CWST - NASDAQ

And Hello. And welcome to Casella Waste Systems, Inc. Q4 2024 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the questions on the session, you will need to press star one one on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I would now like to turn the conference over to Jason Meade. You may begin.

Good morning. Today, we will be discussing our fourth quarter and full year 2024 results, which were released yesterday afternoon. This morning, I am joined by John Casella, Chairman and Chief Executive Officer, Ned Coletta, our President, Brad Helgeson, Executive Vice President and Chief Financial Officer, and Sean Steves, 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 be aware that various remarks we 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 recently filed Form 10-Q 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 on 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 subsequent date to today, February 13, 2025. Also, during this call, we will be referring to non-GAAP financial measures. These non-GAAP financial 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 John Casella to begin today's discussion.

Thanks, Jason. Good morning, everyone, and welcome to our fourth quarter 2024 conference call. This is another great year for the company. We really performed well against our key strategies, maintained focus on our core competencies, and continued to grow the business in a meaningful manner. Very proud of all that we have accomplished this year, and I truly appreciate the efforts around the organization that have supported our execution and growth thus far. We have tremendous opportunities again in 2025 to drive value, and I am very much looking forward to the year ahead. We closed eight acquisitions in 2024 with over $200 million in annualized revenue. This and we are off to a fast start in 2025 with three acquisitions closing to date, with approximately $40 million in annualized revenues. Consistent with the last few years, we are working on several deals and we are poised to put our balance sheet to work. It is amazing to consider our growth over the last two years. Acquired over $500 million in revenues and put over a billion of capital to work. However, I find it equally remarkable that we are now a company of more than 5,000 employees with operations in ten states and have welcomed hundreds of thousands of new customers to Casella over the last couple of years. In particular, our new markets enable us to further build our brand through great service, community engagement, to invest in the in to support new business opportunities, and to bolt on with acquisitions that have the right strategic fit. Opportunity across the entire footprint with many, many, many opportunities from a tuck-in standpoint. In further highlighting 2024, we grew revenues, adjusted EBITDA, and adjusted free cash flow by all over 20%. That marks three years in a row of adjusted EBITDA growth of over 20%. We also maintain a low leverage profile. Clearly, this speaks to our disciplined growth strategy, focus on integration, and the strength of our pricing and operating programs. Our landfills provide us with an excellent end market position. Although C&D and special volumes were down in 2024 due to various external dynamics, we are optimistic that we will experience modest volume growth in 2025 as these pressures ease. Further, our McKean rail landfill is on and provides us with long-term opportunity to meet the disposal needs of our customers as well as potentially partner with third parties that are seeking capacity. As we have grown the business, we have also increased our ability to internal tonnages. This has been a focus in 2024, and will continue to be so in 2025. Shifting to our collection business, had another strong year across our collection operations with year-over-year adjusted EBITDA margin expansion in the base business of over 100 basis points. Sean and his team continue to look for those opportunities from a synergy standpoint, from a technology perspective in terms of driving our operating cost down. This accomplishment is a reflection of our continued investment in automation, further rollout of in-cab technology and routing programs, as well as our flexible pricing. Most of our acquisition growth over the last several years has been in the collection line of business. In fact, now over 60% of our consolidated revenues are in collection. As expected, the acquired businesses usually have initial margins at lower levels as compared to our typical collection business, which presents the ability to improve operations over time as we integrate and take the business to our operating standards. Sean and the team are focused on driving further value here in 2025.

In resource solutions, had one of the best years in the history across our recycling processing operations in national accounts business. Invested in and upgraded our Boston recycling facility in 2023, the operation performed very, very well in 2024. In fact, better than expected and was a contributor to our success in the year. In early 2025, we wrapped up a similar upgrade in Willimantic, