Casella Waste Systems, Rutland, Vermont, released its second-quarter financial earnings Aug. 1, reporting a revenue of $187.5 million for the three months ended June 30.
More highlights from the quarter include:
- Revenues in the second quarter were $187.5 million, up $21.8 million (13.2 percent) year over year. Acquisition activity drove 8.9 of this growth.
- Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $40.4 million in the quarter, up $3.3 million (8.9 percent) year over year.
- Solid waste revenues were up $17.4 million (13.8 percent) year over year as a percentage of solid waste revenues, with price up 5.1 percent, volumes up 0.4 percent and 11.8 percent growth from the rollover impact of acquisitions.
- Revenues in the collection lines of business were up $17.5 million year over year, with price up 5.5 percent across all lines of business, volumes slightly down and acquisitions up $13 million. Collection operations generated about 49 percent of revenue and grew almost 24 percent, primarily through acquisitions.
- Revenues in the disposal line of business were up $900,000 year over year, despite a $3.7 million year-over-year revenue headwind from a landfill closure.
- Landfill pricing was up 6 percent year over year, and average price per ton at the landfill was up 5.9 percent.
- Recycling revenues were up $900,000 year over year with $1.3 million lower commodity pricing, fully offset by $1.6 million higher third-party tipping fees and $600,000 of higher volumes.
Company Chairman and CEO John Casella joined other company executives on an earnings call to discuss Q2 activity in terms of the company’s five key strategies laid out in its 2021 plan. Here are the highlights from John Casella.
Strategy one: Increasing landfill returns
“…As we drive price on existing volumes, we are also replacing lower price streams with higher price customers, which blends up overall pricing and enhances our returns.
“That said, we did experience a couple of notable adjusted EBITDA headwinds in the second quarter related to higher cost due to a very wet spring, particularly in May and June. And these costs have moderated into Q3 as things have begun to dry out. The expected closure of the Southbridge Landfill in November 2018, and higher operating costs at the Ontario Landfill as we worked in the second quarter to resolve odor issues and make site improvements to resolve other issues—most of this work was completed by the end of the second quarter.”
Strategy two: Driving profitability in hauling business
“As we experienced heightened inflation related to disposal recycling and labor, it’s important that our pricing programs are nimble as we aim to outpace costs and expand our margins.
”We have continued to find success in our ability to adjust pricing quickly, and as such, we advanced 5.5 percent collection pricing in the quarter. In several markets, this was not enough to price to overcome inflation. We are working hard to drive through further operating efficiency and review profitability of our book of business and advance further pricing to offset additional inflation.
“At the same time, on a monthly basis, we continue to adjust our SRA [Sustainability/Recycling Adjustment] and E&E [energy and environmental] fees based on market conditions. These programs are working well to offset recycling, commodity pressures, environmental and regulatory costs.”
Strategy three: Creating value with resource solutions
“We built recycling infrastructure that helps to insulate us from volatility and declines in the global recycling markets through our third-party recycling processing contract structure, which allows us to pass commodity risk back to the customer, coupled with our SRA program, which is fully offsetting the commodity risk on our intercompany volumes.
“With this, year-to-date declines in recycling commodity prices have not materially impacted our 2019 recycling forecast. On July 1, we entered into a new recycling processing contract with the city of Boston that reset pricing into appropriate levels to cover current low commodity prices or passing commodity risk back to the city.
“As we have discussed previously, this contract was a significant headwind for us in the recent past, so this was a nice win for the company that allows us to garner an appropriate return on our recycling assets. As we continue to make progress restructuring our third-party contracts, we are also focused on enhancing our contamination fee program, which should help drive improved customer behavior with recycling.
“We’ve also recently kicked off two recycling equipment upgrade projects, which will reduce operating costs and improve the quality of our outbound materials. … A significant driver of the team success has been the ability to capture share of wallet for major industrial customers across our franchise.”
Strategy four: Using technology to drive profitable and efficient growth
“We are pleased with the progress we have made against this initiative over the last 18 months. A prime example is related to our 2018 launch of NetSuite. We are starting to see the benefits begin to play out as we grow the business and not add back-office headcount as we further simplify and better automate the purchasing process. We are getting better scale and we are well-positioned to drive further costs out of our existing processes.
“We have also experienced early success related to our new case management system, which serves to better integrate our sales and customer care teams. We will continue to target enhancing our responsiveness to our customers and improving their overall experience.”
Strategy five: Allocating capital to smart growth
“We’ve completed four acquisitions year to date with annualized revenues of roughly $18.5 million. As previously announced, we signed an asset purchase agreement to acquire select solid waste assets in Albany, New York, and Cheshire, Massachusetts, markets that are producing roughly $30 million of annualized revenues.
“We expect this transaction to close in the third quarter. This will be a great strategic fit to our assets. Given this acquisition, we are on pace again to seed our goal to acquire $20 million to $40 million of annualized revenues.
“We remain focused on driving synergies from acquisitions through the integration of our operations, operating programs, systems and back office. As we had previously discussed, we have completed the finance back office and systems integration work for all of the acquisitions completed in 2018. We remain bullish on the strength of our acquisition pipeline that overlays our existing operational footprint or that is adjacent strategic markets.”