Q4 2022 Casella Waste Systems Inc Earnings Call
Good day, and thank you for standing by and welcome to the Casella waste systems.
Vince Incorporated's fourth quarter 2022 earnings conference call.
At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you'll need to press star one on your telephone you will do then here an automated message advising your hands raised to withdraw your question. Please press star one again, please be advised that today's conference is being.
Recorded I would now like to hand, the conference over to your Speaker today, Charlie water director of Investor Relations. Please go ahead Sir.
Thank you Donna and thank you everyone for joining us this morning with US today are John Casella, Chairman and Chief Executive Officer of Casella waste systems, That's coletta, our president and Chief Financial Officer, Jason Mead, Our senior Vice President of Finance, and Treasurer, and Sean Steves, Our senior Vice President.
<unk> and Chief operating officer of solid waste operations.
Today, we will be discussing our 2022 full year and fourth quarter results.
These results were released yesterday afternoon.
Along with a brief review of those results and an update on the company's activities and business environment, we'll be answering your questions, but first I'll remind everyone that various remarks that we may make about the company's future expectations plans and prospects constitute forward looking statements for the.
<unk> of the Safe Harbor provisions under the private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those indicated by these forward looking statements as a result of various important factors, including those discussed in the risk factors section of our most recent annual report on Form 10-K, which is on file with the SEC.
In addition, any forward looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date.
While we may elect to update forward looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change.
These forward looking statements should not be relied upon as representing our views as of any date subsequent to today.
Also during this call we will be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles.
Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures to the extent they are available without unreasonable effort are available in the appendix in the appendix to our Investor Slide presentation, which is available in investors section of our website at IR Dot Casella Dot com.
Under the heading events and presentations.
And with that I will now turn it over to John Casella, who will begin today's discussion.
Thanks, Charlie Good morning, everyone and welcome to our fourth quarter 2022 conference call.
This is a great great year for our company marked by strong execution during a period of historically high inflation volatile recycling commodity market like to spend a few minutes highlighting our performance in 'twenty, two and our forward look to 'twenty three and our strategies.
Ned will provide some color on the quarter.
I'd like to begin by saying that I'm extremely proud of the performance at all levels of the company during the year, our entire team stepped up and executed well against our key strategies.
Which led us to achievement of several notable milestones in the year, we surpassed the $1 billion in revenue and also generated over $100 million and adjusted free cash flow for the first time in the company's history.
This reflects the focus and determination of our culture that our employees demonstrate everyday and carry forward into 2023 looking more closely at 2022 strong operating and pricing programs worked well to offset inflation. We grew revenues by 22% adjusted a bit it's been up by nearly 21.
Percent mussel crowd of our continued capital discipline and execution against our growth strategies, which helped drive adjusted free cash flow growth of approximately 17% in the year exceeding our long term 2024 plan.
10% to 15% growth per year.
We laid out our 2024 plan last year, we set a target to optimistically grow revenues by $30 million or more per year through acquisitions or development activity. In 2022, we outperformed the go and acquired 14 businesses with roughly $51 million of annualized revenues. We currently.
We have two potential acquisitions under LOI that we expect to close by sometime in the second quarter with total annual revenues of approximately $30 million. This reflects the continued strength of our acquisition pipeline.
As I look at 2023, we remain well positioned to continue to grow the business in a disciplined manner, while generating strong returns.
With a strong balance sheet low leverage and ample liquidity, we are in excellent position to support further growth in our business.
In terms of the base business. The fundamentals are strong however in the fourth quarter, we experienced a headwind from commodities that was slightly greater than anticipated.
This was mainly driven by several recycling contracts that we have acquired through acquisitions over the last couple of years, which do not yet have our monitoring risk mitigation features over time as these contracts reset we intend to incorporate these mechanisms as it relates to early 2023, we have rolled out another.
Robust pricing program for the year to stay ahead of inflation.
I'd now like to provide a brief review related to the execution against a few of our key strategies and the performance of our operations.
We remain focused on improving the returns at our landfills through a combination of operating programs pricing ahead of inflation and key permitting initiatives that support the future disposal capacity needs of our customers and the markets in which we operate improving the mix of our inbound customers is a key.
