Q3 2024 Casella Waste Systems Inc Earnings Call
Thank you.
Good day and thank you for standing by. Welcome to 2024, the quarter Cousella Waste System Conference call. At this time, all participants are listed on the mode.
After the Speaker's presentation, there will be a question and suggestion.
So as the question during this session, you'll need to press star 1-1 on a telephone, you'll then hear the time, maybe let's just write in your hand, it's raised.
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Alright, thank you, Marvin. Good morning and thank you for joining us today.
We'll be discussing our third quarter, 2024 results which were released yesterday afternoon.
Here with me today are John Casella, Chairman and Chief of the Executive Officer of Cicella Waysystems, Ned Coletta, our President, Brad Helgeson, our Chief Financial Officer, and Sean Steeves, our Senior Vice President and Chief Operating Officer of Solid Ways Operations.
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 be aware that various remarks we may make about the company's future expectations.
Plans and Prospects, constitute forward-looking statements for the purposes of the State Parper Provisions under the private securities litigation reform act of 1995.
Actual results made different materially from those indicated by these four-looking statements, as results of various important factors, including those discussed in the risk factor section of our most recently filed Form 10K in Form 10Q, which are on file with SEC.
In addition, any forward-looking statements represent our views only as a today, and should not be relied upon as representing our views in any subsequent date.
While we may elect to update for looking statements at some point of future, we specifically disclaim any obligation to do so even if our views change.
These four-looking statements should not be relied upon as representing our views as of any subsequent due today October 31, 2024.
Also during this call, we'll be referring to non-gap financial measures. These non-gap measures are not prepared in accordance with generally accepted accounting principles.
Regents' Siliations of the non-gap financial measures to the most directly comparable gap measures to the extent they are available without unreasonable effort are included in our press release file on Form AK with SEC.
and with that I will now turn the call over to John Casella to begin today's discussion.
Thanks Charlie, good morning everyone and welcome to our third quarter 2024 Conference Call. Once again, it was a busy, but very exciting quarter as we continue to execute against our strategic growth plan.
I will review these highlights and provide comments on our results. Brad and Ed will then discuss details on the financials and our strategies.
As we announced in our press release last night, we recently completed our sixth acquisition of the year closing a royal on October 1st. This is a company that we've known and respected for decades. They're focused on delivering excellent customer service.
Taking care of their team and supporting your local communities are adding a goal in a line with how we operate.
We'd like to welcome all of our new team members to Cicacela and look forward to serving our new customers with the same outstanding customer service that has helped make royal successful for nearly 70 years.
As always, our initial focus is on integration which I'm happy to share is going well at the three larger acquisitions we completed this year, LMR, White Tail, and now Royal. With nearly 5000 employees and very excited about what the future holds.
Chifting to our results for their quarter, revenue top 400 million.
While we generated over 100 million of adjusted a bit for the first time in a quarter. These achievements reflect the power of the hard work at all levels in underscore the strong foundation of our companies.
Beginning with our landfills, volumes were down year over year, C&D tons remain the driver for almost the entire decline. Special Ways was down marginally in MSW Tunnages, remotely flat in the quarter.
While this is presented a recent headwind, our strategy is not changed as we remain dedicated to preserving our valuable airspace for the long term. To this point, our average price for time at our landfill increased over 7% year over year.
and just recently we received support from the State of Maine on the expansion of our Jupiter-Rich landfill. This is a critical asset for the communities in Maine and will continue to provide a dedicated disposal of waste.
Moving to the collection side, especially happy to report.
The strategic investments in our front line operations are making positive impacts. Adjusting the bid of margins were up 130 basis points in the quarter on same store basis.
This is impressive and a testament to the strong operating program, Sean Steeze, and his team have developed with plans for continued automation, automated truck conversions, rollout of on-board computers and leveraging power BI tools.
We see further opportunities across our faith business and acquisitions.
for more value creation.
These benefits also flow through to our recruiting efforts, employee safety, and turnover trends as well. In some cases, these are at the best levels in the company's recorded history. Applications are strong and both TRI and turnover rates are moving lower.
In Resorts to the solutions we also posted strong results.
across both adjusted the bed of growth and margins. On the same store-based as margins were up 90 basis points year over year and a quarter, we've worked very hard at making strategic investments that enter the demand for sustainable solutions while generating strong returns.
and the broad-based strength in the results shows it.
Beginning with our Merch's Results Benefit from Higher Comodied Prices
is provided the tailwind to our performance. However, this was only part of our success.
The equipment upgrades and certain facilities have increased productivity, throughput, and safety levels while material recovery and quality have also improved. Our Boston Merff is a great example for how technology can enhance our operations.
and his subluprin, we are applying to other facilities, namely our Wohlhutmanic facility. This facility is offline now, but it is expected to be up and running early next year.
Our National Accountant Business remains strong and at a very strong area of growth.
We want new commercial, municipal, industrial businesses in the quarter and now entry into the Hudson Valley with Royal provides opportunity to target commercial and institutional customers with a focus on sustainability, much like our strategy in the middle of the Atlantic.
Speaking of sustainability and late September, we published our 2024 Sustainability Report. I'm lighting our vision and achievements in creating and sharing value with the customers and communities that we serve.
