Company Overview - Casella Waste Systems, Inc. is a regional solid waste, recycling, and resource management services company headquartered in Rutland, Vermont, serving over one million customers across ten eastern states and providing services to more than 10,000 locations nationwide [2][5]. Key Events - The company will ring the Opening Bell at the Nasdaq MarketSite on June 17, 2025, in celebration of its 50th Anniversary [1][2]. Sustainability Commitment - Casella has been recognized for its commitment to sustainability, having established Vermont's first recycling facility in 1977 and being a founding member of the EPA Climate Leaders program [3]. - The company has received a Climate Leadership Award for Excellence in Greenhouse Gas management, with its operations preventing an estimated 5.6 tons of greenhouse gas emissions for every ton emitted [3]. Employee Recognition - The company emphasizes the importance of its over 5,000 employees in achieving sustainability goals and recognizes their contributions on Global Garbageman Day, which coincides with National Waste and Recycling Workers' Week [4].

Core Viewpoint - Investors in the Waste Removal Services sector should consider H20 (HTO) and Casella (CWST) as potential value opportunities, with HTO currently presenting a stronger case for investment [1] Valuation Metrics - HTO has a Zacks Rank of 2 (Buy), indicating a stronger earnings outlook compared to CWST, which has a Zacks Rank of 3 (Hold) [3] - HTO's forward P/E ratio is 17.54, significantly lower than CWST's forward P/E of 110.26, suggesting HTO is more attractively priced [5] - HTO has a PEG ratio of 4.05, while CWST's PEG ratio is 4.28, indicating HTO's expected earnings growth is more favorable [5] - HTO's P/B ratio stands at 1.28, compared to CWST's P/B of 4.80, further highlighting HTO's better valuation [6] Value Grades - HTO has been assigned a Value grade of B, while CWST has a Value grade of D, reflecting HTO's superior valuation metrics [6] - The combination of HTO's solid earnings outlook and favorable valuation figures positions it as the superior value option in the sector [7]

Core Points - Casella Waste Systems, Inc. has announced that three of its drivers have been honored by the National Waste & Recycling Association as part of the annual Drivers and Operators of the Year program, highlighting the company's commitment to excellence and safety in the waste management industry [1][2][3] Group 1: Awards and Recognition - The Driver of the Year awards recognize drivers who operate safely and responsibly, enhancing the image and safety culture of the waste industry, with categories for residential, commercial, and roll-off drivers at local, regional, and national levels [3] - The three recognized drivers are Frank Corl (Regional Commercial Driver of the Year), Juan Caraballo (Regional Commercial Honorable Mention), and Daniel Hale (Regional Roll Off Honorable Mention) [6] Group 2: Driver Profiles - Frank Corl has over 30 years of experience, known for exceptional service and customer satisfaction, demonstrating professionalism and leadership [8][9] - Juan Caraballo, with over 20 years of experience, is recognized for his dedication to customer service and safety, embodying the company's core values [11][12] - Daniel Hale has over 25 years of professional driving experience, known for his reliability and operational excellence, contributing significantly to team efficiency [14][15] Group 3: Company Overview - Casella Waste Systems, Inc. is headquartered in Rutland, Vermont, providing resource management services primarily in solid waste collection, disposal, recycling, and organics services across the eastern United States [15]

Economic Outlook - Jamie Dimon, CEO of JPMorgan Chase, expressed concerns about U.S. stagflation, highlighting the challenges of high inflation coupled with economic recession, which limits policymakers' options to improve the economy [2] - Dimon indicated that U.S. stocks are overvalued and may face a potential decline of 10%, attributing this to high forward price-to-earnings ratios and overly optimistic earnings estimates amid deteriorating economic conditions [3] Investment Opportunities - Autozone has outperformed the S&P 500 with over 250% return in the last five years, despite only a 2% increase in net sales for the first half of fiscal 2025, due to its strong return on invested capital (ROIC) averaging over 50% [7][9][11] - Casella Waste Systems has seen nearly 2,000% growth in shares over the past decade, benefiting from low competition and the necessity of its services regardless of economic conditions, with a recent acquisition adding approximately $90 million in annualized revenue [12][15][16] - Copart, while generating 18% of its fiscal 2024 revenue internationally, remains primarily U.S.-focused and boasts a remarkable net profit margin of 32% for the first half of fiscal 2025, with revenue growth driven by the adoption of additional services [17][18][19] Valuation Insights - All three highlighted stocks—Autozone, Casella Waste Systems, and Copart—are trading at the higher end of their historical valuations, yet are considered reliable investments in uncertain times [20] - Casella Waste Systems is noted as potentially the best bargain among the three, trading at roughly 4 times sales and only about 10% above its five-year average [21]