Area. We are focused on this year is measured through our average landfill.
<unk> per ton.
Which is up seven 4% in the year, helping us offset wins from cost inflation and heightened regulatory costs and.
In addition to price volume and operational strategies, we have in place. We are excited to have two renewable natural gas operations coming online in 2023 through partnerships with third parties.
These facilities further enhance our sustainability profile and present no financial risk as our partners invested 100% of the R&D capital at our sites, we will benefit from the sharing of cash flows related to these projects. The first facility is expected to begin operations in the second quarter. This year.
Followed by an anticipated start date at our second facility in the fourth quarter.
Further we're very excited about our Mckean landfill rail project, we received our weapons permits.
And are moving forward with plans for a real service at the landfill beginning in 2024. This real surge site provides much needed long term disposal outlet for our customers and for the northeast.
Moving on to the questions business 22 marked an exceptional year for Sean and his team from an operating standpoint and for our collection line of business.
We posted another strong year and exceeded our budget in both adjusted a bit of growth and margin expansion our.
Our flexible pricing and operating programs worked well to offset inflation as inflation began ramping early in 2022, we took quick action to address rising cost.
Ported 7% collection price for the year.
Our fuel cost recovery program worked well in the year and fully offset over $27 million of year over year increase fuel costs.
This risk mitigation program is working as intended but higher fuel costs did result in 40 basis points of margin headwind in the year.
Our ongoing investments across the collection fleet are making positive contributions to productivity, replacing railroad trucks with automated trucks and deploying onboard computers is driving value, while improving safety and employee engagement nearly 50% of our addressable fleet is automated and equipped with computers.
We expect the success of this operational strategy will continue as further investments are made in 2023.
Resource solutions, our business model is naturally.
<unk> has.
It has a natural alignment to sustainability.
We continue to create additional value for stakeholders by having a measurable goals that enhance our focus on areas such as safety turnover resource solutions tonnage and so on as our execution against these key metrics improve our performance as a company.
Last week, we closed on an amendment to our credit facility that leaves borrowing costs to progress in achieving our safety and resource solutions goals outlined in our recent sustainability report the sustainability linked loan further strengthens our accountability and our alignment to these areas.
And our resource solutions segment is important to achieving these goals.
<unk> ongoing technological investments at our recycling facilities are aimed at improving safety recovery recovery quality, increasing throughput and reducing labor in 2022, we invested in an installed robotics and optical sorted at several of our facilities further our most significant upgrade.
<unk> is taking place at our Boston facility, which is one of the largest in the country over the last two or so years, we've invested approximately $20 million and new equipment.
<unk> and technology for this facility the plant will be offline for several months. This year as we expect the installation to be completed by mid year 2023.
Finally, I'd like to highlight our capital allocation and growth strategy. We continue to have success executing against our growth strategy through our disciplined approach and targeting acquisitions in pursuing development projects that have strong return profiles, our pipeline remains very robust with over $500 million in revenue.
I've identified opportunities across our existing operating footprint. We are currently in the late stages for several acquisitions and expect another year of strong activity.
On the project development side as I mentioned in 2023.
We're looking forward to R&D facilities coming online in addition to the Finalization of equipment upgrades at our Boston recycling facility.
And on the heels of these projects, we expect our rail operations at our Mckean landfill could be operational sometime in 2024.
Wrapping up <unk>.
Proud of the success that we had in executing in 2022.
Our key strategies and we have started 2023 on solid footing. The building blocks are in place for us to continue to drive value, while growing the business and with that I'll turn it over to Ned.
Thanks, John I would also like to start by thanking our team for a very strong year, we beat our plan for the year. Despite the challenging backdrop of the historically high inflation.
The rising fuel costs and a significant drop in commodity prices. Thank you to everyone.
Moving on to the quarter revenues in the fourth quarter were $272 1 million up $30 3 million or 12, 5% year over year with three 6% of the year over year change driven by acquisition activity and the remaining eight 9% or 21 $6 million a year over year change, resulting.
From organic growth.
Solid waste revenues were up 13, 2% year over year with price up six 2% acquisition growth of two 2% our fuel costs and recovery fees up six 1%, partially offset by a 1% lower volumes.
