By the numbers
Net income: $22.7M
Sold waste price increase: 6.6%
Driven by 7.2% increase from collection and 6% from disposal
M&A spending in 2022: $74M
13 businesses worth an estimated $48M in annual revenue
- Economic outlook: Executives from the Vermont-based company said during a Friday earnings call that their pricing and fee strategies helped offset an internal inflation rate of around 5.9%, while still expanding profit margins during the third quarter. “Our business model remains resilient and we are performing well,” said CEO John Casella.
- Disposal: Landfill pricing was up 5% year over year, but President Ned Coletta said “this doesn’t tell the full story,” as the company’s average price per ton was up 8% and volumes were up 6%. A strong regional tourism season helped boost volumes.
- Recycling: Revenue in the company’s Resource Solutions division was $80.2 million, up notably year over year due to acquisitions. Recycling commodity values have become a headwind — down 37% year over year — though the company’s fee structure is offsetting the trend. Casella projects another 20% decline in commodity values from September through December.
- Capital expenditures: Casella has expanded its spending to facilitate new contract wins, update technology after acquisitions and expand its disposal infrastructure. Onboard computing systems are a key focus, with around 45% of the company’s trucks now equipped. It has a target of 60% by the end of next year. Chief Operating Officer Sean Steves said an incentive pay program linked to the technology has been well-received and “the turnover in that line of business has dried up to to almost nothing.”
- Landfill expansion: As Northeast disposal capacity continues to tighten, John Casella said “we’re probably adding more capacity than anyone else to the market currently.” Permitting is underway for potential expansions at the company’s Hyland and Hakes sites in New York, as well as its rail-served McKean site in Pennsylvania. Casella will invest an estimated $20 million to scale up operations at McKean by 2024.
- M&A: Casella has deals pending worth an estimated $30 million in annualized revenue and still sees a broader $500 million worth of opportunities. Casella said an economic downturn could potentially change valuations to the company’s favor. “Depending upon what happens from a recession standpoint, multiples could contract a little bit in terms of from a competitive standpoint, which could be a positive actually sitting where we are with the capability that we have in the balance sheet,” he said.
- Pricing outlook: When asked if Casella anticipated any ceiling to its potential price increases, Coletta cited federal data that found waste expenses are “less than four-tenths of 1%” of consumer spending and saw no issues ahead. “We don’t look at it as whether there’s a ceiling or not a ceiling, we’re just trying to establish fair programs that get that inflation back to the market."
- Looking ahead: Casella upped earnings guidance for the third time this year, now projecting annual revenue could be as high as $1.08 billion and net income could reach $56 million, among other metrics. The company also reaffirmed guidance that adjusted free cash flow could reach $110 million.
