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Operator: Good day and thank you for standing by. Welcome to the Casella Waste Systems First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Charlie Wohlhuter, Director of Investor Relations. Please go ahead.

Charlie Wohlhuter: Thank you, Liz. Good morning, and thank you for joining us on the call today. Today, we will be discussing our first quarter 2024 results, which were released yesterday afternoon. Here with me are 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. 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 Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent annual report on Form 10-K, which is on file with the SEC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views in any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today, April 26, 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. 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 8-K with the SEC. And with that, I will now turn it over to call – turn over the call to John Casella to begin our discussion.

John Casella: Thanks, Charlie. And good morning, everyone. And welcome to our first quarter 2024 conference call. I’ll begin today’s remarks with highlights of our first-quarter and then have Brad and Ned go into more details on our results and a strategic overview. But first, I’d like to take a minute to credit several of our team members who exemplify our core values and who have been recognized for their service. They put service to our communities first while operating in a safe and responsible manner. We are fortunate to have four drivers earn Driver of the Year recognition by the National Waste and Recycling Association through their focus to enhance safety and be a strong representative of the solid waste industry. They are Curtis Rhodes, Sean Dutton, John Machad and Cesar Giguere.

Our long time market area manager, Bill Meyers in Northern New York was named Citizen of the Year by the United Way of the Adirondack region for his community engagement. They lead by an example and inspire the rest of us to make our own positive contributions to the customers and communities we serve. Shifting to the results. As you saw in our earnings release yesterday, we hit the ground running to begin 2024. Our business is performing at a high level. Revenues were up nearly 30% year-over-year, while we drove adjusted EBITDA growth of over 40%. This resulted in a 150 basis point margin improvement, which demonstrates the strong execution of our operating strategies and the successful ongoing integration of some of the largest acquisitions in the company’s history.

It’s truly impressive and speaks really well of our entire team. On that note, acquisition integration has been among our key priorities, as you know. The hard work our team has done is very evident as we grow. Their commitment and dedication to be of service to each other, our customers and the communities we serve shows. The senior team and I are very proud of the culture. This is the foundation that’s positioned us well for another exciting year of growth and performance. Looking now to a few of our key strategies and the performance of operations. Beginning with the landfills, as we expected in the first-quarter, volumes were down with lower C&D in special waste tonnages. To be clear, this is not a sign we are experiencing weaker construction activity or a signal from the economy.

In fact, roll-off collection volumes were up 1.4% in the quarter, followed by commercial collection volumes up nearly 1%. C&D disposal dynamics are being influenced by a large landfill in the Northeast that is projected to close at the end of this year. We anticipate that C&D disposal market will readjust following the closure. Regardless, we continue to focus our operating programs at the landfills, as well as our quality of revenue. Our average landfill price per ton stat is often a good metric to measure our improvement in quality of the inbound waste stream. For third consecutive quarter, the increase was double digits on a percentage basis. Turning to the collection side of the business. We’ve executed well and have a lot of positive momentum as we advance our strategies across this business line.

Our investments in automated side loaders, rounding technology and real-time data intelligence are providing nice benefits. We are capturing labor, safety and productivity enhancement as we steadily roll out these programs across our collection fleet. As part of the efforts, we aim to keep our costs low for our customers. Our ongoing fleet automation plan is attracting larger and more diverse labor pools and creating a safer work environment for our frontline workers. We experienced favorable trends in our turnover and TRIR safety metric in 2023, and we aim to repeat this in 2024 with incentives aligned up-and-down the organization. In terms of routing initiatives, we completed a number of routing projects in the first-quarter. This is a reflection of our focus on driving synergies in the business.

Sean Steves and his team are applying these operating gains with analytics to help make more informed decisions for better service accuracy, efficiency and quality. These positive contributions are showing up in the numbers. Collection adjusted EBITDA margins improved more than 200 basis points year-over-year in the first quarter, excluding acquisitions. We’ve already begun deploying these programs into the Mid-Atlantic region with more opportunity ahead of us. We are highly focused on service excellence and new customer integration. As we grow the business and onboard new customers, these efforts will help enable our success in customer retention and satisfaction. In the Resource Solutions part of the business, performance in this segment was strong in the quarter with year-over-year adjusted EBITDA growth and margin improvement.