Seasonality is always a bit different from year to year and everyone who has followed this company knows that in this year, we experienced a weaker than expected volumes in the fourth quarter, mainly due to lower than forecasted landfill times and roll off polls. However, landfill rollout clients have rebounded sharply into January and were actually ahead.
In the month of January where we were throughout those losses in the fourth quarter.
Our solid waste price increases plus fees in the quarter were up 12, 3% in total adding the two categories together revenues in the collection line of business were up 16, 5% year over year with price up six 7% and volumes slightly down.
Revenues in the disposal line of business were up seven 6% year over year with price up five 4% in volumes slightly down.
As John discussed our landfill average price per ton was up six 7% as we continue to improve mix at our sites.
Resource solutions revenues were up 10, 6% year over year with seven 5% growth from acquisitions, and six 9% volume growth and 17% growth in processing fees and other price, partially offset by lower commodity is down 21, 5%.
<unk> prices or the average commodity revenue per ton was down 67% year over year on lower cardboard mixed paper pricing lower metals and lower plastics pricing.
Commodity prices hit a high point in April of 2022, and then significantly declined sequentially through the remainder of the year prices did stabilize December and now have risen into January and they were up about $5 a ton sequentially from December to January and are sitting ahead of our budget in the month of January .
Adjusted EBITDA was $56 $2 million in the quarter up $4 8 million or nine 3% year over year with $3 1 million of that growth driven by improvements in our base business and $1 7 million derived from the rollover impact of acquisitions completed.
Given our strong performance in 2022, we had to create a total of $2 $5 million during the third and fourth quarters for a special one time bonus to all of our hourly frontline and back office employees have worked hard to help us excel in this challenging environment as bonus was paid out in early December .
Adjusted EBITDA margins were 27% in the quarter down 60 basis points year over year.
As we dig into that margin decline, it's important to really look at the categories. As we look at it we did cover our inflation with our pricing programs are solid waste price was up six 2% offset by a five 4% headwind from inflation excluding fuel other.
Other margin bridging items include a 20 basis point improvement from our fuel recovery program due to timing differences.
But then we had a 90 basis point headwind from recycling commodity prices of 45 basis point headwind from the special bonus that we just discussed and a 20 basis point headwind from lower volumes.
Solid waste adjusted EBITDA was $51 $3 million in the quarter up seven $6 million year over year with strength in both the collection and disposal lines of business.
So our solutions adjusted EBITDA was $4 $6 million for the quarter down $3 million year over year with continued growth in the industrial the industrial services business offset by lower performance in the recycling line of business.
As John mentioned, our risk mitigating commodity programs, including the SRA fee for hauling customers in the processing fee a rebate structure recycling facility has continued to work well and offset most of the significant drop in commodity prices. Unfortunately. These programs are not fully implemented in several of the markets that we have acquired.
Over the last two years had legacy contracts that did not allow us to pass recycling risk back to customers. These markets accounted for over 80% of the year over year adjusted EBITDA decline.
As of December .
December 31, we had $603 $5 million of debt $71 $2 million of cash liquidity of $337 $2 million. Our consolidated net leverage ratio was 2.08 times and our average cash interest rate was approximately three 6%.
Our balance sheet is in great shape and position us well to continue to grow while also providing stability in this rising interest rate environment with our fixed interest rates on approximately 73% of our debt and our next major debt maturity not until 2025.
In recognition of our continued balance sheet improvement. We recently received one notch upgrades at both standard <unk> Poor's and Moody's.
And also as announced last week, we completed two amendments to our credit agreement, including the early adoption of terms. So first to replace LIBOR as the benchmark rate and as John mentioned, we instituted the sustainability linked loan feature to further align our long term sustainability goals with enhancing shareholder value.
Adjusted free cash flow was $111 2 million for fiscal year, 2022, up $15 9 million or close to 17% year over year with higher capital expenditures more than offset by higher net cash flow provided by operating activities, mainly driven by improved operating performance.
And a small improvement in our changes in assets and liabilities versus last year.
As stated in our press release yesterday afternoon, we announced guidance for fiscal 2023, and those ranges are laid out in our press release.
