I think we're good to go all right hi everybody my name is Trevor Romeo I'm the research analyst here at Blair that covers the waste and recycling services industry just before we begin I'm required to inform you that you can find a complete list of our research disclosures or potential conflicts of interest on our website at William Blair comm so today we're very excited to to welcome casella waste systems back to the growth stock conference casella is one of the leading solid waste and recycling providers in the U.S., focus in the Northeast and the Mid-Atlantic regions. I'm very pleased to announce Casella's CEO, Ned Coletta, CFO Brad Helgeson, and Jason Mead, the Senior Vice President of Finance and Treasurer, is in the audience there. So we'll start here with, I think, a brief slide deck and then a fireside chat, and then immediately after this, there will be a breakout session in the Adler Room for anybody in the audience who would like to follow and ask some more questions. So with that, I'll turn it over to you guys.
Thanks, Trevor. Good morning, everyone. Thanks for joining us. I'll just flip through a couple of slides to give a brief overview and then we'll end the question and answer. So Casella is an integrated solid waste and recycling resource management company. We're located in Vermont, one of the only companies in Vermont. The company was founded there over 50 years ago. and as Trevor said we're an integrated company in 15 states today we're have a mix of collection landfill resource solutions which is our recycling organics professional services brokerage business as well our financials really speak for themselves over the last decade plus and especially over the last five years we've delivered very consistent growth for shareholders with compounding growth rate of revenues of 19% EBITDA of 20% and free cash flow of 21% we've done this over time really following the same recipe we're able to get a great price cost spread about 70% of our customers are not CPI linked so we can price at will and introduce fees as we need to to stay ahead of inflation. We've got great operating investments and programs that have helped us to gain efficiencies from automation of routes to dynamic route optimization to focuses in our recycling facilities on more technology and more automation. At the same time we've been very acquisitive so about half of our growth each year comes from organic price-volume spread, different cost programs, and half of it comes from acquisitions. Year to date this year, we've acquired $150 million of revenues through early April. Pipeline remains very strong, and we're going to look to continue to expand through acquisition growth. Our strategic plan has stayed very consistent over the last decade-plus. We've got five core strategies from driving profitability and collection line of business, driving returns for our landfills, differentiating ourselves for a resource solutions business, driving circularity for customers and communities, and our capital allocation strategy, as I was just discussing, has really been focused on acquisitions, but we've got some great development projects as well. We just brought online one of the closest rail serve landfills to the Northeastern United States in Pennsylvania that can take a million and a half tons a year of a diverse set of waste. Our foundational structure this is really what's allowed us to be very successful over the last 10 years with a focus on our people, a focus on technology, our sales process, culture, and we've been starting to really focus on asset location. We've acquired over 80 companies in the last six years and we're really focused on how to consolidate those operations and get into the right places and markets to have the most efficiency. So our value creation framework, it's pretty simple. You see what we've done over the last five years. We've got a great outlook to continue to grow at the same pace and that comes from organic revenue growth, driving organic EBITDA growth and free cash flow growth combined with acquisitions. Our pipeline right now is close to a billion dollars of revenues in our acquisition pipeline. A lot of great opportunity both in this year and into the future. But we have a few specific drivers that are really beyond just the normal growth. Of course the price spread to cost of 50 basis points but we've got about 15 million dollars of synergies we're pulling out of acquisitions that we've completed the last two years these will be operating costs that will come out over the next three years and we've got about 15 million dollars of costs we're taking out of GNA through investments we've already made in technology and refining process and that will happen over the next three years as well and here's a map of where we are you can see the concentration in the Northeastern United States. These are actually all the acquisitions we've done over since 2018. There's 80 acquisitions. We're very good at targeting acquisitions. We're very good at converting them. Almost all of these were party-to-party without bankers or brokers. We've been an acquirer of choice and a consolidator of choice in the Northeastern United States and I'll focus here for a minute and then we'll open up for questions. We stepped into Mid-Atlantic a couple of years ago with some spin-off assets from one of our public peers. We entered Pennsylvania, Maryland, Delaware. Since then we've done 11 acquisitions. The gray dots are their initial acquisition from GFL. All of the other dots are acquisitions we've done since then. So you can really see how this story is coming together, building density building vertical integration and ultimately driving margins and value I'll stop there instead of going through a whole deck okay great thank you Ned
if you don't mind maybe we can go back to the bigger dots on the map slide just for a second I'd love to start there it seems like landfills are a topic that a lot of investors want to talk about so maybe we can start with that so you know one dynamic that's been interesting has has been rail and you know I think there was a recent report from the Northeast Waste Management Officials Association kind of a mouthful that showed 26% of the waste that's generated in the Northeast is exported out of the region and so a lot of that you know comes on rails I think you've talked about the specific competitor that's had the move from New Jersey to Ohio that kind of had a dampening effect on the in-market landfill pricing maybe last year last two years but that's kind of now full so So I'd say a question that we get from some investors is, well, you know, why won't others just bring on more rail capacity, but it takes a lot of time and capital to do that. So yeah, maybe you could just walk us through the economics of how you move waste around a little bit. And as we go forward into this world where more of the local landfills in the Northeast close, what's kind of the net impact to Kasella?