The growth was widespread. Yes, improvement in the recycling commodity prices was a tailwind. However, we experienced a greater contribution in the quarter from our strategic investments, namely our upgraded Boston MRF is firing on all cylinders with the results that delivered strong incremental adjusted EBITDA in the first-quarter. Modernization of our Willimantic MRF will kick-off later this year, which will be a similar investment in further enhancing the recycling capabilities we provide. On an overall basis, whether it be full upgrade of the processing equipment or selectively replacing certain pieces of equipment, we are constantly looking for ways to improve our operating efficiencies, better end product quality and enhanced recovery across our sustainability infrastructure, while generating solid returns.

In terms of the national account business, customer demand for our professional services remains quite strong and we grew a bit in this line of business for the quarter. The sales strategy is moving to our Mid-Atlantic region where we see opportunity over-time to grow various customer segments. And finally, we really like the growth runway that we see ahead for our entire business. Our core operating strategies are working well and providing us with opportunity to drive further value. We have a number of organic development projects to come. And of course, our M&A pipeline remains robust with exciting opportunities. Now, I’ll turn it over to Brad to go through the results.

Brad Helgeson: Thanks, John. And good morning, everyone. Revenues in the first quarter were $341 million, up $78.4 million or 29.9% year-over-year with $69 million from acquisition rollover and $9.4 million from organic growth or 3.6%. Solid waste revenues were up 36.4% year-over-year with acquisition growth of 33.9%, price up 5.5% and volumes down 2.8%. Revenues in the collection line of business were up 51% year-over-year, with price up 6.2% and volumes down 1.2%. Volume declines were concentrated among residential customers as we work to improve the quality of revenue and margins, while we experienced positive volume growth in both the front-load commercial and roll off lines of business in the quarter. Revenues in the disposal line of business were down 2.6% year-over-year, with landfill pricing up 4.7% and landfill tons down 12.4%.

MSW volumes into the landfills were up 1.7% in the quarter, but C&D volumes remained soft, which we expect to continue over the next several quarters and volumes of soils and sludges were also down. The average price per ton of the landfills was up 13.3% year-over-year, reflecting a mix shift away from lower price streams as we help align on price and prioritize preserving our valuable aerospace. Resource Solutions revenues were up 11% year-over-year, with price up 9.2% across the segment and acquisitions contributing 4.4%. Price growth was driven by an increase of 58% or $41 per ton in our average commodity revenue over Q1 of 2023. Of course, our contract and fee structures work to mute the impact of commodity price swings both – in both up and down markets, so the nearly 60% increase in commodity prices only yielded $3 million of increased revenue in the quarter.

National accounts revenue within Resource Solutions was up 1% year-over-year, with price up 6%, while volume was down 4%, primarily driven by municipal biosolids as we’ve been a bit more selective with that work. Adjusted EBITDA was $71 million in the quarter, up $20.4 million or 40.2% year-over-year, with $15.9 million of the change from acquisitions and $4.5 million from organic growth or 8.8%. Solid waste adjusted EBITDA was $64.8 million in the quarter, up $15.3 million year-over-year with acquisitions, strong pricing and our operating initiatives driving this growth. Resource Solutions adjusted EBITDA was $6.2 million in the quarter, up $5.1 million year-over-year, driven by the benefits of the Boston MRF retrofit, higher recycled commodity prices and acquisitions.

Adjusted EBITDA margins were 20.8% for the quarter, up 150 basis points year-over-year. Once again, our pricing programs fully offset cost inflation in the quarter, which we estimated at approximately 4.5%, excluding fuel. Inflation has been moderating and was down a bit sequentially in the quarter, but of course, remains elevated in historical terms. At a high-level, the year-over-year EBITDA margin bridge included a few key drivers. The positive spread of price over cost inflation, higher recycled commodity prices and improved operating performance, particularly cost efficiencies in the collection business, in total represented approximately 150 basis points of margin improvement. The Boston MRF retrofit contributed approximately $2.5 million or 50 basis points of margin, and acquisitions and related synergies contributed another 50 basis points of margin.