Our guidance ranges for the year assume a stable economic environment, continuing from the fourth quarter into the remainder of 2023.
In addition, our 2023 guidance includes $15 $5 million of revenue growth from the rollover of acquisitions already completed in 2022.
However, as we mentioned in our press release, we have two acquisition targets with approximately $30 million of annualized revenues under letter of intent and we expect to close on these transactions by the ended the second quarter. However, they are not included in our guidance for the year and no. Other acquisitions are included in our guidance.
Our pricing programs continued to increase sequentially from late 2022 into 2023, and we expect solid waste pricing positive, 6% to 7% in fiscal year 2023, we.
We have already rolled out the vast majority of our planned pricing for 2020, right and we have not experienced any meaningful pricing rollback and our solid waste price for the month of January was over 8%.
We believe that we have established appropriate pricing plan for 2023 that positions us well to offset inflationary headwinds, while still improving margins through our investments in technology and core operating programs.
Our internal rate of inflation is currently running at five 4% as I mentioned earlier as discussed in previous quarters, if cost inflation increases further we have great flexibility to advance pricing increases are roughly 70% of our collection.
Yes.
Overall, we expect adjusted EBITDA to be up $8 five to 10, 9% year over year in our guidance with roughly 50 basis points of margin expansion.
However, we do expect margins to be down slightly in the first half of the year due to continued headwinds from recycling commodity prices, we do expect margins to be up in the second half of the year.
We expect adjusted EBITDA growth to come in the following areas.
Collection line of business up roughly $17 million to $20 million disposal line of business up $10 million to $12 million resource solutions down $2 million to $4 million about $2 $5 million of rollover benefit from acquisitions and then some other kind of headwinds in that business due to cost increases of 5% to six.
<unk>.
Overall, we expect adjusted free cash flow to be up about 10% at the midpoint of our guidance range for 2023, we expect very strong flow through from incremental EBITDA with a few cash flow headwinds, including cash interest up roughly $2 $5 million year over year cash taxes up roughly.
$3 million cabinet enclosure up $7 million as we cap it several active site and roughly $3 million of headwinds as delays in certain capital expenditures shifted cash outflows into early 2023 from late 2022.
So in closing our team did an incredible job in fiscal year 2022, accelerating cost efficiency programs to help moderate inflation realigning pricing plans to offset heightened costs and ensuring the eligible customers who are on our fuel cost recovery program and recycling risk management fees.
We are well positioned to continue to execute in 2023 to grow our business through our key strategic initiatives and drive long term shareholder value and with that I'd like to turn it back to the operator for questions.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone towards charting a question. Please press star one again, please wait for your name to be announced please standby, while we compile the Q&A roster.
And our first question comes from the line of Tyler Brown with Raymond James Your line is now open.
Hey, Good morning, guys can you hear me.
Good morning, Good morning, Tyler, Yes, yes, okay. Good.
Myself service here.
Just a quick clarification, where the special bonuses included in the guidance.
Yes. They were set out is something we knew about during the initial guidance a year, but when we update in Q3, we knew about them okay.
Okay, I just wanted to clarify that.
Sure.
Can we start a little bit with volume so I think.
It was a little bit weak here it sounded like there was some pull forward you talked about 50 to 100 basis points of growth in 'twenty. Three can you kind of split that out between collection and disposal.
Yes. So if you look at the fourth quarter, we were trends were weaker than we expected and it was mainly at the landfills with tons and in the roll off line of business not much weakness anywhere else.
What's interesting is that weakness in the fourth quarter, we had about volumes down $1 $8 million during the fourth quarter.
Dollarized basis, all of that decline was more than offset in the month of January so as you know in the northeast, sometimes we get some strange weather pattern strange seasonality and we just saw a period of weakness that we didn't expect in the fourth quarter, but January bounce right back.
So nothing broader economic that we see is just more of that.
Slowing trend into the fourth quarter and it's a nice trends from late December through mid February here.
And then Jason you want to talk about next year, yeah in terms of the.
The breakout between collection and disposal to your point Tyler in 2023.
Our guidance for solid waste 50 to 100 basis points for the full year and it's pretty equivalent between both collection.
