisitions closed to date. We increased guidance for revenue to a range of $2.06 to $2.08 billion, an increase of $90 million, adjusted EBITDA to a range of $473 to $483 million, an increase of $18 million, and adjusted free cash flow to a range of $200 to $210 million, an increase of $5 million. As a reminder, we completed the acquisition of Mountain State Waste on January 1st, and it was included in our original guidance for the full year. We completed three more acquisitions, including Star Waste, on April 1st, so this guidance revision reflects approximately $120 million of new annualized revenue for nine months of the year. Guidance further assumes adjusted EBITDA margins of approximately 20% and adjusted free cash flow with a typical conversion from EBITDA reflecting the incremental impact on net interest costs as we finance the transactions entirely with cash on hand and borrowing on our revolver. We have not yet increased our guidance for the base business after the first quarter. However, we are well positioned relative to our internal plan and will reevaluate guidance in future quarters. With that, operator, would you please open the line for Q&A?

Thank you. At this time, we'll conduct a question and answer session. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. And our first question comes from the line of Adam Rubes of Goldman Sachs. Your line is now open.

Hi, good morning. I think you spoke about Good morning. I think you spoke about $30 million of cost reduction over three years between G&A and mid-Atlantic synergies. I think that translates to something like 50 basis points of additional annual average margin expansion. I know there's always moving pieces and unanticipated bad guys, but all else equals, should we be thinking about a period of outsized margin expansion over the next couple years?

Hey, Adam. It's Brad. Yeah, I think you should. We've always talked about over time, and as you said, there are puts and takes in any given quarter or year, but generally we like to get 50 basis points of recurring margin expansion in the base business over time. You know, given the, I'll call it pent-up synergy opportunity in the mid-Atlantic that's been delayed by certain factors, and the opportunities we see to start to get to the G&A line as a percentage of revenue in a way that the company hasn't really been able to before. We do see an above trend margin improvement opportunity over the next two to three years. I think that's a fair assumption.

Great. And then you recently remarked, I think, that the closure on Ontario could work out to be EBITDA neutral. Can you just talk about the moving pieces there? Presumably the closure could result in lost external tons and maybe longer transportation distances, but I think there are some offsets. So can you just help us think through the different moving pieces?

Yeah, sure. And we'll work on additional information on this over the next several years, but right now we plan to close the Ontario landfill on December 31st of 2028. And as you're aware, we've been working on two important permit increases in New York for a number of years, going on five to six years now. And the most important is Highland, where we're moving the tonnage up from 460,000 tons to a million tons a year. Ontario does roughly 750,000 to 800,000 tons a year of mainly MSW, but there are C and D vines that go into the site. So we will look, as Ontario is winding down, we will look to shift lines that were historically going into Ontario to both Hakes and Highland, and more and more of them into Highland over that time period. And what's really important to note here is Ontario is our most expensive airspace in the company to build and operate each year. And Hakes and Highland represents some of the least expensive to build and operate in each year. So we'll have it in capital efficiency, we'll have operating efficiency, and as you can do the simple math, it doesn't track ton for ton, but as we look at it from an EBITDA standpoint, we should be pretty neutral during that period. On an operating income basis, we'll actually come out the other side with a benefit, and it'll improve both our operating income and net income as we close Ontario.

Great. And then last one from me. Can you provide an update on where we are along the landfill gas program? I know you're not putting up dollars, but it could still be a nice royalty stream. How are you thinking about the timing of the ramp there?

Yeah, this has been an interesting journey. So the first thing to note, I think everyone on the line knows this, but we should reinforce it, is that We chose many years ago to not develop and invest in RNG facilities ourselves. So we've chosen partners through selection processes to develop these sites, and they've invested all of the capital to develop each of the sites and bring them online. We've had mixed results, frankly. It's taken far longer for these developers to develop the projects and come online successfully. And it's frankly a bit of complexity as well. As you know, managing the landfill and managing gas at the landfill appropriately within permit compliance doesn't always align with creating the best pipeline quality of gas. So we have four projects online today. We have our project at Juniper Ridge, Maine, which is an RKMVP project. We have our project at North Country in New Hampshire. It's a Viridi project. And we have two new projects that came online in Q1, both with WAGA at our Chemung and Highland landfills. And, you know, they're all kind of in shakedown stage right now. And they're generating, you know, we expect this year several million dollars of EPA from overall the portfolio of these assets. There's a wide range of outcomes and we'll be watching very closely over the next quarter, two quarters in getting additional information out to the street. The WAGA projects in particular appear to be operating very well in these early shakedown stages, but I think we're a little early to start calling the exact production levels of each of these.

