Casella Waste Systems Inc Q4 2024 Earnings Call Transcript

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

Question: Trevor Romeo - William Blair - Analyst : First one actually maybe just a follow-up on the M&A point, Ned. And kind of just thinking about the opportunity set and how 2025 potentially shape up for M&A. You had some really strong activity in the last 2 years already closed 3 deals in '25. It sounds like the pipeline is maybe a bit higher than you mentioned last quarter. I was just wondering if you could give us an update on what you're hearing from your discussions as far as willingness to sell availability of targets and then kind of on the buyer side, are you seeing any changes in competition for assets. Just kind of how you're expecting M&A to shape up this year?

Question: Trevor Romeo - William Blair - Analyst : Great. And then kind of on a similar theme, I guess. I believe, at least kind of in the reporting that was out there, the acquisition you made in Eastern Massachusetts, you acquired a MRF that -- it sounds like it's pretty close to the Charles Dow merch you already have in Boston. I was just kind of wondering if you could talk about your plans for that facility and what kind of synergy opportunities you see there with your existing business?

Question: Trevor Romeo - William Blair - Analyst : Great. And then maybe just 1 more quick one for me, if you don't mind. Just wondering if you could kind of give an update on the Brookhaven situation in New York. I think we talked about the impending close at the end of 2024. Now that we're past that point. Can you kind of just give us an update on where things stand in the market and if you're still expecting a good portion of those volumes to come back to Casella in '25.

Question: Patrick Brown - Raymond James & Associates, Inc. - Analyst : John, 50 years. Long time, could have been in the hotel business. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 3:00PM, CWST.OQ - Q4 2024 Casella Waste Systems Inc Earnings Call

Question: Patrick Brown - Raymond James & Associates, Inc. - Analyst : But hey, just Brad, real quick, can you possibly help us with Q1? I'm just wondering if all this weather is having an impact?

Question: Patrick Brown - Raymond James & Associates, Inc. - Analyst : Okay. I know you probably enjoy that. Can we -- you guys didn't mention it in the prepared remarks, but can we talk about Ontario basically, what kind of happened there? How would the wind down of that operations played out, where those tons get directed?

Question: Patrick Brown - Raymond James & Associates, Inc. - Analyst : Yes. Okay. So can we talk a little bit more kind of in that same vein, it sounds like there is a sizable opportunity to internalize tons. I think you mentioned 4 markets. It sounds like you made headway in '24, but I'm a little unclear, is that kind of already in the numbers? Is there more incremental benefit? Is that an EBITDA benefit? Or is it just a defensive play. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 3:00PM, CWST.OQ - Q4 2024 Casella Waste Systems Inc Earnings Call

Question: Patrick Brown - Raymond James & Associates, Inc. - Analyst : Okay. So then I'll kind of bring it back to the bridge, Brad. So I think, let's call it the bridge of $60 million of EBITDA year-to-year. Did I hear you right, $30 million to $35 million of that is M&A. Is that right?

Question: Patrick Brown - Raymond James & Associates, Inc. - Analyst : And I think you said the other part would represent roughly 7% organic growth. But it seems like you've got some positive idiosyncratic things, will Willamantic, internalization, Brocade and closure, et cetera. Now it sounds like you're also spending money on technology, and we'll talk about that in a second. But what are those pieces? Because it feels like that's pretty conservative with those idiosyncratic benefits. Does that make sense?

Question: Patrick Brown - Raymond James & Associates, Inc. - Analyst : Okay. Perfect. And what is the technology spend, net? Are you -- what's going on there?

Question: Patrick Brown - Raymond James & Associates, Inc. - Analyst : Okay. Perfect. And then my last 1 -- and Brad, you talked about it a little bit. I do get this question time to time around your NOL position and your cash tax paying position. So did you say that you would be a $5 million cash taxpayer in fiscal '25. But that number could.

Question: Patrick Brown - Raymond James & Associates, Inc. - Analyst : Okay, that's right. So that number, though, on the federal side could go up substantially in '26? Or is it just too early and you guys will update a floater?

Question: Patrick Brown - Raymond James & Associates, Inc. - Analyst : Okay. Yes. Deal structure matters. Okay. Cool. Appreciate it.

Question: Adam Bubes - Goldman Sachs Group, Inc. - Analyst : Given the acquisitions in the second half of 2024 and year-to-date, can you just sort of update us on the expanded collection fleet automation opportunity, how much runway is there today now that we've sort of regenerated that opportunity? And I think looking back to 2021, direct labor costs were 150 basis points lower as a percent of sales. Is that sort of a good way to contextualize the potential margin opportunity from these initiatives?

Question: Adam Bubes - Goldman Sachs Group, Inc. - Analyst : Terrific. And then revisiting the internalization opportunity, can you just help us think about the economics in terms of incremental travel costs versus tip fee savings? And what's the magnitude of incremental opportunities that you're looking at for internalization? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 13, 2025 / 3:00PM, CWST.OQ - Q4 2024 Casella Waste Systems Inc Earnings Call

Question: Adam Bubes - Goldman Sachs Group, Inc. - Analyst : And then last one for me. I just want to talk about your national accounts business for a moment. It continues to grow really nicely. I think up high single digits in 2025. Can you just talk about how you think about the growth algorithm in that business going forward and the magnitude of cross-selling efforts on recently acquired assets.

Question: Brian Butler - Stifel, Nicolaus & Company, Incorporated - Analyst : Just the first one, just when you look at like the price/cost spread, it looks positive going into 2025. Maybe we could talk about where internal inflation was in the fourth quarter and kind of what's built into the 2025 outlook.

Question: Brian Butler - Stifel, Nicolaus & Company, Incorporated - Analyst : Okay. Great. And then considering the M&A levels you guys have had. When you think about the flat to down 1% volume outlook for '25, how much of that is shedding from some of the acquired assets or customers that are just kind of underperforming versus there's any other weakness there?

Question: Brian Butler - Stifel, Nicolaus & Company, Incorporated - Analyst : All right. Great. And then one last one. Can you talk maybe about how you're thinking about PFAS at the landfill and kind of in handling that, especially in New England that's very regulatory focused?

Question: Tony Bancroft - Gamco Investors - Analyst : Well, done. You guys have just grown rapidly in these last few years, and you've really done a great job of integrating your acquisitions. And I sort of -- I guess, I asked this before, but just any thoughts on potential further large maybe transformational M&A that you could do? Would you want to do? Is there a potential funnel of that out there? Just maybe you could give us any updated thoughts just based on all of your success recently.