And disposals, so as we continue to.
Advanced price increases to stay ahead of inflation, we expect our volume gain volume increases in 2023 to be quite modest across both lines of business 50 to 100 basis points, but as Ned said.
January was a strong month to start the year yeah. Okay. That's helpful and then maybe shifting over to price.
I know you guys have a unique mix there very little CPI tied revenue.
Pricing has decelerated for a couple of quarters again, your peers have kind of seen an acceleration again I get it your defined but just any comments on on maybe.
You kind of talked about it in the preamble, but maybe the shape of pricing because it sounds like it's kind of accelerating.
Up into Q1, and then maybe does it fall off as the rest of the year, just how does that kind of look from a modeling perspective.
Yeah right now in our guidance, we have the first half of the year at roughly.
6.5% to 7% range in the second half of the year like six to six and a half.
But as I mentioned earlier went to straight with more price.
We haven't seen significant rollbacks to date.
I think I think as we look back to 2023, we pushed a lot more I mean back to 2020, we pushed a lot more price in <unk>.
February through June time frame that we had planned to as inflation took off and then we eased up a bit into later in the year and we don't have a lot of natural contracts had reset on specific dates and have CPI linked features as you mentioned so it's more of active pricing with our book of business.
And I think where we sat in the fourth quarter, we kind of sit there and look at our budget plans for the year. We've done elasticity studies, we know where we're headed with a price the specific customers and we waited to just get our pricing playing out the door in December and January for 'twenty. Three we'll look at into spring, if we need to course correct like we.
Did in 2022 we'll do so yeah, and so to be clear.
Are you running inflation call it like mid fives to six in 'twenty, two and is that about what you expect it to be in 'twenty three as of right now so.
We started the year low light or kind of high fours and by Q2, we got into a low 5% inflation range, but Q3, we were close to 6% inflation and we're back down to about five four and we've modeled into next year Chase and five ish five five and a half first half of the year and then.
Moderator and through the year as we all hope and expect closer to five maybe a little less than 5% by the end of the year.
Excluding fuel.
Yes, Okay. That's helpful and just quickly on the capping and closure is this 11 million kind of a new run rate or is it an idiosyncratic.
Europe , capping and closure I'm, just curious about that.
Unique here, we don't cap at landfills every year.
There is just several sites.
From a regulatory standpoint and from a build out standpoint, we're capping this year, so that change year over year, the plus $7 million change year over year, a plus $8 million is pretty unique I mean, thats not something we are spending money on each year, so little bit of a headwind to free cash flow there and as I mentioned.
And also there are some timing differences late in 2022, where some capital we expect it to show up at the last minute it rolled into 2023, so its about $3 million free.
Free cash flow that showed up in 2022 that should have been in 2023.
There's no break to our long term goal of achieving 10% to 15% free cash flow growth. These are dynamic times and sometimes little numbers move a little from year to year, but the trend is there.
On the $30 million under LOI.
One is that in core collection and disposal and two is it in your core geography or is it.
Maybe a little bit outside I'm, just kind of curious.
It's actually in the core.
Core platform.
Northeast right right down the middle of the fairway and.
It's in the core business as well.
Okay excellent. Thank you, obviously collection recycling transfer.
Perfect. Okay. Thank you.
Thank you one moment for our next question.
And our next question comes from Michael Hoffman with Stifel. Your line is now open.
Hey, Thank you very much that the throw a fade towards my competitor there. That's a good question on the M&A and trying to figure out if you're buying Tfl's, Pennsylvania, Maryland, Delaware assets.
Tom.
Yeah.
I'll ask it directly or you don't answer that.
Margin bridge.
Can you break out what you think your individual business margin. The line of business. What is the trend expected to get to the 50 basis points solid waste versus <unk>.
Resource solutions, and then can we bridge the whole company.
How much of the $50.
Fuel, becoming a tailwind.
Like that.
Dan I'm not sure I can give by line of business here.
I was wondering I start with some of the building block at a Michael here, Michael So for next year isn't as specific as you would like and we can always follow up after perhaps.
In our guide for 'twenty three fuel is actually still a headwind about 20 basis points and that's primarily concentrated into the first quarter first half of the year as fuel prices really didn't ramp up.