Our sustainability strategy is deeply rooted in our company, from building our first Merff in the state of Vermont back in 1977 to further investments across our Merff network a resource solution segment.
is one part of our focus. The other key areas are the resources we are devoting to our people, in safety, training, recruitment, and retention. These investments support the backbone of our company allow us to better serve our customers and communities.
Finally, I'd like to emphasize this solid weight results our team has delivered.
The strength of our base business positions is very well as I look forward. In recent acquisitions we completed Ed to this foundation, I'm looking forward to a strong finish in 2024 and it's set up for 2025 and beyond.
The outlook is very promising, giving the opportunities in front of us and are continued potentials to grow the business. I'll pass it on to Brad to walk through the details from a financial standpoint.
Thanks John, and good morning everyone.
Revenue is in the third quarter, or $411.6 million, up to $489 million, or $16.7 per cent, year over year, with 37.5 million from acquisitions, including Wohlhuter, and $21.3 million from organic growth, or 6 per cent.
Solve waste revenues were up 17.3% year over year, with that position growth of 13% price of 5.5% and volumes down 1%.
With insolent ways, praising the collection line of business was up 6.1% and volume down 0.7%.
In the front load commercial business, price was up 7.5% and volume up 1.7% while volume declined in the court or concentrated in residential and roll-off as we work to improve the quality of revenue and margins in those businesses.
Revenue is in a disposal item business, we're up 1.7% year over year, we transfer revenue up 3.6% and lentil revenue down 1.5%.
Lantzo price growth at 4.6% was offset by lower volume of 6.1% in revenue terms.
MSW Tom's in the landfills were essentially flat in the quarter and year to date, but we saw continued weakness in C&D times down 16% year over year.
As we've discussed, the C&D market is currently under pressure with the impending closure of the land soil site in the metro in New York market.
We expect this dynamic to continue through the end of the year, but it should have been in 2025.
The average price for ton at the land sales was up 7.1% year over year, reflecting a mixed shift away from lower price streams as we held the line on price in the face of volume pressure and prioritized preserving our value for airspace.
Resource Solutions Revenues, wrote 14 and a half percent year over year with recycling and other processing revenue up 25.8 percent National Accounts, a 8 percent.
Within processing operations, price was up 7% driven by an increase of over 60% in average quantity revenue over 2-3 last year.
Of course, most of the benefit of these higher commodity price is shared with our customers under our contract structures which are designed to mitigate risk. So the net benefit of its or revenue was only $1.6 million in the quarter.
We expect favorably you over your price tops to continue through your end as a cycle to modulate markets remain firm and current prices are well above last year.
The processing volume was up 13.9% with higher recycling volume benefited by production enhancements at the loss of the earth.
With the National Accounts for Avenue, Price was up 1.1% involving was up 7.2%.
Acquisitions contributed 1.8% across the resource solution sector.
A Joseph D. Bada was $102.9 million in the quarter, up 13.3 million or 14.9% year over year, with $9.3 million for acquisitions, including Rollover and 4 million for Morgana Groff.
I just leave it down margins, we're 25% in the quarter, down 40 basis points year over year.
Bridging the year of the year change in E.B.D. margin, a few specific headwinds through the decline in the quarter. As noted in our press release, we incurred over $3 million of the expense of the quarter related to two discrete insurance events, which impacted margins by 80 basis points.
Insurance events are part of our ongoing business so we don't treat these as a justice eave dot add-backs, but the magnitude of these two events was certainly unusual and had a material impact on the quarter.
In addition, lower year of year volume at the land sales, particularly C&D materials as we've discussed, continues the way on results and impacted margins by another 30-based points in the quarter.
The rest of our business performed well in Enlightened Plan, our pricing programs continues throughout patient's location, and we've benefited again for ongoing cost efficiency in the collection of business.
On a same store basis, a Jeff the Vital Margins in the Collection and Resource Solutions line of business, line of business for up 130 and 90 basis points respectively.
So the underlying margin for engine or base business remains strong.
The year where you're bent at a higher production at the Boston Merck was essentially offset in the quarters by the shutdown of the Willamantic Merck, for the retrofitted enough creative that's a silly.
We look forward to having both facilities operating at new higher levels of production in early 2025.
Acquisitions were net newsful to the core, in unconsolidated margins.
Costs of operations were $267.1 million in the quarter, up $40.8 million in your over year with $25.8 million of the increase from acquisitions and $15 million in the base business.
Excluding the impact of the large insurance events that I mentioned, House of Operations were down 40 basis points in the quarter in the base business.
Adjusted Net income was $15.9 million in the quarter, down $4.2 million compared to prior year, with the accelerated amortization of identifiable and tangible associated with recent acquisitions and higher net interest expense weighing on earnings.
Intensible amortization was up to $3.9 million a year. While excess cash balance is related to the company's financing activities in Q2, 2020, resulted in higher interest income in the prior year period.
Gapnitting comes with 5.8 million dollars in the quarter, down on 12.4 million compared to fire a year, driven by a date and a half million dollar closure charge at the South Brisbane Phil, as well as higher DNA in that position related expenses.
