Casella(US:CWST)2023-11-03 15:30Financial Data and Key Metrics Changes - Revenues in Q3 2023 were $352.7 million, an increase of $57.5 million or 19.5% year-over-year, with 18.9% of this change driven by acquisitions [50] - Adjusted EBITDA was $89.6 million, up $14.6 million year-over-year, with $14 million of the growth derived from acquisitions [24] - Adjusted EBITDA margins were 25.4% for the quarter, flat year-over-year, with consolidated price as a percentage of total revenues up 5.8% [25][26] Business Line Data and Key Metrics Changes - Solid waste revenues increased by 28.9% year-over-year, with pricing up 6.9% and volumes slightly down by 3.3% [50] - Collection line revenues were up 43% year-over-year, with pricing up 7.6% and volumes down 1.9% [50] - Disposal line revenues were up 0.3% year-over-year, with landfill pricing up 7.4% and landfill tons down 10.1% [51] Market Data and Key Metrics Changes - Special waste and contaminated soils volumes were down 35% year-over-year due to lower regional activity levels [51] - Resource Solutions revenues decreased by 5.9% year-over-year, with average commodity revenue per ton down approximately 28% [52] - The company expects special waste volumes to decline both sequentially and year-over-year in Q4 [52] Company Strategy and Development Direction - The company is focused on integrating recent acquisitions and enhancing operational efficiency through flexible pricing programs and ongoing fleet automation [46][49] - The acquisition pipeline remains robust, with approximately $500 million of annualized revenue from Northeast operations and $400 million from Mid-Atlantic operations [20] - The company aims to continue growing margins and cash flows into 2024, with expectations of 14% rollover revenue growth from acquisitions completed in 2023 [60] Management's Comments on Operating Environment and Future Outlook - Management noted that while special waste volumes have been weak, MSW and C&D volumes are tracking in line with budgeted and historic levels [8] - The company anticipates continued operating cash flow growth, although inflationary pressures on capital expenditures and higher interest rates may offset this growth [31] - Management expressed optimism about the performance of the company and the larger platform being built, with updated guidance for 2023 reflecting a conservative view of special waste for Q4 [43][58] Other Important Information - The company completed three acquisitions in the quarter, enhancing its operational footprint in the Northeast [41] - Adjusted free cash flow for the year-to-date through September was $96 million, up $14.3 million year-over-year [29] - The company has maintained significant liquidity and balance sheet flexibility to support M&A and organic development [57] Q&A Session Summary Question: Can you help us think about the different moving pieces from Q3 to Q4 that might be pushing margins ahead of the normal seasonal cadence? - Management noted that landfill tonnages had some of the largest days in October, indicating slight changes to business seasonality [33] Question: Can you walk me through if I'm missing any moving pieces regarding margins? - Management highlighted that operational efficiency programs are scheduled for next year, which could expand margins [34] Question: What is the status of the RNG facilities expected to come online? - Management indicated that the second project is delayed and expected to come online in the first half of 2024 [65] Question: Was weather an EBITDA headwind in the quarter? - Management stated that the impact was somewhat neutral, with more tons to the landfill from storm damage offset by a lack of commercial activity [66] Question: How do you view the interest rate environment and its impact on smaller regional players? - Management noted that smaller companies are facing challenges due to higher costs of capital, which may accelerate their desire to sell [124]