Casella Waste Systems, Inc. (NASDAQ: CWST), a regional solid waste,
recycling and resource management services company, today reported
its financial results for the three and nine month periods ended
September 30, 2023.
Highlights for the Three Month and Year-to-Date Periods
Ended September 30,
2023:
- Revenues
were $352.7 million for the
quarter, up $57.5 million, or
up 19.5%, from the same period
in 2022.
- Overall
solid waste pricing for the quarter was up
6.9% from the same period in 2022,
primarily a result of 7.6% higher collection pricing and 5.9%
higher disposal pricing.
- Net income was $18.2 million
for the quarter, down $(4.5)
million, or down
(19.8)%, from the same period in
2022. Net income was negatively impacted
by several items in the quarter, including a $2.4 million increase
in expense from acquisition activities from the same period in
2022.
- Adjusted
EBITDA, a non-GAAP measure, was $89.6
million for the quarter, up $14.6
million, or up
19.4%, from the same period in
2022.
- Net cash
provided by operating activities was $157.8 million for the
year-to-date period, up $5.4 million, or up 3.5%, from the same
period in 2022.
- Adjusted
Free Cash Flow, a non-GAAP measure, was $96.0 million for the
year-to-date period, up $14.3 million, or up 17.5%, from the same
period in 2022.
- The Company closed three acquisitions during the
quarter, including the acquisition of Consolidated Waste Services,
LLC and its affiliates (dba “Twin Bridges”) on September 1,
2023.
"We posted another solid quarter and executed well against our
growth strategies with strong Adjusted EBITDA and Adjusted Free
Cash Flow generation across our newly expanded footprint," said
John W. Casella, Chairman and CEO of Casella Waste Systems, Inc.
"Our team is doing an excellent job balancing the on-boarding and
integration of our recent acquisitions, while keeping their focus
on delivering excellent operating results in the core business
through our key operating programs and organic growth initiatives.
We are poised to carry this momentum forward over the remainder of
the year and into 2024."
"Operations in our new Mid-Atlantic region are off to a great
start," Casella said. "We are excited to serve our new customers
and see lots of opportunity in our expanded markets to grow our
services and improve density through new customer additions and
tuck-in acquisitions. Within our Northeast markets, we completed
three acquisitions in the third quarter, including the acquisition
of Twin Bridges on September 1. Integration efforts are going well
for all of our recent acquisitions, and I would like to once again
welcome our nearly 1,000 new Casella team members."
"Solid waste volumes were down year-over-year on lower
project-based special waste volumes at our landfills and our
efforts to improve margins and performance in the residential line
of business," Casella said. "Special waste streams were choppy in
the third quarter with particular weakness in September but
strengthening in October. Importantly, our pricing programs are
maintaining a positive spread to costs as we advanced solid waste
pricing by 6.9% and furthered our operating productivity
initiatives in the quarter. We expect execution of our plans will
deliver margin expansion year-over year in the fourth quarter and
for the full fiscal year."
"Our Boston material recovery facility came back online in late
June following the state-of-the-art processing equipment upgrades
during the first half of this year," Casella said. "We are seeing
increased productivity, throughput, and safety levels while
increasing material recovery and quality on the back-end. These
early results are exciting, and we look forward to this positive
contribution over the remainder of the year."
For the quarter, revenues were $352.7 million, up $57.5 million,
or up 19.5%, from the same period in 2022, with revenue growth
mainly driven by: newly closed acquisitions along with the
roll-over impact from acquisitions closed in prior periods;
positive collection and disposal pricing; and higher commodity
volumes; partially offset by lower revenues from solid waste
volumes, and recycling commodity prices.
Net income was $18.2 million for the quarter, or $0.31 per
diluted common share, down $(4.5) million, or down (19.8)%, from
the same period in 2022. Adjusted Net Income, a non-GAAP measure,
was $20.1 million for the quarter, or $0.35 Adjusted Diluted
Earnings Per Common Share, a non-GAAP measure, down $(2.9) million,
or down (12.7)%, from the same period in 2022.
Operating income was $34.2 million for the quarter, down $(2.1)
million, or down (5.8)%, from the same period in 2022, which
includes higher depreciation and amortization expense related to
the acquisitions of Twin Bridges, select operations from GFL
Environmental Inc. ("GFL") and other recent acquisitions. Adjusted
EBITDA was $89.6 million for the quarter, up $14.6 million, or up
19.4%, from the same period in 2022.
For the year-to-date period, revenues were $905.0 million, up
$92.0 million, or up 11.3%, from the same period in 2022. The
year-to-date period included several items, including: a $6.2
million legal settlement charge in connection with the settlement
of a class action litigation matter relating to the Fair Labor
Standards Act of 1938 ("FLSA") and state wage and hours laws; an
$8.2 million loss from termination of bridge financing loans
associated with the acquisitions of Twin Bridges and select
operations from GFL; and other one-time costs described in the
Adjusted Net Income reconciliation.
Net income was $27.2 million, or $0.50 per diluted common share,
for the year-to-date period, or down (39.1%), as compared to net
income of $44.7 million, or $0.86 per diluted common share, for the
same period in 2022. Adjusted Net Income was $44.2 million, or
$0.81 Adjusted Diluted Earnings Per Common Share, for the
year-to-date period, as compared to Adjusted Net Income of $47.4
million, or $0.92 Adjusted Diluted Earnings Per Common Share, for
the same period in 2022.
Operating income was $67.1 million for the year-to-date period,
down $(11.1) million from the same period in 2022. Adjusted EBITDA
was $212.5 million for the year-to-date period, up $23.4 million
from the same period in 2022, or up 12.4% from the same period in
2022.