The Southridge shark resulted from the revision of approved post-closure costs, following the receipt of requirements contained in the final closure permit, including increased well-wondering and testing for emerging contaminants.
These requirements were more onerous than previously expected and could not have been reasonably estimated prior to receipt of the final permit, which represented the official closure of the site and transitioned to the post-closure period.
Our effective book tax rate was 44.6% in the quarter and it's projected at approximately 42% for the full year. A certain non-juductible expenses and the screen items push the rate above our statutory rate of approximately 27% including state taxes.
The reason this effect rate is higher than previous years is that a reduction in forecast that's gap net income for 2024 driven by the items I mentioned, magnifies the impact of permanent differences and screen items on the rate.
As a reminder we expect to pay approximately $5 million in cash tax this year.
Met Cash provided by Operating Activities was $171.6 million for the first nine months of 2024 up 13.8 million year over year. This increase was primarily driven by E. Dogrow and came notwithstanding higher cash outflows from net changes in assets and liabilities in the first half.
I just had a free cash flow with $98.8 million in the first nine months, up $4.4 million a year over year, with strong operating cash flow, partially offset by higher capital expenditures.
As we announced in September we completed two important financing transactions in Q3 raising over $500 million an equity and extending an upside-thin our senior credit facility to 1.5 billion, including increasing our overall risk from $300 to $700 million.
These financing positionals well for continuing to execute Honor M&A and growth in Western strategies.
As of September 30, we had $1.1 billion at debt and $519 million cash in our consolidated net leverage ratio for purposes of our bank covenants was 2.57 times.
We closed on the acquisition of Roya Lawner, Cobra 1, and Pro Formula for that transaction or bank covenant, that I've written for less than two and a half times. And we still have approximately one billion dollars of potential financing capacity between next to us cash and underrun the wall.
As we announced in our press release yesterday, we reaffirmed our guidance ranges for revenue, adjusted EBITDA, cash flow from operations, and adjusted free cash flow for 2024, and revised our guidance range for gap net income primarily to reflect the self-bridge land flow closure charge.
With that position close to date, including Royal, we now expect to be at the high end of our guidance range for revenue. However, for a jump to the beta contribution of one quarter of Royal will be roughly offset by the unexpected insurance charges in Q3 that I mentioned, keeping anticipated results within the existing guidance ranges.
Looking ahead is 2025, we're excited for another year of strong growth across revenue, a Jeff-Sidee Bittal and cash flow.
As you build your models for next year, we expect approximately $125 million a roll of a acquisition revenue, primarily from Royal, White Tail, and LMR.
In the basis, that's the anticipate tailwinds from solid waste pricing of approximately 5% improved landfill volumes year-by-year.
The completion of the Will-Amantic Merch Retro Fit and continued benefits from our operating programs and acquisition synergies driving more than improvement across all lines of business.
Taking all this into account, we expect growth in the range of 12 to 15% on the adjusted EBITDA and adjusted for the cash flow growth in our long-term range of 10 to 15%.
Of course this outlook assumes no further acquisition activity.
and with that we'll turn it over to Nick. Thanks, Brad.
Good morning, everyone. The John said we had another busy corner with further execution against our growth strategy. With the purchase of royal carding and up to over first, we completed our 6th acquisition year to date, bringing total acquired revenues to over $200 million on an annualized basis.
We remain selective with our acquisition focusing on opportunities to have the right cultural and the right strategic fit.
We are excited to welcome the Royal Team to Cicacella and believe that this adjacent market presents the unique opportunity to drive landfill internalization and organics sales growth.
The early stages of integration are going well, with efforts to integrate the back office, sales and operations for granting according to our plans.
For an offering perspective, we continue to execute well against our core programs.
including automated truck conversions, route optimization, and extra revenues generated through our onboard computing capacity. These efforts continue to boost safety, operating, and financial performance.
Our recent acquisitions all present great opportunities of quite the same successful programs.
Given the lingering softness and special ways in P&D landfill bonds, we focus efforts over the last several months on increasing landfill internalization across both newly acquired markets and markets entered over the last few years.
Along this day, we have purchased additional long-haul trucks and trailers and have established new transportation lanes from four markets to our New York landfills.
With these moves we expect to drive an increment of 120,000 tons for a year of internalization.
We are working on additional opportunities for 2020-25.
Turning to our development projects, the first phase of investment in our rail surge McCain Pennsylvania landfill is now complete.
Today we have received over 50 rail cars in 6,400 tons of waste that McCain, allowing us to cast equipment and processes.
We are very excited about the future promise of the site. Currently our infrastructure includes a Gantry Crayed Toffload Boxes and over a mile of Rails for us.
We can upload roughly 5,000 tons per day, I can hang around, followed ways, flushes, and special ways to access.
As previously discussed, this site provides a great long-term risk management.
to preserve our flexibility in the disposal constrained northeast. As such, this won't be a meaningful driver of near-term bi-embroke and it's likely to be operated under the same return driven focus that we apply across all opportunities.
As Brad mentioned during the third quarter, we began the full technology and equipment upgrade at the Wheel of Mancic Connecticut recycling facility and we expect to have the project completed by the first quarter of 2025.