Core Viewpoint - The article provides an update on Casella Waste Systems (NASDAQ: CWST) following a previous recommendation to buy, emphasizing a positive outlook on EBITDA growth [1] Group 1: Investment Philosophy - The company adopts a fundamentals-based approach to value investing, focusing on long-term durability and affordability rather than merely low multiples [1] - There is a belief that successful investments carry risks, particularly the risk of overpaying, highlighting the importance of valuation [1] - The company is attracted to firms with steady long-term growth, no cyclicality, and strong balance sheets [1] Group 2: Market Perspective - The article suggests that in certain situations, the potential for growth can outweigh immediate price concerns, indicating a broader view on market dynamics [1]

Summary of Casella Waste Systems (CWST) Conference Call - May 05, 2025 Company Overview - **Company**: Casella Waste Systems (CWST) - **Industry**: Waste Management and Recycling - **Key Personnel**: John Casella (CEO), Ned Coletta (President) Core Points and Arguments 1. **Company Culture and People Focus**: - The foundation of Casella's success over 50 years is its people and culture, emphasizing employee satisfaction as a driver for customer and shareholder happiness [10][12][40] - The company added 1,000 employees last year, highlighting the challenge of maintaining culture during rapid growth [12] 2. **Acquisition Strategy**: - The company has shifted focus from tuck-in acquisitions in the Northeast to exploring new growth areas, including Pennsylvania, Maryland, and Delaware [22][23] - Future growth opportunities are seen along the Eastern Seaboard, avoiding distant markets like California or Texas [25] 3. **Operational Efficiency**: - Casella's operations are heavily reliant on its direct workforce, with 80-85% of employees not working in an office environment [16] - The company has established a CDL school to address driver shortages, resulting in a significant reduction in job openings [30][32] 4. **Regulatory Challenges**: - The regulatory environment is becoming increasingly difficult, with lengthy permit processes and social media scrutiny impacting operations [60][61] - The company is focused on expanding its Highland facility to double its capacity, despite the challenges in obtaining permits [62] 5. **Market Dynamics**: - The company has observed a shift in waste management policies, with some states opting to export waste, which could lead to increased local costs in the future [70][73] - Casella's competitive advantage lies in its local disposal capacity, which is becoming more valuable as regulations tighten [66] 6. **Financial Performance**: - Casella has consistently grown free cash flow by 15-20% annually, with organic growth of 10-12% and additional growth from acquisitions [76] - The company remains optimistic about current market conditions, reporting strong volumes across all business segments despite a slow start to the year [80][81] Additional Important Insights - **Employee Retention**: Internal promotions from helper positions to drivers have shown a retention rate that is 75% lower compared to external hires, indicating the effectiveness of internal development programs [41] - **Supply Chain Issues**: The company faces challenges in acquiring new trucks and equipment due to supply chain constraints, with lead times extending up to 18 months for certain vehicles [43][50] - **Community Engagement**: Casella emphasizes the importance of educating communities about recycling processes, particularly in areas using split-body collection trucks [55][57] This summary encapsulates the key discussions and insights from the Casella Waste Systems conference call, highlighting the company's strategic focus, operational challenges, and market outlook.

