Casella Waste Systems Q3 Revenue Up 22 Percent, Full-Year Guidance Revised

Casella Waste Systems (NASDAQ: CWST) demonstrated resiliency against inflationary pressures, reporting a 22 percent year-over-year (YOY) revenue increase in Q3 2022.

Third-quarter revenue reached 295.3 million for the quarter, up $53.3 million from 2021. The company's operating and pricing adjustments counteracted inflation and attributed to adjusted EBITDA growth of 22.5 percent.

 "As expected, we expanded adjusted EBITDA margins in the third quarter despite significant declines in commodity prices, acquisition headwinds, and the negative impact from the accrual of a special bonus we will pay in December to our hourly employees in recognition of their excellent work,"  said John W. Casella, company chairman and CEO.

New customer growth strategies combined with higher price and full recovery have contributed to about half of Casella's revenue growth to date, with the other 50 percent driven by acquisitions. The 13 closed acquisitions to date have granted $48 million of annualized revenue, outpacing company projections, Casella said.

"We are on track to achieve our multi-year goal of 10 to 15 percent adjusted free cash flow growth per year, which highlights not only our solid operating performance, but also our capital discipline and continued execution against our growth strategy that rebalance between organic growth within our core business and inorganic growth through acquisitions," he noted.

Along with the impact of acquisitions both prior and new, revenue growth also has comprised of: positive collection and disposal pricing; higher solid waste fuel cost recovery fees; and higher pricing, recycling processing fees and volume within Casella's Resource Solutions operating segment. The company added that revenue has been partially offset by lower recycling commodity prices.

"We continue to invest in key operating initiatives that are improving our service efficiency, reducing costs, and improving our team's safety," Casella commented. "Further, a 6.6% increase in solid waste price demonstrates the flexibility we have in our programs to offset inflation."

Rising fuel costs are impacting fleets across every industry. Casella noted that the fuel cost recovery program has acted to offset higher fuel costs throughout Q3 and will recoup the impact in 2022.

As a result of its robust Q3 earnings cycle, the company revised its full-year fiscal guidance.

"Given our strong operating execution year-to-date, the expected positive contribution of acquisitions completed this year and greater visibility through year-end, we are updating certain fiscal year 2022 guidance ranges for the third time this year,” Casella said. “These guidance ranges assume that the economy does not significantly change through the remainder of the year, inflation remains at current historically high levels, and recycling commodity prices decline another 20% sequentially. We expect our pricing, fuel cost recovery fees, and operating efficiency programs will allow us to outpace higher costs and drive margin expansion in the fourth quarter which sets us up well for 2023.”

2022 Full-Year Guidance (revised):

Revenue: Between $1.065 billion and $1.080 billion 
Net income: Between $53 million and $56 million
Adjusted EBITDA: Between $245 million and $248 million
Net cash provided by operating activities: Between $210 million and $214 million
Adjusted Free Cash Flow: between $106 million and $110 million.

Q3 2022 Highlights:

Revenue: 295.3 million
Net income: $22.7 million, up 42.9 percent from Q3 2021
Adjusted EBITDA: $75 million, up 22.5 percent YOY
Net cash provided by operating activities: $152.4 million, up 13.7 percent from the previous year's quarter
Adjusted Free Cash Flow: $81.7 million, up 4.3 percent from the same period in 2021.