Taking the site offline is a negative drag for the second half of 2024. However, we expect the project to generate roughly $4 million of EVA DA in 2025.
We continue to evaluate other opportunities that advance our circularity infrastructure.
The RNG projects being developed by partners are also progressing, albeit slowly. The RNG facility at the Junior Paragylantial finally came online in the third quarter. Looking ahead at three Waga, lead projects continued to advance with commercial operations expected to begin in late 2025.
As a reminder, we have invested zero dollars in these projects in our receiving a royalty payment from the sale of gas and rins, which we believe is the most appropriate risk mitigating past for us.
As we look ahead to late 2020-4 and into 2025, our M&A pipeline contains to be very active with roughly $600 million of revenue across the number of excellent opportunities in various stages of diligence.
The strength of our balance sheet and our robust liquidity positions as well for continued return focus growth. With that, I'd like to turn it back over to the operator for questions. Thank you.
Speaker Change: Thank you. At this time, we'll cut the question and session as a reminder to ask the question, you will need to press star 1-1 on your telephone and wait for your name to be announced.
To withdraw your question, please press star one one again.
Please stand by when we come to the Q&A roster.
Our first question comes from a line that Trevor Romale with him playing a good line that's not open.
Good morning. Thanks so much for taking the questions. First, I was just wanted to ask for a progress update on some of the landfill development and expansion initiatives.
John, I think you mentioned that you have a ridge landfill. Good to hear you receive some support from the state there. Just wondering if you had thoughts on kind of the size and expansion of what the timeline could look like there. And then on the keen, thanks for the update there towards the end.
and just curious how that ramp could look like. For Tom, as we had in the 2010, I'm so honored. Jennifer Rich facility received his vote of benefits.
Uh...
Permit from Maine. That's a very significant permit, very positive.
in terms of being able to provide additional capacity for a number of years.
Speaker Change: Keep in mind, it's not necessarily to expand the facility in terms of total tons. It's really the bring-up facility out for the next 10 years. That capacity is really well received and it's going to give us the ability to continue to provide those services to.
Speaker Change: All of our main customers both commercial as well as municipal. So it's a great step in a great direction now. It's walking through the technical reviews of the additional permits that we need to.
to go to an operating mode.
Very, very positive move, great job by the entire team there.
Our McKinney facility is a net set in its opening statement. We've really begun to shake it down. We've plummeted amount of tons, you know, 1,000, and under 10,000 tons into the facility, but this.
and hundreds of containers and really given the team the opportunity to go through, test everything, run and really begin to shake down the entire facility and really give our people real experience from a real perspective. So again, exciting facility in place, ready to go, but it's really, we don't anticipate a significant ramp up early in the process as NIT said it'll be more, you know, on the basis of need and as pricing continues to move in a positive direction.
and two other positive points there. Today we have three rail surve transfer stations that they're moving ways to other sites.
will look to transition those over time to the canas of her grip.
We also brought on a really talented...
Rail, which is fixed for fashionable on-to-team someone who has over 25 years of experience at helping us.
to work through the ramp up there and citing an additional rail transfer station in the appropriate market, as southern New Hampshire or northern mass markets where we'll have needs over time.
You know, this is a long-term strategy where excited about where we sit right now, but the teams coming together and it's really progressing right where we want it to be.
That's great. Thank you both for that. And then just wanted to ask for maybe a little more detail on a royal acquisition, you know, one from a strategic perspective and just talk about the importance of.
Extending into the middle and lower Hudson Valley and then from a financial perspective Just any thoughts on kind of the EBITDA you'd expect on that night meddling the revenue and any synergy potential.
I have given you a little bit of perspective with regard to this strategic piece of royal royal
has been a small customer of ours for 30 years. We've had a relationship with them for 30 years. It's a spectacular company.
and the Böbenbeide Initiative in the end.
Speaker Change: in place for 70 years, really an exciting opportunity for Cousella.
Westchester, Duchess County, Great Market Area, very, very exciting. A great opportunity for us to advance our resource solutions, offerings to all of those companies.
Both Industrial Commercial, colleges and universities, medical centers, in terms of helping the meat-thirsty sustainability goes. So it's a very exciting, it's an area that we had in our presence from a all-in standpoint. We did, as they said, take a little bit of ways from...
They're transvestations, but obviously now we'll have the opportunity to internalize a lot more of it.
and there is a significant relationship from a strategic standpoint with a county which we will continue as well.
So it's strategically just a terrific fit. We're excited to have the entire team come on board. Very similar culture in terms of taking care of their people.
The Pinesi family really did a great job of taking care of their people and obviously the communities that they served as well.
and I want to do some of the financials there. On the financial side, it's kind of like a mid.
Keene's EBITDA MARCH in company. From our vantage point, though, as John said, there's a few things we can do over the course of two years to drive it to amid 20s.