PART I. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) The company reports a significant revenue increase to $417.1 million driven by acquisitions, alongside a wider net loss Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $491,699 | $613,305 | | **Goodwill** | $1,049,535 | $1,002,266 | | **Total assets** | $3,205,870 | $3,230,068 | | **Total current liabilities** | $251,388 | $307,317 | | **Debt, less current portion** | $1,115,411 | $1,090,632 | | **Total stockholders' equity** | $1,546,889 | $1,550,839 | Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Revenues** | $417,101 | $341,008 | | **Operating income** | $3,143 | $6,835 | | **Net loss** | $(4,810) | $(4,117) | | **Basic and diluted loss per share** | $(0.08) | $(0.07) | Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $50,123 | $7,679 | | **Net cash used in investing activities** | $(158,819) | $(30,057) | | **Net cash used in financing activities** | $(4,708) | $(9,077) | | **Net decrease in cash** | $(113,404) | $(31,455) | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Key disclosures include three business acquisitions for $103.5 million and a probable liability exceeding $1 million - In Q1 2025, the company acquired three businesses for a total cash consideration of **$103.5 million**, resulting in the recognition of **$46.8 million in goodwill**[34](index=34&type=chunk)[37](index=37&type=chunk) - The company recorded a **probable liability exceeding $1 million** for potential penalties related to a Letter of Deficiency from the NHDES[55](index=55&type=chunk) - The NHDES denied a permit for new landfill capacity, impacting **$12.7 million in capitalized project costs** as the company challenges the decision[56](index=56&type=chunk) - Certain operations were reclassified between regional segments, with prior period data restated for comparability[85](index=85&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=26&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Revenue grew 22.3% to $417.1 million, driven by acquisitions, while operating income declined due to higher costs [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Revenue growth of $76.1 million was driven by acquisitions and pricing, offset by increased operating expenses Solid Waste Revenue Change Drivers (Q1 2025 vs. Q1 2024) | Driver | Amount (in millions) | % Growth | | :--- | :--- | :--- | | Price | $14.9 | 5.6% | | Volume | $(4.5) | (1.7)% | | Surcharges and other fees | $1.5 | 0.5% | | Acquisitions | $57.1 | 21.5% | | **Total Solid Waste Revenue Change** | **$69.0** | **25.9%** | Operating Expenses as a Percentage of Total Revenues | Expense Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cost of operations | 67.2% | 67.7% | | General and administration | 13.5% | 13.0% | | Depreciation and amortization | 17.1% | 15.8% | - Depreciation and amortization expense **increased significantly by $17.5 million** year-over-year, primarily due to acquisitions and new investments[113](index=113&type=chunk) [Segment Reporting](index=31&type=section&id=Segment%20Reporting) The Mid-Atlantic region led revenue growth due to acquisitions, while the Corporate segment's loss widened Revenues by Reportable Operating Segment (in millions) | Segment | Q1 2025 | Q1 2024 | $ Change | | :--- | :--- | :--- | :--- | | Eastern | $104.7 | $100.2 | $4.5 | | Western | $152.3 | $123.6 | $28.7 | | Mid-Atlantic | $77.8 | $42.1 | $35.7 | | Resource Solutions | $82.3 | $75.1 | $7.2 | | **Total revenues** | **$417.1** | **$341.0** | **$76.1** | Operating Income (Loss) by Operating Segment (in millions) | Segment | Q1 2025 | Q1 2024 | $ Change | | :--- | :--- | :--- | :--- | | Eastern | $12.8 | $11.2 | $1.6 | | Western | $25.3 | $20.5 | $4.8 | | Mid-Atlantic | $(4.2) | $(3.7) | $(0.5) | | Resource Solutions | $5.0 | $4.4 | $0.6 | | Corporate Entities | $(35.8) | $(25.6) | $(10.2) | | **Total operating income** | **$3.1** | **$6.8** | **$(3.7)** | [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with $267.7 million in cash and increased operating cash flow - As of March 31, 2025, the company had **$267.7 million in cash** and **$675.4 million available** under its revolving credit facility[141](index=141&type=chunk) - Net cash provided by operating activities **increased by $42.4 million** year-over-year, reaching **$50.1 million** in Q1 2025[144](index=144&type=chunk)[145](index=145&type=chunk) - Cash used for acquisitions was **$103.6 million**, and capital expenditures increased to **$55.5 million** in Q1 2025[146](index=146&type=chunk)[147](index=147&type=chunk) - The company was in compliance with all financial covenants, with a consolidated net leverage ratio of **2.45** against a requirement of 4.00[151](index=151&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=39&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company manages market risks from fuel prices, commodity prices, and interest rates through various hedging strategies - A $0.40 per gallon change in diesel price is estimated to impact annual fuel costs by **$6.1 million**, partially offset by **$5.5 million** in fee revenue[165](index=165&type=chunk) - Recycled material commodity price fluctuations are mitigated through strategies like floating fees and revenue sharing[167](index=167&type=chunk) - Interest rate risk on variable-rate debt is managed using derivative instruments designated as cash flow hedges[169](index=169&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=41&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were **effective** at the reasonable assurance level[171](index=171&type=chunk) - **No material changes** to the company's internal control over financial reporting occurred during the first quarter of 2025[172](index=172&type=chunk) PART II. OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=42&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section references Note 8 for legal proceeding details and sets a $1 million disclosure threshold for environmental sanctions - Information regarding legal proceedings is provided in **Note 8, Commitments and Contingencies**, within the financial statements section[175](index=175&type=chunk) - The company has set a disclosure threshold of **$1,000,000** for potential monetary sanctions in environmental proceedings[176](index=176&type=chunk) [ITEM 1A. RISK FACTORS](index=42&type=section&id=ITEM%201A.%20RISK%20FACTORS) No material changes to risk factors disclosed in the 2024 Annual Report on Form 10-K are reported - The company's business risks are identified in its 2024 Form 10-K, with **no material updates** reported for this quarter[177](index=177&type=chunk) [ITEM 5. OTHER INFORMATION](index=42&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - **No directors or officers** adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[178](index=178&type=chunk) [ITEM 6. EXHIBITS](index=43&type=section&id=ITEM%206.%20EXHIBITS) This section lists exhibits filed with the Form 10-Q, including a Guaranty Agreement and Sarbanes-Oxley certifications - Filed exhibits include a Guaranty Agreement and **CEO/CFO certifications** required by Sections 302 and 906 of the Sarbanes-Oxley Act[179](index=179&type=chunk)