Please refer to "Non-GAAP Performance Measures" included in
"Reconciliation of Certain Non-GAAP Measures" below for additional
information and reconciliations of Adjusted Net Income, Adjusted
Diluted Earnings Per Common Share, Adjusted EBITDA and other
non-GAAP performance measures to their most directly comparable
GAAP measures.
Net cash provided by operating activities was $157.8 million for
the year-to-date period, as compared to $152.4 million for the same
period in 2022. Adjusted Free Cash Flow was $96.0 million for the
year-to-date period, as compared to $81.7 million for the same
period in 2022.
Please refer to "Non-GAAP Liquidity Measures" included in
"Reconciliation of Certain Non-GAAP Measures" below for additional
information and reconciliation of Adjusted Free Cash Flow to its
most directly comparable GAAP measure.
Fiscal Year 2023 Outlook
"We have executed very well against our growth strategy this
year. Given the expected contribution from acquisitions closed
year-to-date and continued pricing above our cost inflation,
partially offset by recent weakness in landfill special waste
volumes, we are updating certain fiscal year 2023 guidance ranges,"
Casella said. "These updated guidance ranges assume stable economic
activity levels for the remainder of the year."
The Company raised guidance for fiscal year 2023 by estimating
results in the following ranges:
- Revenues between $1.255 billion and $1.280 billion (raised from
a range between $1.240 billion and $1.265 billion);
- Adjusted EBITDA
between $292 million and $298 million (raised from a range between
$289 million and $295 million); and
- Adjusted Free Cash
Flow between $125 million and $131 million (raised from a range
between $123 million and $129 million).
The Company reaffirmed certain guidance for fiscal year 2023 by
estimating results in the following range:
- Net cash provided by
operating activities between $231 million and $237 million.
The Company updated certain guidance for fiscal year 2023 by
estimating results in the following range:
- Net income between
$33 million and $39 million (updated from a range between $41
million to $47 million) with the reduction primarily associated
with the recent acquisition activity, with depreciation and
amortization up $11.0 million, interest expense net up $2.0
million, and expense from acquisition activities up $3.0 million,
partially offset by a $3.5 million lower income tax provision.
Adjusted EBITDA and Adjusted Free Cash Flow related to fiscal
year 2023 are described in the Reconciliation of Fiscal Year 2023
Outlook Non-GAAP Measures section of this press release. Net income
and Net cash provided by operating activities are provided as the
most directly comparable GAAP measures to Adjusted EBITDA and
Adjusted Free Cash Flow, respectively, however these
forward-looking estimates for fiscal year 2023 do not contemplate
any unanticipated impacts.
Conference call to discuss quarter
The Company will host a conference call to discuss these results
on Thursday, November 2, 2023 at 10:00 a.m. Eastern Time.
Individuals interested in participating in the call should register
for the call by clicking here to obtain a dial in number and unique
passcode. Alternatively upon registration, the website linked above
provides an option for the conference provider to call the
registrant's phone line, enabling participation on the call.
The call will also be webcast; to listen, participants should
visit the company’s website at http://ir.casella.com and follow the
appropriate link to the webcast. A replay of the call will be
available on the Company's website and accessible using the same
link.
About Casella Waste Systems, Inc.
Casella Waste Systems, Inc., headquartered in Rutland, Vermont,
provides resource management expertise and services to residential,
commercial, municipal, institutional and industrial customers,
primarily in the areas of solid waste collection and disposal,
transfer, recycling and organics services in the eastern United
States. For further information, investors contact Jason Mead,
Senior Vice President of Finance and Treasurer at (802) 772-2293;
media contact Jeff Weld, Director of Communications at (802)
772-2234; or visit the Company’s website at
http://www.casella.com.
Safe Harbor Statement
Certain matters discussed in this press release, including, but
not limited to, the statements regarding our intentions, beliefs or
current expectations concerning, among other things, our financial
performance; financial condition; operations and services;
prospects; growth; strategies; anticipated impacts from future or
completed acquisitions; and guidance for fiscal year 2023, are
“forward-looking statements” intended to qualify for the safe
harbors from liability established by the Private Securities
Litigation Reform Act of 1995. These forward-looking statements can
generally be identified as such by the context of the statements,
including words such as “believe,” “expect,” “anticipate,” “plan,”
“may,” “would,” “intend,” “estimate,” "will," “guidance” and other
similar expressions, whether in the negative or affirmative. These
forward-looking statements are based on current expectations,
estimates, forecasts and projections about the industry and markets
in which the Company operates and management’s beliefs and
assumptions. The Company cannot guarantee that it actually will
achieve the financial results, plans, intentions, expectations or
guidance disclosed in the forward-looking statements made. Such
forward-looking statements, and all phases of the Company's
operations, involve a number of risks and uncertainties, any one or
more of which could cause actual results to differ materially from
those described in its forward-looking statements.
Such risks and uncertainties include or relate to, among other
things, the following: the Company may be unable to adequately
increase prices or drive operating efficiencies to adequately
offset increased costs and inflationary pressures, including
increased fuel prices and wages; it is difficult to determine the
timing or future impact of a sustained economic slowdown that could
negatively affect our operations and financial results; the closure
of the Subtitle D landfill located in Southbridge, Massachusetts
("Southbridge Landfill") could result in material unexpected costs;
recent changes in solid waste laws of the State of Maine may result
in lower revenues or higher operating costs; adverse weather
conditions may negatively impact the Company's revenues and its
operating margin; the Company may be unable to increase volumes at
its landfills or improve its route profitability; the Company may
be unable to reduce costs or increase pricing or volumes
sufficiently to achieve estimated Adjusted EBITDA and other
targets; landfill operations and permit status may be affected by
factors outside the Company's control; the Company may be required
to incur capital expenditures in excess of its estimates; the
Company's insurance coverage and self-insurance reserves may be
inadequate to cover all of its significant risk exposures;
fluctuations in energy pricing or the commodity pricing of its
recyclables may make it more difficult for the Company to predict
its results of operations or meet its estimates; the Company may be
unable to achieve its acquisition or development targets on
favorable pricing or at all, including due to the failure to
satisfy all closing conditions and to receive required regulatory
approvals that may prevent closing of any announced transaction;
the Company may not be able to successfully integrate and recognize
the expected financial benefits from acquired businesses; and the
Company may incur environmental charges or asset impairments in the
future.