For Sing!
and the Margin Company and one is just focusing on core operating programs and stuff we do great. Round off in the station.
on board computing on the stage. Yeah, this is some really great opportunities. There's no more work for Sean. Well, more work for Sean. And then the other thing is found, Sean mentioned, Lesle internalization, which got a game plan to move about quarter of the times.
that they generate into our site over the next year, plus, and that'll be some real great value creation over that time period. Blaser term probably opportunity to internalize more, but within the near term about a quarter of the way. So, you know, these adjacent markets are excellent, because we work there. We get that great internalization benefit, it extends our footprint, and you know, also from a sales standpoint, we've got a great playbook with larger incentives, and industrial customers that we think.
and Creative Laws. It's a great group of talented employees that all really come on board with us and just really a very exciting transaction.
Great, that's all great, thanks so much.
Speaker Change: Good work, thank you.
Thank you, one more week for our next question.
Our next question, Councilor Line of Toler Brown, of Ray Wengen, your line of not open.
Speaker Change: Hey, good morning guys.
Speaker Change: Good morning, sir.
Hey, Brad, I think you did a good job explaining the guy, but I just want to be crystal clear. So effectively, this slightly weaker Q3, again, we had these insurance accruals that were maybe unexpected. Largely offset the royal deal. So for all intents and purposes, that is why the guy really doesn't change.
Brad: is to be clear. Yeah, that's right, just netting the tune together. It just didn't, you know, result in a significant enough move to adjust the guidance range either way. But yeah, essentially that punchline.
Speaker Change: Okay, that's Aaron, that's Aaron helpful.
I want to come back to the C&D issues, I know that these are not new. I think you mentioned it with a $2 million headwind in the quarter.
I think it's been a headwind basically all year so has that been as much as an 8 to 10 million dollar e-bedod drag and does that site close on 1231 and I get that you probably won't get it all back in year one but won't that be a positive delta into next year or should be?
Yeah, this is, this is when a pretty significant drag throughout the year Tyler. I mean, we're down close to 150,000 tons here today on C&D. And this isn't like the construction demo market has weekend or something has permanently changed as you laid out that there's a site on Long Island Brookhaven, so we're going to be permanently closed on 1231-24.
and the final stages where you need the lines and the size of grade shape get permanently closed.
So the market will resolve coming into 2025.
Speaker Change: We're really confident, as I talked about in my comments. We're also, you know, if in hyper-focused and just making sure internalization is where it needs to be, we have the right transportation lanes when our third party vendors can't support those lanes. We've been buying trucks and trailers.
Speaker Change: and putting assets on the ground and...
I think we probably should have focused on that a little more earlier in the year and pushing faster and harder. We pushed throughout the summer to do that. It's also helped with some of that that had when we had. I don't think it's like a light switch on January 1, but we've seen the progress of getting that stimulus construction in demo time.
Speaker Change: even now into the fourth quarter. Some of our really great long-term customers from the New York markets who had a nice opportunity to go out to Long Island over the last year and have a good price reduction at this site was getting closed.
We've been talking to them, they're slowly starting to ramp tons back to us into the fourth quarter, so we expect some positives there and coming into next year.
Speaker Change: Okay, now super helpful and I know you guys are going to put obviously a much finer point on 25, call it 90 days, but there are a lot of moving pieces here, so if I just think through some of these.
I mean you've got organic growth.
You've got Willamantic that goes from an negative to a positive, we've just talked about CMD.
Maybe in the key in ramps though that's somewhat debatable. It sounds like you've got internalization opportunities, these insurance accruals, don't recur, you got a big roll over impact, it dominates. There's a lot of things going on. I mean, are some of those.
The key pieces to the bridge are anything else that I should be thinking about.
You know, you hit on your towners, Brad. You hit on a lot of the key drivers. I mean, the way we think 25 is shaping up over 24. There's a lot that's lining up to position as well on a year of a year basis and the biggest one is what you and Edward just talking about.
is Elanthil Lyme's in that market returning to some form of normal seat.
So the way I would think about it is kind of everything you talked about is encompassed in the high level EBITDA guidance that we gave.
We're a course, you know, a budget process right now, so we're going to work through that over the next month or two and we're going to have a much more refined view when we talk again in February. But we're feeling good about the year.
Yeah, okay, perfect. My last one's here, Ned. Can you kind of go back over all the internalization numbers? So I thought you said...
The two are buying some long haul tractors for something like 100, 125,000 tons of yitt truck, but then you also mentioned that you've got three rail sur transvestations that are sending waste to elsewhere.
So can you kind of just talk big picture because this could be a big and I thought I know it's probably not just a 25 it's a multi year story but can you just talk a little bit more about that and just maybe again put a little more shape around it. Thank you. Yeah sure.
Speaker Change: So we have bought additional tractors and trailers and we've established four new transportation lanes to hit our New York landfills from some major population centers where we weren't moving enough waste and turn a lives think Rochester Buffalo capital district.
So, you know, that's ramping up as we speak into the fourth quarter, will be a positive benefit into next year.
Speaker Change: and as I also said, we do have three rail trans-forcations today. We haven't flipped the switch and moved those tons to make team yet.
We will do some of that over time.
But we are more focused on moving MSW in sludges into making a lot of what's leaving the rail today from Cicella's construction in Demo, debris and we feel like they're better outlets.
and other locations for that. So we're more focused on moving, containerized MSW and special ways and sludges to the keen we think that's the higher value creation over the long term.
for the site. That's why you haven't seen us just go out and move those transversations to date. They're moving today to high-o-land films that they're effective T&D rates.
and make sense today. We will be looking at those sites and potentially a new site as well to really start moving so that can interact with us in the next year plus.
