Corporate Growth Conference 2024: Behind the curtain of Casella’s growth

Casella Waste Systems Inc., a Rutland, Vermont-based regional waste, recycling and hauling services company, has substantially grown since its inception nearly 50 years ago, and it does not have plans to slow down anytime soon.

Since 1975, the company has grown its net worth to $7.17 billion (as of Nov. 29, 2024) and, under the helm of Chairman and CEO John Casella, the company is continuing to enhance its growth strategies for 2025 and beyond. At the 2024 Corporate Growth Conference, held Nov. 20-21 in Chicago, Casella sat down with National Waste & Recycling Association President and CEO Michael E. Hoffman to discuss the company’s growth thus far and what the future may hold.

Michael E. Hoffman (MEH): How did you get your start in the waste business?

John Casella (JC): When my dad decided he no longer wanted to work in construction, he bought 500 acres of property between Rutland and Pico and built a motel, where my brother and I worked and got our start in the hospitality industry.

Following college [in Buffalo, New York], I moved back to Vermont, got my real estate license and worked in the real estate department of the Killington Mountain Resort and Ski Area helping with the condominiums.

About five years later, in 1975, my younger brother Doug started Casella’s Refuse Removal [now Casella Waste Systems Inc.], and from the beginning, I helped him with administrative work and permits. He was the guy who could pick up a dime with an excavator, but you would not find him under florescent lights trying to get a permit. After about a year of helping him, he told me to quit my job at Killington and to come be his partner. So, I did, and it was the best decision I have ever made.

Two years later, in 1977, we built the first recycling facility in Vermont. During that time, there were a lot of mom-and-pop businesses in the waste sector, but the children of those business owners went on to be lawyers and doctors as they did not want to be in the waste business. This allowed me and Doug to take on recycling in a different manner to grow our business, and it was the differentiation of that recycling component we really built the business on. It is still that business today, although the business is now really resource solutions helping colleges and universities, industrial customers, municipalities and medical centers meet their sustainability goals.

MEH: Tell us about when you took the company public in 1997. Why go public?

JC: The driving force [to go public] was the opportunities we had in front of us and the need for capital to grow the business. The business was fully integrated at that time with collection services, several landfills and a major recycling component, and the majority of our revenue was mergers and acquisitions (M&A).

[Casella] was one of Jeff Kendall’s first investments, but we took capital in 1993 from the first investment Vermont Venture Capital made, which turned out to be one of its best investments.

MEH: What changed between back then when you delivered the IPO [initial public offering] and your message to the marketplace and now?

JC: There is a lot of water over the dam. The premise was always to continue to grow the business, and we clearly were able to do that. The year after we went public, we went from about $90 million to $200 million, and we did a secondary offering that went very well.

Then around 1999, we acquired KTI Inc., a company similar to our size, for about $300 million. Half of that business was solid waste assets and the other half was 14 different recycling businesses. The solid waste portion of that business was one of our biggest competitors in the market and did really well. However, we realized we did not have enough capital or time to fix the 14 different recycling businesses, and that was our first lesson in sticking to your knitting. It took us about three to five years to divest those assets and get back to our core competency.

We recognized there was a disposal problem in the Northeast and, at that time, we had about 30 million tons of disposal capacity. So, from a business development standpoint, we put together a program to add disposal capacity to the franchise. We were successful with five out of six projects but made a mistake by levering up the balance sheet by $250 million to do all of them without doing some equity with it and reducing the risk from a leverage perspective.

From a financial market standpoint, what happened in 2008 was dramatic, and we levered way too high. It took us about three to four years to transition out of that place, and by 2012, we changed senior management and had the foresight to better understand the regulatory environment, where the market was going and how to better plan from a balance sheet perspective. Ned Coletta brought financial discipline to the finance team, and Ed Johnson built an operating team. During this time, there was a true transformational moment when we realized we were all on the same page.

MEH: What would be your advice about taking a gamble with private or public equity and managing a balance sheet?

JC: We learned our lesson by levering too high and now focus on communications and culture in addition to finances and strategy. Culture eats strategy for breakfast and is the most important thing in our business. We are a service business, and the price of entry is to pick up trash. What you do with that from a hospitality standpoint is the adder, or ‘color,’ that makes a difference. Anyone can buy the trucks, software and containers, but the differentiating factor is the people. If there is anything to take away from this conversation, it is the importance of culture and people.

At one point we had 5,000 employees and two different cultures. You cannot manage two different cultures. If your people are happy, your customers are happy. And if your people and customers are happy, your shareholders will be happy. It is no other order. You have to create a culture where your people are excited about being of service to each other because that is the culture that is going to win.

MEH: Casella has been in Rutland for a long time. Is it a difficult place to attract talent?

JC: I think it is tough to attract people to Vermont, especially the broad array of resources and talent we need to run the company. But we now have major offices in Allentown, Clifton Park, Twin Bridges, etc., as well as some customer care centers, and we are able to attract people to different areas of the company.

We also have grown our human resources department and added recruiters to go into high schools to discuss career opportunities in our industry. [To set these prospects up for success], we opened a commercial driver’s license (CDL) training school in 2020, and to date, 300 students have successfully completed the program and are all on a career path at Casella.

We have found if we keep someone for a year, it is likely they will be with us for 20 years. The challenge is, how do we do that and do that well? That was the emphasis of establishing the school, and now it is a debt-free career option.

This year, we also kicked off our Diesel Technician Training program and have about 50 to 60 people through that so far. We are now revamping the building where the CDL school is to include one bay for preventative maintenance and the other for major maintenance. Later this year, we are dedicating the school to Ken Hier, a 40-year driver of Casella who recently died and is referred to as a ‘Driver of a Lifetime.’

MEH: In 2017, you restarted your M&A strategy. You had about $600 million in revenue, and you are now projected to finish this year with over $1.5 billion. Talk about that.

JC: As we continue to grow, we continue to take a breath and look at where we were weak from a finance team perspective and integration team perspective. We now have full financial, integration and due diligence teams in order to do the transactions we are doing now. The premise is to continue to grow free cash flow, and the whole team has done a great job at that. They are the reason why we have the valuation we have now.

MEH: What do the next five years look like?

JC: From a succession standpoint, we are building a team for the next 20 years. We know if we continue to grow the business like we have over the past 10 years, we will have the opportunity to continue to grow the business. We would like to be up and down the Eastern seaboard, and we have tremendous opportunity in the Mid-Atlantic and Northeast. We do not have a desire to go across the country, but we do see further growth in the region we currently serve.