Q4 2023 Casella Waste Systems Inc Earnings Call
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Operator: Good day, and thank you for standing by. Welcome to the Casella Waste Systems fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode.
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Good day, and thank you for standing by walk to the Casella waste it.
Hello waste Systems' fourth quarter 2023 earnings call at this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during recession, you would press star one on your telephone.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I will now hand the conference over to our first speaker today, Charlie Wohlhuter, Director of Investment Relations. Please go ahead.
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Today's conference is being recorded I would now like turn the conference over to your first speaker today truly we want them director of Investor Relations. Please go ahead.
Charlie Wohlhuter: All right. Thank you, Victor. Good morning, and thank you for joining us on the call today. With us is John Casella, Chairman and Chief Executive Officer of Casella Waste Systems. Ned Coletta, our President, Brad Helgeson, our Chief Financial Officer, Jason Mead, our Senior Vice President of Finance and Treasurer, and Sean Steves, our Senior Vice President and Chief Operating Officer of Solid Waste Operations. Today we will discuss our fourth quarter and full year 2023 results, which were released yesterday afternoon. After a review of these results and an update on the company's activities and business environment, we will be happy to take your questions. But first, please note that various remarks we may make about the company's future expectations, plans, and prospects constitute forward-looking statements for the purposes of the safe harbor provisions under the Private Security Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these four forward-looking statements as a result of various important factors, including those discussed in the risk factor section of our most recent annual report on Form 10-K, which is on file with the SEC.
Alright, Thank you Victor good morning, and thank you for joining us on the call today.
With us are John Casella, Chairman, and Chief Executive Officer, Casella waste systems.
Our president Brad Helgeson, our Chief Financial Officer, Jason Mead, our senior Vice President of Finance, and Treasurer, and John Steitz, Our senior Vice President and Chief operating officer of solid waste operations.
Today, we will discuss our fourth quarter and full year 2023 results, which were released yesterday afternoon.
After review of these results and an update on the company's activities and business environment, we will be happy to take your questions.
But first please note that various remarks, we may make about the company's future expectations plans and prospects constitute forward looking statements for the purposes 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.
Alluding those discussed in the risk factors section of our most recent annual report on Form 10-K, which is on file with SEC.
Charlie Wohlhuter: In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views in any subsequent, 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, February 16, 2024. 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.
In addition, any forward looking statements represent our views only as of today and should not be relied upon as representing our views in subsequent days.
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 February 16 2024.
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.
Charlie Wohlhuter: Reconciliations of the Non-Gap Financial Measures to the most directly comparable gap measure, to the extent they are available without unreasonable effort, are included in the appendix of our investor slide presentation, which will be available in the investor section of our website at ir.casella.com. And with that, I will now turn it over to John Casella to begin our. Thanks, Charlie. And good morning, everyone.
Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures to the extent they are available without unreasonable effort are included in the appendix of our investor Slide presentation, which will be available in the investors section of our website at IR docs and solid dot com.
And with that I will now turn it over to John consolidate to begin our discussion.
John W. Casella: And welcome to our fourth quarter 2023 conference call. This was an exceptional year for the company and illustrates the success that we continue to have in terms of executing against our key strategies. I'm excited about the opportunities that lie ahead.
Thanks, Charlie and good morning, everyone and welcome to our fourth quarter 2023 conference call.
It was an exceptional year for the company.
Illustrates the success that we continue to have in terms of executing against our key strategies.
Cited about the opportunities that lie ahead.
John W. Casella: First, we will highlight our performance for the year, then I'll pass it on to Brad and Ned, who will provide more specific comments around our results and strategy. Our performance in 2023 reflects the successful investments we made across our business.
We will highlight our performance for the year, then I'll pass it on to Brad and Ned who provide more specific comments around our results and strategy.
Our performance in 2023 reflects the successful investments we made across our business.
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John W. Casella: The focus on our people and operations is helping us improve safety and turnover while delivering exceptional service and driving more productivity. We're also experiencing notable operating benefits from our Boston MRF following the full equipment upgrade this past summer. I'm also excited to announce that we have similar plans to fully upgrade the processing equipment at our Willamette, Connecticut, recycling facility later in 2024. We continue to invest in and further modernize our sustainability infrastructure. Our rigorous approach strikes the right balance between economic returns and providing benefits to the environment.
Our focus on our people and operations is helping us improve safety and turnover well.
Delivering exceptional service delivering exceptional service and driving more productivity.
We're also experiencing notable operating benefits from our Boston and Murph following the full equipment upgrade this past summer.
I'm also excited to announce that we have similar plans to fully upgrade the processing equipment at our romantic Connecticut recycling facility later in 2024.
We continue to invest in and further modernize our sustainability infrastructure, our disciplined approach strikes the right balance.
Between economic returns and providing benefits to the environment.
John W. Casella: As I noted in our press release yesterday, completing seven acquisitions was an exciting and notable achievement in 2023, given the size and the new markets we've entered. I'm very encouraged by the early results of our Mid-Atlantic region and other acquisitions that we completed in the year. A real shout out to the Mid-Atlantic team, to Kyle and his team.
As I noted in our press release yesterday, completing seven acquisitions wasn't an exciting a notable achievement in 2023, given the size and the new markets. We've entered I'm very encouraged by the early results of our mid Atlantic region.
The other acquisitions that we completed in the year real shout out to the mid Atlantic team to Kyle and his team have done a.
John W. Casella: They've done a terrific job of integration and bringing Mid-Atlantic up to speed in terms of the Casella culture. The level of engagement of our new team members is really impressive, and it helped facilitate the transition and integration process. It includes implementing our strategy, developing our sales approach, and evaluating acquisition opportunities.
Terrific job integration and bringing the mid Atlantic up to.
Speed into in terms of the cross sell culture the level of engagement of our new team members is really impressive we helped facilitate their transition and integration process includes implementing our strategy developing our sales approach and a value evaluating acquisition opportunities.
John W. Casella: We really like the growth runway we see ahead for the entire business. In 2023, our operating initiatives in our base business, combined with our growth strategy, allowed us to post double-digit growth across key financial metrics; revenues were up over 16% adjusted EBITDA growth top 20%, and for the second consecutive year, adjusted free cash flow was up 15%; we expanded our adjusted EBITDA margins 70 basis points, which was an indication of the strength of our operating and pricing programs. We closed out the year on solid footing in Q4 with 17% adjusted a bit of growth in our base business and over 200 basis points of margin expansion.
Really liked the growth runway, we see ahead for the entire business in 2023, our operating initiatives in our base business combined with our growth strategy allowed us to post double digit growth across key financial metrics.
Revenues were up over 16% adjusted EBITDA growth topped 20% and for the second consecutive year adjusted free cash flow was growth was up 15%, we expanded our adjusted EBITDA margins 70 basis points.
Which.
With an indication of the strength of our operating and pricing programs. We closed out the year on solid footing in Q4 was 17% adjusted a bit of growth in our base business in over 200 basis points of margin expansion.
John W. Casella: As we look to 2024, we have a strong balance sheet, ample liquidity, and are in an excellent position to support further growth in our business. I would like to provide a few related comments on the execution of a few of our key strategies and some of the performance of our operations. As you know, a key part of our strategy is improving returns across our disposal assets and our operating programs that really make this possible. Despite volumes being down year over year in 2023, we were able to drive higher adjusted EBITDA. This is a testament to our team and the focus on getting the right tons at the right price, improving the mix of our inbound streams, helping to drive our average landfill price per ton up 9.8% in a year, and helping to offset the headwinds from lower disposal costs. Lower Disposal Bottoms
As we look at 2024, and we have a strong balance sheet ample liquidity and are in excellent position to support further growth in our business.
Let me provide a few related comments on the execution of a few of our key strategies.
And some of the performance of our operations.
As you know a key part of our strategy is improving returns across our disposal assets.
Operating programs are really made this possible despite volumes being down year over year. In 2023, we were able to drive higher adjusted EBITDA. This is a testament to our team and are focused on getting the right time, the right price improving the mix of our inbound streams, helping to drive our average landfill price per ton.
Up nine 8% in a year and helping to offset the headwinds from lower disposal costs.
Lower disposal volumes excuse me, we remain committed to expanding margins and driving higher returns across our landfill assets.
John W. Casella: We remain committed to expanding margins and drawing higher returns across our landfill assets. On the collection side of the business, I'm especially proud of what we're doing to strengthen our employee base that is enabling us to be a safer and more engaged team, resulting in higher returns in this line of business. Yes, ongoing technology investments like adding automated trucks, route optimization, software, and onboard computers are driving safety and operating efficiencies higher.
The collection side of the business, especially proud of what we're doing to strengthen our employee base that is enabling us to be safer and more engaged team.
Resulting in higher returns in this line of business, yes, ongoing technology investments like adding automated trucks route optimization software onboard computers are driving safety and operating efficiencies higher but the direct investment in our frontline team are equally as important and valuable Sean and that team has done it.
John W. Casella: But the direct investment in our frontline team is equally as important and valuable. Sean and that team have done a terrific job of supporting the field and really driving our cost of operations down. Over 200 students have graduated from our CDL school since starting the program.
Terrific job of supporting the field and really driving our cost of ops down over 200 students have graduated from our CDL schools since starting the program.
John W. Casella: We're seeing great outcomes, particularly lower turnover rates among our graduates in our CDL program. While we're only a couple months into our new diesel technician program, 20 students have received their certificates so far, and these people-focused initiatives promote greater stability and safety, and quite frankly, the results show it. Our company-wide turnover rate is down nearly 20% year over year in 2023, while key safety metrics such as TRIR improve. As our execution against these key metrics improves, so often does our performance as a company. Probably the most significant thing that I'm proud of is that despite the immense growth that we had in 2023, we were able to bring our turnover down and improve our safety record, a real tribute to the entire team. And finally, resource solutions.
We're seeing great outcomes, particularly in lower turnover rates among our graduates in our CDL program, while we're only a couple of months into our new diesel technician program 20 students have received their certificate so far and these people focused initiatives promote greater stability and safety and quite frankly the.
Results show it.
Our company wide turnover rate is down nearly 20% year over year in 2023, while key safety metrics, such as tier tier IR improve.
Our execution against these key metrics improve so often does the performance as a company probably the most significant thing that I'm proud of us throughout the immense growth that we had in 2023, we were able to.