There are a number of other important risks and uncertainties
that could cause the Company's actual results to differ materially
from those indicated by such forward-looking statements. These
additional risks and uncertainties include, without limitation,
those detailed in Item 1A. “Risk Factors” in the Company's most
recently filed Form 10-K and in other filings that the Company may
make with the Securities and Exchange Commission in the future.
The Company undertakes no obligation to update publicly any
forward-looking statements whether as a result of new information,
future events or otherwise, except as required by law.
Investors:
Jason MeadSenior Vice President of Finance & Treasurer(802)
772-2293
Media:
Jeff WeldDirector of Communications(802)
772-2234http://www.casella.com
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(In thousands, except for
per share data)
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenues |
$ |
352,735 |
|
|
$ |
295,268 |
|
|
$ |
904,975 |
|
|
$ |
812,962 |
|
Operating expenses: |
|
|
|
|
|
|
|
Cost of operations |
|
226,303 |
|
|
|
190,285 |
|
|
|
592,865 |
|
|
|
538,779 |
|
General and administration |
|
41,177 |
|
|
|
34,348 |
|
|
|
112,721 |
|
|
|
97,702 |
|
Depreciation and amortization |
|
47,736 |
|
|
|
32,527 |
|
|
|
116,095 |
|
|
|
93,106 |
|
Expense from acquisition activities |
|
3,261 |
|
|
|
816 |
|
|
|
9,801 |
|
|
|
3,878 |
|
Southbridge Landfill closure charge |
|
70 |
|
|
|
245 |
|
|
|
276 |
|
|
|
563 |
|
Legal settlement |
|
— |
|
|
|
— |
|
|
|
6,150 |
|
|
|
— |
|
Environmental remediation charge |
|
— |
|
|
|
759 |
|
|
|
— |
|
|
|
759 |
|
|
|
318,547 |
|
|
|
258,980 |
|
|
|
837,908 |
|
|
|
734,787 |
|
Operating income |
|
34,188 |
|
|
|
36,288 |
|
|
|
67,067 |
|
|
|
78,175 |
|
Other expense (income): |
|
|
|
|
|
|
|
Interest expense, net |
|
10,223 |
|
|
|
5,999 |
|
|
|
23,888 |
|
|
|
16,818 |
|
Loss from termination of bridge financing |
|
— |
|
|
|
— |
|
|
|
8,191 |
|
|
|
— |
|
Other income |
|
(225 |
) |
|
|
(1,523 |
) |
|
|
(1,019 |
) |
|
|
(1,978 |
) |
Other expense, net |
|
9,998 |
|
|
|
4,476 |
|
|
|
31,060 |
|
|
|
14,840 |
|
Income before income
taxes |
|
24,190 |
|
|
|
31,812 |
|
|
|
36,007 |
|
|
|
63,335 |
|
Provision for income
taxes |
|
6,018 |
|
|
|
9,140 |
|
|
|
8,797 |
|
|
|
18,677 |
|
Net income |
$ |
18,172 |
|
|
$ |
22,672 |
|
|
$ |
27,210 |
|
|
$ |
44,658 |
|
Basic weighted average common
shares outstanding |
|
57,962 |
|
|
|
51,677 |
|
|
|
54,228 |
|
|
|
51,604 |
|
Basic earnings per common
share |
$ |
0.31 |
|
|
$ |
0.44 |
|
|
$ |
0.50 |
|
|
$ |
0.87 |
|
Diluted weighted average
common shares outstanding |
|
58,062 |
|
|
|
51,806 |
|
|
|
54,325 |
|
|
|
51,749 |
|
Diluted earnings per common
share |
$ |
0.31 |
|
|
$ |
0.44 |
|
|
$ |
0.50 |
|
|
$ |
0.86 |
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands)
|
September 30,2023 |
|
December 31,2022 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
CURRENT ASSETS: |
|
|
|
Cash and cash equivalents |
$ |
219,089 |
|
$ |
71,152 |
Accounts receivable, net of allowance for credit losses |
|
140,332 |
|
|
100,886 |
Other current assets |
|
53,920 |
|
|
35,441 |
Total current assets |
|
413,341 |
|
|
207,479 |
Property, plant and equipment,
net of accumulated depreciation and amortization |
|
935,402 |
|
|
720,550 |
Operating lease right-of-use
assets |
|
103,116 |
|
|
92,063 |
Goodwill |
|
737,150 |
|
|
274,458 |
Intangible assets, net of
accumulated amortization |
|
256,689 |
|
|
91,783 |
Other non-current assets |
|
52,317 |
|
|
62,882 |
Total assets |
$ |
2,498,015 |
|
$ |
1,449,215 |
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
CURRENT LIABILITIES: |
|
|
|
Current maturities of debt |
$ |
33,957 |
|
$ |
8,968 |
Current operating lease liabilities |
|
8,626 |
|
|
7,000 |
Accounts payable |
|
100,108 |
|
|
74,203 |
Current accrued final capping, closure and post-closure costs |
|
13,155 |
|
|
11,036 |
Other accrued liabilities |
|
97,338 |
|
|
76,393 |
Total current liabilities |
|
253,184 |
|
|
177,600 |
Debt, less current
portion |
|
1,012,169 |
|
|
585,015 |
Operating lease liabilities,
less current portion |
|
68,584 |
|
|
57,345 |
Accrued final capping, closure
and post-closure costs, less current portion |
|
104,401 |
|
|
102,642 |
Other long-term
liabilities |
|
28,810 |
|
|
28,713 |
Total stockholders'
equity |
|
1,030,867 |
|
|
497,900 |
Total liabilities and stockholders' equity |
