Q2 2025 Casella Waste Systems Inc Earnings Call
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Welcome to the Casella Waste Systems Inc. Q2 2025 conference call.
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I would now like to hand the conference over to your speaker today. Brian Butler VP of investor relations. Please go ahead.
Thank you, Daniel. Good morning and thank you for joining us on the call. Today we'll be discussing our second quarter 2025 results which were released yesterday afternoon. This morning, I'm joined with John cassella, chairman and chief executive officer of cassella, Weight Systems. Next calleta, our president Brad algen, our Chief Financial Officer and Sean, Steve's our senior vice president and Chief Operating Officer of solid waste operations.
After a review of these results and an update on the company's activities and business environments, we'll 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, including those discussed, in the risk factor section of our most recent form 10q, which is on file with the FCC in addition. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views on any subsequent date.
While we may elect to update for 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 to today August 1st 2025, also, during this call will be referring to non-gaap financial measures. These non-gaap measures are not prepared in accordance with generally accepted accounting principles.
Correct. 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 our press release filed on form, a pay with the FCC, and with that, I will now turn over the call to Jacques Ella, to begin our discussion. John, thanks, Brian, and good, good morning everyone. Welcome to our second quarter 2025 conference call.
In June, we probably rang the NASDAQ opening bell to commemorate this 50th anniversary. This milestone marks our evolution from a single truck operation in Vermont to a leading provider of waste recycling and resource management services across the Northeast and now into the Mid-Atlantic.
Over 5 Decades of growth, our dedicated team has consistently delivered exceptional service and Industry leadership. All, while staying true to our core values and working toward a cleaner, more sustainable future. I would like to sincerely. Thank all of our employees for their grit hard work, and commitment every day. The celebration was not only a reflection of our past but also a reaffirmation of our vision for the future. It highlighted, the strength of our culture, the resilience of our business model and the Deep trust we've built with our customers and communities. We are incredibly proud of the Legacy we've created and energized by the opportunities ahead.
Turning to the quarter, we delivered another strong performance in Q2 with robust growth in both revenue and adjusted EBITDA year to date. We've achieved record first half adjusted free cash flow of over $70 million, more than $30 million above the same period last year. These results reflect solid execution and meaningful contributions from our recent acquisitions.
Pricing remains healthy with solid waste, pricing up 5% year-over-year, we continue to execute. Well, on our operating plans driving meaningful margin Improvement across our Legacy business. This performance has been part partially offset by some growing pains in the Mid-Atlantic. As we work through the transition to our systems and getting the acquired Fleet up to our standards, we are executing on a plan to rapidly. Get this performance on track.
Very well.
Driven by improved performance at our upgraded recycling facilities. We've now completed 6 Acres year to date representing about 90 million in annualized revenues. And we're excited about the pending acquisition of Mountain State waste which will expand our foreign in Pennsylvania and also into West Virginia, adding another 30 million in annualized revenues look forward to welcoming welcoming their employees and customers to the cassella family and integrating their operations into our broader Network. Our m&a pipeline remains full of targets that align perfectly with our strategy. And our strong balance sheet, positions us to continue to pursue and complete these deals opportunistically looking ahead. We raised our full year Revenue, guidance reflecting on the continued strength of our core pricing and acquisition activity and reaffirmed, our adjusted a bit of an adjusted free cash flow. Guidance ranges representing another year of Records.
Financial results. And with that, I'll turn it over to Brad to walk through the financials in more detail.
Thanks, Sean. Good morning, everyone.
Revenues in the second quarter were 465.23 million up 88.2%, or 23.4% year-over-year with 61.671 million, from Acquisitions, including rollover and 21 million from organic growth or 5.6%.
Solid Waste revenues, were up 27.1% year-over-year with price applied percent and volume down 0.8%.
Within Solid Waste price in the collection line of business was up 4.9% in the quarter. Led by 5 5.9% price in front load commercial and volume was down 1.2%.
However, your year-over-year volume trends improved from the first quarter, with indications of a stable economy in our markets.