Bringing our turnover down and improve our safety record a real tribute to the entire team and finally resource solutions as I mentioned before our sustainability is woven into the framework of the company. It is an area we continually strive to enhance similar to our upgraded Boston Murph, which has delivered strong results over the back.
John W. Casella: As I mentioned before, sustainability is woven into the framework of the company and is an area we continually strive to enhance. Similar to our upgraded Boston MRF, which has delivered strong results over the back half of 2023, we are reviewing other facilities where we can improve operating efficiencies and materials recovery. Our next large upgrade, as I said, will be at our Willimantic MRF, slated to begin in the second half of this year, turning to our professional services business. You know, hats off to Paul and Liza; that entire team has done a terrific job of growing our revenues and looking at those opportunities. We've won a significant additional business throughout 2023 and see lots of potential to continue to grow this business looking ahead. A key driver of this optimism is the potential of the new market entries that they present for more customers for us to win by differentiating our service offerings.
Half of 2023, we are reviewing other facilities, where we can improve operating efficiencies and materials recovery. Our next large upgrade as I said, we'll be at our Willimantic Merck slated to begin in the second half of this year.
Turning to our professional services business.
Hats off to Paul and Lisa that entire team has done a terrific job of growing our revenues and looking at those opportunities.
One a significant additional business throughout 2023, and see lots of potential to continue to grow. This business looking ahead. Our key driver of this optimism is the potential of the new market entries.
But what they present for more customers for us to win rate differentiation differentiating.
John W. Casella: Again, a really exciting opportunity for us to really provide those services to those industrial customers in the Mid-Atlantic. Very excited about the opportunities that present themselves in front of us looking ahead. Wrapping up, and exiting 2023, I have to say I am so proud of our entire team. Our drivers, our mechanics, our division managers, particularly in those states, Vermont, New Hampshire, upstate New York, Pennsylvania, where our teams provided service in the midst of what was a catastrophic flooding.
Our service offerings.
Again, a really exciting opportunity for us to really provide those services to those industrial customers in the mid Atlantic.
Very excited about the opportunities that present themselves.
Front of Us looking ahead.
Wrapping up.
Exiting 2023 I have to say.
And so proud of our entire team.
Our drivers our mechanics, our division managers.
Particularly in those states.
New Hampshire, Upstate New York, Pennsylvania, where our teams.
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John W. Casella: I can talk about for a long time some of those divisions that didn't have an operating center, yet they picked up their customers and took care of the communities that depend on us for service. So a big hats off to the entire service team. They did a fabulous job in 2023. When you look across the entire organization, from finance with Ned and Jason enhancing the capital structure to continue to grow the business, Shelly and Sam in permitting compliance, and legal, it's just an absolute success story. Unbelievable performance for the year.
I can.
Talk about for a long time some of those divisions that Didnt have an operating center yesterday.
Picked up there they picked up their customers. It took care of the communities that depend on us for service a big hats off to the entire service team.
This job in in 2023, and when you look across the entire organization from finance with Ned and Jason enhancing our capital structure to continue to grow that business.
Shelly and Sam and permitting compliance and legal.
Just absolute.
Absolutely.
Unbelievable performance for the year.
John W. Casella: HR, again, can't say enough about Kelly and the HR team. Onboarded 1,000 people in 2023. And, you know, probably most importantly, all of the management team has been able to go through Core Values training and have a real understanding of, you know, what it takes to manage it. So an extremely exciting year.
HR.
Can't say enough about Kelly and the HR team onboard at a 1000 people in 2023.
And probably most importantly, all of the management team has been able to come through or values training and have a real understanding of what it takes to manage it to sell it and extremely exciting year.
Bradford J. Helgeson: Very, very significant from a growth perspective, but equally as significant in our ability to bring down turnover and improve our safety record. And with that, I'll turn it over to Brad to go through more specifics on the numbers. Okay. Thanks, John. Good morning, everyone. I've been with the company for a little over three months now, and I'm really thrilled to be part of the team. You know, Ned left some big shoes to fill, but obviously, he remains by my side.
Very.
Significant from a growth perspective, but.
But equally as significant in our ability to bring down turnover and improve our safety record.
And with that I'll turn it over to Brad to go through more specifics on the numbers, okay. Thanks, John and good.
Everyone.
With the company for a little over three months now and.
And I'm really thrilled to be part of the team.
Nevertheless, some big shoes to fill but obviously he remains on our side.
Bradford J. Helgeson: Moving on to the quarter, revenues in the fourth quarter were $359.6 million, up 87.4 million, or 32.1% year-over-year, with $71.7 million of change driven by acquisition activity and $15.8 million of organic growth, or 5.8%. Solid waste revenues were up 40.4% year over year, with acquisition growth of 34.3%, price up 6.7%, and volumes down 1.4%. Revenues in the collection line of business were up 54.8% year over year, with prices up 7.2% and volumes down 2%. Volume declines were primarily a result of softness in temporary roll-off activity and customer churn driven by our efforts to improve the quality of revenue and margins in the residential line of business.
Moving on to the quarter.
Revenues in the fourth quarter were $359 $6 million up $87 4 million or 32, 1% year over year with $71 7 million unchanged driven by acquisition activity and $15 $8 million of organic growth or five 8%.
Solid waste revenues were up 44% year over year with acquisition growth of 34, 3% price up six 7% and volumes down one 4%.
Revenues in the collection line of business were up 54, 8% year over year with price up seven 2% and volumes down 2%.
Volume declines were primarily a result of softness in temporary roll off activity and customer churn driven by our efforts to improve quality of revenue and margins in the residential line of business.
Bradford J. Helgeson: Revenues in the disposal line of business were up 8% year over year, with landfill pricing up 6.9%, landfill tons down 3.7%, reflecting softness and C&D volumes in the market, while MSW and special waste volumes were essentially flat. Resource Solutions revenues were up 8.8% year over year, with prices up 5.2% across the segment, and acquisitions contributing 3.8%. Price growth was driven by an increase of 81% or $45 per ton in our average commodity revenue over the historically low prices of Q4 2020, though this was muted by lower tipping fees that adjust to share higher commodity prices with our customers. Stepping back, recycled commodity prices have ridden a rollercoaster over the past two years, with a multi-year peak in the first half of 2022 and a trough in the second half, followed by a moderation of volatility and sequential recovery in prices over the course of 2023.
Revenues in the disposal line of business were up 8% year over year with landfill pricing up six 9%.
As our tongues down three 7%, reflecting softness in C&D volumes in the market, while MSW and special waste volumes were essentially flat.
Resource solutions revenues were up eight 8% year over year with price up five 2% across the segment and acquisitions contributing three 8%.
Price growth was driven by an increase of 81% or $45 per ton in our average commodity revenue over the historically low prices of Q4 2022.
This was muted by lower shipping fees, just to share higher commodity prices with our customers.
Stepping back recycled commodity prices have written a roller coaster over the past two years.
With a multi year peak in the first half of 2022 and trough in the second half followed by a moderation of volatility at sequential recovery in prices over the course of 'twenty three.
Bradford J. Helgeson: Overall, commodity prices were a headwind on revenue for the year, but have now turned positive on a comparable year-over-year basis. But regardless of the direction of prices, the company's model works to preserve returns on its investment in recycling through the cycle, sharing the commodity price risk with our customers via contract structures and our SRD. The past two years served as a really good case study. [inaudible] Adjusted EBITDA was $82.2 million in the quarter, up $25.9 million, or 46.1% year-over-year, with $16.3 million of the change from acquisitions and $9.7 million, or 17%, from organic growth. At $295 million for the year, adjusted EBITDA came in at the middle of our guidance range as it increased in Q3. Solid waste adjusted EBITDA was $74.8 million in the quarter, up $23.5 million year-over-year, with acquisition, strong pricing, and operating efficiencies driving this growth. Resource Solutions to Justice Ibbott-Dodd with $7.4 million in the quarter, up $2.8 million year-over-year, driven by the benefits of the Boston retrofit and higher commodity prices. Adjusted EBITDA margins were 22.8% for the quarter, which is a Casella record for the fourth quarter and up approximately 210 basis points year over year.
Overall commodity prices were a headwind on revenue for the year, but have now turned positive on a comparable year over year basis.
But regardless of the direction of prices the company's model works to preserve returns to the investment in recycling through the cycle sharing the commodity price risk with our customers via contract structures and our SRA fee.
The past two years served as a really good case study.
National accounts revenue within resource solutions was up four 2% year over year.
Adjusted EBITDA was $82 2 million in the quarter up $25 9 million or <unk> 46, 1% year over year with $16 $3 million of the change from acquisitions, and $9 7 million or 17% from organic growth.
At $295 million for the year adjusted EBITDA came in at the Middle of our guidance range has increased at Q3.
Solid waste adjusted EBITDA was $74 $8 million in the quarter up $23 $5 million year over year with acquisition strong pricing and operating efficiencies driving this growth.
<unk> solutions adjusted EBITDA was $7 4 million in the quarter.
Sure.
$2 $8 million year over year, driven by the benefit of the Boston or retrofit and higher commodity prices.
Adjusted EBITDA margins were 22, 8% for the quarter, which is a can sell a record for the fourth quarter up approximately 210 basis points year over year.
Bradford J. Helgeson: Again, our pricing programs fully offset cost inflation in the quarter, with consolidated price growth of 5.9%, providing a 110 basis point spread over inflation, which ran at 4.8%, excluding fuel. However, inflation has been moderating, but flat sequentially in the quarter, and of course, remains elevated in historical terms. In addition to the 110 basis points from net price, further year-over-year margin bridging items include 140 basis points from Improved Collection Operating Performance Reflecting Labor and Cost Efficiencies from Our Operating Programs; improved recycling processing performance, again, driven by the Boston MRF retrofit; and lower fuel expense, net of fuel recovery. These were offset by a 35 basis point headwind from lower landfill volumes and higher leachate costs.
Again, our pricing programs fully offset cost inflation in the quarter with consolidated price growth of five 9%, providing a 110 basis points spread over inflation, which ran at four 8% excluding fuel.
Inflation has been moderating for flat sequentially in the quarter and of course remains elevated in historical terms.
In addition to the 110 basis points from net price further year over year margin bridging items include 140 basis points from improved collection of operating performance, reflecting labor and cost efficiencies.
Our operating programs improved recycling processing performance again, driven by the Boston Merck retrofit.
And lower fuel expense net of fuel recovery fees.
These were offset by a 35 basis point headwind from lower landfill volumes and higher leachate costs and <unk>.
