Casella raises year-end guidance based on strong Q3 results

Casella Waste Systems Inc., Rutland, Vermont, reported its Q3 earnings on Oct. 28.

For the quarter, revenues were $242 million, up $39.3 million, or up 19.4 percent, from the same period in 2020. Casella says this revenue growth was mainly driven by the rollover impact from acquisitions; positive collection and disposal pricing; higher solid waste volumes; higher recycling commodity prices; higher resource solutions processing volumes and higher resource solutions nonprocessing revenues that were partially offset by lower Sustainability Recycling Adjustment (SRA) fees as the company shares higher commodity prices with its customers.

Net income was $15.9 million for the quarter, or $0.31 per diluted common share, up $0.8 million, or up 4.9 percent, as compared to net income of $15.1 million, or $0.31 per diluted common share, for the same period in 2020. The quarter included $1.9 million of expense from acquisition activities and $0.3 million of legal and other expenses associated with the closure of its Southbridge Landfill in Southbridge, Massachusetts. The same quarter last year included $0.2 million of expense from acquisition activities and $2.6 million of legal and other expenses associated with the Southbridge Landfill closure.

Adjusted net income was $17.5 million for the quarter, up $0.3 million, or up 1.9 percent, as compared to adjusted net income of $17.2 million for the same period in 2020.

Operating income was $27.4 million for the quarter, up $6.8 million, or up 32.7 percent, from the same period in 2020. Adjusted operating income was $29.6 million for the quarter, up $6.1 million, or up 26.2 percent from the same period in 2020. Adjusted EBITDA was $61.2 million for the quarter, up $10 million, or up 19.4 percent, from the same period in 2020.

For the year-to-date period, revenues were $647.4 million, up $73 million, or up 12.7 percent, from the same period in 2020. Net income was $32 million for the year-to-date period, as compared to net income of $28.2 million for the same period in 2020. Adjusted net income was $35.3 million for the year-to-date period, as compared to adjusted net income of $32.1 million for the same period in 2020.

Operating income was $61.3 million for the year-to-date period, up $16.3 million from the same period in 2020. Adjusted operating income was $65.9 million for the year-to-date period, up $15.5 million from the same period in 2020. Adjusted EBITDA was $152.2 million for the year-to-date period, up $23.4 million from the same period in 2020.

Net cash provided by operating activities was $134.1 million for the year-to-date period, as compared to $111.9 million for the same period in 2020. Adjusted free cash flow was $82.3 million for the year-to-date period, as compared to $60 million for the same period in 2020. Adjusted free cash flow for the year-to-date period included the following adjustments: $4.5 million of landfill closure, site improvement and remediation expenditures associated with the Southbridge Landfill closure; $3.4 million of cash outlays related to acquisition activities; $10.2 million of capital expenditures associated with the expansion of its Waste USA Landfill in Coventry, Vermont; and $11.1 million of non-recurring capital expenditures primarily related to acquisitions.

"We had another strong operational quarter, as we continued to execute well against our long-term strategic plan,” John Casella, chairman and CEO of Casella Waste Systems, says. “As a result, we increased revenues by 19.4 percent and adjusted EBITDA by 19.4 percent year over year in the quarter, and we increased year-to-date adjusted free cash flow by 37.2 percent year-over-year.

“These positive results are a testament to the hard work, adaptability and dedication of our team, our asset positioning in the disposal capacity constrained Northeast market, and strong execution against our operating and cost-efficiency programs. Our solid waste pricing continued to improve sequentially as we advanced 4.1 percent solid waste pricing during the third quarter, with strength in both collection and disposal lines of business. Solid waste volumes were up 2.8 percent year over year, with much of this growth driven by the continued rebound of disposal volumes, especially in the New York markets.

“Our team did a great job controlling costs while volumes continued to ramp back online during the quarter, and certain cost categories experienced heightened inflationary pressure. Our investments in technology, including our route optimization program, continued automation of our fleet, and real-time data analytics helped to offset these inflationary cost increases.

“We continue to execute well against our long-term growth strategy, and we have acquired nine businesses with approximately $86 million of annualized revenues year-to-date through October. We expect to recognize roughly $50 million of revenues in 2022 from the rollover impact of acquisitions already completed in 2021.

“We are focused on acquiring well-run businesses in strategic markets that will drive long-term growth, additional vertical integration and enhance operating synergies. Our acquisition pipeline remains robust, and we believe that there is continued opportunity to drive additional cash flow growth across our footprint through execution of our growth strategy.”

Fiscal year 2021 outlook

“Given our strong execution during the third quarter, the expected contribution of acquisitions already completed this year and our increased visibility of economic trends, we are updating our fiscal year 2021 guidance ranges that were first announced in mid-February,” Casella says. “These guidance ranges assume a stable economic environment continuing through the remainder of the year with only a modest further rebound in solid waste volumes.”

The company raised guidance for the third time in fiscal year 2021 by estimating results in the following ranges:

· Revenues between $870 million and $880 million (as compared to between $850 million and $860 million);

· Net income between $37 million and $41 million (as compared to between $35 million and $39 million);

· Adjusted EBITDA between $200 million and $204 million (as compared to between $195 million and $199 million);

· Net cash provided by operating activities between $162 million and $166 million (as compared to between $158 million and $162 million); and

· Adjusted free cash flow between $85 million and $89 million (as compared to between $79 million and $83 million).