Price in the disposal line of business was up 5.8% and volume of 0.6% year-over-year.
In the landfill business were strong with total tons up 9 and a half percent, including higher, third-party, mfw and CND volumes. And over 12% growth in internalized volumes
We feel that we have meaningful opportunities to grow volumes further in our sites, but it's safe to say that the persistent Market headwinds that we experienced last year are behind us.
We drove price 8.2% at the transfer stations with flat volume in the quarter.
Resource Solutions, revenues or up 10.2% year-over-year with Recycling and other processing Revenue up 9.6% and national accounts up, 10.6%.
Within resource Solutions processing operations. Our average recycled commodity sales price was down 16% year-over-year with software markets, across the board, and most Commodities. Now selling below 5 year averages.
Notwithstanding market pressures, our contract structures share this risk with our customers by adjusting tip fees in down markets. So, the net impact of lower prices on our revenue was just 1.6%, or less than a million dollars.
Processing, volume, and revenue terms were up 8.6%, driven by higher volumes at the Boston and Willimantic recycling facilities.
Within national accounts, Revenue price was up 5.9% and volume up 1.9%.
Adjust the deba was 109.5 million in the quarter up, 17.9 million or 19.5% year-over-year with contribution from Acquisitions including rollover and organic growth.
Adjusted eadon. Margin was 23.5% in the quarter down approximately 75 basis points a year over year.
Bridging the year-over-year change in adjusted time, margin acquisitions contributing at lower initial margins than our overall business presented a headwind of 85 basis points.
The base business on a same store basis expanded margins by 10 basis points overall, with Legacy footprint, operations growing margins by over 100 basis points. But the Mid-Atlantic region, representing a near-term headwind. As we continue to work through business integration and Synergy execution, in impacted by ongoing system, conversions and delays in truck, deliveries.
I should note that these headwinds are transitory and represent margin expansion opportunities in the future, which we expect to see in 2026.
48.2 million of the increase from Acquisitions and 16.1 million in the base business.
General and administrative costs were 54.5 million in the quarter up 7.3 million year-over-year.
It's depreciation and analyzation costs were up, 21.7 million year-over-year, with 16.1 million. Resulting from the recent acquisition activity, including the amortization of acquired intangibles.
As a reference DNA is associated with Acquisitions, was approximately 24% of acquired revenues in the quarter as compared to 15% over our base business.
Adjusted. Net income was 23 million in the quarter or 366 cents per diluted share up 1.3 million and down 1% per share.
GAAP net income was $5.2 million in the quarter, impacted by a $6.9 million increase in the amortization of acquired intangibles.
I provided by operating activities with 139.6 million in the first 6 months of 2025 up 59.9 million. Year-over-year driven by ibid dog growth and more normalized, seasonal, working capital flows, as compared to 2024.
DSO was 34 days Down 2 days from year end and 4 days. Year-over-year
for the first 6 months and representing approximately, 40% of our full year guidance,
Capital expenditures were $121.9 million, up $47 million year-over-year, including $40 million of upfront, one-time investment in recent acquisitions.
As of June 3006 billion dollars of debt and 200 218 million of cash, our Consolidated, net leverage ratio for purposes of our bank confidence was 2.39 times.
And our 700 million revolver, remained undrawn.
Our liquidity and leverage profile will enable us to be to be opportunistic and continuing to execute our growth strategy and robust m&a pipeline.
As announced in our press release yesterday, we updated some of our guidance ranges for 2025.
We raised our our Revenue guidance to a midpoint of 1.83 billion in light of acquisition activity to date.
However, we reaffirmed our range on adjusted Eva as the contribution from our announced acquisition activity since establishing. Guidance has not yet exceeded the original range and we will remain cautious on the pace of synergy execution, this year in the Mid-Atlantic region,
We also raised the bottom end of our ranges on a just Vivid de.
adjusted free cash flow, sorry and and cash flow from operating activities based on the strength of cash, flow year to date and our confidence in the second half.
Regarding cash flow. I should note that we will not see a benefit from the recent tax legislation in 2025, as we would not have been a federal cash taxpayer in any event.
