By the numbers: Q3 2024
Revenue: $411.6M
Up 16.7% year over year
Net income: $5.8M
Down 68.2% compared with the previous year, due mainly to unexpected landfill closure expenses
Adjusted EBITDA: $102.9M
Up 14.9% year over year.
- Financial picture: During a Thursday earnings call, CEO John Casella applauded the company’s first-ever milestone of reaching $400 million in revenues and more than $100 million in adjusted earnings before interest, depreciation and amortization in a quarter. Yet Casella also described the quarter as “mixed” due to headwinds from unexpected expenses and insurance payments, along with lower landfill volumes.
- Royal acquisition: Casella completed the acquisition of Royal Carting and Welsh Sanitation on October 1. President Ned Coletta reiterated that the deal helps the company expand into New York’s Hudson Valley area and helps it drive landfill internalization and organic sales growth. Over the next few years, Casella plans to focus on the companies’ core operating programs, route optimization and automation to achieve greater EBITDA margins.
- M&A strategy: Casella’s six acquisitions this year, including Whitetail Disposal, have brought in about $200 million in annualized revenues, Coletta said. The M&A pipeline “continues to be very active, with roughly $600 million of revenues across a number of excellent opportunities in various stages of diligence,” mainly with smaller tuck-ins including those meant to fit into the company’s mid-Atlantic footprint, Coletta said.
- Company integration: Casella will be “selective” on M&A deals in the near future, mainly companies with the right culture or “strategic staff,” Coletta said. John Casella added that the goal for the rest of 2024 will be focused mainly on integrating the businesses the company purchased this year.
- Landfill volumes: Casella reported a $2 million headwind from lower landfill volumes compared with this time last year. C&D volumes were down 16% year over year, mainly due to ripple effects from the anticipated Brookhaven Landfill closure in New York at the end of the year. Executives expect C&D volumes to recover next year. MSW volumes were flat, while special waste was down slightly, said CFO Brad Helgeson.
- Unexpected insurance expenses: Results were affected by accruals related to two different incidents that caused injuries at Casella locations in Q3, including one in East Montpelier, Vermont. Those events impacted adjusted EBITDA by over $3 million in the quarter, Casella said.
- Southbridge Landfill closure expenses: Casella reported an $8.5 million increase in expenses related to post-closure monitoring costs at the landfill in Massachusetts. The charges were “more onerous than expected” due to increased requirements in the final closure permit such as increased well monitoring, Helgeson said.
- McKean Landfill: Casella continues to test the rail infrastructure improvements that were completed in Q2 at its Pennsylvania landfill. John Casella said “hundreds” of containers carrying about 10,000 tons have gone through the facility so far. “We don't anticipate a significant ramp up early in the process,” he said.
- MRF upgrade progress: Technology and equipment upgrades at the Willimantic recycling facility in Connecticut are expected to be complete in the first quarter of 2025. “Taking the site offline is a negative drag for the second half of 2024,” Coletta said, but Casella expects the project to generate about $4 million of EBITDA in 2025.
- RNG projects: An RNG facility at the Juniper Ridge Landfill in Maine came online in Q3. Three other projects, led by Waga Energy, continue to advance, with commercial operations expected to begin in late 2025, Coletta said. Casella has not invested money in these projects and are expected to earn royalties from renewable fuel credits and gas sales, “which we believe is the most appropriate risk mitigating path for us,” he said.