Bradford J. Helgeson: And a five basis point headwind from acquisitions as the acquired businesses have come in at a slightly lower margin pre-synergy than the existing business. This represents a margin tailwind opportunity, of course, as we execute on our integration and synergy. Cost of operations in the quarter was up $54.8 million a year, but down 120 basis points as a percentage of revenue, as the company continues to outpace inflation on the revenue line and operate more efficiently, as I've mentioned. $50.1 million of the increase was from acquisitions. So on a same-store basis, cost of operations was down over 200 basis points as a percentage of revenue year-over-year, which is a tremendous performance. General and administrative costs in the quarter were up $7.4 million year over year but down 110 basis points as a percentage of revenue.
Five basis point headwind from acquisitions as the acquired businesses have come in at a slightly lower margin pre synergies than the existing business.
This represents margin tailwind opportunity of course, as we execute on our integration and synergy plans.
Cost of operations in the quarter was up $54 $8 million year over year, but down 120 basis points as a percentage of revenue as the company continues to outpace inflation on the revenue line and operate more efficiently as I've mentioned.
$51 million of the increase was from acquisitions. So on a same store basis cost of operations was down over 200 basis points as a percentage of revenue year over year, which is tremendous performance.
General and administrative costs in the quarter were up $7 $4 million year over year.
110 basis points as a percentage of revenue.
Bradford J. Helgeson: $5.3 million of the increase was from acquisitions. The company is investing in the G&A line to support its growth, including adding a new region to manage our Mid-Atlantic operation. We expect to gain further leverage here over time as we, The depreciation and amortization costs were up $21.4 million year over year, with $18.3 million of the increase resulting from the recent acquisition activity. As Ned explained last quarter, we expect heightened DNA for the first few years after each acquisition. To put this in perspective, the DNA associated with acquisitions was 25.5% of acquired revenues in the quarter, as compared to 12.6% for the base price.
$5 $3 million of the increase was from acquisitions.
The company is investing in the G&A line to support our growth, including adding a new region to manage on our mid Atlantic operations, we expect to gain further leverage here over time as we grow.
Depreciation and amortization costs were up $21 $4 million year over year with $18 $3 million with the increase resulting from the recent acquisition activity.
Is that explained last quarter, we expect heightened D&A for the first few years after each acquisition.
To put this in perspective DNA associated with acquisitions was 25, 5% of acquired revenues in the quarter as compared to 12, 6% for the base business.
Bradford J. Helgeson: The P&L included a unique nonrecurring item in the fourth quarter that I'd like to take a moment to explain. $3.9 million charge for an event at our Ontario County landfill, where a layer of soil slid down the veneer of a capped section of the landfill. Nobody was hurt, and no more operations were never interrupted.
The P&L included a unique nonrecurring item in the fourth quarter, but I'd like to take a moment to explain.
$3 $9 million charge for an event at our Ontario County, landfill, where a layer of soil slid down the veneer of a cap section of landfill.
Nobody was hurt and overall operations were never interrupted the.
Bradford J. Helgeson: The charts cover the write-up of costs related to the capping work and current period costs for cleanup. Engineering analysis is currently underway to determine root causes and responsibility for the. Our effective tax rate was 31.4% for the full year, as certain non-deductible expenses and discrete items pushed the rate above our statutory rate of approximately 27%.
The charge cover the write off of costs related to the cap cabin work and current period costs for cleanup and jewelry.
Engineering analysis is currently underway to determine root causes and responsibility for the event.
Our effective tax rate was 31, 4% for the full year and certain non deductible expenses and discrete items pushed the rates above our statutory rate of approximately 27%.
Bradford J. Helgeson: Adjusted net income was $7.5 million in the quarter, down $2 million compared to the prior year, with the accelerated DNA associated with acquisitions weighing on earnings. Gap net loss was $1.8 million in the quarter, impacted by $5.2 million of expenses related to acquisitions and the $3.9 million landfill capping. Adjusted DPS was $0.13 in the quarter and $0.94 for the year. Gap EPS was a loss of $0.03 in the quarter, and earnings were $0.46.
Adjusted net income was $7 $5 million in the quarter down $2 million compared to prior year with the accelerated DNA associated with acquisitions weighing on earnings.
GAAP net loss was $1 8 million in the quarter impacted by a $5 $2 million of expenses related to acquisitions, and a $3 $9 million Rancho capping charge.
Adjusted EPS was <unk> 13 cents in the quarter and <unk> 94 for the year GAAP EPS was a loss of <unk> <unk> in the quarter and earnings of 46 for the year.
Bradford J. Helgeson: The company's acquisition growth strategy is weighing on the bottom line in the near term, with costs incurred to pursue, execute, and integrate acquisitions and accelerate DNA-impacting earnings. But it's building significant shareholder value for the long term, and these acquisition-related P&L headwinds will become tailwinds in the future. Adjusted free cash flow was $128.3 million for the full year 2023, up 15% year-over-year and in the middle of our increased guidance range at Q3. Net cash provided by operating activities was $233.1 million for the full year.
The company's acquisition growth strategy is weighing on the bottom line in the near term with costs incurred to pursue execute and integrate acquisitions and accelerated DNA impacting earnings, but it's building significant shareholder value for the long term and these acquisition related P&L headwinds will become tailwind in future years.
Adjusted free cash flow was $128 3 million for the full year 2023 up 15% year over year and in the middle of our increased guidance range at Q3.
Net cash provided by operating activities was $233 1 million for the full year.
Bradford J. Helgeson: This was driven by improved operating performance, partially offset by the cost of higher debt to finance acquisitions and higher outflows from net changes in assets and liabilities. In that line, DSO was flat year over year at 34 days, but we faced a few headwinds from a working capital standpoint, including higher landfill capping. Relative to our expectations at Q3, capital expenditures ended up coming in a little lighter, as we planned for the heaviest capital spending quarter in the company's history, but delays in equipment deliveries pushed some spend into 2024, which is reflected in our guidance, which I'll discuss shortly. Going the other way, cash costs for acquisition-related activities came in a bit. As of December 31, we had $1.05 billion of debt, $2 The Consolidated Net Leverage Ratio for Purposes of Bank Covenants was 2.78 times. Our average cash interest rate was approximately 5%, and we had fixed interest rates on over 75% of our debt.
This was driven by the improved operating performance, partially offset by the cost of higher debt to finance acquisitions and higher outflows from net changes in assets and liabilities.
In that line DSO was flat year over year at 34 days, but we faced a few headwinds from a working capital standpoint, including higher landfill capping costs.
Relative to our expectations at Q3.
Capital expenditures ended up coming in a little lighter as we plan for the heaviest capital spending quarter in the Companys history, but delays in equipment deliveries pushed some spending into 2024, which is reflected in our guidance, which I'll discuss shortly.
So in the other direction cash costs for acquisition related activities came in a bit higher.
As of December 31, we had $1.05 billion of debt $221 million of cash and available liquidity of $493 million.
Our consolidated net leverage ratio for purposes of our bank covenants was $2 seven eight times, our average cash cash interest rate was approximately 5% and we had fixed interest rates on over 75% of our debt. So the balance sheet is in great shape.
Bradford J. Helgeson: So the balance sheet is in great shape. Our liquidity and leverage profile will enable us to be opportunistic in continuing to execute on our robust M&A strategy. As stated in our press release yesterday, we announced guidance for 2024, and those ranges and relevant underlying assumptions are laid out in our report. At the midpoints, the ranges reflect 18% growth in revenue year over year, 21% growth in adjusted EBITDA, and 13% growth in free cash.
Our liquidity and leverage profile will enable us to be opportunistic in continuing to execute on our robust M&A pipeline.
As stated in our press release yesterday, we announced we announced guidance for 2024, and those ranges and relevant underlying assumptions are laid out in our release.
At the midpoint of the ranges reflect 18% growth in revenue year over year, 21% growth in adjusted EBITDA and 13% growth in free cash flow.
Bradford J. Helgeson: Our guidance ranges assume a stable economic environment, but reflect a slightly cautious outlook on C&D volumes. On the top line, our guidance includes $175 million, or approximately 14% of acquisition rollover, with approximately 4.5% overall organic growth at the mid- While we expect to be acquisitive again in 2024, our guidance does not reflect any further acquisition activity. In the solid waste business, we expect pricing of 5% to 6%, again ahead of inflation, which for us is still running at approximately 4.5%. We retain pricing flexibility across approximately 70% of our collection revenue, so we're well positioned to respond to changing conditions, if necessary, as the year progresses. Solid waste volumes are expected to be flat to down 1%, with potential weakness in C and D volumes in the landfill and temporary roll-up businesses reflected in that estimate.
Our guidance ranges assume a stable economic environment, but reflect a slightly cautious outlook on C&D volumes.
On the top line our guidance includes a $175 million or approximately 14% of acquisition rollover with approximately four 5% overall organic growth at the midpoint.
While we expect to be acquisitive again in 2024, our guidance does not reflect any further acquisition activity.
Organically in the solid waste business, we expect pricing of 5% to 6% again ahead of inflation, which for US is still running at approximately four 5%.
We retain pricing flexibility across approximately 70% of our collection revenue. So we are well positioned to respond to changing conditions if necessary as the year progresses.
Solid waste volumes are expected to be flat to down 1% with potential weakness in C&D volumes in the landfill and temporary rollout businesses reflected in that estimate.
Bradford J. Helgeson: Bridging 2023 Adjusted E-Productor Guidance, approximately $40 million is acquisition rollover, and $5 million is improved performance at the Boston MRF, net of the impact of downtime to retrofit the Willimantic MRF, as John discussed earlier. And $10 to $20 million is base business organic growth. Our Adjusted EBITDA guidance reflects 30 to 50 basis points of margin improvement in 2024. Bridging Margin From 2023, acquisitions are expected to weigh on margins by approximately 10 basis points. The Boston Murph net at Willimantic downtime is expected to add approximately 10 to 20 basis points.
Bridging 2023, adjusted EBITDA to our guidance approximately $40 million is acquisition rollover $5 million as improved performance at the Boston Murph net of the impact of downtime to retrofit that willimantic, Mark as John discussed earlier and $10 million to $20 million is base business.
Ganic growth.
Our adjusted EBITDA guidance reflects 30 to 50 basis points of margin improvement in 2024.
Bridging margin from 2023 acquisitions are expected to weigh on margins by approximately 10 basis points.
