Casella Waste Systems Inc Q3 2024 Earnings Call Transcript

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

Question: Trevor Romeo - William Blair & Company - Analyst : Hi, good morning. Thanks so much for taking the questions. First one, I was just wanted to ask for a progress update on some of the landfill development and expansion initiatives. John, I think you mentioned the Juniper Ridge Landfill. Good to hear you received some support from the state there. Just wondering if you had thoughts on kind of the size and expansion of what the timeline could look like there? And then on McKean, thanks for the update there towards the end. Just curious how that ramp could look like for tons as we head into 2025 and beyond?

Question: Trevor Romeo - William Blair & Company - Analyst : That's great. Thank. Thank you both for that. And then just wanted to ask for maybe a little more detail on the Royal acquisition, one from a strategic perspective, can you just talk about the importance of extending into the Middle and Lower Hudson Valley? And then from a financial perspective, just any thoughts on kind of the EBITDA you'd expect on that $90 million of revenue and any synergy potential? Thanks.

Question: Trevor Romeo - William Blair & Company - Analyst : Okay. That's all great. Thanks so much.

Question: Tyler Brown - Raymond James - Analyst : Hey, good morning guys.

Question: Tyler Brown - Raymond James - Analyst : Hey, Brad, I think you did a good job explaining the guide, but I just want to kind of be crystal clear. So effectively the slightly weaker Q3, again, we had these insurance accruals that were maybe unexpected largely offset the Royal deal. So for all intents and purposes that is why the guide really doesn't change, just to be clear.

Question: Tyler Brown - Raymond James - Analyst : Okay. That's fair and helpful. I want to come back to the C&D issues. I know that these are not new. I think you mentioned it was a $2 million headwind in the quarter. I think it's been a headwind basically all year. So has that been as much as an $8 million to $10 million EBITDA drag? And does that site close on [12/31]? And I get that you probably won't get it all back in year one, but won't that be a positive delta into next year or should be?

Question: Tyler Brown - Raymond James - Analyst : Okay. No, super helpful. And I know you guys are going to put obviously a much finer point on '25, call it 90 days. But there are a lot of moving pieces here. So if I just think through some of these, I mean, you've got organic growth, you've got Willimantic that goes from a negative to a positive. We just talked about C&D. Maybe McKean ramps up, though that's somewhat debatable. It sounds like you've got internalization opportunities. These insurance accruals don't recur. You got a big rollover impact of M&A. So there's a lot of things going on. I mean are some of those the key pieces to the bridge or is there anything else that I should be thinking about? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 2:00PM, CWST.OQ - Q3 2024 Casella Waste Systems Inc Earnings Call

Question: Tyler Brown - Raymond James - Analyst : Yes. Okay, perfect. My last one here Ned, can you kind of go back over all the internalization numbers? So I thought you said that you are buying some long haul tractors for something like 100,000, 125,000 tons via truck. But then you also mentioned that you've got three rail serve transfer stations that are sending waste elsewhere. So can you kind of just talk big picture because this could be a big and that's not I know it's probably not just a '25, it's a multi-year story. But can you just talk a little bit more about that and just maybe again put a little more shape around it? Thank you.

Question: Tyler Brown - Raymond James - Analyst : Yeah, perfect. Okay. Thank you so much.

Question: Adam Bubes - Goldman Sachs &Company, Inc - Analyst : Hi, good morning. I was wondering if you could just provide a little more color on the insurance expense accruals related to the two discrete events. What is that exactly related to? And does that roll off next quarter?

Question: Adam Bubes - Goldman Sachs &Company, Inc - Analyst : Got it. Understood and hoping for the best for everyone involved there. And then on the 2025 outlook, there's a lot of moving pieces in terms of the margin bridge shifting from bad guys to good guys when you think about Willimantic, Leachate headwinds this year, C&D volumes potentially returning. How are you thinking about the early puts and takes on potential for an outsized 2025 margin expansion year?

Question: Adam Bubes - Goldman Sachs &Company, Inc - Analyst : Got it. And then last one from me, really high level of M&A contribution flowing through the portfolio. Great to see that level of growth. Is it prudent to expect a pause here in M&A spend over the next couple of quarters as you integrate over $200 million annualized revenues acquired this year?

