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By the numbers
Q3 net income: $18.2M
Down 19.8% year over year, with Casella noting impact in part from a $2.4 million increase in expenses from acquisition activities
Adjusted EBITDA: $89.6M
Up 19.4% year over year
- Financial picture: “This quarter marks a pivotal and exciting time in the company's history as we execute against our growth strategy,” said CEO John Casella during a Thursday earnings call, adding that positive momentum from revenue growth and pricing strategies to stay above inflation will carry the company into a strong Q4. He highlighted revenue growth, particularly the roll-over impact from acquisitions closed in previous periods, and credited the company’s collection and disposal pricing strategy to stay above inflation pressures, he said. The company also announced it has hired a new CFO, Brad Helgeson, who previously worked for Covanta. Ned Coletta will remain president.
- M&A activity: Casella closed on three acquisitions in Q3, the most notable of which is the $219 million acquisition of Twin Bridges in September. It also completed two tuck-ins in “adjacent markets in the Northeast.”
- Integration: Casella is now working on integration efforts from these acquisitions. It’s also still working on integrating assets from a $525 million deal with GFL Environmental in July. Those assets in Pennsylvania, Delaware and Maryland “are on track to hit or exceed pro forma, operations and service are excellent, and we are quickly working to establish our culture and core values,” he said. Overall, Casella has nearly 1,000 new team members from its recent acquisitions. Looking ahead, the company is still “building our sales pipeline as we continue to work on acquisition opportunities in this market,” John Casella said.
- Volumes: Landfill tons were down 10.1%, while Coletta said special waste and contaminated soils volumes were down 35%. MSW and C&D waste volumes, which are the majority of the volumes Casella accepts at its landfills, stayed on track for the quarter.
- Special waste: Volumes in this category were particularly weak in September, but started to recover by October as several new projects began. “We have experienced project delays as customers continue to gauge the economy, and when to initiate projects,” said Coletta. The company says it now has a “solid” special waste pipeline. Other companies have reported similar challenges with special waste volumes during recent earnings calls.
- Pricing: Overall solid waste revenues were up 28.9% year over year. Solid waste pricing was up 6.9% for the quarter, while landfill pricing was up 7.4% in the quarter “as we work to stay ahead of higher capital cost items at our site and ever increasing regulatory compliance,” Casella said.
- Commodities: Casella reported higher commodity volumes for the quarter, due mainly to its Boston MRF coming back online in June. However, lackluster commodity prices partially offset those gains. Average commodity revenue was down about 28% year over year due to lower values for cardboard and mixed paper, as well as plastics and metal, Coletta said. Declining commodity prices were partially offset by a growth in processing fees.
- Updated outlook: Casella has updated 2023 guidance in some areas, which John Casella said accounts for positive acquisition contributions and weaker landfill volumes. The company now expects revenues between $1.255 billion and $1.28 billion, up from its previous $1.24 billion to $1.265 billion range. It estimates adjusted earnings before interest, taxes, depreciation and amortization to be between $292 million and $298 million, up from the $289 to and $295 million range. Net income is expected to be between $33 million and $39 million, down from the $41 million to $47 million range, due to recent acquisition activity.