Financial Data and Key Metrics Changes - Revenues in Q1 2025 were $417.1 million, an increase of $76.1 million or 22.3% year over year, with $57.3 million from acquisitions and $18.4 million from organic growth of 5.4% [13][20] - Adjusted EBITDA was $86.4 million, up $15.4 million or 21.7% year over year, with adjusted EBITDA margins at 20.7%, down 10 basis points year over year [16][20] - Adjusted net income was $12.2 million or $0.19 per diluted share, an increase of $3.5 million or about $0.04 per share [19] Business Line Data and Key Metrics Changes - Solid waste revenues increased by 25.9% year over year, with pricing up 5.6% and volume down 1.7% [13][14] - Collection pricing was up 5.8%, while volumes decreased by 1.7%, attributed to slower roll-off volumes during winter [9][14] - Resource Solutions revenues grew by 9.5% year over year, with national accounts up 10.9% [15][16] Market Data and Key Metrics Changes - Organic growth in the landfill business exceeded 7%, driven by both price and volume increases [8][9] - The average price per ton in the landfill business was up 4.8% in the quarter [15] - Commodity prices remained stable, with recent softness in the fiber market offset by strength in plastics and aluminum [15] Company Strategy and Development Direction - The company continues to focus on internalizing more of its own tons and executing its acquisition strategy, having closed four deals year to date with approximately $50 million in annualized revenues [10][25] - The active M&A pipeline is robust, with over $500 million in revenues in various stages of engagement [26] - The company aims to enhance operational efficiency through fleet automation and route optimization [23][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the 2025 outlook, citing limited exposure to tariffs and a resilient business model [10][22] - The company is closely monitoring macroeconomic uncertainties but remains optimistic about future value creation opportunities [10][21] - Management noted that the challenging winter weather impacted roll-off volumes but expects a seasonal uptick as spring progresses [9][72] Other Important Information - The company was recognized on Forbes' 2025 America's Best Midsized Employers list, highlighting its commitment to core values and culture [7] - The company has a consolidated net leverage ratio of 2.45 times and maintains approximately $900 million of availability between excess cash and an undrawn revolver [21] Q&A Session Summary Question: How much of the landfill volume increase is due to lost construction and demolition volumes flowing back? - Management indicated that about one-third of the increase is from recapturing construction and demolition tons in the New York market, with two-thirds from efforts to internalize additional tons [30][31] Question: What is the unfilled annual landfill capacity today? - Management stated that they are running about 30% excess capacity, primarily in New York State, with opportunities to drive more volume to specific landfills [32][33] Question: Can you provide an update on the Juniper Ridge landfill gas plant ramp? - The Juniper Ridge project is online but operating at low production levels, with expectations for ramp-up throughout the year [36][38] Question: What is the expected EBITDA contribution from internalization? - Management noted that the impact of internalization on EBITDA is complex and varies by acquisition, making it difficult to provide a specific figure [75][76] Question: Why was the full year guidance not changed despite strong Q1 results? - Management explained that it is typical not to change guidance in the first quarter unless there are significant deviations from expectations [90][91]