The Boston MRF netted willimantic downtime is expected to add approximately 10 to 20 basis points and organic growth at 30 to 40 basis points in our guidance with pricing leverage in our operating programs offset somewhat by a softer volumes.
Edmond R. Coletta: Organic growth adds 30 to 40 basis points to our guidance, with pricing leverage and our operating programs offset somewhat by softer volumes. We expect free cash, and adjusted free cash flow to grow consistently with our long-term rate of 10 to 15 percent. We anticipate another year of investing significantly in the business, with capital expenditures of approximately $180 million, which includes approximately $20 million for the Willimantic MERC retrofit, $20 million of other non-recurring spending in connection with recent acquisitions, and approximately $5 million to complete the initial startup investment at the McKean Landfill Rail Project. In closing, this is an exciting time in the company's history as our growth initiatives and operating programs are bearing real fruit, and we Now I'll turn it over to Ned to add some further color on our strategic... Thanks, Brad. And good morning, everyone.
We expect free cash adjusted free cash flow to grow consistently with our long term rate of 10% to 15%.
We anticipate another year of investing significantly in the business with capital expenditures of approximately $180 million, which includes approximately $20 million for the Wheeler metric Merck retrofit $20 million of other nonrecurring spending in connection with recent acquisitions and approximately $5 million to complete the initial startup.
<unk> investment at the Mckean landfill rail project.
In closing this is an exciting time in the company's history as our growth initiatives and operating programs are bearing fruit.
And we are well positioned to continue this momentum into 2024 now.
Now I'll turn it over to Ned to add some further color on our strategic initiatives. Thanks, Brad and good morning, everyone 2023 was an exciting year for casella as we continued to execute extremely well against our long term strategic plan and its execution is clearly demonstrated in our financial results for the year.
Edmond R. Coletta: 2023 was an exciting year for Casella, as we continue to execute extremely well against our long-term strategic plan, and this execution is clearly demonstrated in our financial results for the year. This growth was driven by continued execution against our operating efficiency programs, organic revenue growth, and pricing initiatives, robust acquisition activity, key development projects, and continued investment in our foundational pillars.
This growth was driven by continued execution against our operating efficiency programs, our core organic revenue growth and pricing initiatives robust acquisition activity key development projects and continued investment in our foundational pillars.
Edmond R. Coletta: As outlined by John earlier, we completed seven acquisitions in 2023 and acquired approximately $315 million of annualized revenues, including the expansion of our footprint into the Mid-Atlantic region. However, completing the acquisitions was just the starting point, and our team has worked very hard through late 2023 and into early 2024 to integrate the newly acquired businesses into our operations systems and back office. We're tracking well against Proforma for each acquisition and expect to complete the remaining systems and back office integration work in the coming months. Kyle Larkin and our new Mid-Atlantic team are doing a great job executing against our operating plan while working tirelessly on the critical integration effort. The GFL team has been super helpful providing transition services and assisting us with a successful migration off their systems, and a thank you to their entire team.
As outlined by John earlier, we completed seven acquisitions in 2023 and acquired approximately $315 million of annualized revenues, including the expansion of our footprint into the mid Atlantic region.
Completing the acquisitions with just the starting point and our team has worked very hard through late 2023 and into early 2024 to integrate the newly acquired businesses into our operations systems and back office.
We're tracking well against pro forma for each acquisition and expect to complete the remaining systems and back office integration work in the coming months.
Kyle Larkin and our new mid Atlantic team are doing a great job executing against our operating plan, while working tirelessly on the critical integration efforts.
<unk> team has been super households, providing transition services and assisting us with the successful migration of off their systems and thank you to their entire team.
Edmond R. Coletta: Our Western Region team, led by Michael Stamen, has partnered extremely well with Scott Earle and the Twin Bridges team to quickly advance integration efforts to drive operating synergies and ensure top-notch customer service through that acquired region. With the expansion of our operating footprint into the Mid-Atlantic in 2023, we have built our acquisition pipeline to over $800 million, and we are positioned well to have another strong acquisition year in 2024. On the development side, we continue to invest in return-driven sustainability infrastructure, including the full equipment upgrade at our Boston recycling facility completed in early Q3'23. As John mentioned, we're tracking ahead of Proforma, with a strong performance driven by higher revenues on additional material recovery, a 35% improvement in productivity at lower operating costs, and increased our processing throughput.
Our Western region team led by Michael statement is partnered extremely well with Scott and.
And the twin bridges team to quickly advance integration efforts to drive operating synergies and ensure top notch customer service through that acquired region.
With the expansion of our operating footprint into the mid Atlantic in 2023, we have built our acquisition pipeline to over $800 million and we are positioned well to have another strong acquisition year in 2024.
On the development side, we continue to invest and return driven sustainability infrastructure, including a full equipment upgrade at our Boston recycling facility complete in early Q3 'twenty three.
As John mentioned, we're tracking ahead of pro forma with the strong performance driven by higher revenues on additional material recovery of 35% improvement in productivity it lowered our operating costs and increased our processing for it but.
Edmond R. Coletta: A big thank you to Bob Capodonna and Austin McKnight and the entire team for their excellent leadership managing through a very complex upgrade process. Our team also made great progress on the build out of the rail offload infrastructure in McKean, Pennsylvania, landfill, and we expect the facility to be online in mid to late 2024. In this first phase, we're bringing online capacity to offload up to 5000 tons a day of containerized municipal solid waste soils and sludges. We expect this operation to ramp slowly over the next few years, as this investment is less about near-term volumes and more about long-term risk management and flexibility, as we want to ensure viable waste disposal outlets long-term in a capacity-constrained North. Finally, we expect our first R Archaea or BP will own and operate the facility, while Casella generates a royalty stream from the sale of gas and rings with zero capital investment.
Thank you to Bob catheter in Austin, ignite and the entire team for their excellent leadership managing through it very complex upgrade process.
Our team also made great progress on the build out the rail offload infrastructure in Mckean, Pennsylvania landfill and we expect that facility via online in mid to late 2024. In this first phase, we're bringing online capacity offload up to 5000 tons, a day of containerized municipal solid waste soils and sludges.
We expect this operation to ramp slowly over the next few years as this investment is less about near term volumes and more about long term risk management and flexibility as we want to ensure viable waste disposal outlets long term in a capacity constrained northeast.
Finally, we expect our first R&D project at our Juniper Ridge landfill to be online in the first half of 2020 for Arcadia, or BP will own and operate the facility while consolidate generates a royalty stream from the sale of gas and rent with zero capital investment this facility will generate roughly 700.
Edmond R. Coletta: This facility will generate roughly 700,000 MMBTUs per year. As we continue to grow as an organization, we're laser focused on maintaining our positive culture and value system by investing in and developing our people and ensuring that we have the right people in the right roles. This has been quite an undertaking with our rapid growth. Over the last year, we've welcomed over 1,000 new employees at Casella through acquisitions and organic growth, and our team did an amazing job effectively onboarding these new team members.
And then btu per year.
As we continue to grow as an organization, we are laser focused on maintaining our positive culture and value system by investing in and developing our people and ensuring that we have the right people in the right roles. This has been quite an undertaking with our rapid growth over the last year, we've welcomed over 1000, new employees to casella through applications.
Organic growth and our team did an amazing job effectively onboarding these new team members.
Edmond R. Coletta: Furthermore, we continue to make excellent progress on key technology efforts at Casella, including our program to automate our residential collection fleet, introduce onboard computing in our truck fleet, and improve our customers' experience with new digital tools. Sean Steves and the operating teams have done a top-notch job over the last year executing against our operating plan while implementing key operating initiatives. Through the end of 2023, we'll have automated 56% of our residential fleet with either an automated side loader or Carado truck. These efforts are making a positive impact on reducing our cost of service and enhancing our people's safety in the field. The new Mid-Atlantic operation introduced a great additional opportunity to advance fleet automation, with only 50% of the residential fleet automated today.
Further we continue to make excellent progress on key technology efforts at Casella, including our program to automate our residential collection fleet introduce onboard computing and our truck fleet and improve our customers' experience with new digital tools.
John <unk> and the operating teams have done a top notch job over last year executing against our operating plan, while implementing key operating initiatives through the end of 2023, we've automated 56% of our residential fleet with either automated side loader are corrado trucks. These efforts are making a positive impact.
<unk> and reducing our cost of service and enhancing our people safety in the field.
The new mid Atlantic Operation introduced a great additional opportunity to advance fleet automation with only 50% of our residential fleet automated today.
Operator: We have deployed onboard computers in approximately 70% of our 1400 truck fleet, and we expect to make additional progress in 2024. The OVCs are enhancing our safety profile on the road, creating additional revenue opportunities, digitizing things like route sheets, and automating important data collection used for our operations teams and our customer reporting. Kevin Drogan, our CAO, and Keith Landau, our new CIO, effectively partnered to launch a new customer payment portal in 2023, marking an important step in our efforts to further digitize and improve our customer experience. We plan to continue to invest in this key area of strategy to ensure our customers have the right tools in the coming years to manage their services and access key data intelligence. Looking to 2024, we believe we have a strong opportunity to continue to execute in the key areas to drive further shareholder value and profitable growth. And with that, I'll turn it over to the operator for questions. Thank you. At this time, we'll conduct a question and answer session. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced.
We have deployed onboard computers and approximately 70% of our 1400 truck fleet and we expect to make additional progress in 2024. The Ob <unk> are enhancing our safety profile on the road, creating additional revenue opportunities digitizing things like route sheets and automating important.
Data collection used for our operations teams and our customer reporting.
Kevin.
<unk> and Keith land, our new CIO effectively partner to launch a new customer payment portal in 2023, marking an important step in our efforts to further digitize and improve our customer experience.
We plan to continue to invest in this key area of strategy to ensure our customers have the right tools and the coming years to manage their services and access key data intelligence.
Looking into 2024, we believe we have a strong opportunity to continue to execute in the key areas to drive further shareholder value and profitable growth and with that I'll turn it over to the operator for questions today.
Thank you and at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for him to be announce toward drawing a question. Please press star one again.
Operator: To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from the line of John Mazzoni from Wells Fargo. Your line is open. Good morning.
Please standby, while we compile the Q&A roster.
One moment for our first question.
Two shutdowns.
Our first question comes from the line of John Massoni from Wells Fargo. Your line is open.
Good morning.
Maybe quickly touch on.