$ |
2,498,015 |
|
$ |
1,449,215 |
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS(In
thousands)
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
Cash Flows from Operating
Activities: |
|
|
|
Net income |
$ |
27,210 |
|
|
$ |
44,658 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
Depreciation and amortization |
|
116,095 |
|
|
|
93,106 |
|
Interest accretion on landfill and environmental remediation
liabilities |
|
7,470 |
|
|
|
6,018 |
|
Amortization of debt issuance costs |
|
2,221 |
|
|
|
1,414 |
|
Stock-based compensation |
|
6,699 |
|
|
|
5,589 |
|
Operating lease right-of-use assets expense |
|
10,956 |
|
|
|
10,405 |
|
Disposition of assets, other items and charges, net |
|
279 |
|
|
|
(282 |
) |
Loss from termination of bridge financing |
|
8,191 |
|
|
|
— |
|
Deferred income taxes |
|
5,233 |
|
|
|
13,819 |
|
Changes in assets and liabilities, net of effects of acquisitions
and divestitures |
|
(26,529 |
) |
|
|
(22,296 |
) |
Net cash provided by operating activities |
|
157,825 |
|
|
|
152,431 |
|
Cash Flows from Investing
Activities: |
|
|
|
Acquisitions, net of cash acquired |
|
(847,763 |
) |
|
|
(73,963 |
) |
Additions to property, plant and equipment |
|
(90,364 |
) |
|
|
(87,667 |
) |
Proceeds from sale of property and equipment |
|
971 |
|
|
|
571 |
|
Net cash used in investing activities |
|
(937,156 |
) |
|
|
(161,059 |
) |
Cash Flows from Financing
Activities: |
|
|
|
Proceeds from debt borrowings |
|
465,000 |
|
|
|
82,200 |
|
Principal payments on debt |
|
(18,563 |
) |
|
|
(57,407 |
) |
Payments of debt issuance costs |
|
(12,759 |
) |
|
|
(1,232 |
) |
Payments of contingent consideration |
|
— |
|
|
|
(1,000 |
) |
Proceeds from the exercise of share based awards |
|
89 |
|
|
|
192 |
|
Proceeds from the public offering of Class A common stock |
|
496,231 |
|
|
|
— |
|
Net cash provided by financing activities |
|
929,998 |
|
|
|
22,753 |
|
Net increase in cash and cash
equivalents |
|
150,667 |
|
|
|
14,125 |
|
Cash, cash equivalents and
restricted cash, beginning of period |
|
71,152 |
|
|
|
33,809 |
|
Cash, cash equivalents and
restricted cash, end of period |
$ |
221,819 |
|
|
$ |
47,934 |
|
Supplemental Disclosure of
Cash Flow Information: |
|
|
|
Cash interest payments |
$ |
28,626 |
|
|
$ |
14,750 |
|
Cash income tax payments |
$ |
9,689 |
|
|
$ |
2,875 |
|
Non-current assets obtained through long-term financing
obligations |
$ |
8,053 |
|
|
$ |
9,420 |
|
Right-of-use assets obtained in exchange for operating lease
obligations |
$ |
18,558 |
|
|
$ |
7,672 |
|
|
|
|
|
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESUNAUDITED RECONCILIATION OF CERTAIN
NON-GAAP MEASURES(In thousands)
Non-GAAP Performance Measures
In addition to disclosing financial results prepared in
accordance with generally accepted accounting principles in the
United States ("GAAP"), the Company also presents non-GAAP
performance measures such as Adjusted EBITDA, Adjusted EBITDA as a
percentage of revenues, Adjusted Operating Income, Adjusted
Operating Income as a percentage of revenues, Adjusted Net Income
and Adjusted Diluted Earnings Per Common Share that provide an
understanding of operational performance because it considers them
important supplemental measures of the Company's performance that
are frequently used by securities analysts, investors and other
interested parties in the evaluation of the Company's results. The
Company also believes that identifying the impact of certain items
as adjustments provides more transparency and comparability across
periods. Management uses these non-GAAP performance measures to
further understand its “core operating performance” and believes
its “core operating performance” is helpful in understanding its
ongoing performance in the ordinary course of operations. The
Company believes that providing such non-GAAP performance measures
to investors, in addition to corresponding income statement
measures, affords investors the benefit of viewing the Company’s
performance using the same financial metrics that the management
team uses in making many key decisions and understanding how the
core business and its results of operations has performed. The
tables below set forth such performance measures on an adjusted
basis to exclude such items:
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net
income |
$ |
18,172 |
|
|
$ |
22,672 |
|
|
$ |