Great.

Thanks so much. Just to give you a sense, we're running 25,000 MMBTUs a month at Chemung Highland North Country right now in this shakedown phase, just to give you a little sense of scale.

Thank you. One moment for our next question. Our next question comes from the line of Trevor Romero of William Blair. Your line is now open.

Hi, guys. Thank you for taking the questions here. I wanted to ask maybe one or two on Starways. So, you know, sounds like a good deal. I guess $100 million of revenue, but how should we think about the current margin profile for that business? And then I think they had done something like eight acquisitions in the last four years themselves. So, you know, what are your thoughts on where they are from an operating efficiency perspective and how they've kind of integrated the deals that they had done?

Yeah, hey, Trevor. That's Brad. So, you know, our assumption for guidance purposes and external conversation is it's about 20% EBITDA margins. I mean, it's broadly consistent with other acquisitions that we've acquired. Yeah, I think like with most or all of our acquisitions, we're going to seek to get those margins up materially over time. Given in particular where STAR fits into our existing business in the greater Boston area, growth opportunities that unlocks for us, particularly on the south side of Boston, we're actually really, really bullish on the opportunity to improve that business within the Casella footprint over time.

And on your integration point, the entrepreneur who founded STAR, Patsy Sperduto, really did things the right way. He had a great team. They invested heavily in systems and process, and they were integrating these small tuck-ins as they went along, and we bought You know, a great company that's operating extremely well, has a strong management team, as I said, is a nice platform for growth into the future. This is not a fix-it one. Sometimes you buy companies that we spend quite a bit of time working on fixing things and having to over-invest to get them to a certain standard. This is backed by a great PE firm, Clairevest, that... you know, was putting some excellent capital into it. As an example, they had just completed a great retrofit to their construction demo processing facility, transfer station processing facility, and had state of the art technology in the facility. So we're buying something that's a very nice platform and integrates well with our businesses.

Yeah, and you mentioned recent acquisitions that the company has made. Something that's somewhat unique with this acquisition is they have some potential future acquisitions in their pipeline that will fold into our efforts going forward.

That's interesting. Okay. And maybe just a quick follow-up on STAR again. I think you mentioned, I think, Ned, the transfer station coming on and the key that could take volumes from Massachusetts now. So just in terms of kind of the disposal and maybe internalization opportunities with this deal, anything there or just maybe anything broadly on the synergy opportunities you could point out?

Yeah, so in this first phase, we're looking at it as more of how do our trucks, Casella's trucks, pre-acquisition route to their transfer station? Can we take advantage of that from a route synergy standpoint? Initially, the materials from that transfer station will continue to go to third-party sites. They have attractive contracts with several third-party disposal sites. Will look at that long term to see if there's an internalization opportunity, but that's not one of the first phases of synergy. If we're able to advance permits in New Hampshire over the next several years and develop additional landfill capacity in New Hampshire, they would be very strong vertical integration there.

Okay, great. If you don't mind, maybe one more quick one, just on the national accounts business, because I think Obviously, very strong growth there. You know, I think that business has sort of a margin mix impact. So if you think about that growing, call it double the rate of the company, you know, maybe you could just remind us kind of the incremental margins on that business and whether that makes, you know, the 65 basis points of kind of base business margin you're talking about maybe look even better on an underlying basis.

Yeah, it's a good question. So we love that business, obviously, as you alluded to, the growth profile. It's very little capital investment. It helps to drive business back across our solid waste segment to the extent that there are customers that are coming in through the national account sale effort, so the effort that are serviced ultimately by our own trucks. That's the kind of work that we love. Really, the solutions-based sales effort aligns really well with Cassell and our strengths and our focus areas. So it's a great business. The only footnote, I guess, from a financial standpoint is low market because it's low capital and the nature of the business. So on an EBITDA margin basis, it's mid-single digits, mid-upper single digits EBITDA margin. So if you were to pull national accounts out, you know, that would be accretive to our EBITDA margin, but obviously there are many other factors that lead us to think this is a great business that we want to push forward.

