Casella Lays Out 2024 Strategy, Touts Northeast Disposal Projects And Boston MRF Upgrade

After years of M&A, the Vermont-based company is on track to approach $1 billion in revenue for 2022. Executives said they have wide flexibility to adjust prices amid inflation.

Casella Waste Systems completed what it called "arguably the best year in the company’s history," with adjusted free cash flow growing by nearly 38% and results exceeding all aspects of a multiyear plan established in 2017.

Driving this, in part, was ongoing M&A activity for the Vermont-based company, which purchased 10 companies worth $88 million in annualized revenue last year at a cost of $170.65 million (net of cash acquired). So far this year it has acquired an additional five companies worth $4 million in revenue, for a collective revenue contribution of $55 million expected from the acquisitions in 2021 and to date.

During a Friday earnings call, CEO John Casella said elements of a new 2024 strategy include growing revenue by at least $30 million per year through acquisition or development opportunities (while keeping leverage low) and growing adjusted free cash flow by 10% to 15% per year. Other aspects of the new plan include increasing landfill returns, improving collection profitability, creating more value from resource solutions and strengthening "foundational pillars" such as the company's workforce, technology and facilities.

Casella's annual earnings call served as an opportunity to outline its medium-term growth plans after coming out of a multiyear turnaround strategy. Executives said they expect further profitability in the years to come, citing efforts to build out the lower-margin transfer station business. They said this positions them to capture more high-margin landfill tons in the future.

"Everybody knows that disposal capacity is very limited and things are shifting. States like Massachusetts are looking to export all their waste. We're now down in Connecticut, they're struggling with their disposal plan," said Johnson, in reference to entering the latter market via last year's Willimantic Waste Paper acquisition. He added that these transfer station investments help to "strategically place ourselves in the market where the disposal crisis is."

The company's McKean site is seen as a key destination to take Northeast waste. Coletta said expanding the company's Hyland site was also especially strategic because another large landfill in the Buffalo market is set to close in the coming years. In anticipation of that, two of Casella's recent transfer station acquisitions have been in that market.

Amid multiple analyst questions about why landfill pricing couldn't be higher, given the scarcity of disposal assets, executives said average landfill pricing was up more than 6% in the fourth quarter and continues to rise this year, with further contract resets coming up.

“This is a long-term opportunity, and it’s not just a one-year opportunity, so this pricing is going to come for years into the future," said Coletta.

Get the free daily newsletter read by industry experts