27,210 |
|
|
$ |
44,658 |
|
Net income as a
percentage of revenues |
|
5.2 |
% |
|
|
7.7 |
% |
|
|
3.0 |
% |
|
|
5.5 |
% |
Provision for income taxes |
|
6,018 |
|
|
|
9,140 |
|
|
|
8,797 |
|
|
|
18,677 |
|
Other income |
|
(225 |
) |
|
|
(1,523 |
) |
|
|
(1,019 |
) |
|
|
(1,978 |
) |
Loss from termination of bridge financing (i) |
|
— |
|
|
|
— |
|
|
|
8,191 |
|
|
|
— |
|
Interest expense, net |
|
10,223 |
|
|
|
5,999 |
|
|
|
23,888 |
|
|
|
16,818 |
|
Expense from acquisition activities (ii) |
|
3,261 |
|
|
|
816 |
|
|
|
9,801 |
|
|
|
3,878 |
|
Southbridge Landfill closure charge (iii) |
|
70 |
|
|
|
245 |
|
|
|
276 |
|
|
|
563 |
|
Legal settlement (iv) |
|
— |
|
|
|
— |
|
|
|
6,150 |
|
|
|
— |
|
Gain on resolution of acquisition-related contingent consideration
(v) |
|
(376 |
) |
|
|
— |
|
|
|
(965 |
) |
|
|
— |
|
Environmental remediation charge (vi) |
|
— |
|
|
|
759 |
|
|
|
— |
|
|
|
759 |
|
Depreciation and amortization |
|
47,736 |
|
|
|
32,527 |
|
|
|
116,095 |
|
|
|
93,106 |
|
Depletion of landfill operating lease obligations |
|
2,255 |
|
|
|
2,376 |
|
|
|
6,558 |
|
|
|
6,523 |
|
Interest accretion on landfill and environmental remediation
liabilities |
|
2,469 |
|
|
|
2,002 |
|
|
|
7,470 |
|
|
|
6,018 |
|
Adjusted
EBITDA |
$ |
89,603 |
|
|
$ |
75,013 |
|
|
$ |
212,452 |
|
|
$ |
189,022 |
|
Adjusted EBITDA as a
percentage of revenues |
|
25.4 |
% |
|
|
25.4 |
% |
|
|
23.5 |
% |
|
|
23.3 |
% |
Depreciation and amortization |
|
(47,736 |
) |
|
|
(32,527 |
) |
|
|
(116,095 |
) |
|
|
(93,106 |
) |
Depletion of landfill operating lease obligations |
|
(2,255 |
) |
|
|
(2,376 |
) |
|
|
(6,558 |
) |
|
|
(6,523 |
) |
Interest accretion on landfill and environmental remediation
liabilities |
|
(2,469 |
) |
|
|
(2,002 |
) |
|
|
(7,470 |
) |
|
|
(6,018 |
) |
Adjusted Operating
Income |
$ |
37,143 |
|
|
$ |
38,108 |
|
|
$ |
82,329 |
|
|
$ |
83,375 |
|
Adjusted Operating
Income as a percentage of revenues |
|
10.5 |
% |
|
|
12.9 |
% |
|
|
9.1 |
% |
|
|
10.3 |
% |
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net
income |
$ |
18,172 |
|
|
$ |
22,672 |
|
|
$ |
27,210 |
|
|
$ |
44,658 |
|
Loss from termination of bridge financing (i) |
|
— |
|
|
|
— |
|
|
|
8,191 |
|
|
|
— |
|
Expense from acquisition activities (ii) |
|
3,261 |
|
|
|
816 |
|
|
|
9,801 |
|
|
|
3,878 |
|
Southbridge Landfill closure charge (iii) |
|
70 |
|
|
|
245 |
|
|
|
276 |
|
|
|
563 |
|
Legal settlement (iv) |
|
— |
|
|
|
— |
|
|
|
6,150 |
|
|
|
— |
|
Gain on resolution of acquisition-related contingent consideration
(v) |
|
(376 |
) |
|
|
— |
|
|
|
(965 |
) |
|
|
— |
|
Environmental remediation charge (vi) |
|
— |
|
|
|
759 |
|
|
|
— |
|
|
|
759 |
|
Interest expense from acquisition activities (vii) |
|
— |
|
|
|
— |
|
|
|
496 |
|
|
|
— |
|
Gain on sale of cost method investment (viii) |
|
— |
|
|
|
(1,340 |
) |
|
|
— |
|
|
|
(1,340 |
) |
Tax effect (ix) |
|
(987 |
) |
|
|
(73 |
) |
|
|
(6,920 |
) |
|
|
(1,071 |
) |
Adjusted Net
Income |
$ |
20,140 |
|
|
$ |
23,079 |
|
|
$ |
44,239 |
|
|
$ |
47,447 |
|
|
|
|
|
|
|
|
|
Diluted weighted
average common shares outstanding |
|
58,062 |
|
|
|
51,806 |
|
|
|
54,325 |
|
|
|
51,749 |
|
|
|
|
|
|
|
|
|
Diluted earnings per
common share |
$ |
0.31 |
|
|
$ |
0.44 |
|
|
$ |
0.50 |
|
|
$ |
0.86 |
|
Loss from termination of bridge financing (i) |
|
— |
|
|
|
— |
|
|
|
0.15 |
|
|
|
— |
|
Expense from acquisition activities (ii) |
|
0.07 |
|
|
|
0.03 |
|
|
|
0.18 |
|
|
|
0.08 |
|
Southbridge Landfill closure charge (iii) |
|
— |
|
|
|
— |
|
|
|
0.01 |
|
|
|
0.01 |
|
Legal settlement (iv) |
|
— |
|
|
|
— |
|
|
|
0.11 |
|
|
|
— |
|
Gain on resolution of acquisition-related contingent consideration
(v) |
|
(0.01 |
) |
|
|
— |
|
|
|
(0.02 |
) |
|
|
— |
|
Environmental remediation charge (vi) |
|
— |
|
|
|
0.01 |
|
|
|
— |
|
|
|
0.01 |
|
Interest expense from acquisition activities (vii) |
|
— |
|
|
|
— |
|
|
|
0.01 |
|
|
|
— |
|
Gain on sale of cost method investment (viii) |
|
— |
|
|
|
(0.03 |
) |
|
|
— |
|
|
|
(0.03 |
) |
Tax effect (ix) |
|
(0.02 |
) |
|
|
— |
|
|
|
(0.13 |
) |
|
|
(0.01 |
) |
Adjusted Diluted
Earnings Per Common Share |
$ |
0.35 |
|
|
$ |
0.45 |
|
|
$ |
0.81 |
|
|
$ |
0.92 |
|
(i) Loss from termination of bridge financing is
related to the write-off of the remaining unamortized debt issuance
costs associated with with the extinguishment of bridge financing
agreements associated with acquisitions.