Unknown Speaker: Maybe we could just briefly touch on... Yeah, thanks guys. Can we just quickly touch on some of the... Transcripts provided by Transcription Outsourcing, LLC, and other types of early indicators for 24, and how should we think about not only the cadence but also any step-downs or other types of items that might impact the model. Yeah, so overall, you know, the same trends are going to continue in the Northeast. We've had sites close, and we expect additional sites to permanently close over the coming years.
Yes. Thanks, guys can you just quickly touch on some of the.
Trends youre seeing within the disposal line, specifically around the volumes I think we have kind of understood a lot of the northeast dynamics here.
How should we think about pricing on that kind of line item. What are you seeing in terms of tipping fees and other types of kind of early indicators for 'twenty four and how should we kind of think about not only the cadence and also any kind of step downs or other types of items that might impact the model. Thanks.
Yeah. So overall the same trends are going to continue in the northeast we've had sites closed and we expect additional sites permanently close over the coming years.
Unknown Speaker: But what's happening, and what happened over the last several months and into early 24, is, you know, as certain sites approach the end of their life, they want to just fill them up. And, you know, they might even, you know, hold prices steady or look for additional lines. And we see this a bit with one of the large construction and demolition debris sites that's going to close in the next year plus, and they're kind of sprinting to the end of the line.
But what's happening and what's happened over the last several months and into early 'twenty four is.
Our insights approach to and as their life. They wanted to sell the box and.
They might even halt price steady or look for additional lines. So we see this event with one of the large construction and demo debride sites.
You're going to close in the next year, plus and they're kind of sprinting to the ended aligned as such we've seen a little pressure on the construction and demo side of volumes, but things are stable to positive both in MSW contaminated soils.
Unknown Speaker: As such, we've seen a little pressure on the construction and demo side of volumes, but things are stable to positive, both in MSW and contaminated soils. On the pricing side, we've entered 2024 with a robust pricing plan at the landfill, kind of high single digits again, and it's been well received in the marketplace.
On the pricing side, we've entered 2024 with a robust pricing plan at the landfills kind of high single digits again.
And it's been well received in the marketplace.
Unknown Speaker: These price increases are well justified. Our inflation continues to run high on the landfill development side, capping, and closing, you know. The regulatory environment continues to get more and more complex, and we need to get those costs back to the marketplace. So that softness in C&D, you know, it's probably a little bit less about the economy in the Northeast than it is about just that rush for someone to close their site and get it buttoned up. And then you'll see the other side of that with some additional tightening in the market coming in 2025.
Price increases are well justified our inflation continues to run high on the landfill development side caffeine closing.
Regulatory environment continues to get more and more complex and we need to get those costs back to that to the marketplace. So that softness in CND.
Probably a little bit less about the economy in the northeast than it is about just that rush for someone to close their site yet.
And then Youll see the other side of that with some additional tightening in the market coming in at 25%. It clearly bodes well for the next three to five years in terms of how we're looking at pricing for disposal capacity.
Unknown Speaker: It clearly bodes well for the next three to five years in terms of how we're looking at pricing for our disposal capacity. You know, that disposal capacity is really worth more on a year-over-year basis. So we're pretty excited in terms of the position that we have set for the next three to five years on landfill pricing. And also, in addition to that, we have invested the capital to make sure that our McKean facility is up and operational. We don't anticipate significant ramping up in 2024 at all, but the facility is up and will be up and operational at the end of this quarter. Got it.
That disposal capacity.
As you know.
Really worth more on a year over year basis. So we're pretty excited in terms of the position that we set over the next three to five years from landfill pricing perspective.
And also in addition to that we also.
As.
Many people know have invested the capital to make sure that our.
Mccain facility is up and operational we don't anticipate.
<unk> ramping in 2024 at all but the facility is up and will be up and operational at the end of this quarter.
Unknown Speaker: Good call. Thank you. And maybe just a quick one on that inflationary kind of trend; it was helpful to kind of get that base rate. But as we think about the price costs for N24, could you just outline some of the main drivers between kind of what you're seeing on the inflation side and outside of kind of fleet, other types of one-time items, and also if you could quantify any potential kind of uptick or kind of tailwind from commodity prices. And I think we kind of understand that you guys have less exposure on that side, but just anything in terms of kind of those inflationary buckets would be very helpful. Yeah, it's Brad.
Alright, good color. Thank you.
And maybe just a quick one on death inflationary kind of trend that was helpful or can I get that base rate, but as we think about the price cost spread in 24 could you just outline some of the main drivers between kind of what youre seeing on the inflation side and outside of kind of fleet.
Other types of kind of onetime items and also if you could quantify any potential.
Tech or kind of.
<unk> from the commodity prices.
I think we kind of understand that you guys had less exposure on that side, but just anything in terms of kind of those inflationary buckets would be very helpful. Thanks.
Unknown Speaker: So, you know, inflation remains stubbornly high. The company reported inflation north of 5% last year; we've seen that kind of trend down, but gradually, you know, in the fourth quarter, we were running just under 5%. And, you know, looking at four and a half percent. It really is across the board, you know, we're seeing particular, particularly stubborn inflation in outside repairs. You know, Ned alluded to this a second ago.
Yes, it's Brad so.
Inflation remains stubbornly high.
Company reported.
<unk> north of 5% last year, we've seen that kind of trend down but gradually.
In the fourth quarter, we were running just under 5%.
Looking at four 5%.
It really is up across the board, we're seeing particular.
Particularly stubborn inflation is.
And outside repairs.
Net alluded to this a second ago.
Unknown Speaker: You know, the cost of relating to landfills is up really across the board. Tires, that's a notable one. You know, labor is probably pretty consistent with our overall inflation rate. So, you know, we're not really taking a view at this point on further, you know, material moderating of that number. You know, we kind of assume more or less where we are for the balance of the year. Based on that inflation number, we're targeting five to 6% price growth, as we said earlier, that's across collection and disposal in the solid waste business. So, you know, looking to plus or minus maintain that, you know, 100 basis points spread.
The cost of relating to the landfills those are up really across the board.
Tires.
A notable one.
Labor Labor is probably pretty consistent with our overall inflation rate so.
We're not really taking a view at this point on on further material.
Moderating of that number.
We kind of assume more or less where we are for the balance of the year based on that inflation number were <unk>.
Targeting 5% to 6% price growth as we said earlier.
Thats across collection and disposal in the solid waste business, so looking at plus or minus maintaining that 100 basis points spread.
Unknown Speaker: And commodities, you asked about commodity prices, you know, our, and as you mentioned, our model is such that the commodity prices don't impact us actually that much either way. But, you know, commodity prices look like they're going to be up certainly year over year. And, you know, the beginning of the year is bearing that out so far. Thank you.
And commodities you asked about commodity.
And as you mentioned our model is such that the commodity prices don't impact us actually got much either way, but.
Commodity prices look like they're going to be up certainly year over year end.
Beginning of the year is bearing that out so far.
Alright, thank you.
Operator: One moment for our next question, and our next question comes from Tyler Brown from Raymond James. Your line is open. Hey, good morning.
Thank you for enrollment for next question.
Okay.
Yeah.
And our next question comes from the line of Tyler Brown from Raymond James Your line is open.
Hey, good morning.
Unknown Speaker: Hey, good morning, Mark. Hey, first off, Brad, great to hear your voice again on a conference call. But hey, I just wanted to get a little bit more color on the veneer failure. So this is kind of a multi-part question. But one, John, have you had a slide like this before? Two, I may have missed it, but what was the determined root cause? Was it too much sludge or precipitation? And then three, it happened later in the quarter.
Hey, good morning, Mark either.
Hey, first off Brian Great to hear your voice again on a conference call.
Well, Hey, I, just wanted to get a little bit more color on the veneer failure, so kind of a multipart question, but one John have you have you had a slide like this before two I may have missed it but what would be determined root cause it to much larger precipitation and then three happened later in the quarter. So should we expect.
Unknown Speaker: So should we expect a spillover of expense into Q1? I'll talk a little bit about the veneer failure. The veneer failure, you know, really was stopped by the Transportation Roads that we had in the facility. And again, as Brad said, no one was hurt. It was a non-issue.
The spillover of expense into Q1.
Let me I'll talk a little bit about the.
The veneer failure.
The veneer failure.
It really was stopped by.
The.
Transportation roads that we had in the facility and again as Brad said no. One was hurt it was a non issue is all done by third parties, we're going through that from a practical standpoint with a third party contract contractor with the engineers to make a determination as to.
Unknown Speaker: It was all done by third parties. We're going through that from a practical standpoint with a third-party contractor and the engineers to make a determination as to what caused it. It could very well be gas.
What caused it could very well be.
Unknown Speaker: There are a couple of different perspectives at this point in time, Tyler, but we haven't had the report yet. And we'll obviously go through that in detail and try to make sure that we understand on a go-forward basis what additional steps we need to take to make sure that we prevent it from happening in the future. Maybe, Brad, I think that we're... One additional point, it's the soil on top of a synthetic cap that slid down a slope, basically. So there was nothing exposed inside the landfill, no damage to the landfill itself, Okay, no engineering costs.
Gas.
Theres a couple of different perspectives at this point in time.
Tyler, but we haven't had the report yet.
And.
We will obviously go through that in detail and try to make sure that we understand on a go forward basis, what additional steps, we need to take to make sure that we.
Precluded from happening in the future.
Maybe Brad I think one additional point.
It's the soil on top of a synthetic cap that slid down a slope basically so there is nothing exposed inside the landfill no damage to the landfill itself, but it needs to be pulled down and then rebuild.
Okay.
<unk> cost.
Unknown Speaker: We don't believe, at this point in time, that's correct. We're doing more evaluation, Tyler, but at this point in time, we don't believe there will be any additional costs or any additional work that we're going to need to do. Okay, okay, great. And then I got a few questions on cash flow. So I think you mentioned that you only have $5 million slated for McKeen.
We don't we don't believe so at this point in time that's correct.
And we're doing we're doing more evaluation tailored but at this point in time, we don't believe there'll be any additional.
Any additional costs or any additional work that we're going to need to do.
Okay, Okay, Great and then I got a few.
Multipart question on cash flow, so I think you.
Mentioned.
That you only have 5 million slated for mckean. So is that spend basis basically winding down at this point number two there was a $6 million legal settlement payment that youre expecting in 'twenty four what was that and then three windows the South bridge in Potsdam remediation start to Sunset I know Thats a <unk>.
Unknown Speaker: So is that spend basically basically winding down at this point? Number two, there was a $6 million legal settlement payment that you're expecting in 24. What was that?
