Casella Waste Systems Inc at Oppenheimer Industrial Growth Conference (Virtual) Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Well, great. Let me actually start with this theme of the leadership succession. John talked on the earnings call about how this was years in the making. So I want to ask two questions here. One, how do we think about your roles functionally changing? And more broadly, how are you -- how is Casella building a culture of professional growth in the company?

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Well, I'm going to circle back to that, Ned, and thank you for that, a little bit later in the call. I want to ask you a question about technology and sustainability. If you think about, historically, the industry, particularly waste collection being fairly fragmented with lower barriers to entry relative to disposal, in the last few years, we've seen increasingly how technology and sustainability could be drivers of competitive advantage, including on the collection side. So in your markets, what are some of the shifts you would highlight in terms of what products and services your customers are asking for and are willing to pay for, and how you are developing those offerings?

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : That's very helpful. Sticking with the technology front, I mean, on the call -- on the last call, you mentioned continuing to invest in automated trucks, route conversion, route optimization. How would you characterize how fast the technologies available to the industry are improving in that regard? Has it been gradual, or any step changes? Are there any examples you might call out where -- because the ROI has been longitudinally better now versus a few years ago. Is it to the extent that feeds into what you're talking about here in terms of sustainability offerings, it could be impactful?

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : How much remaining opportunity do you have in terms of bringing more of the rear-loader trucks over to ASL? I'm sure you operated in some markets where it might be a little bit logistically tough to do that, but it seems like there's an awful lot of improvement not just associated with cost, but also in terms of collection and customer efficiency associated with it.

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Yeah. And I should know this at this point, maybe you do, but just seems like there's some maybe efficiencies in terms of waste reduction and customer behavior when you go to a carting system as well here in New York City, where we're just putting our bags out at the curb; and it really doesn't matter how much we put out there, they're going to pick it up. When you go to carts, I imagine there's a significant improvement in waste reduction that will be attractive to municipalities.

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : That's really interesting. Yeah, just enabling that good behavior and making sure there's the infrastructure there to support can make an awful lot of difference. I wanted to get into pricing, M&A, and other areas, but let me just actually stick with a last question around recycling and automation technology first. We are seeing a number of peers spending more around MRF automation, greenfield investments, forward integration with the plastics. How do you think about priorities for your investment in the recycling space? What are the potential savings to you by going to more automated MRFs?

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Well, that's a very helpful color. I guess turning to solid waste trends. You had the pricing up, I think, 5.6% in the quarter, collection price up more than that, landfill price per ton up more than that; pricing seems to get better every month in the quarter. So where do we go from here? Are we going to run into peak price growth just given the comps? How long do you see these levels of mid- to high-single digit price sticking?

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Yeah. And to clarify, are a lot of those contract resets based off of look backs 12 months prior, or even [more rolling]? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 04, 2022 / 4:45PM, CWST.OQ - Casella Waste Systems Inc at Oppenheimer Industrial Growth Conference (Virtual)

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Okay. Okay. Yeah.

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Yeah. And I don't mean to editorialize for a second, but I think we are seeing broad-based investor questions around margin trends. And the reality is the growth algorithm for this industry has always been you will get the price, right, and you will get the margin expansion. There may be some lag, but -- just elements of the restricted portion of the business having a catch-up effect. That is always part of how these companies have operated, and it doesn't really seem to be any different now except that inflation is just running so much hotter.

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Yeah. And I think your core inflation ex-fuel was 4.3% in the quarter, and it looked like a lot of the issues were one-time in nature. You are improving, you were up 20 bps I think year-over-year in March. And some of the peers, I would say, have been running significantly higher than that core inflation you posted. So how do you see inflation trending over the course of the year? And what can you do to control it internally? You mentioned the fuel surcharges. But just how do we think about offsets?

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Right, right. So you mentioned M&A. Just looking at the outlook here, you've done six deals, $30 million annualized revenues here to date, talk about the pipeline. How do you see the business environment impacting the pace of M&As? Certainly, it's a very challenging operating environment, but curious to see what you are looking at on your end.

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Very helpful. Thanks. Just a quick question on the balance sheet. You're at 70% fixed debt, correct me if I'm wrong. Do you feel comfortable with that ratio given we are starting to see rates really climb here a little bit, or do you move to fixed out even more?

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : And I would also imagine, feel free to comment, that credit spreads relative to whatever is happening in the market might be a little bit better than in the past just given how resilient the company and the industry was during COVID. I mean, it's -- the proof is all there. So hopefully, you will see that when you go to market next time.

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Okay. So the last question I have before we can take some Q&A is really coming closer and closer to the first question, and it's about technology and automation and people. Some of the players in the industry have been mapping a strategy to structurally reduce headcount through technology and automation. How do you think about your labor needs to grow the business and where technology can reduce labor intensity? And then at the same time, how do you drive employee engagement and professional growth?

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Okay. Perfect, Ned. We've got times for just a couple of questions, so let me get a few here. Number one, you talked about regulatory requirements being key to the market to participate in. Can you comment on PFAS and to what extent that is a driver of your future business strategy?

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Very good. Thanks, Ned. Next one, what's the company doing to help improve plastic's recycling rates?

Question: Noah Kaye - Oppenheimer & Co. Inc. - Analyst : Okay. That's great color. We have to stop there, but this was a terrific discussion. And I certainly encourage investors watching this to follow up with us and to follow-up with the company, certainly with Charlie, in particular, in his role. And we hope everyone has a great rest of the conference, a great day, and we thank you for taking the time. Thank you, gentlemen.