Question: Adam Bubes - Goldman Sachs &Company, Inc - Analyst : Great, thanks so much.

Question: Timna Tanners - Wolfe Research - Analyst : Hey, good morning. I wanted to follow-up on the M&A discussion. I thought I heard in your preliminary remarks that you had by Carter, sounded like you were implying up to $1 billion or so, I want to check in that. If that were the case, would that be an amount up to which you wouldn't need to tap debt or equity markets to do any of those tuck-ins or other deals up to that amount?

Question: Timna Tanners - Wolfe Research - Analyst : Okay. Helpful. And then also along those lines, I know a lot has been said about the election. I don't want to beat it dead horse there. But I think with regard to M&A, there's some thought that there may be some ease in FTC approach or replacement of that head. Is there has that changed much for you all in terms of how you look at M&A? Has that been a constraint?

Question: Timna Tanners - Wolfe Research - Analyst : Got it. That's helpful color. Thank you again.

Question: Stephanie Moore - Jefferies - Analyst : Hi, good morning. Thank you. I wanted to touch a little bit about the synergy realization from prior deals, maybe specifically if you wanted to touch on some of the deals last year, GSL and Twin Bridges, and then kind of what you've seen early on from the synergy capture or potential for synergy capture from deals announced this year? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 2:00PM, CWST.OQ - Q3 2024 Casella Waste Systems Inc Earnings Call

Question: Stephanie Moore - Jefferies - Analyst : Great, that's helpful, helpful color. And then I just had one follow-up on the 2025 high level guidance. I think you called out margin expansion across all lines of business. So if you think about the margin drivers for next year, clearly the pricing commentary looks strong. So we should see another year of pricing in excess of inflation and the benefit there. But what are the other major drivers as we think of next year? Thanks.

Question: Stephanie Moore - Jefferies - Analyst : Understood. Thank you so much.

Question: Brian Butler - Stifel Nicolaus and Company, Incorporated - Analyst : Hi, good morning. Thanks for taking the question.

Question: Brian Butler - Stifel Nicolaus and Company, Incorporated - Analyst : The first one, can we go back to the landfill closure and kind of that happening at the end of this year? I mean that 150,000 tons you're down. I mean what would keep that from coming back I guess? Is there really any other place for that volume to go?

Question: Brian Butler - Stifel Nicolaus and Company, Incorporated - Analyst : And that 60%, 70% that maybe comments back, is that part of what's built into the 12% to 15% EBITDA growth for 25% I mean, how much is in there I guess, if any?

Question: Brian Butler - Stifel Nicolaus and Company, Incorporated - Analyst : Okay. And then let's circle back again just on M&A. Maybe a little bit more color maybe on the $600 million pipeline. What's kind of the makeup from a deal perspective on size? And then maybe just your thoughts on how competitive has the M&A market been? I mean, this has been a huge year in 2024. Is that carrying into 2025?

Question: Brian Butler - Stifel Nicolaus and Company, Incorporated - Analyst : Okay, great color. And then last one for me just with the acquisition -- the post-acquisition development capital spending, does that come down in 25%, now that we are kind of through the GFL assets in the Twin Bridges?

Question: Brian Butler - Stifel Nicolaus and Company, Incorporated - Analyst : Okay, great. Thanks for taking the questions. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 31, 2024 / 2:00PM, CWST.OQ - Q3 2024 Casella Waste Systems Inc Earnings Call

Question: Michael Feniger - BofA Global Research - Analyst : Yes. Hey, everyone. Thanks for squeezing me in. I'm just curious on some of the M&A. We've seen some public players announce some acquisitions in New York and the Northeast market as well. I'm just curious if you're seeing more out there in competition in terms of your M&A pipeline. Is it getting more competitive to these assets or on the flip side, is it are we seeing some more discipline out there as we are starting to see some more announcements of the Northeast market from some of the public peers?

Question: Michael Feniger - BofA Global Research - Analyst : Okay. Great to know. And just I am curious I know there is a lot of noise in moving parts. But I'm just curious what you're seeing for your underlying cost inflation in the third quarter as you move into the fourth quarter? Obviously, there's labor, there's a lot of moving pieces, but how you think that kind of sets up just bigger picture what the cost budget kind of looks like for 2025 and how you're thinking about some of the pricing to offset that? Thanks, everyone.