If you recall, our expectation was for acquisitions to weigh slightly on consolidated margins in 2024 as they did in the fourth quarter. The performance has exceeded expectations, including the pace of achieving synergies, particularly at Twin Bridges. These were partially offset by approximately 100 basis points of margin headwind from the lower landfill volumes and higher leachate costs with the wet weather that we experienced in the quarter. Cost of operations in the quarter was up $50.6 million year-over-year, but down nearly 100 basis points as a percentage of revenues as the company continues to outpace inflation on the revenue line and operate more efficiently. $48.1 million of the increase was from acquisitions and $2.5 million from the base business.

So, on a same-store basis, cost of operations was down over 140 basis points as a percentage of revenue year-over-year. General and administrative costs in the quarter were up $8.7 million year-over-year, but down 60 basis points as a percentage of revenue. $5 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 our Mid-Atlantic operations, where we expect to gain further leverage here over-time as we grow. Depreciation and amortization costs were up $20.6 million year-over-year, with $19 million of the increase resulting from the recent acquisition activity. As I explained last quarter, we expect heightened D&A for the first few years after each acquisition, driven in particular by the accelerated amortization of identifiable intangibles.

To put this in perspective, D&A associated with the acquisitions was over 27% of acquired revenues in the quarter as compared to 13% for our base business. Our effective tax-rate was 30% in the quarter and certain non-deductible expenses and discrete items pushed the rate above our statutory rate of approximately 27%. Adjusted net loss was $0.8 million in the quarter, down $6.1 million compared to prior year with the accelerated D&A associated with acquisitions weighing on earnings. GAAP net loss was $4.1 million in the quarter, impacted by D&A and $5 million of near-term expenses related to acquisition due-diligence, closing and integration. Adjusted EPS was a loss of $0.01 in the quarter and GAAP EPS was a loss of $0.07 in the quarter. Net cash provided by operating activities was $7.7 million in the quarter compared to $16.1 million in the first quarter of 2023.

This was driven by higher outflows from net changes in assets and liabilities, including the payment of the accrued FLSA legal settlement of $6.2 million and AP timing, which should resolve itself over the balance of the year, partially offset by lower AR due to a modest improvement in DSO. Adjusted free-cash flow was a loss of $2.4 million in the quarter compared to positive $2.2 million in the first quarter of 2023. As I’m sure you all know, the first quarter is our seasonally weakest quarter, particularly from a cash-flow perspective, and results were further impacted this quarter by $4 million in higher replacement CapEx. As of March 31, we had $1.05 billion of debt, $189.5 million of cash and available liquidity of $462 million. Our consolidated net leverage ratio for purposes of our bank covenants was 2.72 times.

Our average cash interest rate was 5.6%, and we had fixed interest rates on over 77% of our debt. Our liquidity and leverage profile will enable us to be opportunistic in continuing to execute on our growth strategy and robust M&A pipeline. As stated in our press release yesterday, we reaffirmed guidance for 2024 across all of our key financial metrics. While the business is off to a great start this year, it’s premature to consider revising guidance. Our full-year guidance ranges imply significant growth in the last three quarters of the year, particularly from a cash-flow standpoint, but this is consistent with the normal seasonality of our business and our plan for this year. With that, I’ll turn it over to Ned.

Ned Coletta: Thanks, Brad. And good morning, everyone. As discussed last quarter, we completed seven acquisitions in 2023 and acquired approximately $315 million of annualized revenues. Our team has been hard at work through late 2023 and into early 2024 to successfully integrate the newly-acquired businesses into our operations, systems and back-office. And given these successful efforts, we’re tracking well against pro-forma for each acquisition. Our Mid-Atlantic team led by Kyle Larkin is doing a great job executing against our operating and efficiency plans. To date, we have installed onboard computers on roughly 55 trucks and achieved limited route synergies through our early automation and route optimization efforts. We have 17 automated side load trucks ordered for 2024 for this region and expect to drive meaningful operating cost reductions in 2025 when these trucks are delivered and routes are optimized.

We’re tracking well against our plan to recognize $8 million of operating cost synergies over the next three years. Our IT, finance and customer care teams have been working tirelessly since last summer on the Mid-Atlantic Systems integrations and in early April, we successfully completed the final migrations from GFL. A big thank you to the entire Casella team for all your hard work and I’d like to extend a special thank you to the GFL team for their help providing transition services and assisting us with the successful migration off their systems. Our Western Region team led by Michael Stehman has partnered extremely well with Scott Earl and the Twin Bridges team to quickly advance integration efforts to drive operating synergies and ensure top-notch customer service.