Yeah, it's a multifaceted question. So maybe just take a quick step back. Let's kind of look at what's happened over the active microphone. Thank you. Look back at what's happened over the past couple of decades and pivot forward, and then we'll kind of zoom in on what's happening right now. So there's rough numbers, 30 million tons of waste that's generated in the Northeast, Northeast defined as New England plus New York, New Jersey. depending on you you mentioned 26 depending on who measures it close to a third of that waste is now on rail heading out of the region to faraway landfills in ohio alabama georgia south carolina the reason for that is we're not permitting new landfill capacity in the northeast landfill capacity has steadily declined in the northeast over the last couple decades to the point where prices have continued to rise and it began to make sense for companies to make the investment in rail to move the waste out of the market because there's nowhere else for it to go. So, you know, the economics are, it varies. It really depends on the specific destination and the logistics of the rail move, but just to use some rough numbers, you know, call it $100, $110 a ton or so, is the disposal price for waste disposal in Metro Boston, in Metro New York, sort of close to the population centers. The most cost-effective disposal outlet there is to direct haul from your collection vehicle to a local landfill, there aren't many of those anymore, or a local waste energy plant. the second most economic thing to do is is go to a transfer station and have that waste long-haul trucked to a landfill that's a little bit further outside of the population centers that's primarily our portfolio and then the least economic but really the only place that the market had to turn is rail so if you rewind you know a decade ago at 60 70 80 dollars a ton it didn't make sense to rail and there was enough capacity to handle it at a hundred a hundred ten dollars all of a sudden it starts to make sense to make the significant investment in in the rail infrastructure loading unloading all of the transportation equipment rail cars rail containers and then pay to pay the rail operator to move it so you know the question of is there going to be more rail the answer is yes you know because prices are going to keep going up and at higher prices once we go to 120 130 140 all of a sudden a site that didn't make sense to set up a rail move to will make sense and so on it's the only way that the markets ultimately going to balance itself out the definite limiter there
there's only a handful of landfills in the US actually have rail lines that go them and the ones that do have rail lines that go to them are nearly full so this isn't just like all of a sudden another landfill is gonna pop up somewhere right next to a rail line it can take you a decade or more to permit a greenfield landfill so this isn't like a normal supply-demand balance where you just create something new quite easily right and what happens you know
consistent with what Ned is describing and this is what's happened the last year or two in the market where disposal prices have continually gone up for decades you know but it doesn't go up in a straight line it goes up in a bit of an ebb and a flow where landfills close all of a sudden that squeezes prices prices jump higher but to the extent that someone is making a long-term investment rail that capacity comes online now all of a sudden it's a little bit of an ebb period where you know all of a sudden companies that have waste in the market have options and for an equivalent price that they could bring the waste to us okay now I have this rail outlet to bring it to you know so that that then you know that's the ebb period of really
the consistent prices moving up but as we look to the next five years there are multiple large landfills in the Northeast that will be closing so we're going to enter another significant tightening period it's unclear to us but it could be another you know 20% of the market permanently closing or more during that period and there's no new capacity coming online other than two expansions that casell is doing we're in the process of expanding two sites in New York State our Hakes landfill which is one of only three construction demo landfills in New York State and our Highland landfill in New York we're more than doubling the annual capacity. At the end of that permitting process, we've been permitting for over six years. We expect that to be successfully completed in late 2026. It'll be the second largest landfill in the Northeastern United States when that's completed. So it's very, very hard to bring on new capacity and market. There's been only one new greenfield landfill in 35 years and there's only been a handful of expansions. And so this crunch in the marketplace will continue, and we're back into a period where we're running the most full against our permits that we've run in over five years since pre-COVID. We're seeing a positive pricing backdrop. And once again, our rail asset is one of the closest to the market, and we're really saving that for our own portfolio. Yep.