However, the provisions of the tax bill, most significantly, the reinstatement of bonus depreciation will certainly benefit our tax position in the future deferring and ultimately reducing our eventual Federal cash tax burden.
With that, I'll turn it over to net.
Thanks, Brad and good morning everyone.
As highlighted.
Metrics organic trends remain positive in the second quarter with solid waste. Pricing is up 5% year-over-year and total company volumes are up 30 basis points, with particular strengths in Resource Solutions and landfill lines.
Collection operations made meaningful improvements. We completed 11 routing projects that reduce both route gates and driver headcount requirements, operational productivity, and our eastern and western regions remain strong, with direct labor and overtime costs flat on a trailing 12-month basis. This helped to offset cost pressures in our Mid-Atlantic region, where labor costs are currently running hundreds of basis points higher than in other regions.
As John mentioned truck, delivery delays in system. Conversions in the Mid-Atlantic had a domino impact in the quarter. Delaying route, optimization Automation and other cost synergies from being recognized as quickly as expected.
We do expect 55 additional trucks to deliver in late 2025, to the Mid-Atlantic region with nearly 40 of these trucks being automated.
Romantic in Boston, recycling, processing facilities.
This operational strength along with our floating processing and SRA fees. More than offset the impact of weaker commodity prices, which declined roughly $20, a tonne or 16% year-over-year.
With total volumes of 88,000 tons year of year or 9, and a half percent with increased internalization driving a 55,000 hunting increase or roughly 13%.
We also continue to Source more construction and demolition tons. Mainly due to the previously announced competitor landfill closure on Long Island, which had been a headwind throughout 2024
Since opening in mid-2024, our machine landfill has successfully accepted over 400 rail cars and processed close to 2,000 containers of waste.
We're building out a new rail offload, transfer, building at the site to expand the range of materials that can be handled from the current containerized MSI MSW. To also include gondolas of MSW c and d and soils.
We expect these upgrades to be completed in the first half of 2026 and at that time, we'll work to drive additional internalization to the site and also selectively attract new customers and material streams.
We also continue to execute well against our acquisition strategy. As John mentioned, closing 3 additional deals in the second quarter totaling over $40 million of annualized, revenues. Additionally, we're really excited about the agreement. To acquire Mountain State waste, which will expand our Geographic footprint and added incremental 30 million of annualized revenues after it closes.
As we enter the second half of 2025, our acquisition pipeline remains robust with over, 500 million dollars of annualized Revenue opportunities. Our balance sheet remains strong with leverage, under 2.4 times in total liquidity of approximately 900 million.
Our outlook for the remainder of 2025 remains positive supported by continued execution of our acquisition strategy, in a resilient sustainable, organic growth model our limited exposure to commodity prices and tariffs. Further reinforces our confidence in delivering consistent results with that. I'll turn it back to the operator for questions. Thank you.
As a reminder to ask a question. Please press star 1, 1 on your telephone, and wait, for your name to be announced.
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Our first question comes from Tyler Brown with Raymond James. Your line is open.
Hey, good morning guys. Can you all hear me?
Sure can yep. Yeah, good morning. Tyler
Hey morning. Um so Ned can we just kind of start with the Mid-Atlantic? So it's seems like maybe that group is lagging a little bit. Maybe can you talk about some of the reasons why? And I think you're implementing an Erp there but big picture
Once that new system is in place, won't there be a substantial pricing opportunity in that market in 26? Because I was under the impression that pushing price was kind of call it logistically, difficult and Cass. Cash collections were kind of slow on that Legacy system.
Yeah, great question, Tyler. Um, so if we flash back in time, there's always those moments where you make a R&D decision and we may be made 1, that's been a little bit painful. Um, when we acquired the businesses originally from gfl, we decided to actually stay in the same building operating system. They had been operating and it was more of an R&D decision for us to see, you know, how it would work. And if it was something that would work for the rest of our business flashforward, it's not a great system. Um, there's not great analytics, it's not great. Um,
The same level of visibility around the elasticity of pricing that we have in our legacy system. So, there is an opportunity there as well.