All right.

Okay. Thank you very much, guys.

Thank you.

Thank you. One moment for our next question. Our next question comes from Tyler Brown of Raymond James. Your line is now open.

Hey, good morning, guys. Good morning. Hey, I want to come back to the 4.3% landfill price number. I think that number last quarter was 2.5%, so that's a really nice acceleration, but can you kind of talk about what drove that acceleration? Was the issue more about last quarter being a bit low, or was it a more concerted effort this quarter just just any color on that metric specifically?

Yeah. So we're working hard to get more process and discipline around our sales efforts up and down the company and, you know, great new hire in Chris Rade. And about a year and a half ago, our longtime lead of landfill sales stepped away. And that responsibility was kind of absorbed across a couple other places. And we frankly didn't have enough management of pipeline um quality of revenue and and what we're doing and um uh we we rebuilt that through 2025 and we're working to further advance it now under chris's leadership so i i think it's one part like um we didn't get the job done as well as we could have kind of done and two um you know frankly for a little bit there there There was one rail move that was ramping up out of New Jersey that was putting a little downwards pressure on the overall northeastern environment. That rail move is full now. It's a third-party company that's moving waste out of New Jersey out to Ohio. They really don't have a lot of excess capacity in that system. So they never directly took one of our customers, but generally probably a little bit of pressure on the overall environment as well.

Okay. Okay, that's helpful. And then quickly, OnStar, just to be clear, they are not, or at least not materially, in heavily flow-controlled markets tied to the Massachusetts burner, so internalization could be an opportunity long-term. Just want to understand that.

Yeah, there is no flow control in those markets, but as with any major metropolitan market, traffic matters and the positioning of assets matter. So as Brad said earlier, we're really strong today. Boston, Boston North to the West, Star is very strong to the South from the positioning of their hauling businesses. And it really gives us the opportunity to grow in those markets. We've had the strongest organic collection growth over the last decade in the greater Boston market. And you kind of think about this, you know, from our sustainability, our resource solutions approach, the integration with our state, our recycling facility in that market. We've sold a lot of really premier customers and we've grown share of wallet. And we think we can kind of expand upon the success Star has had in a similar way over the next coming years.

Okay, great. And then, Brad, just to help us on Q2 margins, So I know that there's a normal step up because, you know, it kind of unsaws, if you will, up in the northeast. Revenue kind of takes a step up sequentially. But then you've got acquisitions that are diluted by nature. Fuel is diluted by nature. Can you just give us any color on how we should think about margins, either sequentially or year over year, just to kind of get us in the right spot?

Yeah, so as you pointed out, sequentially margins are much better in the second quarter and then advancing into the third quarter in our business, particularly given our geography. On a year-over-year basis, you really mentioned the two main factors that we'll be dealing with this second quarter, which is fuel surcharges. I mean, we'll see where fuel goes over the second quarter, but higher fuel costs that are covered by our recovery fees are, of course, margin dilutive, and the acquisitions. So we'll see how the acquisitions impact things. You know, another point I would make on the base business, just thinking about your model in quarter over quarter, is the synergies in the mid-Atlantic, and also actually the G&A savings that Ned had mentioned earlier, those will be more back-end loaded. So we'll start to see as we've completed the the consolidation of the mid-atlantic onto our system we're going to start to see those benefits in the second quarter of the synergy realization but that's really a q3 and q4 story more so and then the the convenience fees that ned mentioned are entirely back then loaded um so you know q2 we'll see we'll see where we end up you know there are some headwinds as you as you mentioned um but you know our focus is really on frankly the the third quarter and the fourth quarter um for this year and then, of course, going into 2027.

Right, but if your kind of updated guidance is flattish on the margin line with the dilution, so is it crazy to think it could be slightly down in Q2 on a year-over-year basis, up sequentially, though?

It's a really good question. That's not crazy to think that way. But to be clear, the base business will be

Even the positive acquisitions could weigh on it slightly negative. We weren't able to get fully under the hood on Star since it was a DOJ process and the customers, the routes, all of those things until really day one, Tyler. So we're digging in now and really looking at the progression of what we can do there. So as we've said, you'll probably little more overhang of margins, 20-ish percent to start with, and we'll look to improve from there.