To date, we have eliminated 14 trucks through or synergies in close to operating locations. Through these efforts, we are tracking well ahead of our three year synergy plan to eliminate $4 million of costs. Our acquisition pipeline today is approximately $800 million of potential revenues across our entire footprint, including the Mid-Atlantic region. We are positioned very well to have another solid acquisitive 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 as John discussed. The facility continues to operate well above pro-forma and in the first quarter delivered strong incremental growth. Given the success of that facility upgrade, we’re scheduled for the full upgrade of our Willimantic, Connecticut facility in Q4 of 2024.

We expect our first RNG project at the Juniper Ridge landfill to be online in midyear of 2024, with final commissioning expected in the coming weeks. RKF or BP owns and will operate the facility, while Casella generates a royalty stream from the sale of the gas and RINs with zero capital investment by Casella. In addition, we anticipate an additional two to three RNG projects with third-party developers coming online in the second half of 2025. Our team also continues to make excellent progress in the build-out of the rail offload infrastructure at our McKean, Pennsylvania landfill, and we expect the facility to be online in mid-2024 with our first test loads received. In this first phase, we’re bringing online capacity to offload up to 5,000 tonnes per day of containerized MSW soils and sludges.

We expect this operation to ramp very 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 the capacity constrained Northeast. As we continue to grow as an organization, we are focused on maintaining our positive culture and core value system by investing and developing our people. This is especially important as our team grew by over 30% or 1,000 employees in the last year through acquisition and organic growth. And our team did an amazing job effectively onboarding and welcoming our new team members. As demonstrated in the first-quarter, we are set-up very nicely in 2024 to continue executing against our core strategies to drive further shareholder value and profitable growth.

And with that, I’d like to turn it back to the operator for questions. Thank you.

Operator: [Operator Instructions] Our first question comes from the line of Michael Hoffman with Stifel.

Michael Hoffman: Good morning.

John Casella: Hi. Good morning, Michael. I think first and foremost, a big congratulations from the entire team here at Casella for the new position in leadership at NWRA. From our perspective, it’s really exciting to have your leadership and energy to lead the National Association. It’s really exciting. So, first and foremost.

NedColetta: So, congratulations, Michael. Although, we’ll miss you on these calls. Last one.

Michael Hoffman: Well, yes, now you got me choked up. Well, I probably will go with True Bistro, so I’ll have to listen-in a few times anyway. Thank you. Those are awfully kind words. So, the dynamic in your – I’m going to say legacy portfolio because that’s where there’s a real landfill constraint. I mean, Pennsylvania has got tons of landfills. So, the dynamic in that legacy book on the landfill side continues to favor your strategy. But are we finding the market price getting to a level where the third party hauler has more options about whether they stay-in market and use you or management or, you know, the smaller places or move and go by rail? And why I ask is we’re hearing more tons thinking about moving out of the market and there’s this question in this.

What’s the strategic move? I think McKean is part of that, but what is your strategy on how you react to volumes starting to move around because we’ve opened up the access because prices have gotten, not because you, just in general prices have gotten to a place where they can.

NedColetta: Yes, Michael, this is never going to be a perfect linear or timed relationship. It takes many, many years to permit new landfill capacity or even if you’re going to open a new rail transfer station to get permitted and built and operating. So you’re seeing – much like you’ve seen over the last decade, some ebbs and flows, right? Like, there’s an anticipation of few sites are going to close this year into next year. So new rail capacity, new transfer capacity has come online, which in the near-term is kind of sucking some tons from the Northeast and causing a little bit of lower volumes in the market, but nothing is off with the mid-term trend. We still expect sites like Brookhaven on Long Island to close at the end of this year and other sites over the next couple of years.

And it will become capacity constrained again. It’s just not, you know, a perfect linear relationship, as you know. We’ll never chase tons. We’re very disciplined. We know how valuable our airspace is, and we’re very focused on returns. So part of what you saw in the first-quarter and in Q4 of last year is we chose to just allow some tons to leave the system, especially on construction and demo short term while some sites reach the end of life. We’ll ultimately get back tons into our system and be able to create quite a bit of value from that waste over-time.