Fully until late Q1 of 2022 and as the year progress, we continue to offset more and more of that with our with our fuel recovery fees. So fuel slight headwind next year of 20 basis points.
Acquisition rollover of $15 million or $15 $5 million of revenues and the associated EBITDA is about a 10 basis point headwind next year, and then recycling on lower commodity prices again, primarily concentrated in the first half of the year is about a 15 basis point headwind.
So those are three of our larger buckets for next year, all incorporated into our 50 basis points of margin expansion as part of our guidance.
Okay. So then the offset to get to the 50 is all all price or is there something else.
Pricing in the operator operating programs some volte.
Volume rollover as well as it relates to our resource solutions business outside of recycling through Michael which is an.
An area of growth for us over the last several years.
So if I went into the line of business just high level answer the ending year margin was ex filed waste is going to be up have an above average up because they've got offset what I'm, assuming is going to be a negative for line of business full year resource solutions.
Yes.
It was a powerful statement you've got a lot of operating leverage going through solid waste in 'twenty three.
Given what youre doing.
Yes, that's true I mean, we're looking at the model across our solid waste regions, we have some nice margin expansion.
And resource solutions is a margin to tractor in the year as currently modeled given.
What we mentioned earlier on the commodity side and frankly, our risk mitigation programs are in great shape as I mentioned earlier. It really is a handful of contracts have come over for a few of the acquisitions as data so a bit and you look at the fourth quarter recycling.
<unk> was down about $2 $5 million on commodities and almost all of that came from just a couple of handful of contracts it sounds like.
Groundhogs day back to like a number of years ago, where we had a few contracts in our base book of business that we had to reset we did a great job and move them to a risk mitigating programs and at a really nice from that point forward.
So to that end could you update for us because we stopped thinking about this for the seller because the SRA and the mix was kind of 90 10 SRA versus exposure what is your $10 move in the commodity basket equals what an EBITDA today since that's now more of a factor yes.
For each $10 move it's around $900000.
And if you think about it commodities dropped $110 a ton year over year.
So we definitely.
See that same correlation where we had commodity started about $2 $5 million.
In the quarter.
And that's a pretty significant drop as you well know historically high and we shielded the vast majority of it but all of that drop right now quite a bit of it is just coming from a handful of contracts and some of those acquired markets.
Okay, and then could you share with US what was your average basket in 'twenty, two and what's implied in guidance for your basket.
Yes.
I have to average basket for Q4 adjacent if you have it for the full year.
Habits, where it is today.
Yes, I think thats, that's maybe more important so for.
As we look kind of Michael I think.
Our guidance.
Early 2023 through December of 2023, we have recycling commodity prices up.
About 20% through the year.
Or.
I think it's more of a party to talk about the dollars, we only have commodities coming up $14 a ton through the year. It sounds like a big percentage, but it's very low we're sitting at about.
People Cathay basket is much different ways within this basket that we look at $64 a ton today.
And it was roughly in December around $59, a ton and we expect it to rebound to about $78 a ton through the year. So the guide right now does not have much movement on recycling commodities and as an example last year, we for the full year, we are about $125.
Todd So we really haven't taken much back through the guide on a recovery.
Okay and then.
On the free cash flow bridge is there possibly missing.
You gave a lot of data there but.
<unk> a good guy in 'twenty three is I don't repeat the special bonus but is there a headwind you exceeded plan. So I'm, assuming there's a cash bonus payout that's above plan in the spring so that's a headwind.
How do I think about those yeah.
So I gave those kind of bridging items on EBITDA for each of the lines of business.
Good Guy in 2023, and collection and disposal and EBIT into resource solutions, such as embedded there for our employees. So you are right that is an implied headwind, it's not something that is guaranteed to be done again into the year and.
We did we did exceed bonus targets in 2022, so there is a little bit higher cash outflow happening. This spring as those payments are made to once again, but not on not a material bridging items are probably something with those bad guys. I said would be a slight offset.
Cash interest cash taxes.
Alright, Jason number.
So yes insurance on the boat side the difference between year over year cash or we can find that well there I think we.