Yeah. Okay. I just want to make sure I had that. And then just last one, if I can, Ned, this is a bit of a periphery question, but I'm kind of curious about it. So I think in Massachusetts, there are a couple of larger landfills, sorry, ash landfills that are set to close in coming years that are kind of related to some of the burners. How do you think that's going to play, and what do you think, and how will they deal with that excess ash?

Yeah, so it needs to go somewhere, and it needs to go to Subtitle D Landfill. So that will take up capacity in the marketplace. It's something that really hasn't been discussed. I can't get to a lot of details there, but we believe there's some real Tad Piper- value working with some of our peers across the waste energy business on certain of those streams and it's an area that we've been actively. Tad Piper- engaged and we think there's some value creation over time and hopefully we'll have more to report, but but it's a great point I think the easiest part of the point is those landfills are closing or filling up and that ash. The further you move it, the more expensive it gets. And we've got some great in-market solutions. Our McKean rail facility actually fits very, very well with some of the berm plants as well.

And Tyler, you mentioned Massachusetts landfills, but there's, as a reminder, there's also a lot of ash that goes into the Brookhaven landfill on Long Island, which is going to be closing ash over the next few years.

Yeah, that's as much as 400,000 tons a year. that goes into that landfill today. And the Brookhaven landfill, you know, that caused a little upheaval when it was closing from a C&D standpoint, but it's still open for ash through the next two years. And it will be closed at some point in time. And there's still, you know, we talk about this sometimes, this ebbs and flows. As we look out over the next 10 years, there's still a lot of disposal that's coming offline in the Northeast. And as you pointed out, some of these sites are just taking ash. But at any point in time, you could go through a year period of time where you have a little bit more capacity like we did in 2025 of rail. Then that fills up. People look to the next phase of sites closing. So I think the long-term horizon is still the same as we've been talking about for years. There's a supply, demand, and balance in these markets. And our in-market capacity is very valuable and will continue to have pricing power.

Yeah, super interesting. Okay, thank you, guys.

Thank you.

Thank you. One moment for our next question. Our next question comes from a line of Jim Shum of TD Calendly. The line is now open.

Hey, good morning, guys. So... That's actually my question is I wanted you guys to address a little bit more the supply demand situation in the Northeast, because I think a lot of investors are solely focused on rail or hearing rail is moving waste out. And maybe you look at some of the landfill pricing recently, which is sub 5%, which maybe is not that impressive to some folks. And there's a concern that you know, that landfill pricing is going to be depressed longer term. So, you know, I just wanted to get your views. You know, we've talked about, you've talked about a couple of, a couple of moving parts, but like, what is your longer term view on, you know, your Northeast landfill pricing? You know, from time to time you are going to see these rail projects move waste out, but what, you know, when you guys look at the closures, what does that mean for pricing, you know, in 2027, 2028, 2029? Can you get, you know, is it more mid-single digits? Can you get upper single digits at some point? Or, like, how are you guys thinking about that?

Yeah, thanks for the question. So, if we look at the last decade plus, you know, pricing at the landfills, has generally been mid-single digits, and it's ranged from a couple of lows for us in 2025 to highs as much as 8% or 9% during that time period. And it really depends. I mean, you need to look at the book of business. So some of our outside years also have a relationship of big large contracts that might be renewing in those periods. And there might be step ups in those contracts. So say you have a five year contract and the market continues to tighten over the five years, you might get some of those outsized pricing years around those resets. But generally, we're kind of stacking up to that mid single digits. And I think we feel really confident that if we can price at those levels, we'll have a great economic outcome and returns for shareholders. I said it to Tyler a minute ago, I feel the same way. If you look at all the sites that will be closing over the next decade, there's not enough space for all of this waste in the marketplace. So then you start to look at what are the alternatives that, you know, the best alternatives are in market, right? Where you can use a truck, move the waste via long haul truck to a landfill or to a waste to energy plant. The more expensive solution, both capital and operating costs is to move it via rail. It's far more expensive, but it's the only viable option as in-market capacity comes out. So we see that as a tailwind for us over the next number of years as well. Sites will be closing. We've got a great outlook on capacity. We have over 25 years at our sites today. We've got some important expansions in process that are working well, and we expect to land those in the next year. And we look at the backdrop, which should be positive over the next decade.