(ii) Expense from acquisition activities is
primarily legal, consulting or other similar costs incurred during
the period associated with due diligence and the acquisition and
integration of acquired businesses or select development projects
as part of the Company’s strategic growth initiative.
(iii) Southbridge Landfill closure charge are
expenses related to the unplanned early closure of the Southbridge
Landfill along with associated legal activities. The Company
initiated the unplanned, premature closure of the Southbridge
Landfill in the fiscal year ended December 31, 2017 due to the
significant capital investment required to obtain expansion permits
and for future development coupled with an uncertain regulatory
environment. The unplanned closure of the Southbridge Landfill
reduced the economic useful life of the assets from prior estimates
by approximately ten years. The Company expects to incur certain
costs through completion of the closure process.
(iv) Legal settlement is related to reaching an
agreement in June 2023 with the collective class members of a class
action lawsuit relating to certain FLSA claims as well as state
wage and hours laws.
(v) Gain on resolution of acquisition-related
contingent consideration associated with the reversal of a
contingency for a transfer station permit expansion that is no
longer deemed viable.
(vi) Environment remediation charge associated with
the investigation of potential remediation at an inactive waste
disposal site that adjoins one of the landfills we operate.
(vii) Interest expense from acquisition activities
is the amortization of debt issuance costs comprised of
transaction, legal, and other similar costs associated with bridge
financing activities related to acquisitions.
(viii) Gain on sale of cost method investment
associated with the sale of the Company's minority ownership
interest in a subsidiary of Vanguard Renewables.
(ix) Tax effect of the adjustments is an aggregate
of the current and deferred tax impact of each adjustment,
including the impact to the effective tax rate, current provision
and deferred provision. The computation considers all relevant
impacts of the adjustments, including available net operating loss
carryforwards and the impact on the remaining valuation
allowance.
Non-GAAP Liquidity Measures
In addition to disclosing financial results prepared in
accordance with GAAP, the Company also presents non-GAAP liquidity
measures such as Adjusted Free Cash Flow that provide an
understanding of the Company's liquidity because it considers them
important supplemental measures of its liquidity that are
frequently used by securities analysts, investors and other
interested parties in the evaluation of the Company's cash flow
generation from its core operations that are then available to be
deployed for strategic acquisitions, growth investments,
development projects, unusual landfill closures, site improvement
and remediation, and strengthening the Company’s balance sheet
through paying down debt. The Company also believes that
identifying the impact of certain items as adjustments provides
more transparency and comparability across periods. Management uses
non-GAAP liquidity measures to understand the Company’s cash flow
provided by operating activities after certain expenditures along
with its consolidated net leverage and believes that these measures
demonstrate the Company’s ability to execute on its strategic
initiatives. The Company believes that providing such non-GAAP
liquidity measures to investors, in addition to corresponding cash
flow statement measures, affords investors the benefit of viewing
the Company’s liquidity using the same financial metrics that the
management team uses in making many key decisions and understanding
how the core business and cash flow generation has performed. The
table below, on an adjusted basis to exclude certain items, sets
forth such liquidity measures:
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net cash provided by
operating activities |
$ |
74,629 |
|
|
$ |
60,180 |
|
|
$ |
157,825 |
|
|
$ |
152,431 |
|
Capital expenditures |
|
(39,949 |
) |
|
|
(32,799 |
) |
|
|
(90,364 |
) |
|
|
(87,667 |
) |
Proceeds from sale of property and equipment |
|
195 |
|
|
|
64 |
|
|
|
971 |
|
|
|
571 |
|
Southbridge Landfill closure and Potsdam environmental remediation
(i) |
|
887 |
|
|
|
1,318 |
|
|
|
3,224 |
|
|
|
3,272 |
|
Cash outlays from acquisition activities (ii) |
|
2,233 |
|
|
|
1,163 |
|
|
|
8,292 |
|
|
|
3,579 |
|
Post acquisition and development project capital expenditures
(iii) |
|
6,573 |
|
|
|
5,511 |
|
|
|
12,722 |
|
|
|
9,499 |
|
McKean Landfill rail capital expenditures (iv) |
|
2,403 |
|
|
|
— |
|
|
|
3,306 |
|
|
|
— |
|
Adjusted Free Cash
Flow |
$ |
46,971 |
|
|
$ |
35,437 |
|
|
$ |
95,976 |
|
|
$ |
81,685 |
|
(i) Southbridge Landfill closure and Potsdam environmental
remediation are cash outlays associated with the unplanned closure
of the Southbridge Landfill and the Company's portion of costs
associated with environmental remediation at Potsdam, which are
added back when calculating Adjusted Free Cash Flow due to their
non-recurring nature and the significance of the related cash
flows. The Company initiated the unplanned closure of the
Southbridge Landfill in the fiscal year ended December 31, 2017 and
expects to incur cash outlays through completion of the closure and
environmental remediation process. The Potsdam site was deemed a
Superfund site in 2000 and is not associated with current
operations.