Great. Well, that last part there was kind of going to be my next question. So just on your expansion efforts, because that's also kind of a big topic of discussion with some investors, I think. You have Ontario and North Country that are scheduled to close. I think that's roughly 20% of your overall annual volumes. And you mentioned Hakes and Highland. You're working on the permits. I think Juniper Ridge, you just got a favorable decision. And then New Hampshire, you got a couple different things going on. So maybe just, you know, what gives you confidence you can get some of these across the finish line?
Yeah. Well, we're not immune to these dynamics in the Northeast. It's very challenging to expand landfill capacity. And in New Hampshire, we've had a landfill, one of two major landfills in the state for close to 30 years. We've got less than a year's worth of life left. We've worked on three alternatives for this waste. We serve over 150,000 customers and municipalities and businesses throughout the state. We've worked on expanding our current landfill, which requires a zoning vote in the local community. We've worked on permitting a greenfield landfill, and we've also been developing a very large rail transfer facility on CSX Main Line. The landfill permitting activities continue to chug along, but they're complex, and they probably will not be completed until after North Country ultimately closes. So we'll see waste leaving New Hampshire via rail to our McKean landfill. Long term, we'll continue to work on developing that capacity. Moving to New York, the story's much better where we are today. We're closing our Ontario landfill in two years at the end of 2028. but we'll have two landfill expansions ramping online at the same time. It'll actually be a positive financial outcome for shareholders, where Ontario's are single most expensive landfill to operate each day and to build, and Highland and Hakes are our two least expensive. So we'll have a trade where we'll move tons from expensive capacity to less expensive and have a positive outcome. North Country, we've been ramping down for four years. So we're at the point today where we produce two million dollars of EBITDA a year at this site So it's not a big headwind for us, but it's a very complex regulatory environment And right now it looks like rail may be the best alternative in that market. Maine as you mentioned We've got about seven years of capacity left in Maine. We've been in permitting for two years If you can believe it, we've had some really positive outcomes in the permitting process and we feel confident with our expansion there for the long term. If you look across our portfolio today, we have over 20 plus years of capacity at current run rates. There's just some sites that are ramping up, some sites are ramping down, but it's overall a very positive story.
Okay, great. So maybe let's shift over to volume. There was a lot of severe weather, especially in the Northeast in Q1. I think some of the kind of more cyclical volume categories, you know construction manufacturing that sort of thing it's been pretty choppy the past few years but you did see i think 13 c and d tons uh growth i guess in q1 so maybe you could just talk about volume trends the last few months you know and speak on kind of puts and takes for your outlook for the back half of 26 and and beyond for volumes yeah so q1 is is always tough with our footprint
You know, this year seemed particularly difficult, and we saw that in some of our numbers. And again, as you alluded to, the areas of our business where you would tend to see the impact. C&D volumes were strong at the landfills, but volumes were down at our transfer stations, for example. Roll-off was down. So there was some softness, definitely, in the business. What happens every spring, as it thaws in the northeast, is people come out of hibernation and there's a lot more activity and that's what we're seeing. So nothing I would call out one way or the other other than it's generally in line with what we expected, generally in line with our budget. You know, once we get through Q2, once we get the spring under our belt, then I think we'll have a better idea where we're headed for the rest of the year. Yeah, I'd talk about one more
part about volumes. For many years, we've had a price volume kind of trade where I'd rather have positive price and push price to five plus percent and run volumes around zero percent The last couple of years We've seen slightly negative volumes in our collection line of business and most of that's really due to acquisitions We've completed so we buy businesses we get into the book of business We start to run profitability analytics and we'll churn some of the lowest quartile customers and then we'll do Consolidations to get density on route and you'll you'll lead to a better outcome There's a little bit more churn there, but I've just brought in a new chief revenue officer. He's been 20 plus years in the industry, great executive. He and I are really trying to rebuild a lot of our sales processes from the ground up, with a lot of focus on retention, better customer access tools. We have a new app that's launching an app store very quickly. We have a new customer portal. There's a lot of things we're doing to make us easier to do business with, which we believe will lead to more stickiness over time and you know one of my goals is if we can move that retention number up slightly and keep our same pricing programs LD to a better volume outcome also over time right