Yeah, perfect, okay, thank you so much. Thanks Tyler.
Speaker Change: Thank you for your next question.
Speaker Change: The End of the Video
Our next question, come to our line of Adam Babies of Common Faculty line now open.
Hi, good morning. I was wondering if you could just provide a little more color on the insurance expense accruals related to the two-discreet events. What is that exactly related to and does that roll off next quarter?
Yeah, so we had a really tragic accident. One of our transvestations were a third party on the trot hit one of our employees.
Speaker Change: you know, costume.
and the British significant injuries to her employees. He's alive, he's recovering, but with her workers' confidence in like this, we got hit with a full accrual.
Even though much of this will be suffocated back over time.
Speaker Change: to that third party's insurance provider. So, you know, really unfortunate in many ways, we're just thankful that our employees on the man has a fight ahead of him, but it's...
Speaker Change: and Edmond Coletta.
Almost one part insurance, one part legal, where we had at a third-party transfer station, Minus Pally unloading a truck.
Speaker Change: Bump set truck into a third party, that third party was injured.
and we had to take up a larger role this quarter associated with that that we always thought was a GL claim and it's turning out to be an auto claim.
So, there's just two really unusual claims that fit within the normal curls of what we look at, and it hit us unexpectedly in the corner that not something we normally would see.
Speaker Change: Under the hood.
Yeah, and Justin to finish. I'll see you next year, questions about it. This is one time. There's a potential that the accrual to change up or down in the future, but this is our best estimate as of today.
got it understood and hoping for the best for everyone involved there. And then on this 20-25 outlook, you know, there's a lot of moving pieces in terms of the margin bridge shifting from bad guys to good guys when you think about it.
Will a man pick Leachay headwind this year, seeing devolumed potentially returning? Are you thinking about the early puts and takes on potential for an outside 25 margin expansion yet?
Yeah, I think it's the medically you're thinking about the right way, and it's premature for us to put a finer point on the margin bridge. But because of the things you mentioned, your expectation is that...
Speaker Change: and a lengthy 2025 looking like, you know, above trend in terms of margin expansion, given the headwind that we faced this year.
and then last one from me, you know, really high level of M&A contribution flowing through the portfolio, great to see that level of growth. Is it prudent to expect a pause here in M&A spend over the next, you know, couple quarters if you integrate over 200 million annualized revenues acquired this year?
Speaker Change: Adly.
It's always opportunistic, so we have a number of transactions that we've been working to develop over.
Speaker Change: Years?
and a few of them contain a move through the pipeline, not larger, but a smaller top-end set that will fit very well.
into existing markets, especially into the mid-Atlantic. I think you should expect to see over the next six months.
Continuous focus on some talk ins and just real accretive value. Our team is hyper-focused on integration work though that's where the money's made and that's the most important part. And we've added some great select resources to help us expand our capacity to do integration work more effectively, more rapidly. So, you know, we are focused in that area. I wouldn't say it's a full pause on acquisitions because there's definitely deals there in the pipeline that can keep it kind of moves along. I think it's fair to say though that for the fourth quarter, you know, certainly,
A significant effort from an integration standpoint and only doing what is necessary for those transactions that are in the pipeline to continue to move them. But certainly, from now through the end of the year, a real focus on the integration of the businesses that...
Speaker Change: We've bought in 2024.
Great, thanks so much.
Speaker Change: Thank you.
Our next question comes from line up to the tanners of Wolf Research, your line is not open.
The Higman.
I'm going to follow up on the, I thought I heard in your preliminary marks that you had by part or found that you were implying up to a billion dollars or so much check in that. If that were the case.
Would that be an amount up to which you wouldn't need to tap dead or equity markets to do any of those tuck-ins or other deals up to that amount?
Speaker Change: The billiards was just the excess cash that we have on the balance sheets following.
The Acquisitioner Royal, we have about $300 million left sitting on the balance sheet.
We upstairs our law, as I mentioned, we announced, so that's 700 million. So 300 plus 700 is the total between those two. That isn't taking into account potential available liquidity given proper amount of leverage.
Obviously that assumes we would exhaust all of that liquidity and that wouldn't necessarily be our approach So really it's just a kind of an overall sense for how much room we have
Okay, but is it safe to say that some of the smaller deals you would be able to absorb pretty easily then with your available liquidity? I didn't want to just think you'd like to know.
Speaker Change: A question.
Speaker Change: and I'm also lying on those lines and a lot has been said about the election and I want to see it, of course, there but I think with regard to emanator some thought that there may be some easing, FPC approach or replacement of that head is there. Is that changed much for you all in terms of how you look at emanator that has been a constraint?
I don't think that it's going to change much, I mean, I think the real question is whether
In terms of what direction it goes in if there are significant issues from the tax standpoint.
It could have an impact from an emanating standpoint in terms of people's behavior, but...
Speaker Change: From our perspective, it's not going to change much. I think the opportunities that we have, the things that we've been working on.