(ii) Cash outlays from acquisition activities are cash
outlays for transaction and integration costs relating to specific
acquisition transactions and include legal, environmental,
valuation and consulting as well as asset, workforce and system
integration costs as part of the Company’s strategic growth
initiative.
(iii) Post acquisition and development project capital
expenditures are (x) acquisition related capital expenditures that
are necessary to optimize strategic synergies associated with
integrating newly acquired operations as contemplated by the
discounted cash flow return analysis conducted by management as
part of the acquisition investment decision; and (y) non-routine
development investments that are expected to provide long-term
returns. Acquisition related capital expenditures include costs
required to achieve initial operating synergies and integrate
operations.
(iv) McKean Landfill rail capital expenditures are related
to the Company's landfill in Mount Jewett, PA ("McKean Landfill")
rail side development that are added back when calculating Adjusted
Free Cash Flow due to the specific nature of this investment in the
development of long-term infrastructure which is different from the
landfill construction investments in the normal course of
operations.
Non-GAAP financial measures are not in accordance with or an
alternative for GAAP. Adjusted EBITDA, Adjusted EBITDA as a
percentage of revenues, Adjusted Operating Income, Adjusted
Operating Income as a percentage of revenues, Adjusted Net Income,
Adjusted Diluted Earnings Per Common Share, and Adjusted Free Cash
Flow should not be considered in isolation from or as a substitute
for financial information presented in accordance with GAAP, and
may be different from Adjusted EBITDA, Adjusted EBITDA as a
percentage of revenues, Adjusted Operating Income, Adjusted
Operating Income as a percentage of revenues, Adjusted Net Income,
Adjusted Diluted Earnings Per Common Share, and Adjusted Free Cash
Flow presented by other companies.
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESUNAUDITED RECONCILIATION OF FISCAL
YEAR 2023 OUTLOOK NON-GAAP MEASURES(In
thousands)
Following is a reconciliation of the Company's estimated
Adjusted
EBITDA(i)
from estimated Net income for fiscal year
2023:
|
(Estimated) Twelve Months Ending December 31,
2023 |
Net
income |
$33,000 - $39,000 |
Provision for income taxes |
13,000 |
Other income |
(1,000) |
Gain on resolution of acquisition-related contingent
consideration |
(965) |
Interest expense, net |
37,000 |
Loss from termination of bridge financing |
8,191 |
Legal settlement |
6,150 |
Southbridge Landfill closure charge |
500 |
Expense from acquisition activities |
10,000 |
Depreciation and amortization |
168,000 |
Depletion of landfill operating lease obligations |
9,000 |
Interest accretion on landfill and environmental remediation
liabilities |
9,124 |
Adjusted
EBITDA |
$292,000 - $298,000 |
Following is a reconciliation of the Company's estimated
Adjusted Free Cash
Flow(i)
from estimated Net cash provided by operating activities
for fiscal year 2023:
|
(Estimated) Twelve Months Ending December 31,
2023 |
Net cash provided by
operating activities |
$231,000 - $237,000 |
Capital expenditures |
(162,000) |
Proceeds from sale of property and equipment |
1,000 |
Southbridge Landfill closure and Potsdam environmental
remediation |
4,000 |
Post acquisition and development project capital expenditures |
31,500 |
Cash outlays from acquisition activities |
8,500 |
McKean Landfill rail capital expenditures |
11,000 |
Adjusted Free Cash
Flow |
$125,000 - $131,000 |
(i) See footnotes for Non-GAAP Performance Measures and
Non-GAAP Liquidity Measures included in the Reconciliation of
Certain Non-GAAP Measures for further disclosure over the nature of
the various adjustments to estimated Adjusted EBITDA and estimated
Adjusted Free Cash Flow.
CASELLA WASTE SYSTEMS, INC. AND
SUBSIDIARIESUNAUDITED SUPPLEMENTAL DATA
TABLES(In thousands)
Amounts of total revenues attributable to services
provided for the three and nine
months ended September 30, 2023
and 2022 are as
follows:
|
Three Months Ended September 30, |
|
|
2023 |
|
% of TotalRevenues |
|
|
2022 |
|
% of TotalRevenues |
Collection |
$ |
206,093 |
|
58.4 |
% |
|
$ |
144,117 |
|
48.8 |
% |
Disposal |
|
66,337 |
|
18.8 |
% |
|
|
66,147 |
|
22.4 |
% |
Power generation |
|
1,797 |
|
0.5 |
% |
|
|
1,643 |
|
0.6 |
% |
Processing |
|
3,021 |
|
0.9 |
% |
|
|
3,133 |
|
1.0 |
% |
Solid waste operations |
|
277,248 |
|
78.6 |
% |
|
|
215,040 |
|
72.8 |
% |
Processing |
|
27,782 |
|
7.9 |
% |
|
|
32,159 |
|
10.9 |
% |
National Accounts |
|
47,705 |
|
13.5 |
% |
|
|
48,069 |
|
16.3 |
% |
Resource Solutions operations |
|
75,487 |
|
21.4 |
% |
|
|
80,228 |
|
27.2 |
% |
Total
revenues |
$ |
352,735 |
|
100.0 |
% |
|
$ |
295,268 |
