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Casella Waste Systems, inc (CWST) Q3 2021 Earnings Call Transcript | The Motley Fool


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Casella Waste Systems, inc (NASDAQ:CWST)
Q3 2021 Earnings Call
Oct 29, 2021, 10:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good day, and thank you for standing by and welcome to Casella Waste Systems Inc Q3 2021 Conference Call. [Operator Instructions] I would now like to hand the conference over to Joe Fusco, VP of Communications. Please go ahead.

Joseph FuscoVice President, Communications

Thank you for joining us this morning, and welcome. This is our 97th Earnings Call. Or, if you’ve been binge watching us, this is Season 24, Episode 3. With us today are John Casella, Chairman and Chief Executive Officer of Casella Waste Systems; Ed Johnson, our President and Chief Operating Officer; Ned Coletta, our Senior Vice President and Chief Financial Officer; and Jason Mead, our Vice President of Finance. Our recurring character is that train whistle which has joined us as well today.

Today we will be discussing our 2021 third quarter results. These results were released yesterday afternoon along with a brief review of those results and an update on the Company’s activities and business environment. We will be answering your questions as well. But first, as you know, I must remind everyone that various remarks that we may 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 those forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent annual report on 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 as of 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 of any date subsequent to today.

Also, during this call we will be referring to non-GAAP financial measures. These non-GAAP measures are not 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 available in the appendix to our investor slide presentation which is available in the Investors section of our website at ir.casella.com. And with that, I’ll turn it over to John Casella who’ll begin today’s discussion.

John W. CasellaChairman, Chief Executive Officer & Secretary

Thanks, Joe. Good morning, everyone and welcome to our third quarter 2021 conference call. We are very pleased with our performance and continue to execute — execution against our core strategies. In the third quarter, revenues and adjusted EBITDA were both up over 19% year-over-year. We also continue to drive adjusted free cash flow growth, and through the third quarter adjusted free cash flow has increased over 37% compared to the same period in 2020.

Our core solid waste and resource solutions businesses are performing at high levels, as we continue to advance key pricing and operational strategies which help ensure we stay ahead of the inflationary costs related to labor disposal containers and equipment. At the same time, we’re growing our business meaningful — meaningfully in a disciplined manner through strategic acquisitions and select development projects. So far, this year we’ve closed 9 acquisitions with $86 million of annualized revenue. Most notably, this includes Willimantic acquisition in Connecticut, which we announced in July. Since then we’ve acquired four additional businesses within our operating footprint including two transfer stations in the Buffalo market. Overall, the acquisition pipeline is robust and we’re actively working on several deals in various phases.

Now a brief update on the recent highlights performance against our key strategies. Starting with disposal. We continue to see modest volume recovery. Landfill tonnages were up slightly in the third quarter compared to the same period last year. The volumes have not returned to pre-pandemic levels, this is almost entirely related to New York City and the surrounding area, with lower economic activity levels paired with labor stresses on third-party truckers that move the volume to our sites. That said, third-party volumes were generally in line with our expectations. Year-to-date, we’ve advanced 3.8% landfill price. As volumes come back into the system and the Northeast disposal capacity continues to tighten, we will have further opportunity to advance our pricing programs. Our operating programs at our disposal sites also continue to drive value. Ed and the team have done a nice job here improving key operating metrics and improving performance. From an R&D perspective, we have two projects in development that are slated to come online over the next year. And in both cases, third parties are deploying the capital and we will benefit from the sale of landfill gas to that third-party.

Moving to the collection business. Collection operations continue to perform very well. Ed and Ned will drive into some of the pricing inflation and volume trends. I wanted to discuss my commentary on people, our workforce given the unique environment that we’re in. From a labor perspective, our continued investment into our human resources, technology programs has certainly helped to mitigate some of the challenges. Over the past several years we have reset our labor rates in many markets, provided improved transparency through our career paths initiatives and then have significantly invested in training, including our new CDL school. The outcome of these initiatives has helped to bring improved stability across our workforce while lowering turnover and improving retention. This has benefited us greatly through the past several months from a labor perspective. Ultimately, we have been able to maintain high levels of service excellence and accuracy during a challenging labor environment. And also, I should mention the fact that we are focused so highly on keeping our people safe through the pandemic and rewarding them for their continued dedication to our customers and the company, because of that has without doubt enhanced our culture.

Our continued investment in route optimization and automation has really helped us through this period. The work is Sean Steve’s and his team are doing is really outstanding in terms of our ability to optimize our routes and fully automate it and bring automation to those areas, particularly from an acquisition standpoint where we have a nice opportunity to really gain efficiencies. We have gained labor efficiencies while widening our labor pool due to the increase in automation across the business. Simultaneously, we’ve improved the quality of our fleet, which has resulted in lower maintenance costs while improving the sentiment of our drivers and mechanics.

Next, the resource solutions business. Both our recycling processing operations and our non-core business units are performing very well. We continue to make, return driven investment into our recycling processing facilities as we aim to gain further operational efficiencies while improving the quality of our end product. We’ve created a balanced business model that is economically and environmentally sustainable. As recycling commodity prices have increased, we’ve been able to share in the upside with our customers through lower tipping fees, a lower SRA fee and in case of some materials, a higher rebate. While we also benefited from…


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