Okay, so
I'll try to ask this question, we'll see what you give me, but what would you say the Synergy ebita benefit could be from that, that group of Assets, in 26? I mean, is this a couple million bucks or is this 10 million or more? Just any color.
Yeah. So we have an we haven't fully built out our budget for next year and we're still working through the steps here. But on the routing side, um, this will come in over the course of a couple of years as you're aware. And we had said there was ultimately, as much as you know, 6 5 6, 7 million dollars of benefit over several years as we automate that Fleet on the back office side, um, there's millions of dollars of benefit over. You know, I wouldn't say it's all at once but as we get the systems issues resolved. So, um, you're looking at, you know, 5 to 10 million dollars over a couple of years. We'll give a better idea on the pacing of that. Um, when we get our budget pulled together,
Okay. Yeah, that's very helpful. And then can we turn to to Mountain State? So,
I'm just kind of curious about what some of the dynamics are in West Virginia. Is that a disposal-neutral market? Can you internalize that through a transfer station? Just what's the market structure there? And then it looks like they have really nice set of assets. Will that kind of serve as a mini platform in that region?
It it will, you know, the majority of a good portion of the assets are in Pennsylvania and they expansion into West, Virginia. The expansion into West Virginia is through into Morgantown, which is a very, uh, it's a terrific MSA in West Virginia, a lot of growth there because of the University. Uh, so it's a secondary tertiary Market that we're similar, you know, a similar to some of our other markets. Um, I think that there is an opportunity for us to continue to build off of that platform. Uh, there are, uh, operations. We do, uh, go into, uh, Ohio and Kentucky, uh, with the West Virginia, uh assets. Uh, so there is an opportunity for a for us to add, uh, to that platform, uh, on a go forward basis.
Yeah. Okay. As you may be aware, it's a franchise market. So, um, they have these lifetime franchise agreements that come with part of the acquisition. And in those markets, we would either be the Sole Provider or that there might be, you know, several providers. But, but you have a franchise agreement where you're picking up, um, you know, customers within a defined rate structure, um, but but, you know, it's a very nice well-run profit.
Business with great assets.
Yeah, definitely. Looks like it. My last one here, just Brad. This is a minutiae modeling question, but why did the interest expense guidance drop so much? Was that—I mean, it doesn't look like the debt balance really moved, and I'm doubting the coupon moved that much. Just what was going on there?
Uh, yeah, I think just as the year progresses, um, you know, we were just refining our view and and letting some of the conservatism on that line out. Um, is is really the really the bottom line.
Okay, yeah, no. I just wanted to go over that. All right, thank you, guys. Thank you. Thank you.
Thank you. Our next question comes from Adam. You best with golden sacks. Your line is open.
Hi, good morning. I just had a follow-up on the admitted Atlantic Dynamic. Just to put a finer point on it, is this a case where it's slower than expected, Synergy realization, or are we also realizing incremental costs in the Mid-Atlantic year-over-year that's impacting that margin bridge associated with the integration?
Go after um, some of the synergies that we were able to capture.
Understood. I think you closed on $40 million in annualized revenues incrementally inter-quarter. Can you just expand on the details of those transactions in terms of, uh, geographic and business mix? Any other details?
Yeah, we do. Um, we don't typically give out the names but um, we had 1 acquired western region. It's an existing Market. Uh, we'll be able to develop tuck in synergies with that. Um, we'll ultimately, uh, be able to consolidate routes. Uh, good at good solid acquisition. Uh, we had 2 other Acquisitions in the Atlantic 1, is a very direct overlay, which will have nice synergies over the next couple of next year plus, it's in Delaware to Southern PA and then a second acquisition in PA that, um, is a bridge between 2 operations sits right in between have some overlay, but but it expands, um, territory slightly. So, so all really nice, um, fits and and Acquisitions. We've been working on for, you know, a period of time and, and have good Synergy value.