Financial Data and Key Metrics Changes - Revenues in Q1 2025 were $417.1 million, an increase of $76.1 million or 22.3% year over year, with $57.3 million from acquisitions and $18.4 million from organic growth of 5.4% [14] - Adjusted EBITDA was $86.4 million, up $15.4 million or 21.7% year over year, with adjusted EBITDA margins at 20.7%, down 10 basis points year over year [17][18] - Adjusted net income was $12.2 million or $0.19 per diluted share, an increase of $3.5 million or about $0.04 per share [19] Business Line Data and Key Metrics Changes - Solid waste revenues increased by 25.9% year over year, with pricing up 5.6% and volume down 1.7% [14] - In the landfill business, organic growth exceeded 7% with positive contributions from both price and volume, where price was up 3.3% and tons up 3.9% [9][16] - Resource Solutions revenues were up 9.5% year over year, with national accounts up 10.9% [16] Market Data and Key Metrics Changes - Pricing momentum in the collection side of the solid waste business was positive at 5.8%, offsetting a volume decrease of 1.7% [10] - The average price per ton in the landfill business was up 4.8% in the quarter [16] - Commodity prices remained stable, with recent softness in the fiber market offset by strength in plastics and aluminum [17] Company Strategy and Development Direction - The company continues to execute its acquisition strategy, having closed four deals year to date with approximately $50 million in annualized revenues [11] - The active M&A pipeline is over $500 million in revenues in various stages of engagement, focusing on operational fit and margin improvement [25] - The company aims to internalize more of its own tons and is working on expanding fleet automation and improving employee retention [9][10] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the 2025 outlook, seeing opportunities for future value creation despite macroeconomic uncertainties [11][21] - The company has low exposure to tariffs and is closely monitoring vendor pricing related to tariffs [22] - Management noted that the first quarter was a strong start to 2025, with operational strategies working well [11][12] Other Important Information - The company was recognized on Forbes' 2025 America's Best Midsized Employers list, highlighting its core values and culture [7] - The company has approximately $900 million of availability between excess cash and its undrawn revolver, positioning it well for future growth [21][90] Q&A Session Summary Question: How much of the landfill volume increase is due to lost construction and demolition volumes flowing back? - Management indicated that about a third of the increase is from recapturing construction and demolition tons in the New York market, with two-thirds related to efforts to internalize additional tons [30][31] Question: Can you provide an update on landfill capacity for internalization? - Management stated that they are running about 30% excess capacity, primarily in New York State, with opportunities to drive more volume to specific landfills [33][34] Question: What is the expected EBITDA contribution from internalization? - Management noted that the impact of internalization is acquisition-dependent and varies based on specific transactions [78] Question: Why was full-year guidance not changed despite strong Q1 results? - Management explained that it is typical not to change guidance in the first quarter unless there are significant deviations from expectations [99][100] Question: Is there any impact on acquisition candidates due to economic uncertainty? - Management reported no significant impact on M&A activity, maintaining steady engagement with potential candidates [102]

Core Insights - Casella (CWST) reported quarterly earnings of $0.19 per share, exceeding the Zacks Consensus Estimate of $0.11 per share, and compared to a loss of $0.01 per share a year ago, representing an earnings surprise of 72.73% [1] - The company posted revenues of $417.1 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.13%, and showing an increase from $341.01 million year-over-year [2] - Casella shares have increased approximately 11% since the beginning of the year, contrasting with a decline of -5.3% in the S&P 500 [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.43 on revenues of $457.68 million, and for the current fiscal year, it is $1.21 on revenues of $1.79 billion [7] - The estimate revisions trend for Casella is favorable, leading to a Zacks Rank 1 (Strong Buy) for the stock, indicating expected outperformance in the near future [6] Industry Context - The Waste Removal Services industry, to which Casella belongs, is currently ranked in the bottom 19% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Another company in the same industry, Montrose Environmental (MEG), is expected to report a quarterly loss of $0.12 per share, reflecting a year-over-year change of -175%, with revenues projected at $167.97 million, an increase of 8.1% from the previous year [9][10]