let's maybe shift over to M&A which has been a huge growth driver for Cassell over the years and so I think Ned you mentioned almost a billion in your in your kind of actionable pipeline now so you know first of all maybe how is that weighted in the sort of New England versus Mid-Atlantic and then you know kind of following up on that we had John here last year and he kind of talked about expanding down the eastern seaboard as kind of a long-term goal so at this point kind of what is your appetite for beefing up what you have
versus kind of continuing to expand yeah they're not a lot of you know John Kissel and I spent a lot of years working together and forming strategy for the company but one of the differences in strategy he and I have is where we're focused from acquisition standpoint we are not going up and down the eastern seaboard we're focused on tucking acquisitions over the top of our existing businesses and adjacent acquisitions we're not jumping to new geographies and it really takes a lot to do that and there's a lot of risk involved from our standpoint building into adjacencies allows us to leverage our GNA our back office even just our regulatory environment our legal our lobbying teams. So that's where our focus is. If you look at year-to-date this year, we've done four acquisitions, $150 million of acquired revenues. One of those acquisitions was in our eastern region, one in our western region, one in our mid-atlantic, and one in resource solutions. So the pipeline's diverse, and it's not just all of our efforts going to the mid-atlantic. As I showed earlier, though, in this slide, we have done 11 acquisitions in the mid-atlantic, And you can kind of see by the dots that there's a rhyme and a reason to this where we're trying to build density in certain markets. We're also trying to bring online key assets to drive more vertical integration. So we've acquired two transfer stations over the last year. We have several more in the pipeline, and this will allow us to become more efficient at the end of routes, consolidate waste, get better price points at disposal sites. We also have a lot of pent-up synergies in this market that our teams very, very focused on getting out of the business. An example of this is you buy one company here, buy one company here, routes overlap. So you reroute the entire market, bring in automation, take trucks off the road. This year alone, we'll be taking $5 million of operating costs out of that business this just by taking trucks off the road and bringing more automated equipment into the marketplace.
Yeah. Great. Maybe let's stick with the mid-Atlantic then. I believe you have the ordered cash system migrations finished as of I guess it's June, so last month. So maybe as it stands today, what is your confidence in the five million of synergies this year, maybe being a touch conservative like I think you had said a quarter or two ago, and then is there a chance we see maybe some of the pricing, that kind of upside play in you know second half of this year or is it more
of a next-year phenomenon? Yeah so things are going really well in the mid-Atlantic I don't want to get too much into the weeds on the systems journey there but we are at the point today where we are a hundred percent on the same system across all these business units in the mid-Atlantic and it's enabling us to start to collapse operations collapse routes we've also brought to bear a more modern version of our order to cash system that's fully integrated to technology in our trucks, including our route optimization software. It's fully integrated to our new customer portal, our new customer app, our general ledger, our CRM. So the entire ecosystem right now is set up to where we can start to strip out back office costs as well as the operating costs. We're on track to deliver the five million dollars of operating costs this year. It's in the second half of the year so that's you know more like ten million dollars because we're really just starting to take the trucks off the road today. The next phase of what we're doing in the market is focusing on quality of revenues. So the systems that came with these acquisitions were lacking a lot of tools we need to really understand how much money we make from every customer so we now have our standard tools in place it gives our managers our salespeople the tools to understand I'm making 20% margin on this customer 5% margin on this customer it gives us a roadmap to move up the market over time and there was just some simple things missing I mentioned this last night there were no scales on any of the trucks from these acquisitions so like when we go to a dumpster front load truck pick up the dumpster typically you weigh it every time and that data will flow automatically into our systems and we're constantly understanding has something changed with this customer where there's more weight and more costs associated with their waste. None of that was in place, it's in place today we're starting to understand. Now to your question about accelerating, we've taken a little bit of a right turn in the mid-Atlantic over the last couple months. In our traditional We have two very, very successful fees that pass risk back to our customers. We have an energy and environmental fee that passes 100% of fuel risk back to customers. Very, very successful. And we have a recycling fee that as commodities go up and down for recycling, it passes all of that risk back to our customers as well. These fees are really well established in the Northeast. They've managed risk over time. As we've bought these businesses in the mid-Atlantic, there were no fuel surcharges in place. So as you can imagine, this spring with fuel spiking rapidly, that was a great opportunity for us to bring our fees into that marketplace rapidly. We've done that over the last three months. It's helping to offset all of the fuel costs that are rising in that market. But we tapped the brakes a little bit on the profitability work, and we'll pick that up second half of the year. but the fuel was really important to cover off because you know when you're dealing with millions and millions of gallons of diesel and you see prices up that much you got to get that back to the marketplace and the timing of the