BradHelgeson: I think that also is a reflection, Michael, of the investment that we made in late ’23 and now in ’24 to bring McKean on where it’s been an option for ten years. And clearly, from a transportation cost perspective, we’ll be as competitive as anyone from a rail serve perspective on a go-forward basis. We’re excited about that opportunity and it’s a great move for us to make sure that we have the disposal capacity long-term to meet the needs of our customers in the Northeast.

Michael Hoffman: Well, and it’s – I don’t think it’s unrealistic to think of McKean as both offensive and defensive and that’s not a negative. It’s going to give you that opportunity to flex. That’s all right. And so as more volume moves. Fleet has been a challenge. We’ve been under ideal replacement rates, but it appears it might be improving at maybe a little bit or better pace. Some of the other companies have reported and their fleet adds have been more in-line with normal replacement. What is your vision on that? And clearly, it would have a positive to repair and maintenance cost?

John Casella: I think there’s still a bit of a struggle in terms of delivery of vehicles. I think we’re certainly getting through it. Our overall five-year fleet plan is in good shape. Sean has done a terrific job. We’ve managed to be very proactive with the Board getting our capital approved years in advance to be able to be in a position to get the slots to be successful in maintaining our fleet at a good age. The other interesting aspect of that is when some of the acquisitions that we’ve done, particularly the Twin Bridges, the average age of that fleet actually brought our overall age down because they were all two or three years old. So, we’ve been able to get through it. Sean has done a fabulous job of managing that process and managing our five year plan so that we’re not out of sync at all, but it’s still a struggle in terms of delivery and getting all of the slots that we’d like from a replacement standpoint.

NedColetta: And John, you take that comment one-step further and you look at some of the early synergy work the team has worked on in the Capital District of New York. We’ve taken 14 routes off the road by combining the companies. And a lot of times you do acquisitions, you have older, less quality trucks and usually we don’t have a lot of great uses other than spares for them. In this case, there are some really high-quality vehicles that we’re putting to work in the fleet as well. So, another really nice benefit from all the hard work the team has done in that market and Sean’s team.

Michael Hoffman: And then last one for me. On labor, it looks like the market is starting to help labor, but how do you feel about where you are in your open positions, whether year-over-year or sequentially and sort of the thought about the labor path and wage inflation? The sense is maybe it’s coming in-line a little bit better, faster because the market is helping.

John Casella: Yes. I think that’s a very fair perspective. The efforts that we’ve made from an HR standpoint and from the CDL School and the maintenance school are really paying dividends. We put 250 folks through the CDL School. And we’ve seen not only our turnover lower on an annual basis by about 20%, we’ve also lowered the total number of openings that we’ve had significantly on a year-over-year basis. So, we’re excited about where we sit. The maintenance school has come up this year. It was – we started that about three, four months ago and are having good results of that. The new facility will be operational before the end of this year in conjunction with the CDL School. So our CDL School and maintenance school will be on the same piece of property, which is really exciting.

So I would – I think that your characterization is correct. It’s getting easier, but not without significant investment and attention on our part. The other thing that we’ve done too, Michael, is we’ve started to talk about the power of hard work from a marketing perspective in terms of really marketing our work as a differential for those people that don’t necessarily want to work in an office. And that has been getting a tremendous amount of play across our entire footprint. We’ve targeted, from a marketing perspective, those areas where we have more significant openings and it’s really starting to pay huge dividends. So, it’s – I think the team has done a really good job of addressing the issue across the board. Not only with the training facilities, but from a marketing perspective, as well as from an HR standpoint.

NedColetta: And it’s not just about money, right, John? Like, really, it’s about culture, it’s about how we treat people. We’re doing a lot with pulse surveys to make sure that we really have an understanding and we don’t get behind any sort of leadership issues or just whatever.

John Casella: And the other piece of the facility, five-year facility plan that we put in place a few years ago too, is paying real dividends because you got to have facilities that people want to come to work at. So, improving the facilities is also another big plus.

Michael Hoffman: Right. Okay. Well, thank you very much and thank you for the kind words in the beginning, and we’ll see you in a week in Las Vegas.

John Casella: Sounds good.

NedColetta: See you then, Michael. Thank you.

Operator: Thanks. Our next question comes from the line of Stephanie Moore with Jefferies. Please go ahead.

Harold Antor: Hi, this is Harold Antor on for Stephanie Moore. So, I guess, a quick question. You know, you talked about, I guess, on the volume front, I know that came in a level weaker than expected. How should we think about that as we look through the rest of the year? And how did the volumes exit the quarter?