Follow up on that yeah, or you know just the one one headwind in 'twenty to offset the headwind in 'twenty three because they they offset each other so it's about that same government.
And then.
Timing on Mckean when you start construction. This summer if you've got your wetland permits so you'll be in a place.
To potentially be opened before Boston renews in 'twenty four.
I think it was a possibility Michael it really depends on the regulatory agencies the permit that we are.
Waiting on now is a solid waste permit.
So we've got both of our wetlands permits and right now we're in the mix on our solid waste permits so some of it depends on.
What happens with that permanent how long it takes to get through that process.
And does the guidance include <unk>.
Capital spending for the spur and things like that and the containers and all of that or does for you adjust the guide when construction starts.
So we have tended to be a $10 million.
Capital in our guide right now Michael and as the year progresses, we'll look to update that number as needed and that's that's a lot of the capital.
First phase being going to get this first bill offload infrastructure, Bill and additional yellow iron at the landfill, we're aiming to first take in Containerize MSW and then move to construction and demo debris later, we think thats a larger need across our cuts.
From a base in the northeast to be able to have a solution for MSW.
Should be the majority of it at least for the first phase phase one.
As the majority of it.
No no and then I think John was referring to the cost of the.
Capital.
Yes.
And that we have in the plan should be the majority of the capital that we need for phase, one which is the containerized MSW and getting into.
Some C&D.
Okay.
So that leaves me to my last question is what's your thoughts about a two or three year stack on free cash flow growth because.
Things like this $10 million of much I don't assume you repeat that $10 million and 24.
I just wanted to understand that there is a 10% to 15% CAGR and the milestones.
We're at the very low end of it this year, but my sense is that.
Back into the middle of that CAGR upper end of it even without M&A.
But like to hear your thoughts on that.
Yeah, Michael I think Youre right, we made a comment earlier that we probably still a tiny bit from 2023 into 2022, just given some of the capital expenditure timing issues.
And.
Mentioned that at some of the <unk>.
Capping spend is really a little atypical this year so.
I don't think 2023, it's really too far off of that that general growth rate and we don't see other factors that.
Impacted over the next couple of years, we're really confident that we can continue to grow within that growth rate.
Okay.
The middle half of the range on organic growth pushing to the upper half of the range with acquisitions or above the range with acquisition activity.
And then last one just start to think about cadence.
On pricing.
If you've opened the year at an eight.
Is it fair to say that maybe <unk> 73 to six 4%, 5% that averages six five and I know you said six to six and a half as an average for the second half so I'm, a little below that but the way to think.
Yes, we were a little ahead of it with the eighth a little ahead of what was planned. So we're planning the first half of the year like six five to seven in second half of the year six six and a half.
Hopefully with this price sticks in the marketplace, and we're able to exceed that plan and drop a bit more to margins.
Okay.
And we have to react we will react right I mean, if we have to react as we did in 2022, we will.
With additional price if need be from an inflationary standpoint.
Okay.
Thank you. Thank you Michael Thanks, Michael Thank you.
As a reminder to ask a question you will need to press star one one.
Next question comes from the line of Sean Eastman with Keybanc. Your line is open.
Hey, guys. This is Nick on for Shaun Today I was just wondering if you could give an update on the permitting for.
For Heartland, and hakes and sort of how that's going I know you called out some.
Inventory issues Youre fighting with them.
I just think in the previous year, so any color on that would be appreciated.
Yes, I mean I think that.
Sam.
Engineering team permitting team continue to move forward with the permitting as I said previously.
Previously, we've got our wetlands permits for.
Mckean, which were a big lift and now we're in a solid waste permit which is somewhat straightforward.
And then with regard to.
Highland and Hakes, just continue to move through the process with both facilities.
And nothing nothing out of the ordinary no no big surprises continue to move forward on permitting on both of those facilities.
Thank you.
Yes.
Thank you.
And at this time I would like to hand, the conference back to Mr. John Casella for closing remarks.
Thanks, everybody for joining us today.
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All of your participation we look forward to discussing our first quarter 2023 earnings in April Thanks, everybody have a great weekend and a good holiday. Thank you.
This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
The conference will begin shortly to raise and lower Johan during Q&A you can dial one one.
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