Okay, great. And then I just wanted to ask you, another question I get from investors a lot is you have this network of landfills in the Northeast, and then you make this platform acquisition into the Mid-Atlantic, and then you're growing West or Southeast from there, but you don't really have any landfills in this area. You kind of have McKean and Pennsylvania, but how should people think about your collection margins? What is sort of the ultimate goal? can you earn 30% margins without a landfill in mid-Atlantic geography? Or is it more like, should we be thinking more like 25%? And I know that you guys have said it's closer to 20% right now. And let's think about 25%, I think, over the next couple of years. But longer term, is there upside to that 25% number?

Yeah, so one of the things that's important to note is we use market-based pricing at all of our landfills, our recycling facilities, our transfer stations. So we charge ourselves market-based rates. So if you look at our collection business, say in the Northeast where it's vertically integrated, the margins produced by that collection business are apples to apples to the mid-Atlantic because we're charging intercompany market-based rates. And we generally generate about 30% EBITDA margins on our collection line of business. In the mid-Atlantic today, our margins are roughly 20%. This is not because we don't have landfills. This is because we have work to do. This is a business that, you know, the quality of the truck fleet was lacking. There wasn't enough density in certain parts, quality of revenue. And we've got strategies around each of these points, and we've laid out a plan for the next three years as we put more automated trucks in the fleet collapse routes to add about $15 million of EBITDA to that market, which will translate to mid-20% margins. You know, having landfills is a great thing and having the vertical integration. But what also is important is having the right transfer assets so you can get your trucks off the road, consolidate waste, and then be able to look to multiple disposal options. And much of our focus right now in the mid-Atlantic is either on buying or developing the right transfer assets in that marketplace that allow us to successfully continue to grow. And we've had some great progress here. We've bought an excellent transfer station last year in the third quarter. We're working on some additional opportunities. We have a new recycling facility we just bought on April 1st. We're working on developing another recycling facility ourselves. So you'll look to see that margin progression come up. And we do look at, over time, it's apples to apples. And we'll be able to have a trajectory, hopefully over the number of years, to get to the same 30% margin level.

Yeah, and another add-on to that is not every market is created equal, of course, from a disposal perspective. So having the security of disposal capacity in our markets in New England, let's say upstate New York, is incredibly strategically valuable. You contrast that with the mid-Atlantic, eastern Pennsylvania would be a great example. There's plenty of landfill capacity down there. You know, we like the landfill business. It would help margins. We wouldn't turn down the opportunity to own landfill there, but it's not a strategic imperative. I think the focus, as Ned said, the focus down there is really going to be building out our transfer station network so that we can most efficiently access the disposal sites that are down there.

Okay, great. Thanks for all the color guys. Appreciate it.

Thank you. Thank you. One moment for our next question. Our next question is Tammy of JP Morgan. Your line is now open.

Hi, good morning. Congrats on the nice results. We've seen lately a, hi, how are you? We've seen the CPI tick up lately. So can you remind us how any acceleration in the headline CPI impacts your pricing maybe on the entire parts of the portfolio and is there a typical lag?

Yeah, so it does impact our pricing on some of our business, most notably municipal contracts, you know, where there's that direct relationship between the contract pricing and underlying inflation index. But, you know, as a reminder, 70, 75% of our collection business is open market, meaning we just have service agreements directly with customers where pricing is wherever we want to set it and whatever the market will bear and whatever is appropriate given our underlying cost inflation. So I would say directionally it impacts us, but actually not necessarily directly because we have total flexibility to react to the circumstances.

But I think higher CPI prints in a certain way do allow maybe a bit more pricing spread. But, you know, as Brad said, 70, 75% of our book of business, we can price at will. And we've shown that amazing flexibility over time. Last year, we talked about this. We saw our price cost spread narrow more than we wanted to in the first half of the year. And we came out on a select group of customers with a second set of price increases in the last half of the year. And, and we, You know, we thought that was an important thing to do to get that spread back to where we believe it should be. So, we're trying to be really dynamic, but of course, the CPI prints something we're always looking at, but we're also looking at our own cost profile where we need to be.

