Casella(CWST) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 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 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][37] - The company recorded a probable liability exceeding $1 million for potential penalties related to a Letter of Deficiency from the NHDES[55] - The NHDES denied a permit for new landfill capacity, impacting $12.7 million in capitalized project costs as the company challenges the decision[56] - Certain operations were reclassified between regional segments, with prior period data restated for comparability[85] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Revenue grew 22.3% to $417.1 million, driven by acquisitions, while operating income declined due to higher costs Results of Operations 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] Segment Reporting 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 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] - Net cash provided by operating activities increased by $42.4 million year-over-year, reaching $50.1 million in Q1 2025[144][145] - Cash used for acquisitions was $103.6 million, and capital expenditures increased to $55.5 million in Q1 2025[146][147] - 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] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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] - Recycled material commodity price fluctuations are mitigated through strategies like floating fees and revenue sharing[167] - Interest rate risk on variable-rate debt is managed using derivative instruments designated as cash flow hedges[169] ITEM 4. CONTROLS AND PROCEDURES 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] - No material changes to the company's internal control over financial reporting occurred during the first quarter of 2025[172] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 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] - The company has set a disclosure threshold of $1,000,000 for potential monetary sanctions in environmental proceedings[176] ITEM 1A. RISK FACTORS 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] ITEM 5. OTHER INFORMATION 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] ITEM 6. EXHIBITS 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]