You know, keep in mind some of the development work that we're doing from an M&A standpoint goes
you know, goes on for a year or so before we're doing something from an emanating standpoint. So constantly building relationships, constantly talking with people.
Speaker Change: RIT activities and that could have been changed, but behavior may be impacted in terms of which way the election goes. Embodest appreciation stepping down is a real impact to M&A and has been, I think, as you're aware, to the, we've been really effective at how we've bought companies, we've been able, like, oil, for instance, it was an F-re-or.
which we bought the stock at company, but are able to get asset treatment step up basis. Shield a lot of taxes, so we've been really affected on how we bought things. But stepping down next year from 60% bonus to 40% you know, changes to MP values and MPV value of the tax assets in, you know, brings in multiple for M&A. So I think that might be one way if the election plays on one way or the other that you can see M&A accelerated or maybe.
Stay around the same level.
got it, that's helpful color, thank you again.
Welcome to...
Our next question comes from line of steps anymore of Jeff Rees, your line is not open.
Speaker Change: Hi, morning, thank you.
Speaker Change: Thanks for watching!
I wanted to touch a little bit about the Syngi Realization from Prior Deals, maybe specifically if you wanted to touch on Syngi Deals last year, GFL and Twin Bridges, and then kind of what you've seen early on, the Syngi Capture or Potential for Syngi Capture from Deals announced this year. Thank you.
So Twin Bridges, we are ahead of planned, we've had a really great job of capturing synergies both.
with clapping rounds.
Speaker Change: and taking trucks off the road and also advancing some landfill internalization and in-clapsing facilities as well we've been able to.
and reduced number of total facilities by two over the last year. So we're well ahead of our plans and achieved every synergy in our model already. The mid-Atlantic atmosphere part from GFL were behind our plans there and kind of netting neutral between the two. And our biggest negative is there being behind.
Speaker Change: which is the complexity of the transition services. It's hard to buy assets out of another company and we didn't have enough visibility on our review book of business collections associated with that and the like.
Speaker Change: Everything's on our systems now and we have much better data visibility and we're back to executing the plan and growing the business.
So those two, you know, we're going to capture the synergies in the mid-Atlantic and there's a lot of work to be done there. Other things I've played through in the mid-Atlantic than we said this all along that...
Automating trucks, and moving from old rear loads to automated side load trucks is like a five or six year run for us where we have a lot of work to do over 200 trucks.
and this year our truck deliveries have been pretty significant lately. We primarily buy from Mac and Kenworth and we have about...
But say 30% of our truck deliveries have been delayed in my push into next year and a number of those were in the mid-Atlantic as well, which is way on us getting some of those early synergy benefits and automation in that market.
It's a little early with LMR, White Tail, and of course Roy Hill, but the teams are asking very well on the ground in each of those acquisitions. The former owners have been extremely gracious.
are working very, very hard to complete integration work and help us to be successful.
Witton Be More Than Full, and that's the most important part. Making sure it seems
Speaker Change: Our secure, we maintain employees, customers are maintained and that transition goes well. So with each of those acquisitions, you know, you've got a plus effort by the former owners making sure things are stable and running well.
Great, that helpful color. And then I just had one follow up on the 225, you know, high level guidance.
Speaker Change: Thank you called out Marginx, the Ancientist Cross-All-Wines of Business. So if you think about the Margin drivers for next year, clearly the pricing commentary looks strong, so should see another year pricing in excess of inflation and the benefit there. But what are the other major drivers? Is this a big thank you next year? Thanks.
Speaker Change: Yeah, it's continued efforts of Sean Hiss team on reducing operating costs in the collection line of business.
and as both John and I, comments in our fair remarks were really seeing the, if you could have dig down to the next level, people know the consolidated numbers. We're seeing real benefits from those quarter after quarter in the collection line of business.
The Resource Solutions of course will a man take birth coming back on and talk to about that and really having both will a man take in and fostering how all cylinders.
Pretty much from the beginning of 2025, that'll be a nice margin tailwind.
and again, and we're beating a dead horse here, but the real drag this year from a margin perspective has been the old landfill business and specifically the CND market.
So with that, again, returning to some old known innovation, that should, if we do nothing, that should be a nice margin tailwind.
So, you know, we see opportunity across all lines of business for Martin Expansion. This year it's really been two out of the free and next year we expect landfill to participate as well.
Speaker Change: and a fit, thank you so much.
Speaker Change: and well.
Thank you, we'll look for next question.
Speaker Change: and the next question comes for the line of Ryan Butler of Stateville, your line is not open. But morning, thanks for taking the question.
The two points we go back to the landfill closure and kind of that happened in that the end of this year. I mean, that 150,000 tons you're down. I mean, what would keep that from coming back, I guess, is there really any other place for that volume to go?
Speaker Change: Well!
You know, a bit of their fun to competitive site among Island as well, it's not to get too much into the weeds, but there's a little too private place among Island, or a municipal sector, a cave in an private site.
Speaker Change: and they've both been battling it out over the last year with the closure of Brookhaven. Our expectations, you know, that majority of that waste returns to us in 2020-25, but some of it did go to that other private site. Wow, you're 100% of that, but maybe, you know...