And then the last 1 for me, you know, thinking back to the second half of last year, I think you had some margin. Headwinds from insurance events incentive comp and lower landfill volumes were also a headwind with Lancel volumes having recovered now and lapping some of those headwinds from last year is it fair to think?
Margins could expand at or better than the sort of 50 basis points of underlying margin expansion trend. How should we think about the sequential margin expansion in the back half of the year? Thanks.
Good question. And certainly the, uh, this is Brad. Certainly the landfill, um, business flipping from a headwind to a Tailwind. Um, you know, we'll be a nice, uh, nice driver of of margin expansion year-over-year in the second half. I I, I would say though that, um, the margins implied, by the fact that we, um, we raised our Revenue guidance. We held our guidance range, not just at IBA, um, that implies slightly, um, softer margins than we had expected. So the second half and that's really again the the not the key harping on it but but it's the Mid-Atlantic. So I think what we're seeing is you know, 50 60 basis point of kind of the same store margin Improvement um in the first half the Legacy operations have exceeded that. Um, and then the Middle Atlantic was a bit of a drag. Um, so I think the pay
Case at which we can execute on the synergies get trucks, delivered, Etc. Um, that's really going to tell the tale for uh, for the second half on margins, but but you have those different factors, um, that are going to be going to be impacting it
Great. Thanks so much.
Thank you. Our next question comes from Trevor Romeo with William Blair. Your line is open.
Hey, good morning, guys. Thanks for, um, taking the questions. I was just hoping you could maybe speak.
Good morning. Um, hoping you could speak to, um, the volume performance in the quarter and, and the Outlook, I think Brad you mentioned, you know, in,
Stable economy in your markets and, and clearly some good Trends in the landfill, um, you've also got some of the, you know, the Brook Haven factors in your own internalization initiatives. I guess so, hoping you can maybe just talk to like what you're seeing in the cyclical areas of volume and help us. Parse out the underlying Trends in your markets versus the uh more cassella specific trends.
Sure. Um,
Uh hey Trevor. Um so if you're a call on in the first quarter, uh, we talked in particular about uh a really soft environment for roll off. And the time we weren't really sure was that weather and it was a difficult weather in the north weather quarter in the Northeast, was it whether or or was there some underlying economic weakness at play as well. Um, you know that business has um, has recovered
2 business lines. Um but overall including recyclables including our national accounts business our collection business and of course landfills um it it's actually a pretty good volume story.
Yeah, and and it doesn't get reflected in our funds that Brad, but but it is important to note that a good degree of the volume increase at the landfills was internalized, fine. Um, you know, almost 60,000 tons and is that really reflects what 1, you know, getting synergies. Derived from Acquisitions that. We've done over the last 2 years, as we've rolled off contracts and also just our efforts over the last year to put new Transportation Lanes in place and, and ensure that transfer stations are are getting to our landfills to create that value. So you know, another strong quarter there by our team of of getting that job done and and delivering those those benefits.
Okay, thank you both. That's that's really helpful there.
and then, um,
You know, sorry. I just want to go back 1 more time to, to guess the Mid-Atlantic. I think you, you talked about the systems and the fleet I think in detail already, but I think 1 comment I caught from from, NED was Labor running, much hotter and if I look at your expense details and I think direct labor costs were up like 170 basis. Points year-over-year is a percentage of Revenue so maybe just a little more detail on what's going in there. Is it primarily just not having any automated trucks yet or something else?
Going on with labor there.
Yeah, so um we've we've mentioned this a few times, um, where the labor, the labor cost is a percentage of Revenue or net revenue in the Mid-Atlantic. It's much higher than our Legacy hauling businesses in the Northeast. And that's because there's a lack of automation, a lack of optimization of routes and it won't get all solved at once, this is going to take years to solve as we get new trucks into Fleet, as we look to automate certain Municipal contracts. But right now we have a much higher degree of Labor servicing the same Revenue base in that market, which, which is a great opportunity. As we've mentioned a few times. We thought we were going to yield that opportunity a little bit faster in 2025 and now with truck delays, it's coming a little slower, but but the opportunity is there. So we expect that to start coming down and we expect that to be a real Tailwind into the future where we can start taking that labor out of that business model more more more broadly across the business.