BradHelgeson: Yes. Hi, this is Brad. You know, the volume probably came in a little bit softer, but we’re feeling really good about the plan for the year and the guidance we put out at the beginning of the year for volume to be flat to down 1% overall in the solid waste line of business. Unpacking that a little bit, you know, certainly when we talked about it this quarter, you know, C&D volumes in the landfills, that’s sort of a temporary issue and that’s really kind of more than anything else. I think weighing on overall volumes. You know, collection volumes are relatively strong. You know, as I mentioned in my prepared remarks, residential business was down, but frontload and roll-off were actually up. So, it’s a pretty good picture looking forward. We feel good about the guidance that we gave at the beginning of the year.

NedColetta: And we expect volumes to be down modestly in Q2, but then kind of flattish in the second-half of the year.

BradHelgeson: Yes, that’s fair.

Harold Antor: All right. Great. Thanks for the update. And then, I guess, just on pricing. Is pricing sticking? Are you getting any pushback from clients? How should we think about that going forward?

NedColetta: Yes. So, as you may know, we come out with about 75% of our pricing for the year in late December into January. And we’ve had really great stickiness with that pricing. So much of it really has to do with the service you deliver to customers and, you know, differentiated service. And we do an amazing job, especially with some of our resource offerings and just the quality of our service delivery. We measure every single day service delivery in our markets and hold ourselves accountable to high standards. So, as we come out – with pricing programs, if we’re getting the job done and we’re giving high-quality service to our customers, you know, it’s accepted by the market and that’s where we are right now and we’re feeling really good about the trajectory for the rest of the year.

Harold Antor: Thank you.

Operator: [Operator Instructions] Our next question comes from the line of Adam Bubes with Goldman Sachs.

Adam Bubes: Hi, good morning. Thanks for taking my question.

John Casella: Good morning.

Adam Bubes: The margin trajectory started-off really strong, you know, 150 basis points year-over-year of margin expansion. Can you just help us think about how you expect the cadence of margin expansion to look on the path to the 30 basis points to 50 basis points margin expansion outlook? And how do you feel you’re tracking against that range given the strong start of the year?

BradHelgeson: Yes, it’s Brad. I’ll start-off and maybe Ned can jump in with some historical perspective. But you know, certainly, we’re off to a good start, as you mentioned. You know, we feel really good about the full-year implied EBITDA margin range that we talked about at the beginning of the year. You know, I think if you sort of use history, the historical trend of margins sequentially is probably a good starting point. And you know, I think one comment with regard to Q2 is, you know, given how strong we started the year in Q1, you know, probably look for a little bit less sequential margin increase, Q1 to Q2 than, for example, we saw last year. You know, and I think landfill margins – landfill volumes are playing a role there. But you know, so as we, you know, look at across the year, you know, it made quarter-to-quarter look a little bit different, but you know, we feel good about where, you know, where we set our guidance.

NedColetta: Yes. And I think a bit of this is a little bit conservatism as well. We’re just a few months into the year. The trends were really solid in the first-quarter. But there are also some things that led to that 150 basis point margin increase like the Boston MRF year-over-year comp. Last year, we were spending a lot of money to move materials around. This year, we didn’t have to move materials around, plus we had the benefit of the new system. So we’ll pick that up again in Q2, but that doesn’t recur in Q3 and Q4. So, I think as we look at the year, yes, we got off amazingly well with 150 basis points of margin enhancement. We kept guidance in that, you know, 40 basis point to 50 basis point improvement range just as we get more visibility on the year.

Adam Bubes: Got it. And you know, price-cost continues to be a nice tailwind for you. As we think about margin expansion runway going-forward, beyond price-cost, how significant is the opportunity from the productivity gains, the routing software, back office efficiency, fleet automation, you know, what should we think about the annual contribution from those initiatives?

NedColetta: Yes. Within our core business, it’s regenerative. And it’s – we still have quite a bit of work that we can do over the next few years on the fleet side from automation, conversions to front loads, route optimization. Sean has a team that’s continually working with our local teams to find opportunities. But where it gets really exciting is around acquisitions, either tuck-ins or new areas. And as we had laid out when we first did the acquisition of the Mid-Atlantic region, you know, there’s almost half of that fleet are rear load trucks. Now, it’s going to take us years to address because some of them are in specific municipal contracts and some of them may never get converted. But we’ve got a great track record of moving in and moving to automated fleets, which drives higher productivity, better safety profile and excellent returns.