fuel fees it's maybe a little bit counterintuitive where we're putting the fees in place at a time when fuel costs are higher therefore the fee is higher but it's all over the headlines everyone's living a day-to-day so it isn't a surprise to customers when a fuel fee shows up on their bill for the
first time. It's actually been a really successful over the years when you acquire a business that's typically one of the steps with a customer that can cause the most questions. Why are you putting fees on my bill? And they don't understand that's a very fair mechanism. If fuel is high they're paying more, if fuel is low it's not a permanent price increase. And our customers get accustomed to that over long periods of time. But you acquire a business and generally that's a step that's a little bit hard but when fuel spiking it's actually the perfect time to do it we get very little pushback from the marketplace right and you guys
were able to offset all the costs yes essentially immediately which is which is great okay now when you think about kind of scaling the mid-atlantic business from here you know I think you do have the 15 million of synergies over the next three years that's a great start but you think about maybe as you expand how do you continue to expand more and more profitably scaling kind of the the business without scaling the team things like that to get toward that kind of
30% collection margin type of business yeah I mean this is another area of key focus for us as a management team is to become more scalable more efficient from a G&A perspective and that'll benefit us in the mid-atlantic but but across the company so in addition to the mid-atlantic synergies we've laid out a target of 15 million of G&A not synergies but G&A you know cost efficiencies over the next few years and that that's a number of things you know the first step just from a timing perspective is we eat the merchant fees associated with customer credit card payments today you know so we're catching up to most of the economy and laying and and laying out a convenience fee so people can use a credit card but you know they would they would pay via pay the fee associated with it you know we need to be a lot more scalable technology led you know we're very we're effective in our back office but it's very manually focused it's very manually driven so our financial shared services payables receivables cash applications Those can be much more technology-led. We're going to be exploring AI solutions. It's the buzzword, obviously, for those activities. From an accounting perspective, we're entirely, almost entirely, decentralized. Significant opportunities for us to become more efficient, centralizing accounting activities, and then allowing our field controllers with knowledge in the business to pivot to be better partners to our managers. spans of control across our frontline management you know we could we could greatly standardize those to be more cost effective and more consistent across our divisions i mean i could go on and on there's sort of a i hate the term low-hanging fruit because it implies it would be easy it's not going to be easy but we have a pretty clear pathway to that level of savings and one more
point on that one of my major goals over the last six months as a new CEO it's a team refreshment as well we've had some really great members of our team who have been on board for a lot of years but we unfortunately kind of outpaced where they were and from a skills experience standpoint I've brought in a new chief revenue officer a new head of customer care a new VP senior VP of HR a new head of safety. These are all areas where we were not bringing the solutions to bear that would allow us to effectively scale and grow to the next level. We're also right now working on bringing a new chief operating officer which will be a great addition to our team to help us to continue to grow effectively and bring more discipline to our operations up and down. So you know It's definitely a period of time where refreshment's a really positive thing. Over the last three years, Brad joined our team, great team member. We brought in a new CIO, which has allowed us to really move on the technology side over the last couple of years. We've got a great foundational platform, great growth trajectory, and as Brad said, for us to execute to the next level, it's a lot of technology systems-driven process and bringing in a refreshment of team who have the right experiences really will help us achieve that faster.
Okay, excellent. Well, that was a great use of the time. We've got the breakout session in the Adler room for anyone who wants to join, but Ned and Brad, thank you so much.