Casella Waste Systems Inc., a regional solid waste, recycling and resource management services company headquartered in Rutland, Vermont, has reported financial results for the first quarter of 2019, ended March 31.
The company reports revenue of $163.7 million for the quarter, a $16.2 million, or 11 percent, increase from the same period in 2018. Revenue growth was driven primarily by robust collection and disposal pricing; the roll-over impact from acquisitions; higher recycling, organics and customer solutions volumes; and higher recycling processing fees. These were partially offset by lower solid waste volumes, the closure of the Southbridge Landfill and lower recycling commodity prices, Casella Waste says.
Overall solid waste pricing increased 5 percent during the quarter, driven by a 6 percent increase in collection pricing and a 4.2 percent increase in landfill pricing compared with the first quarter of 2018.
Casella Waste’s net loss was for the quarter was $1.7 million, an improvement of $2.2 million, or 56.2 percent, from the same period in 2018.
Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $26.6 million, a $2 million, or 8.1 percent, increased compared with the same period in 2018. Growth mainly was driven by improved performance in Casella Waste’s collection, recycling and customer solutions lines of business, partially offset by a decline in performance in the disposal line of business, according to the company.
April 30, the same day it announced its quarterly earnings, Casella Waste completed the acquisition of M.C. Disposal Inc., a waste collection company in Maine with approximately $7 million in annual revenue. The company says it remains on track to exceed its acquisition target range for fiscal 2019.
John Casella, Casella Waste chairman and CEO, says, “MCD has built a solid business through excellent customer service, and we expect this acquisition will tuck-in well with our existing operations and allow us to build further route density and drive operational efficiencies. We are pleased to welcome the hardworking MCD employees and owners to our team.”
He continues, “While there is still work ahead of us, we have made great progress over the last several months successfully integrating and recognizing synergies from the 10 acquisitions that we completed in 2018.
“Our acquisition pipeline remains robust with over $40 million of annual revenues under letter of intent that we expect to close by the end of the third quarter,” Casella says. “We believe that there is additional opportunity to drive cash flow growth across our footprint through strategic growth.”
He adds that the company is “pleased with the strong start to the year as we continued to execute well against our key strategies as part of our 2021 plan,” which include driving normalized free cash flow growth by increasing landfill returns, improving collection profitability, creating incremental value through resource solutions, using technology to profitably drive growth and efficiencies and sensibly allocating capital for strategic growth.
The company’s solid waste pricing programs “are running ahead of budget,” Casella says, at 5 percent overall. “Our disciplined pricing programs are aimed at balancing volume growth while covering inflation and expanding margins. We accomplished both goals in our collection operations, with margins and cash flows up as we shed unprofitable work, improved operating efficiencies and offset historically high inflation.”
Lower disposal volumes negatively affected revenue by $3.4 million year over year because of a one-time $3.5 million soil remediation project in the first quarter of 2018, Casella says.
“Given the continued tightening of the northeast disposal market, we worked to drive strong pricing discipline, coupled with our goals to maintain sufficient landfill capacity through the higher priced summer months and to eliminate more challenging waste streams,” he says. “We expect positive disposal volume growth through the remainder of the year.”
The company’s efforts to restructure third-party recycling processing contracts and off-take commodity pricing risk led to improved operating income year over year in Casella Waste’s recycling business despite commodity prices being down roughly 18 percent for the period. “Our SRA (sustainability/recycling adjustment) fee, revenue share contracts and contamination fees combined with our efforts to produce higher quality materials and manage processing costs have allowed us to improve recycling financial performance in a challenging commodity pricing environment," Casella says.
The company reaffirmed its revenue, net income, adjusted EBITDA and normalized free cash flow guidance ranges for the year, with Casella crediting the company’s “continued strength in our collection, recycling and customer solutions operations year to date and our plan to increase volumes at our landfills (while maintaining pricing discipline) through the remainder of the year.”
He adds, “We do not expect the year-to-date declines in recycling commodity prices, most notably cardboard, to significantly impact our forecast for the remainder of the year.”
Casella Waste forecasts 2019 revenue to range from $710 million to $725 million, net income to range from $34 million to $38 million and adjusted EBITDA to range from $152 million to $156 million. The company says it expects net cash provided by operating activities to be between $111 million and $115 million (updated from $119 million to $123 million mainly because of the adoption of a lease accounting standard that shifted payments on landfill operating lease contracts from an investing activity to an operating activity) and normalized free cash flow of between $51 million and $55 million.