And as I said earlier, we have 17 automated trucks on order this year that could possibly take off the road, you know, 25 to 30 or more rear load trucks as we get into specifics. So, you know, this is an opportunity that’s going to continue to add millions of dollars of operating cost-savings each year. On the back-office side, we brought in a new CIO last August, Keith Landau, who has 25 years of experience, most recently was a CTO at Deloitte and previous to that was in the waste industry. And Keith has hit the ground running. We’re doing an amazing job really rethinking some of our systems approach and back office and, you know, more to comment on this story over-time. We see there being a great opportunity to continue to shave G&A costs.

You know, over the last couple of years, Jason, as a percentage of revenues, we’ve come down maybe 80 basis points.

BradHelgeson: Over 100 basis points.

NedColetta: 100 basis-points over the last three years. So, it is coming out of the business, but there’s more room to go and we’ve got great opportunity to do so.

BradHelgeson: I mean, I’ll real quickly, add a data point to kind of underscore, you know, what Ned was talking about with the acquisitions. So, just a snapshot on the first quarter. You know, the acquisitions in the quarter, kind of digging into the cost of operations line, we’re 21% of revenue on direct labor. The base business was 14%. So, you know, that’s not exactly apples-to-apples as far as we acquired primarily collection operations and, you know, we have more of a diverse business mix in the base business. But really, that I think highlights the significance of the opportunity over time.

Adam Bubes: Got it. Really appreciate the color there. And then, one more quick one from me. You know, it sounds like guidance still embeds volumes of flat-to-down 1%. Do volumes have to improve ahead of normal seasonality for you to reach those numbers or is that just the comps getting easier and sticking with this current, you know, run-rate from here?

John Casella: I think the comps will get a bit easier in terms of volume through the year, you know. And obviously, just the way the math works, you know, we were down 2.8% solid waste and guiding to zero to down 1%. So, you know, that implies we’re expecting some recovery in that, you know. And we feel-good about that.

Adam Bubes: Got it. Thanks so much.

Operator: Thank you. Our next question comes from the line of Michael Feniger with Bank of America. Michael, your line is open.

John Casella: Good morning, Michael.

Michael Feniger: Am I up? Yes, thank you so much. I just was curious, Ned, on the M&A pipeline being active and robust. Is this more collection assets? Is there some integrated assets also kind of available? Just curious if you kind of get a sense of that pipeline and is that something you guys are actively pursuing? Or is this year more of an integration digestion given kind of the transformational year you guys had in ’23?

John Casella: Yes. Great question, Michael. Thank you. A much of our focus right now is on driving density and adjacencies. You know, really not looking at large new platforms in any serious way at this moment in time. We’re really looking at density, both in the legacy markets and now down into the Mid-Atlantic with strong tuck-ins, strong adjacent acquisitions. That’s our focus.

BradHelgeson: And clearly, I think Michael said it earlier, Michael, the – the Mid-Atlantic market has a tremendous amount of disposal capacity. So, the opportunities that we have there would be with transfer station and recycling facilities, you know, fully-integrated in terms of collection, transfer and recycling. So, nice opportunities for us to continue to build the collection, recycling and transfer portion of the business. So, right down the middle of the fairway. So, great opportunities from a growth standpoint there.

NedColetta: And we’re generating, you know, the highest returns in our business right now, in our collection line of business, followed by recycling. So, you know, as we continue to invest in automation and route synergies, we just are getting great, great returns in those areas. Our playbook, our team, our muscle memory is very, very good. So, as we get into small tuck-ins and we integrate them into our business, it creates a lot of value quickly.

Michael Feniger: And Ned, I know you guys talked a lot about the onboarding and the route optimization. Just to kind of put a finer point on it, and I realize you’re going to be deploying that with your acquisitions. I mean, do you feel like you’re still in, like, early innings of this process? Is this more, you know, third, fourth or what you’re seeing now makes it feel like you’re kind of in the later innings of this process?

