Casella(CWST) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenues in the first quarter were $262.6 million, up$ 28.6 million or 12.2% year-over-year, with 2.5% from acquisitions and 9.7% from organic growth [124] - Adjusted EBITDA was $50.7 million in the quarter, up$ 5.1 million or 11.2% year-over-year, with $4.7 million of growth driven by improvements in the base business [11] - Solid waste adjusted EBITDA margins expanded over 220 basis points year-over-year for the quarter, reaching 25.4% [8][35] - Adjusted free cash flow started the year light at only$ 2.2 million, with capital expenditures up $5 million year-over-year [125] Business Line Data and Key Metrics Changes - Revenues in the collection line of business were up 17.1% year-over-year, with price up 8.9% and volume slightly down [34] - Revenues in the disposal line of business were up 19.3% year-over-year, with price up 9.3% and volumes up 6.4% [34] - Resource Solutions revenues were up 1.2% year-over-year, with 4% growth from acquisitions and 9.9% volume growth, but faced headwinds from lower commodity prices [34] Market Data and Key Metrics Changes - Commodity prices were down roughly 52% year-over-year, impacting the Resource Solutions segment [34] - The company reported a slight moderation in volumes from January, but overall, the first quarter showed a slight increase in volume [32][40] Company Strategy and Development Direction - The company is focused on expanding its footprint in the Northeast and Mid-Atlantic regions through strategic acquisitions, including the pending acquisition of GFL's solid waste operations [31][126] - The acquisition is expected to generate approximately$ 185 million in revenues and $43 million in EBITDA in the first 12 months, with$ 8 million in annual synergies expected within three years [126] - The company aims to enhance operational efficiencies through fleet automation and route optimization, with about 50% of the collection fleet automated [9][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year adjusted free cash flow guidance of $119 million to$ 125 million, despite some timing variances [12] - The management noted that inflationary pressures are being managed effectively, with solid waste prices up 8.8% [122] - There is optimism regarding the execution of growth strategies and the potential for long-term shareholder value creation [121][117] Other Important Information - The company has a robust acquisition pipeline with about $500 million of addressable opportunities [33] - The Boston MRF facility is undergoing a retrofit, expected to improve performance significantly once operational [22][105] Q&A Session Summary Question: How will the company prioritize assets in the new Mid-Atlantic region post-acquisition? - Management indicated a balanced approach, focusing on both legacy Northeast markets and new Mid-Atlantic opportunities [15] Question: What is the outlook on volume performance and any potential slowdown? - Management noted slight softness at the end of the previous year but did not see significant concerns moving forward, with a slight increase in volume during the first quarter [40][41] Question: Can you elaborate on the cash tax shielding benefits from the GFL acquisition? - The acquisition is expected to yield over$ 130 million in cash tax savings over a multiyear period, enhancing the company's financial position [126][109] Question: What are the expected capital expenditures for the new footprint? - Initial investments are planned for the first year, but the fleet appears to be in good shape, minimizing significant capital impacts on free cash flow [82] Question: How does the company view the disposal capacity in Pennsylvania? - Management expressed confidence in the significant disposal capacity available in Pennsylvania, alleviating concerns about capacity constraints [85]