Uh Trevor we we are seeing uh labor costs at sort of the upper end of of our cost back from an inflation standpoint. Um, you know, overall we think we're um comfortably covering cost inflation with our our, our pricing programs as as we as we aim to do. Um you know but labor has been 1 of the um higher running line items um candidates leave from up from an inflation standpoint.
Got it. All right. Thank you all. I really appreciate it. Thank you.
Thank you. Our next question comes from Jim xiong with TD Cowen. Your line is open.
Hey, good morning. Thanks, guys. Um
So yeah, just on the um collection pricing. Um looks like a fairly significant dip in the second quarter sequentially. You went from 5.8% and q1 to 4.9%, which you know, seems pretty unusual quarter to quarter sequentially there. What what's driving that?
So part did did Jim and Brad. Um, part of the issue is is mix. So um, you know, across the lines of business front end commercial has been our strongest line of business from our pricing standpoint. Um, roll off has been the relative weakest and of course, in the first quarter. Um you know it was much less rolloff activity than there is in the second quarter. So um, the best I could I could explain it is it's sort of a re-weighting of the business lines rather than a same store, you know, um, decline in, in, in pricing Trends. Yeah, we also, um, we had, we had great pricing in the front load line of business in the quarter of Ras you laid out and and very strong pricing and the the residential line of business as well. But our pricing was a bit weaker in the roll off and we've been, you know, as we exited this spring and Vines
We were a bit weaker than we expected. Um, we didn't test the market last 50 as much as we may in certain years. We were looking for those volumes, and it really isn't until June and July that we were able to start pushing price a bit more in the roll-off line of business, and we're starting to see that come more now.
And then what's the longer-term outlook for Resource Solutions? I mean, can this grow as quickly as Solid Waste, or does it become proportionally smaller over time?
I think this uh um the evolution of resource Solutions in terms of providing the services that our customers are looking for whether it's colleges and universities municipalities, um, industrial customers. Um, I think that the, the resource Solutions part of the business, or materials management is we call it, um, is going to continue to grow at a fairly rapid Pace. We have tremendous opportunity, uh, in the Mid-Atlantic as an example. We're just beginning to scratch the surface. We put the sales team in place, obviously, uh, we're beginning to work that at this point in time. Um, but when you think about, uh, Mid-Atlantic is as an example from a resource solution, standpoint, we've got tremendous opportunities from an industrial standpoint uh to really add a lot of value to the business on a go for it. So I think that we're going to continue to see resource Solutions grow at a fairly rapid pace.
Okay, got it. Thanks and if I could just squeeze 1 more and if you don't mind um you know, capex is a thank you capex. Is a percent of sales is sort of been running 12 to 13% over the the past few years. It seems seems kind of high relative to maybe your your landfill.
Composition to me. So how do you, how do you see that evolving over time? What's the right sort of capital intensity, where do we land? And and you know I don't know 3 4 years.
Yeah it's it's Jim it's it's going to go up and down of course as you know, based on um you know our our schedule for landfill development um you know the collection business Just Trucks and containers that tends to be 6 to 7% of Revenue. Um you know, landfill could could bring that number up significantly depending on how busy the um,
Uh, uh, the construction schedule is for particular year. Um, I'd also point out, um, you know, going to be a unique Factor, given the relative significance of our, um, our acquisition activity is that, you know, when we acquire businesses, we tend to not in all cases, but, but generally, we tend to have pretty significant upfront. Capex as we try and in 1 shot, bring their asset base, um, up to our standards, um, in terms of the fleet, in terms of the facilities. So, certainly that, um, is a, uh, is a factor as well. And, and, and 1 that, you know, again for us, given the relative importance of acquisition activity. Um, you know, is probably a bit different from our competitors.
Understood. Great! Thanks for the answers, guys. Appreciate it.
Yep. Love
Thank you. As a reminder, to ask a question, please press star, 1, 1 on your telephone again. That is star 1, 1 to ask a question.