Unknown Speaker: And then three, when does the Southbridge and Potsdam remediation start to sunset? I know that's a multi-part question. I'm sorry about that, but those questions.
And final question I'm, sorry about that but yes all of those questions.
Unknown Speaker: So, in regards to McKean, we are nearly wrapped up with this first phase. We've put in almost a mile of spur track, switches, and a gantry crane offload infrastructure to take off containerized solid waste and containerized soils and sludges. So we're building out the infrastructure to be able to turn on the facility up to 5 to 6,000 tons a day. But, as I said earlier, we don't expect to ramp up rapidly. This is long-term risk management for the Northeast as we look at the risk of other sites potentially closing over time. We'll look to kind of slowly ramp this up. It's not going to be material in our numbers in 2024.
So in regards to Mccain, we are nearly wrapped up with its first phase we've put in almost a mile where thats spur track switches.
Gantry Crane offload infrastructure to takeoff containerized solid waste and containerized soils and sludges.
So we are building out the infrastructure to be able to turn on facility up to five to 6000 tonnes. A day as I said earlier, we don't expect to ramp rapidly. This is long term risk management for the northeast as well.
We look at the risk of other sites potentially closing over time.
We'll look to kind of slowly ramp this up it's not going to be material in our numbers in 2000 $24 million to $5 million kind of stepping into 'twenty. Four is just some of the remaining track work a little bit more switch where some of the heavy equipment showing off articulated trucks with rail systems.
Unknown Speaker: The $5 million kind of stepping into 2024 is just some of the remaining track work, a little bit more switch work, some of the heavy equipment showing up, articulated trucks with rail systems to take the containers up onto the working face of the landfill. So it's mainly wrapped up. If we were to ever invest in taking construction demo waste at the landfill, we would have additional investment. But at this point in time, it's not really in the near-term game plan for our strategy at the site. The $6 million charge that we took back in, I think, the second quarter or second quarter in relation to the Fair Labor Standards Act class action lawsuit, that money we expect to go out the door in the first quarter of 2024. And what happened here was there was a class action lawyer who contested that certain of our employees worked through their DOT-mandated lunch breaks. We had clear policies, and clear standards in the organization that that wasn't supposed to ever happen. Our employees do truly need to take lunch breaks.
Take the containers up onto the working face of that the land sale. So it's mainly wrapped up if we were to ever invest to take construction and demo waste at the landfill.
We would have additional investments at this point in time, it's not really in the near term game plan for our strategy at the site.
That $6 million charged.
Charge that we took back in.
I think the second quarter or second quarter in relation to the fair Labor standards action class action lawsuit that money, we expect to go out the door in the first quarter of 2024 and what happened here was there was a class action lawyer, who can test stays at certain of our employees worked through.
They are mandated.
Mandated lunch breaks we had clear policy is clear standards in the organization that that wasn't supposed to ever happen our employees do surely needed to take lunch rates, but in retrospect, our documentation our systems, maybe werent as great as they could've been FERC court of law, So we decided to settle with such attorney.
Unknown Speaker: But in retrospect, our documentation, our systems maybe weren't as great as they could have been for a court of law, so we decided to settle with that attorney. And much of that money will go to our employees, our drivers who were part of the class action class. So, you know, we've done a lot of introspection and changed processes and procedures to ensure that our people truly are taking those breaks and we have the right documentation in place for the future. So, you know, it's a culmination of... Yeah.
And much of that money will go to our employees our drivers who were part of that class. So we've done a lot of introspection and change processes and procedures to ensure that our people truly are taking those breaks and we have the right documentation in place into the future. So.
Yes, it's a culmination of and its also Tyler it's also consistent.
Unknown Speaker: And it's also, Tyler, it's also consistent; the class action attorneys really have targeted the industry. Yeah. This is not a Casella one-off situation, John.
The class action attorneys really of the card.
Did the industry. Yeah. This is not a casella one off situations.
Unknown Speaker: You're right. Yeah. So, you know, the lockdown remediation is complete. There's some kind of continuous monitoring into the future, but that Superfund site was fully cleaned up.
Right.
So the Potsdam remediation is complete.
There is some kind of continuous monitoring into the future, but thats Superfund site was fully cleaned up.
Unknown Speaker: The other joint parties, you know, made investments as well, and we're really at the end of that. Southbridge, you know, painfully, we've been working on the final closure approval with the state of Massachusetts for several years now. The site's in great shape.
Other joint parties.
<unk> made investments as well, we're really at the end of that South fridge.
Painfully, we from working on the final closure approval with the state of Massachusetts for several years now the sites in great shape.
Unknown Speaker: We're ready to enter the post-closure phase. We've done, you know, the vast majority of investment at the site to get it to that phase, and we just haven't gotten that final regulatory approval, and we're working hard to get that, Tyler. Okay, great. Yes. Thank you so much.
We're ready to enter the post closure phase we've done the vast majority of investment at the site to get it to that phase and we just haven't gotten that final regulatory approval and we're working hard to get that Tyler.
Okay, great. Yes. Thank you so much I know that was a multipart question.
Unknown Speaker: I know that's a multi-part question. Um, yeah. Okay, I want to turn to New York.
Yes, Okay I wanted to I wanted to turn to New York. So I know you don't Hall in New York, but I'm just curious if you have any thoughts on the recent design awards there.
Unknown Speaker: So I know you don't haul in New York, but I'm just curious if you have any thoughts on the recent zone awards there. Do you think that that impacts you at all? And I know that while you don't and you likely won't call in that market, would it ever make sense to possibly open a rail access transfer station in that market to maybe help clear some of those tons to McKean? Yeah, so, you know, New York City has completed the Waste Zones and MAPA awards, and as you correctly point out, we do not directly participate in New York City.
You think that that impacts you at all and I know while you can.
Joan and you likely won't hall in that market would it ever make sense to possibly open rail access transfer station in that market and maybe help clear some of those tons to Mccain.
Yeah. So.
New York City completed the waste zones, and major awards and as you correctly pointed out we do not directly participate in New York City. We have historically had some customers that transfer of waste out of New York City to our landfills.
Unknown Speaker: We have historically had some customers that transfer waste out of New York City to our landfills in upstate New York, and we continue to have some great customers in that market. We didn't enter, you know; it's not a market; it's a real focus for us. However, we will continue to work with some of the transfer stations that have won awards, and there may be some opportunity to move waste to McKean. You know, those awards were for 10 years, with 10 year renewals at the discretion of New York City.
And we continue to have some great customers in that market.
We didn't enter.
Market, it's a real focus for us however, we.
We'll continue to work with some of the transfer stations have won awards and there may be some opportunity to railways to mckean.
Those awards were for 10 years with 10 year renewals at the discretion of New York City.
Unknown Speaker: And, you know, we have one of the closest sites to the city with a lot of capacity, so it is a great opportunity for us. I would only add, Tyler, when you look at that, I think 14 of the 20 franchises were awarded to Interstate, Action Interstate, and they have their own facilities and their own rail services. So it's very likely that a very large portion of that waste will go to their facilities. I think we will have an opportunity as an alternative in terms of the overall disposal capacity in the city. And certainly, there are transfer stations that we're working with right now that will be able to continue into the future. But again, we have to keep in mind that a good portion of that franchise waste is with Interstate. Yes, very interesting. My last one is kind of in the same vein.
When you have a lot of closest sites to the city with a lot of capacity. So it is a great opportunity for us.
I would only add Tyler.
Tyler when you look at that.
I think 14 of the 20 franchises.
Franchises were awarded to Interstate.
Interstate and they.
They have their own facilities and their rail serve so it's very likely that a very large portion of that of that waste will go to their facilities. I think we will be we will have an opportunity as an alternative in terms of the overall disposal capacity in the city and certainly their transfer stage.
<unk> that we're working with right now that we'll be able to continue into the future.
But again, you've got to keep in mind that a good portion of that franchise waste is with Interstate.
Yes, very interesting my last one it's kind of in the same vein and you talked about it a little bit on the first question, but it does feel like rail capacity continues to ramp in the northeast are you seeing any measurable impact on disposal pricing broadly.
Unknown Speaker: And you talked about it a little bit in the first question, but it does feel like rail capacity continues to rise in the Northeast. Are you seeing any measurable impact on disposal price pricing broadly? Yeah, well, one of the things we've seen, I mentioned it with the one construction demo debris site that's reaching the end of life on Long Island and also with some of the ramp up in rail activity in the Northeast, it kind of ebbs and flows, right? So a site goes offline in the Northeast, there's a capacity crunch, then some new capacity comes through rail or other alternatives, and you see a little bit of a tailing off of volumes.
Yeah, well one of the things we've seen I mentioned, it's wasted one construction and demo debris site, that's reaching end of life and long Island and also with some of the ramp up in rail activity in the northeast it kind of ebbs and flows right. So our site comes offline in the northeast as a capacity crunch and some new capacity.
Comes through rail or other alternatives you see a little they are accounting off of volumes, but frankly that really hasnt impacted our view on pricing or maybe even other market participants because of the inflationary backdrop and just some of the complexity around new and emerging regulations and cost set site. So.
Unknown Speaker: But frankly, that really hasn't impacted our view on pricing or maybe even other market participants because of the inflationary backdrop and just some of the complexity around new and emerging regulations and costs at sites. So you see that a little bit with the volumes, as we said, with the construction demo right now, but it doesn't change our outlook on how we're going to run these sites for long-term returns. We have to be laser focused on 10 year returns at these sites. Yep. No.
You see that a little bit with the volumes as we said with construction and demo right now, but it doesn't change our outlook on how we're going to run these sites for the long term returns we have to be laser focused on 10 year returns at these sites.
Unknown Speaker: Okay. Perfect. Thank you guys so much for the time.
Yeah, Okay perfect. Thank you got so much for the time.
Operator: Thanks, Tyler. Thanks, Joe. Thank you.
Thanks Tyler.
Operator: One moment for our next question. Our next question will come from Michael E. Hoffman from Stifel. Your line is open. Hey gang, how are you doing up there? Good. Michael, how are you?
Thank you one moment for our next question.
Our next question comes from the line of Michael Hoffman from Stifel. Your line is open.
Hey gang, how are you doing up there.