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2023 |
|
% of TotalRevenues |
|
|
2022 |
|
% of TotalRevenues |
Collection |
$ |
495,917 |
|
54.8 |
% |
|
$ |
400,910 |
|
49.3 |
% |
Disposal |
|
181,433 |
|
20.0 |
% |
|
|
169,503 |
|
20.9 |
% |
Power generation |
|
5,042 |
|
0.6 |
% |
|
|
6,050 |
|
0.7 |
% |
Processing |
|
7,351 |
|
0.8 |
% |
|
|
7,883 |
|
1.0 |
% |
Solid waste operations |
|
689,743 |
|
76.2 |
% |
|
|
584,346 |
|
71.9 |
% |
Processing |
|
75,970 |
|
8.4 |
% |
|
|
93,421 |
|
11.5 |
% |
National Accounts |
|
139,262 |
|
15.4 |
% |
|
|
135,195 |
|
16.6 |
% |
Resource Solutions operations |
|
215,232 |
|
23.8 |
% |
|
|
228,616 |
|
28.1 |
% |
Total
revenues |
$ |
904,975 |
|
100.0 |
% |
|
$ |
812,962 |
|
100.0 |
% |
Components of revenue growth for the three months
ended September 30, 2023 compared
to the three months ended September 30,
2022 are as follows:
|
Amount |
|
%
ofRelatedBusiness |
|
% ofOperations |
|
% of TotalCompany |
Solid waste
operations: |
|
|
|
|
|
|
|
Collection |
$ |
10,977 |
|
|
7.6 |
% |
|
5.1 |
% |
|
3.7 |
% |
Disposal |
|
3,905 |
|
|
5.9 |
% |
|
1.8 |
% |
|
1.3 |
% |
Processing |
|
1 |
|
|
— |
% |
|
— |
% |
|
— |
% |
Solid waste price |
|
14,883 |
|
|
|
|
6.9 |
% |
|
5.0 |
% |
Collection |
|
(2,770 |
) |
|
|
|
(1.3) |
% |
|
(0.9) |
% |
Disposal |
|
(4,468 |
) |
|
|
|
(2.1) |
% |
|
(1.5) |
% |
Processing |
|
37 |
|
|
|
|
0.1 |
% |
|
— |
% |
Solid waste volume |
|
(7,201 |
) |
|
|
|
(3.3) |
% |
|
(2.4) |
% |
Surcharges and other fees |
|
(220 |
) |
|
|
|
(0.2) |
% |
|
— |
% |
Commodity price and volume |
|
4 |
|
|
|
|
— |
% |
|
— |
% |
Acquisitions |
|
54,742 |
|
|
|
|
25.5 |
% |
|
18.5 |
% |
Total solid waste
operations |
|
62,208 |
|
|
|
|
28.9 |
% |
|
21.1 |
% |
Resource Solutions
operations: |
|
|
|
|
|
|
|
Price |
|
(4,457 |
) |
|
|
|
(5.6) |
% |
|
(1.5) |
% |
Volume |
|
(645 |
) |
|
|
|
(0.8) |
% |
|
(0.3) |
% |
Surcharges and other fees |
|
(724 |
) |
|
|
|
(0.9) |
% |
|
(0.2) |
% |
Acquisitions |
|
1,085 |
|
|
|
|
1.3 |
% |
|
0.4 |
% |
Total Resource
Solutions operations |
|
(4,741 |
) |
|
|
|
(6.0) |
% |
|
(1.6) |
% |
Total
Company |
$ |
57,467 |
|
|
|
|
|
|
19.5 |
% |
Components of capital expenditures (i) for the
three and nine months ended
September 30, 2023 and
2022 are as follows:
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
Growth capital
expenditures: |
|
|
|
|
|
|
|
Post acquisition and development project |
$ |
6,573 |
|
$ |
5,511 |
|
$ |
12,722 |
|
$ |
9,499 |
McKean Landfill rail capital expenditures |
|
2,403 |
|
|
— |
|
|
3,306 |
|
|
— |
Other |
|
2,217 |
|
|
1,015 |
|
|
6,115 |
|
|
3,501 |
Growth capital
expenditures |
|
11,193 |
|
|
6,526 |
|
|
22,143 |
|
|
13,000 |
Replacement capital
expenditures: |
|
|
|
|
|
|
|
Landfill development |
|
16,155 |
|
|
11,664 |
|
|
27,353 |
|
|
24,526 |
Vehicles, machinery, equipment and containers |
|
10,593 |
|
|
11,851 |
|
|
29,284 |
|
|
41,375 |
Facilities |
|
2,008 |
|
|
1,414 |
|
|
8,522 |
|
|
5,639 |
Other |
|
— |
|
|
1,344 |
|
|
3,062 |
|
|
3,127 |
Replacement capital
expenditures |
|
28,756 |
|
|
26,273 |
|
|
68,221 |
|
|
74,667 |
Capital
expenditures |
$ |
39,949 |
|
$ |
32,799 |
|
$ |
90,364 |
|
$ |
87,667 |
(i) The Company's capital expenditures are broadly defined
as pertaining to either growth or replacement activities. Growth
capital expenditures are defined as costs related to development
projects, organic business growth, and the integration of newly
acquired operations. Growth capital expenditures include costs
related to the following: 1) post acquisition and development
projects that are necessary to optimize strategic synergies
associated with integrating newly acquired operations as
contemplated by the discounted cash flow return analysis conducted
by management as part of the acquisition investment decision as
well as non-routine development investments that are expected to
provide long-term returns and includes the capital expenditures
required to achieve initial operating synergies and integrate
operations; 2) McKean Landfill rail capital expenditures, which is
unique and different from landfill construction investments in the
normal course of operations because the Company is investing in
long-term infrastructure; and 3) development of new airspace,
permit expansions, and new recycling contracts, equipment added
directly as a result of organic business growth and infrastructure
added to increase throughput at transfer stations and recycling
facilities. Replacement capital expenditures are defined as
landfill cell construction costs not related to expansion airspace,
costs for normal permit renewals, replacement costs for equipment
and other capital expenditures due to age or obsolescence, and
capital items not defined as growth capital expenditures.
Casella Waste Systems (NASDAQ:CWST)
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