Our next question comes from Stephanie Moore with Jeffrey. Your line is open.
Hi, good morning. Thank you.
Good morning.
I wanted to maybe touch on a bigger, a bigger picture question here and you know, given the current Administration does appear to be a bit more, um, amenable to to larger scale m&a, if that changes your acquisition strategy at all, or if there's anything that you can call out from a pipeline standpoint, thank you.
Yeah, I don't think that, uh, it really changes our strategy at all. Uh, Stephanie, I think that we've indicated that, you know, we see great opportunity on the Eastern Seaboard. Um, you know, there are some larger companies there, but, um, we're still focused on, um, you know, solidifying, um, the investment that we have in the Northeast, solidifying the investment that we've just made in the Mid-Atlantic in terms of taking advantage of those platforms, continuing to add, uh, tuck-ins to, uh, those platforms as well. And then, obviously, looking for additional platforms, uh, down the Eastern Seaboard. Um, so I don't, I don't think that it changes, um, you know, our strategy from a, uh, M&A standpoint at all.
Thank you appreciate it. Thank you certainly certainly beneficial in terms of the the tax depreciation Etc. It's uh it's very positive in terms of how we look at that with regard to the m&a activity on a go forward basis, from a tax perspective. Very positive
And then I was hoping.
To fruition here and you know any potential impact we can we can expect to see over the course of the next you know, 24 months or so. Thank you.
Yeah, so mine. Um, first became operational late last spring and we started off very slowly and we started to ramp the site more that this spring, but today we're only taking containerized MSW. So like in 12 T boxes, we offload, Gantry train, run them up to the the face of the landfill um our permit at the site stipulates that we're going to offload any Gondola. So loose MSW, loose CMD or contaminated soils. We need to do so inside a building. So we've always had plans to add a a Transfer Station transfer building at the site, we had all the the rail track outlaid to to do that. And we're starting to build that building now, uh, we'll expect that to be completed into the first quarter and that will allow us to actually to complete some vertical integration initially with 1 of our transfer stations. We'll look to move there, um but but he also opens up some additional streams of waste from
Third parties that we may consider. As we've said for a long time, you know, we'd never opened McKean to just become a big third-party commercial site. It it's really a lot of it is defense for the Northeast for the next, you know, 5 to 10 years as is a lot of risk around disposal capacity, but but we want to make money at this site, we want to have great returns.
Parents, so getting this building completed, ramping up volumes a bit more, all part of that strategy. So we expect the machine to be a positive line contributor through 2026, and we'll let you know as we get that volume risk scheduled together.
Yeah, I think it's fair to say that um, is a, a really nice opportunity for us to open up, uh, McKean for some select customers 2 or 3 select customers that could, you know, be a base, uh, on a go forward basis. Particularly as Ned said, uh, after we get, uh, completion of the building, then we'll be able to take the gandas which really opens up, uh, our opportunity. Uh, meanwhile the team has really done a great job of getting up the speed operationally. They're moving the containers. They're, they're really, um, you're really getting the experience and the operating, uh, wherewithal to be able to, you know, perform at a high level there. So, we're, we're pretty excited about that. Um, and once we're able to broaden, uh, what we can take their with the building, uh, it's going to be a positive in 2026 and, and just as the footnote to what, um, what Ned mentioned about the investment to bring on the capability, to accept Gondola waste. Uh, you'll notice in the
In the reconciliation of our guidance numbers in the press release. Um, this quarter, we have, um, a line for McKean rail. That was a lot of spend, of course last year had, um, hadn't really factored into our forecasting for this year, uh, until we decided to add this capability. So, um, that that's why there's that additional number, um, in the reconciliation to preach flow.
Understood, thank you.
You're welcome.
Thank you. I'm showing no further questions at this time. I would now like to turn it back to John cassala for closing remarks
Uh thanks everyone for joining us. Uh, this morning and look forward to all of you joining us. For a third quarter, call in October. Thanks everybody have a great day.
This concludes today's conference call.
Thank you for participating. You may now disconnect.