Unknown Speaker: Can't complain, although we're going to get the snowstorm that you were supposedly going to get now. Which could you take advantage of? That's not good. We're much more prepared to take that snow than you are down there, for sure. So if we could dig in, I'd like to talk about volume from the perspective of good volume versus bad volume and Purposeful Shedding. And a good volume for me is MSW, small container business, large container, uh... permanent versus bad volume is low-quality margins. How do you frame your outlook on those trends? Because I think that's a better story than we might be negative volume in the aggregate. Yeah, it's a great point, Michael. But we didn't get too much into the weeds on that.
Go ahead, Michael However, you can't complain, although we're going to get the snow storm and you were supposedly going to get now whats can you take it that's not that's not good.
More prepared to take that Snow then you are down there for sure.
So if we could dig into.
I'd like to talk about buy them from my perspective, a good volume versus bad volume.
And purposeful shedding.
Goodbye and with me is MSW small container business large container.
Permanent versus bad volume is low quality margins, how do you frame your outlook about those trends because I think thats a better.
Better story than we might be negative volume in the aggregate.
Yes.
Great point, Michael I mean, we didn't get too much into the weeds on that Brad mentioned that where if you look at our volume decline in the fourth quarter. It really was highlighted in two areas.
Unknown Speaker: Brad mentioned it, where if you look at our volume decline in the fourth quarter, it really was highlighted in two areas, construction and demolition debris at the landfill that we just discussed. And then on the haul-in side, it was a little bit of roll-off on the C&D side and a little bit of residential work. And, you know, when we look at that, it was some of our lower-margin work, especially on the residential side, we've been laser-focused on making sure we have the right customers, the right price. You know, labor's been a challenge the last couple of years, truck availability, so we're really focused on, you know, making sure we get the right return on each stock we have. So some of this purposeful shedding, you know, we're trying to get customer segments up to a certain margin point, and we're not willing to, you know, accept lower than that. On the construction and demo side, you know, probably a little bit of slowing into the fourth quarter. We always see that. I think in the Northeast, a little bit more slowing there than maybe some other parts of the country.
Construction and demo debris at the landfills that we just discussed and then on the hauling side. It was a little bit of roll off on the CND side, and a little bit of residential work and.
When we look at that it was some of our lower margin work, especially on the residential side, we've been laser focused on making sure we have the right customers right price.
Labor has been a challenge the last couple of years truck availability. So we're really focused on making sure we get the right return on each stock we have so some of it's purposeful shedding.
We're trying to get customer segments up to a certain margin point and we're not willing to accept lower than that in the construction and demo side, probably a little bit of <unk>.
Flowing into fourth quarter, we always see that.
I think in the northeast a little bit more slowing there that there may be some other parts of the country.
Unknown Speaker: You know, starting out 2024 in a pretty solid area in that regard, you know, nothing with further sequential decline. Okay, so the other part of volume and tying it to Tyler's rail commentary, um Two big competitors on the collection side moved a lot of volume out of the market away from the burners in the fourth quarter, and there was a temporary Impact on Spot Prices. As the burners scramble to fill their volume, because basically their volume is an airplane seat, if they don't get it, they can't backfill it.
Starting out 2024, and a pretty solid area in that regard.
Nothing with further sequential declines.
Okay. So the other part of volume and tying it to Tyler's.
Rail commentary.
Two big competitors on the collection side has moved a lot of volume out of the market away from the burners in the fourth quarter and then there was a temporary.
Impact of spot prices.
Does the burner scramble to fill because they're basically their volume is an airplane seat if they don't get it but can't backfill it.
Unknown Speaker: What is the state of the spot market today? I am my impression, our surveys say the spot markets recovered and figured this out even in the seasonally weak period. And that's another statement about the quality of underlying unit pricing in the disposal market regardless of volume. Yeah, so we don't take a lot of tons at our landfills per se by spot price.
What is the state of the spot market today.
My impression our survey say the spot market's recovered that they figured this out even in the seasonally weak period and that's another statement about the quality of the underlying unit pricing in the disposal market regardless of volumes.
Yes, so we don't we don't take a lot of tons at our landfills per se by spot price.
Unknown Speaker: You know, we definitely have pretty long-term strategic relationships with various haulers, or we have our own, you know, flows of waste. But we take advantage of it on the other side; we do a lot of work with the burn plants in the Northeast, and we've been able to renew some great contracts across our footprint and also take advantage of some of those, you know, lower spot prices. And we'll always be in the camp of if we can bring waste at the right price point to a third-party site and maybe take advantage of a price point like that, save our long-term landfill capacity for later, we'll make that decision. We, you know, there's so much tension long term.
We definitely have pretty long term strategic relationships with various haulers, where we have our own.
Flows of waste, but we take advantage on the other side, we do a lot of work with the burn plants in the northeast and we fail to renew some great contracts across our footprint and also take advantage of some of those lower spot prices and will always be in that camp, but if we can bring waste at the right price point to a third party.
<unk> site, and maybe take advantage of a price platelet that save our long term landfill capacity for later, we'll make that decision.
Tension long term.
Unknown Speaker: You know, historically, also, Michael, as you know, we were more than happy to fill that spot capacity and would enter into those agreements to fill that spot capacity for the incinerators in the wintertime. And we have a little bit of that ongoing, but, you know, it could be more significant in terms of our ability to help stabilize that through the course of the winter. Yeah, Brad had a number in his script that's actually important here.
Historically also Michael as you know we.
We're more than happy to fill that spot capacity.
Would enter into those agreements to fill that spot capacity for the incinerators in the wintertime and we have a little bit of that ongoing but.
There could be more significant.
In terms of our ability to to help stabilize that through the course of the winter and brought in a number of his script, it's actually important there so Brad.
Unknown Speaker: So, Brad, our average price per ton at the landfills was, I think it was close to 10%, right? 10% and a quarter, so that just shows, and that's the average across our tons going in and third-party tons. It's a function of how we're managing the disposal and the mix of waste going in, right? We're not lowering for spot, you know, pricing.
Our average price per ton at the landfills was up.
Thank you I understand here close to 10% per site.
10% in the quarter, so that just shows and that's the average across our tons going add third party function of how we're managing the disposal.
The mix of waste going in right. So we're not lowering for an amount of spot freight market. Okay.
Unknown Speaker: Okay, that's good to know. And then I think we can all agree that inflation is probably going to end at a higher low than it was in the prior 15 years, and none of that should frighten you because you can price it. The more important comment, and it's a question at the same time, there's no risk to unit prices, and you can manage your underlying cost of inflation, and you can price a quarter.
That's good to know and then.
I think we can all agree that probably inflation is going to end at a higher low than it was the prior 15 years and no none of that should frighten you because.
Because you can price the more important comment and it's a question at the same time there is no risk to unit prices and you can manage your underlying costs are in place and then you can price accordingly.
Unknown Speaker: So whether we stay with structurally higher or not, you're gonna be able to price it through, and there's no risk to you. That's correct. Okay, no, no risk.
So whether we stay with structurally higher you're going to be able to price it through and Theres no rest of unit price.
That's correct, Okay, no no risk no right and then just to be clear on that particularly.
Unknown Speaker: No risk. And then just to be clear on the label, particularly with our book of business, particularly with our book of business, because of the small amount of municipal contracts that we have, we have the capability to offset inflation. Yeah, you have a high percent that is open market access to products. And then the landfill liner failure is not a slope failure, like a couple of the other ones. It was not a liner failure, Michael; it was not a liner error.
With our book of business.
Particularly with our book of business because of the.
A small amount of municipal contracts that we have we have the capability to offset inflation.
You have a high percent that is open market.
Access to progress.
Then the landfill line of failure is not a slope failure like.
It was not a liner.
Michael It wasn't that aligner failure. So when you cap the facility you put a cap over the top of the existing waste and then synthetic cap and then.
Unknown Speaker: So when you cap a facility, you put a cap over the top of the existing waste, and then a synthetic cap, and then on top of that goes the soils, and that's where the veneer failure was. So it wasn't a failure of a liner. It was just simply a failure of the cap, the synthetic cap, and the dirt over the synthetic cap slid.
On top of that goes.
The soils.
And that's where the veneer failure was it wasn't a failure of a liner it was just simply a failure.
The cap.
Synthetic cap the dirt over the synthetic capsulate right and so we're very clear it doesn't.
Unknown Speaker: Right. And just to be very clear, there's a peer company out there that had a true slope failure; Advanced Disposal had one several years ago. But this is not a slope failure, just to be clear for everybody.
Yes, there was a peer company out there that had a true slope failure advanced disposal had won several years ago. This is not a slope failure, that's just to be.
Unknown Speaker: It's not disrupting revenue, blah, blah, blah. Okay. No, not at all.
It's not disrupting revenue by blah blah okay.
Unknown Speaker: It didn't disrupt the operations of the facility, Okay, and there was no, no action from a regulatory agency. Okay. And then lastly, New York City, I think we have to talk about that in terms of two different types of waste. There's the commercial waste, which is what the franchising is about, and then there's residential.
No not at all.
The operations of the facility.
Okay, and there was no no action from.
From a regulatory standpoint, Okay, and then lastly, the New York City I think we have to talk about that in two different types of ways. So theres, a commercial ways, which is what the franchise. There was bad and then there's residential what are.
Unknown Speaker: What are you most sensitive to as an opportunity? Because I think that commercial volume pretty much had homes before they were franchised, and maybe there's a little bit of movement, but for the most part, it all had a home where the residential law was, and It seems like there's more opportunity to take advantage of where they want to move that. Yeah, um, as we've said before, I mean, we've had a number of commercial customers coming out of the city to our sites in New York for years, Michael, and those flows are pretty steady, and several of those partners have won, you know, contracts in this wave as well. So we don't see anything that's a major plus or minus here for Casella in our interactions.
Are you most.
Sensitive to as an opportunity.
Because I think that commercial volume pretty much had homes before they were franchised maybe.
Maybe there's a little bit movement, but for the most part it all had a home where the residential volume.
It seems like there's more opportunity to take advantage of where they want to move that.
Yeah, as we've said before I mean, we've had a number of commercial customers coming out of the city to our sites in New York for years, Michael and those flows are pretty steady and several.
Several of those partners have won.
Contract in this wave as well so we don't see anything that's a major plus or minus here for casella in our interaction is maybe.
Unknown Speaker: There's maybe maybe a little bit of new rail capacity getting looked at in the city. That could be an opportunity, but that's about it from our vantage point. Okay. Thank you very much.
Maybe a little bit of new rail capacity is getting looked at in this city that could be an opportunity but thats.
That's about it from our vantage point.
Okay.
Thank you very much.
