- Updated guidance: Casella Waste Systems announced it was updating guidance ranges, notably its revenue guidance. CEO John Casella said the company’s overall “strong operation execution” and its recent acquisition of Northstar Pulp & Paper helped inform the shift. He expects pricing and cost recovery fees to outpace inflation for the rest of the year, leading to year-over-year margin expansion.
- Economic outlook: Revenue grew in the first quarter this year, which the company says is driven by the rollover impact from its recent acquisitions and some newly closed deals, plus positive collection and disposal pricing. Its Resource Solutions department revenues were up 30% year over year due to higher prices and volumes, said Ned Coletta, senior vice president and chief financial officer. Combined recycled commodity prices were up 3.8% from last year, particularly for cardboard, metals and mixed paper, he said during the company's earnings call.
- Managing inflation: John Casella also outlined actions the company is taking to deal with the “historically high inflationary environment.” The company adjusted its 2022 pricing programs, including calling for a 6.5% increase in collection pricing and a 5.6% increase in solid waste pricing for the quarter. The company also aims to mitigate rising fuel costs through a floating monthly recovery fee. “We've never quite seen a market like this with diesel rising as fast as it did, so our fee works well,” Coletta said.
- Acquisitions strategy: Along with the Northstar deal, Casella reported five other year-to-date acquisitions, worth $30 million in annualized revenues, and has seen its pipeline of potential deals grow to $500 million. In response to an analyst question referencing WM's recent comments on wanting to be more conservative with M&A spending, Casella said his company won’t pursue “growth for the sake of growth, but growth for the sake of creating and growing free cash flow.” However, ongoing labor challenges in the sector and other economic factors could create future business opportunities, and he said "folks that we never thought would really be interested in monetizing are really coming into the market.”
- Facility updates: A key facility upgrade, the modernization of its Boston recycling facility, is delayed until 2023 in part because of ongoing supply chain challenges. However, Casella said the delay won’t have an operating impact in 2022. Casella also experienced other construction delays at its landfill in Ontario County, New York.
- Landfill operations: Casella had to temporarily close operations at several landfills this quarter due to high winds or heavy snowfall that made it unsafe to work. This created a “slow start to the year” in terms of landfill volume, which is off about 3.7% from last year's first quarter, said President and Chief Operating Officer Edwin Johnson. However, the company still expects to hit its annual volume targets and overall landfill pricing was up 4.2% year over year.
- Leadership changes: Johnson announced he will retire on June 30. Coletta will become president on July 1, while also retaining his role as CFO. Sean Steves, the current senior vice president of operations, will become senior vice president and chief operating officer of solid waste operations, and Jason Mead, currently the vice president of finance, will become senior vice president of finance and treasurer.
Casella forecasts $1B in annual revenue, growing M&A pipeline
The Northeastern company reported a positive quarter despite facility construction setbacks, inflation issues and lower landfill volumes. It also previewed $500 million in acquisition potential.
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