That is good to know. Thank you. I'll pass it on.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Slow Mo Regenbaum of the Sawyer Lines. Open.

Hi, good morning. Thank you very much for taking my questions. Hey, Ned, it was just echoing that it was really good to see that third party landfill pricing stepping back up. And you talked about two factors, one of your own, just putting in more effort and ensuring appropriate pricing and getting good business. And the other one was rail. Just in terms of the impact over the last few quarters and then the turnaround, would you say that it was more a matter of turning around because the rail, you know, the competitor just kind of filled up already over there? And the other aspect I want to just dig a little bit into is, do you have a sense in terms of the comparison between the rail pricing and what you're getting at your own kind of transfer stations and tipping at the landfills? Just, you know, at what point would it make more sense for someone else to add a lot more capital and just go ahead and add more capacity to rail? I guess what I'm trying to just get at is to understand, you know, the risk of kind of something just kind of popping up again. Or is it, you know, something that is unlikely because, you know, the amount of capital would be very expensive. And right now, you know, the comparability cost is not worth it.

yeah great questions um so i'll start off with your first question around the pricing in the quarter and the pricing trajectory at our landfills as i mentioned earlier i think it was one part kind of pipeline management and quality of revenue we're seeking and managing the customer base and one part um You know, looking at a certain rail move that was ramping up out of New Jersey over the last several years that they gave some negative pricing pressure to the overall marketplace. If you look at, there's only a few landfills that accept rail by way of railways from the northeast or just railways in general and A few of them have some excess capacity, but they're very expensive to get to, and they take a long time in a lot of rail exchanges. And a few of them are a bit closer to the market and more reasonably costed. And if we look at both sides of the equation, one, the capacity to actually move more rail cars each day out of certain transfer stations. And two, the actual capacity of these landfills against their daily permits, you're seeing Both sides of that have constraints today. And the last factor, and we heard about one of our competitors talked about this on their earnings call last week. Generally, I would say the major companies who have rail service landfills, including Casella, we're not looking at these as merchant sites where we're looking at the lowest cost waste. We're looking at these as long-term defensive strategies to take care of our own customers. And we talked to We heard this one company talk about how the vast majority of their rail move was really tied to their own tons in New York State, in New York City, and looking to gain certainty there of cost and certainty of disposal. And Costello looks at it through the same lens, and I know others do as well, where this isn't a merchant play to seek the bottom of the market. This is very capital intensive, very costly move to material. So coming back to your point, this one competitor is ramping up capacity. They're at capacity today on the transfer side, forming the trains, and they're generally at capacity at the landfill side. So they're going to look to returns in pricing quality. They don't have room for a lot more tons. So, you know, I think through periods like this, what we do is we look at returns at our sites and we're laser focused on taking the right materials in at the right price and long-term return profiles because the scarcity is real and you can't replicate many of these assets.

Okay, great. Then I just wanted a little bit more tactically In the quarter, you know, you drove that margin, even on margin outperformance. And even though in the beginning of the year, you were talking about there being more margin expansion the second half of the year and really drove, you know, pretty good margin expansion this quarter. And I was wondering what went better than expected just from an operational perspective? Like what surprised you or where were you able to really execute better than you thought you would?

Yeah. One example of where we did a little bit better than we expected and better year over year was on the maintenance side. So in the mid-Atlantic, as Ned was talking about, we're just on the cusp of completing our system integration and really being able to be in a position to execute on our synergy plan. But we've also, as we've been working on that, we've received delivery of a large number of trucks into that market. And so the ongoing maintenance costs, equipment rental for us to keep trucks on the road, to keep customer service, we no longer have a need for those. So, you know, that's just one example, not necessarily the whole story, but that's been a nice tailwind for us.

Okay, thanks. If I could just squeeze one more in. You might just going over, you know, the volumes in terms of year over year growth along the various lines that are kind of cyclical. So the special ways to see indeed the temporary polls, just the things that people are looking at to see, you know, where things are going cyclically.