67% of the name. But your right, I mean, there are a lot of places to take it, and we expect those flows to return to our left.
and that's 60-70% that may be coming back. Is that part of what's built into the 12-15% EBITDA growth for 25? I mean, how much is in there, I guess? If any.
Yeah, that's encompassed in the 12 to 15 percent kind of high level guidance. Again, we're not at this point, you're parsing through the specific growth associated with each driver, but that's reflected in the article overall.
Speaker Change: Okay, and then the circle back again just on M&A. Maybe a little bit more color maybe on the 600 million pipeline.
What's kind of the makeup from a deal perspective on size and then maybe just your thoughts on how competitive has the M&A market ban? I mean, this has been a huge year and 24. Is that carrying in the 25?
Yeah, so if we look at our pipeline, there's a great mix between sub-$20 million revenue companies that are really nice top-end existing markets or adjacencies. And there's a lot of focus there. And then there's a handful of adjacent markets that are a little bit larger, like some of the transactions we've done over the last year.
Speaker Change: and...
We continue to have a balance of...
Speaker Change: Party to Party at the decisions where owners of companies would we have to direct discussions with and we come to a fair price and some come through a banker let process as well. So, you know what we're not.
Speaker Change: You know, it's probably lapsed in 10% of our deals are coming through an auction process still so we're really effective on the street with the relationships that John's built over a lot of years. Another great pipeline for our growth is our national accounts group.
So we've had a team for over 35 years that...
Wind Large Multi-Site Commercial, Retail, and Dots Trail Cutsworth. And some of them we've served with our trucks.
Some we broke her out to third parties and you know those third party companies that we do business with we get to know them over time We form relationships and trust and it really helps with with our pipeline development as well over time
Speaker Change: Keep in mind that we stepped into the mid-Atlantic, which gives us a significant opportunity for additional tuck-ins throughout the entire mid-Atlantic.
and then stepping into Royal Inductus and Westchester County again, additional opportunities to continue to grow around that market area. Both opportunities were new opportunities to settle in the last year.
Speaker Change: and I'm setting up opportunities from a continued growth standpoint. It is net set.
Speaker Change: You know, some of those transactions are, you know, the 10, 15, 20, 30 million dollar businesses that...
just will fit in very nicely and very exciting in terms of the future growth.
Okay, great color, and then last one for me, just with the acquisition, the post acquisition development capital spending, that comes down into 25. Now that we're kind of through the GFL assets and the twin bridges.
Speaker Change: Well, it's a sort of thing where if we were to stop acquisition activity that it would naturally roll off and that's going to be, but the reality is it's going to be a function of how active we are in deploying new capital.
So it's no way you're saying it's impossible to answer that. Defend on how to make sure you place that from the neck position standpoint.
Okay, great, thanks for taking the questions.
Speaker Change: Thank you.
Thank you for your next question.
Our next question comes from a lot of Michael Finniger, a bank of America, your line is not open.
Yes, hey everyone, next for squeezing me in. I'm just curious on some of the M&A, you know, we've seen some public players.
Michael Finniger: Adam some acquisitions in New York and the Northeast of Market as well. I'm just curious if you're seeing more out there in competition in terms of your M&A pipeline.
is getting more compared to these assets or on the flip side are we seeing some more discipline out there as we're starting to see some more announcements of the Northeast Market from some of the public peers.
I think that from our perspective we don't, we don't anticipate.
and he's significant additional competitive.
You know activities, as Ned said, we, you know, a lot of the transactions that we're doing are based on the relationships that we built for a lot of years in the marketplace.
and the presence that we've had in the Northeast for...
You know, almost 50 years now, so...
Certainly, there will be deals, the larger deals are going to be competitive, they always are with other.
Michael Finniger: of the companies, but for the most part, I don't think that we would characterize the market currently as seeing significantly additional competitive more so than what we've seen over the last year.
Oh, we're good, great to know and just...
I'm curious, I know there's a lot of noise in moving parts.
I'm just curious what you're seeing for your underlying cost inflation in the third quarter as you move in the fourth quarter, obviously there's labor, there's a lot of moving pieces, but how do you think that kind of sets up just bigger picture, what the cost of business kind of looks like for 2025 and how you're thinking that's what the pricing is to offset that.
Yeah, the cost inflation is Bradford, cost inflation has been, you know,
Stubborn Outdog Call it over the course of this year.
So in the first quarter, you know, consistent, I think, with year-to-date, we've been running in that Ford 5% of sort of mid-forces as an average.
across our cost back and within that there are some areas where inflation remains a big issue. And other areas where it's eased, but sort of that four to five percent is kind of overall.
You know, looking ahead the next year, we certainly don't have a crystal ball, but we're budgeting, assuming no easing. And so what we're going to have to do is continue to try and reduce costs in other ways and drive press.
Speaker Change: Thank you, I'm showing you all the questions at this time. I'll not like to turn back to John Casella for Colzeman Marks
Thank you. Thanks everybody for joining us this morning. We'll be all have a safe and fun Halloween. We're forward to discussing our fourth quarter, 2024 earnings in February. Thanks everybody, have a great day.
Thank you for your participation today's conference, this is conclude the program, you may now disconnect.