Unknown Speaker: Thank you, Michael. Thank you. And once again, that's star 11 for questions. Star 11.
Thank you Michael it's Michael.
Thank you.
Once again Thats star one one for questions are one way alright.
Operator: One moment for our next question. Our next question will come from the line of Adam Bubes from Goldman Sachs. Your line is open.
One moment for our next question.
Our next question will come from the line.
I'm <unk> from Goldman Sachs. Your line is open.
Adam Samuel Bubes: Hi, thanks for taking my question. I think you mentioned the acquired businesses in 2023 have come in at slightly lower margin pre-synergies than the existing standalone business. Can you just elaborate on that a little more?
Hi, Thanks for taking my question.
You mentioned the acquired businesses.
In 2023 have come in at slightly lower margin pre synergies.
Existing standalone business can you just elaborate that on that a little more how much lower aero margins coming in and can you just update us on.
Bradford J. Helgeson: How much lower are margins coming in? And can you just update us on progress integrating twin bridges and GFL assets without any major surprises? Yeah, hi Michael, it's Brad.
Progress integrating <unk> and GSL assets any major surprises.
Yeah, Hi, Michael it's Brad so.
John W. Casella: So, you know, I mentioned that they're coming in at a lower margin; I'm really talking a slightly lower margin, you know, to the tune of, I think it weighed five basis points on margins in the fourth quarter. So, you know, we view this as, you know, very quickly, an opportunity as we start to integrate the businesses, continue to integrate the businesses, and capture the synergies. This will become a margin tailwind pretty quickly. You know, Yeah, I think that probably the most significant aspect of those transactions, both of them, GFL and Twin Bridges, no real surprises, Adam, we were able to, and the relationship that Ned has built with GFL and Jason, the entire team, the transition has gone well.
I mentioned that they're coming in at a lower margin I'm really talking about slightly lower margin.
To the tune of I think five basis points on margins in the fourth quarter. So.
Yes.
Really we view this as a very.
Very quickly.
And opportunity as we start to.
Integrate the businesses continue to integrate the businesses.
And.
And capture the synergies that will become a margin tailwind pretty quickly.
And I think probably the most significant.
Aspect of those transactions.
<unk> and twin bridges, no real surprises Adam.
We were able to.
The relationship that Ned has built with GSO and Jason and the entire team.
The transition has gone well.
John W. Casella: Scott Earl, as Ned said earlier, is working with our folks to, you know, really rethink routing and do the things from an integration standpoint that we need to do as quickly as we can. So we're really excited about it. No surprises. If anything, the surprises are on the upside, in terms of, you know, the participation from both companies and also from Scott in terms of, you know, looking at, you know, rerouting, and the opportunity to really create the value that Brad's talking about that is going to be a tailwind for us shortly. And the margins, margins were also not a surprise for us either. So they were a little bit lower, but that's not a surprise either.
Scott Earl as Ned said earlier.
Working with our folks.
It really rethink routing and do the things from an integration standpoint that we need to do as quickly as we can so we're really excited about it no surprises if anything that surprises are on the upside in terms of.
The participation from both companies.
And also from Scott in terms of looking at.
Rerouting and the opportunity to to really create the value that brad's talking about that that is going to be a tailwind for us shortly.
And if margins do.
Margins also were not a surprise for us either so they were a little bit.
Lower but that's not a surprise either.
Bradford J. Helgeson: And then can you just talk about how much of the targeted synergy you are expecting to realize in 2024? So, you know, can you just help us understand the margin ramp of these assets from here? Yeah, so we had in the Mid-Atlantic about $8 million of synergies being recognized over three years, and we'll get about, we'll get about a third of that from thereabouts in the first year. And with Twin Bridges in the Capital District, we had about $4 million of synergies recognized over three years, and we're probably tracking more to like 50% of that in the first year. We've had some really excellent progress on some early consolidations, and we're feeling great about that, and probably a little upside there as well over the three-year period. Yeah, and that's baked into the margin expansion that's reflected in our guidance.
And then can you just talk about how much of the targeted synergies.
Are you argue you're expecting to realize in 2024. So can you just help us understand the margin ramp up of these assets from here.
Yeah. So we had in the mid Atlantic about $8 million of synergies being recognized over three years and we're looking at about let's say about a third of that.
Thereabouts in the first year in the mid Atlantic and with twin bridges in the capital District, we had about $4 million of synergies recognized over three years, and we're probably tracking more to like 50% of that in the first year, where we've had some really excellent progress on some early consolidations and were feeling great about that and probably.
A little upside there as well over the three year period, yes.
Baked into the margin expansion.
Bradford J. Helgeson: And kind of stepping back, if you add up the synergies for all the deals that were done last year, and I talked about the opportunity as we go forward, it's about 100 basis points in total over time, so we'll get some of that this year. And during the GFL and Twin Bridges asset integration period, you know, how are you thinking about the level of M&A you can sustain over the next, you know, 12 months? And how do higher interest rates change how you're thinking about funding?
<unk> guidance and kind of stepping back if you add up the synergies for all the deals that were done last year and I talked about the opportunity as we go forward. It's about 100 basis points in total over time, So we will get some of that this year.
And during the DFL and twin bridges assay integration period, how are you thinking about the level of M&A you folks can sustain over the next 12.
And how do higher interest rates change, how youre thinking about.
John W. Casella: Let me take part of that for you, Adam. I think that, from an integration standpoint, we couldn't be more happy with the Mid-Atlantic team that Kyle Larkin has put together. And keep in mind, he ran those assets for some of our competitors before coming on board with Casella. So he's built out an entire team for the Mid-Atlantic. The integration is going extremely well. The same thing with Twin Bridges.
Big M&A.
Let me take part of that for you Adam.
Think that from an integration standpoint, we couldnt be more happy with.
The mid Atlantic team that Kyle Larkin has put up and keep in mind. He ran those assets for some of our competitors before coming onboard with the seller. So he's built out an entire team for the mid Atlantic.
The integration is going extremely well same.
Edmond R. Coletta: That's going extremely well as well, so I don't think that the integration of GFL or Twin Bridges is going to have any impact on us in 2024 from an M&A standpoint. We still have significant work to do from an integration standpoint, but we're, you know, from a practical standpoint, we have very significant opportunities for continued growth. We've been able to demonstrate the capabilities to integrate those businesses, a very significant amount of M&A, and at the same time, lower our safety record, lower turnover. So I think that we did a lot of work, you know, over the last year, really looking at where our weaknesses are. We've, you know, we've addressed most of those weaknesses.
Same thing with twin bridges, that's going extremely well as well. So I don't think that the integration of GFS or to Enbridge is going to have any impact on us on a go forward into 2024 from.
M&A standpoint, we still have significant work to do from an integration standpoint.
But.
From a practical standpoint, we have very significant opportunities for continued growth we have been able to demonstrate the capabilities to.
Integrate those businesses very significant amount of M&A and at the same time bring down.
Lower our safety.
Record lower turnover so I.
I think that we did a lot of work.
Over the last year really looking at where our weaknesses.
We've approached most of those weaknesses we've hired.
John W. Casella: We've hired, you know, the people that we needed to in terms of some of the back office challenges of the growth that we've had. So we're pretty excited about where we sit and looking forward to 2024. And on the interest rate side, Brad, you want to jump in? Yeah, I mean, it's not a concern for us. Yeah, we're over 75% fixed, and I think that the only thing that it does is it may change how Ned looks at the financials and how we look at it. It may have some impact in terms of how we're modeling acquisitions, but it probably has more of an impact in terms of creating more pressure on independents to sell their businesses.
People that we needed to in terms of some of the back office challenges of the growth that we've had so.
We're pretty excited about where we sit and looking forward to 2024.
And on the interest rate side, Brad you want to hop in.
Not a concern for us Kevin Yes, we're over 75% fixed.
So.
Thanks, Matt.
The only thing that it does do is it may change how Ned looks at.
The financials and how we're looking at.
It may may have some impact in terms of how we're how we're modeling acquisition.
Probably not probably has more of an impact in terms of creating more pressure on independence to sell their businesses and we've got close to $500 million of liquidity right now both through cash rate that $220 million of cash liquidity on our revolver. So we're in a really good position to put them.
Bradford J. Helgeson: Yeah. And we've got close to $500 million of liquidity right now, both through cash. We've got $220 million of cash. We have liquidity on our revolver.
Edmond R. Coletta: So we're in a really good position to put money to work for shareholders with positive returns. And to John's point, I mean, we've got a lot of work we're doing on integration, so it really causes you to look towards quality and strategic fit. And everything that's in our near-term pipeline this year is super high quality, great overlaps, and great fit. We're excited about the near-term pipeline. Yeah, and I think that, quite honestly, Adam, we're, you know, we've stayed very disciplined in terms of making sure that it's a high quality acquisition to integrate into the company, and you don't really hear much about the M&A that we pass on.
Money to work for shareholders with positive returns and to John's point I mean, we've got a lot of work we're doing on integration. So it really causes you to look towards quality strategic fit and.
Everything that's in our near term pipeline this year's Super high quality, great overlaps great fit.
We're excited about the near term pipeline.
And I think that.
Quite honestly Adam.
We've stayed very disciplined in terms of making sure that it's a high quality.
A high quality acquisition to integrate.
The company and you don't really hear much about the the M&A that we pass on.
Adam Samuel Bubes: Great. I appreciate the color. Thanks so much. You're welcome. Thank you. And as of now, there's no one left in the queue, but we will take a brief pause for anyone to queue up, and when there is no one in the queue, I'll turn it back to John Casella for any closing remarks. Thank you everyone for joining us this morning. I hope you all have a great holiday weekend. I look forward to discussing our first quarter 2024 earnings in April.
Great I appreciate the color. Thanks, so much.
Youre welcome.
Thank you.
And as of now there's no one left in the queue, but we will take a brief pause for anyone to Q1.
And showing no one in the queue I will turn it back to John Casella for any closing remarks.
Thanks to everyone for joining us. This morning, I Hope you all have a great holiday weekend and look forward to discussing our first quarter 2024 earnings in April Thanks, everybody have a great day and a great holiday weekend. Thank you.
John W. Casella: Thanks, everybody. Have a great day and a great holiday weekend. Thank you. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day. Transcribed by https://otter.ai, [inaudible]
Thank you for your participation in today's conference. This does conclude the program you may now disconnect everyone have a great day.
Yes.
Okay.
[music].
Okay.
Okay.