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Casella Waste Systems Announces Q2 2019 Earnings Results
The company reported revenues of $187.5 million for the quarter and continued to execute well against its key strategies.
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Rutland, Vt.-based Casella Waste Systems Inc. announced its Q2 2019 earnings results, reporting revenues of $187.5 million for the quarter, up $21.8 million, or 13.2 percent, from the same period in 2018.
“We are pleased with our results in the second quarter, as we continued to execute well against our key strategies as part of our 2021 plan,” said John W. Casella, chairman and CEO of Casella Waste Systems, Inc., in a statement. “We remain focused on driving normalized free cash flow growth by increasing landfill returns, improving collection profitability, creating incremental value through resource solutions, using technology to drive profitable growth and efficiencies and prudently allocating capital for strategic growth.”
“During the second quarter, we continued to focus resources on successfully integrating and recognizing synergies from the acquisitions we have completed over the last year,” added Casella. “We have acquired roughly $18.5 million of annualized revenues year-to-date, and we expect to acquire another $30 million of annualized revenues in the third quarter with assets in the Albany, N.Y., and Cheshire, Mass., markets. Our acquisition pipeline remains robust, and we believe that there is continued opportunity to drive cash flow growth across our footprint through strategic growth.”
Additionally, the company is focusing on growing and supporting its workforce, aiming to make Casella a top workplace in the industry.
“We’re focused on ensuring that Casella is a choice employer in our market by actively engaging with our employees, investing in developing programs and laying out clear career paths for our key roles,” said Casella on a call with investors. “We recently introduced programs that are geared toward attracting and retaining maintenance technicians, drivers and a variety of other operational roles. While we’re in our early innings, we’re starting to see the benefits through increased applicant flow, employees’ participation in the programs and over time, we’re also hopeful to realize reduced turnover as a result of these programs, which will also lower safety-related incidents and improve productivity … With the help of our HR [human resources] team, we’re also in the process of creating robust apprentice onboarding and training platforms. Our goal is to develop a training program to help us train CDL [commercial driver’s license] drivers and apprentice-level technicians who are highly committed to the company and dedicated to superior service and safety.”
Here are some other highlights from the firm’s results:
Revenues were $187.5 million, up $21.8 million, or 13.2 percent, from the same period in 2018. This growth was mainly driven by robust collection and disposal pricing; the rollover impact from acquisitions; higher recycling, organics and customer solutions volumes; and higher recycling processing fees that were partially offset by lower solid waste volumes, the closure of the Southbridge Landfill in Massachusetts and lower recycling commodity prices.
The company has acquired approximately $18.5 million of annualized revenues year-to-date and has signed an asset purchase agreement for the acquisition of assets generating approximately $30 million of annualized revenues, which is expected to be completed in the third quarter.
Adjusted EBITDA was $40.4 million for the quarter, up $3.3 million from the same period in 2018. This growth was mainly driven by improved performance in the company's collection, recycling, disposal and customer solutions lines of business, partially offset by a decline in performance in the landfill gas-to-energy and organics lines of business.
Net income was $11.9 million for the quarter, up $10.2 million, or 599.2 percent, from the same period in 2018.
Net cash provided by operating activities was $38.3 million year-to-date, as compared to $48.1 million for the same period in 2018.
Normalized free cash flow was $10 million year-to-date, as compared to $16.1 million for the same period in 2018.
Overall solid waste pricing for the quarter was up 5.1 percent, driven by strong collection pricing, up 5.5 percent, and robust landfill pricing, up 6.0 percent, from the same period in 2018. “Our solid waste pricing programs are running ahead of budget as we advanced 5.5 percent pricing in the collection line of business and 6 percent pricing at the landfills, for overall solid waste price of 5.1 percent during the second quarter,” said Casella in a statement. “Solid waste volumes were up 0.4 percent in the quarter, driven by growth in landfill volumes as we began to selectively ramp up landfill volumes to take advantage of higher-priced materials through the summer months. We expect positive disposal volumes through the remainder of the year as we bring new expansion capacity on at one of our New York landfills. Collection volumes were down slightly in the quarter as we continued to focus on shedding unprofitable work and advancing pricing in excess of heightened inflation.”
Excluding the Southbridge Landfill closure, landfill tons were up 6.3 percent percent year-over-year.
Recycling revenues were up $900,000 year-over-year, with $1.3 million lower commodity pricing, but this was offset by $1.6 million of higher third-party tipping fees and $600,000 of higher volumes.
Organics revenues were up $300,000 year-over-year, and customer solutions revenues were up $3.3 million year-over-year due to several new multisite retail customers and strong growth in the high margin industrial services work.
Commodity prices were down 13.3 percent year-over-year, mainly on lower plastics pricing, and down 23.2 percent sequentially from Q1 to Q2, mainly due to further declines in OCC pricing, with cardboard pricing down 44 percent from December to July. “We continued to make great progress improving recycling contract structures and off-taking commodity risk during the second quarter,” said Casella in a statement. “These efforts resulted in a year-over-year improvement in our recycling operating income despite commodity prices being down roughly 13 percent during the same period. Our SRA fee, revenue share contracts and contamination fees combined with our efforts to produce higher-quality materials and manage processing costs have allowed us to improve recycling financial performance in a challenging commodity pricing environment.”
Operating income was $15.5 million for the quarter, up $0.4 million from the same period in 2018. Adjusted operating income was $16.9 million for the quarter, up $1.3 million from the same period in 2018.
“On July 1, we entered into a new recycling processing contract with the city of Boston that reset pricing to appropriate levels to cover current low commodity prices while passing commodity risks back to the city,” said Casella during the call with investors. “This contract was a significant headwind for us in the recent past, so this was a nice win for the company that allows us to garner an appropriate return on our recycling assets.”
“Given the strength in our solid waste, recycling and customer solutions operations combined with the expected contribution from the acquisitions we have completed year-to-date, we are raising and reaffirming our guidance ranges for the fiscal 2019,” said Casella in a statement. “Our fiscal 2019 guidance does not take into account any financial contributions for acquisitions not yet completed, including the acquisition of assets generating roughly $30 million of annualized revenues that is expected to be completed in the third quarter.”
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