Yeah. So, so on the, um, you know, first off on the collection side, uh, the portion of our collection business that is most, uh, cyclically impacted is the roll off business roll off was down. little over 3% year over year. So that's something that we look at and point to for where the economy might be impacting us. In our case, I think it was probably more weather than it was economy. But that's an area we look at. On the landfills, we saw MSW stronger, we saw C&D stronger. C&D would be a potentially economically cyclical volume stream. One area where we did see relative weakness year-over-year, which in fact is on mixed, was special waste volumes. So again, that's another area where we don't have perfect knowledge on whether that's weather, whether that's uncertainty, given the fact that we're at war and projects not moving forward. Hard to know exactly, but that's another area where we may have seen it.

Yeah, and in a particularly cold winter, though, many of those jobs, whether they be infrastructure jobs or the start of major construction projects where you're digging out contaminated soils or even just industrial jobs where you're dredging out industrial lagoons and things like that. They're just not happening at the same pace in the winter. Not to blame the weather, but when it gets really cold, you're just not doing that work.

Got it. Okay, thank you.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Harold Anter of Jefferies. Your line is now open.

Good morning, guys. This is Harold Anter on for Steph Moore. Just one for me. I guess just on the pricing front, you know, I think we did 5.1% in the quarter. The guide is at around 5%. So I guess typically 1Q is a high watermark. So I guess what we expect, you know, I guess this implies kind of consistent pricing at these levels for the rest of the year. I guess you know what's kind of driving that. Do you expect second-off pricing to round, just given improvement in the mid-Atlantic? Anything, Dan, I guess just on, could you remind us how churn performs in the quarter? I think, you know, the industry has been seeing, you know, better churn metrics. in the course. I just wanted to get a sense for, you know, we're cheering around for you guys and how that, and if you're doing, making any investments on the tech side, that's improved enough. Thank you.

Yeah. Hey, Al. It's Brad. So, we feel pretty good about the trend of pricing as we look forward to the end of the year. I guess a couple points to highlight. One, really, this is really a function of the price number that we report. You know, we're not reporting the price increases that we go out with and then see that number erode as prices are rolled back over the course of the year. I mean, that's a net number of rollbacks, so it's not one that, all else being equal, should deteriorate over the course of the year. The other important point, I think, for us right now is the Mid-Atlantic. So given where we are with systems consolidation, we've had very limited ability to assess pricing across the customer base, assess profitability, and implement our pricing programs with the intelligence and specificity that we do in the rest of our business. So we would expect that to be a consistent tailwind over the course of the second half of this year and into next year on. As far as technology, and Ned hinted at this in his prepared remarks, we're actually on the cusp of rolling out an app and really a different way of accessing the customer and meeting the customer where they want to do business, where they can pick up an app and sign up for service rather than picking up the phone.

Yeah, in our digital customer engagement, e-commerce activities are right now across about 60% of our markets. We'll be across 100% in the third quarter. And this is actually our fastest growing sales channel, as you can imagine. And we're rejiggering our back office, our sales alignment to support this growth as well.

Thank you. One moment for our next question. Our next question comes from the line of William Griffin of Bar Crazy Light. It's not open.

Great. I appreciate you squeezing me in, and thanks for the opportunity. Just one quick one here. But given the Star Waste acquisition on April 1st, and that was kind of a chunkier deal Could you just elaborate a little bit on how you're thinking about maybe balancing leverage versus, you know, further tuck in M&A over the balance of the year and just your capacity to do that following Starways? Thank you.

Yeah, I mentioned in the prepared remarks that pro forma for Star and the other two acquisitions that we closed on April 1st were at about 275 leverage. That has room to grow. We don't aspire to be highly levered. I think a key tenet of our capital allocation strategy and capital strategy generally has been to maintain moderate leverage, to stay nimble, and for risk management purposes. That all being said, at 275, we do have capacity to move down a bit higher. For immediate, quickly emerging opportunities, we have about $500 million of available liquidity. So, you know, we're not done. We're looking at a lot of attractive opportunities. Our pipeline is healthy, and we'll see what we can cross over the course of the year.

All right. Thank you very much. Thank you.

Thank you. I'm showing no further questions at this time. I'll now turn it back to Ned Coletta for closing remarks.

Thank you, everyone, for joining us today. We look forward to speaking with you again in early August to discuss your second quarter results. Everyone have a wonderful day and weekend. Thank you.

Thank you for your participation in today's conference. To just conclude the program, you may now disconnect.