BradHelgeson: I think that – I would say – I would characterize it as being in the mid innings and probably a great deal of that is related to the M&A activity. So, you know, as we continue to grow from an M&A standpoint, we continue to provide opportunity for Sean and his team to, you know, bring efficiency, productivity to the businesses that we’re buying, Michael. So, you know, I think a little bit further ahead on the core business from, you know, from an efficiency standpoint, but still a little bit left to be done there as well.

Michael Feniger: Perfect. And just last one to squeeze in. I’d love to get, you know, Casella’s view on, you know, last Friday, you know, what we’re seeing out of the preliminary proposals around PFAS. Obviously, landfill and your disposal assets has been a great part of your story. Just what – I know it’s still early, and some of this isn’t finalized, I’d love to get a sense from you all how you’re kind of interpreting it and what that kind of means going-forward? What you’re kind of looking for going-forward? What we should be paying attention to? Thanks, everyone.

John Casella: Yes. It’s really interesting. This has been years in the making and we actually welcome federal regulation around this. It was getting kind of confusing state-by-state, district by district. So, to have some real clarity around with Circla and some of the recent rulings on groundwater standpoint as well and drinking water are really, I think, positives for the industry. And finally, the EPA has taken a stance that the manufacturers of these chemicals are responsible for them. And the users and the manufacturing products are responsible, not the passive receivers like landfills or wastewater treatment facilities or even the passive use in biosolid application for fertilizer. So, you know, from our vantage point, great first step. I’m sure there’s going to be more to this story, but it’s exactly what we’ve been saying for years.

BradHelgeson: I think the other piece of that too, Michael, with regard to Casella is, you know, not only, you know, do we have an RO plant in McKean that can take-out the PFAS, we also are doing foam fractionation pilot program with the State of Vermont in our Waste USA facility in Vermont, where we’ve seen significant positive results from that pilot program in terms of, you know, 98% removal on four or five components from a PFAS standpoint and about 65% on the fifth one. So, early stages of the pilot program. But again, we’re out in front from an innovation standpoint, trying to understand what kind of technology will take the PFAS out of our leachate on a go-forward basis. Two efforts in terms of technology and understanding of what it’s going to take to take the PFAS out of our leachate. So, again, out in front from an innovation standpoint.

NedColetta: That’s a great point. So the liability issue was really spoken to you by the recent Circla. But on the innovation side, as John said, the reality of on-the-ground, we want to take that PFAS out of leachate and our team has done an excellent job on the technology side, looking for cost efficient ways to do so. Okay. Thanks, Mike.

Operator: Our next question comes from the line of Tony Bancroft with GAMCO Investors.

John Casella: Good morning, Tony.

NedColetta: Hi, Tony.

Tony Bancroft: Yes, I’m sorry, I think I got cut-off. Good morning. Thank you for the call. Great job. You know, John and team, you guys have obviously done a fabulous job over the years. You know, you guys have did the recent acquisition for the Mid-Atlantic. I think you’re, you probably size-wise, there’s probably some capability to do something, again, some more transformational, particularly in the region you’re in. Is there something out there that you’re seeing or maybe looking to get into, another kind of business that’s somewhat aligned with, you know, the traditional business? Maybe just any just general thoughts on maybe longer-term view on things? Thank you.

BradHelgeson: Sure. I think that, you know, our view is that, you know, really right down the middle of the fairway. Our biggest opportunity is to add value in the existing business that we’re in. The $800 million that Ned talked about from an M&A standpoint is right down the middle of the fairway. We don’t see stepping out of our, you know, comfort zone and our capabilities as something that’s going to create significant shareholder value. Our execution of our strategy in terms of the M&A directly is, you know, the – clearly the way that we’re going to create the most shareholder value on a go forward basis. So, you’re not going to see us, you know, deviate from that strategy. There’s really no basis for it. We can create the most value in the existing business model.

Tony Bancroft: Great answer. Congratulations on all your successes. You’ve done wonderful. Thanks.

NedColetta: Thank you, Tony.

BradHelgeson: Thank you.

Operator: [Operator Instructions] I’m showing no further questions in queue at this time. I’d like to turn the call back to John Casella for closing remarks.

John Casella: Thank you, Operator. And thanks, everyone, for joining us this morning. We hope you have a great weekend. Look forward to discussing our second quarter 2024 earnings in July. Thanks, everybody. Have a great day.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.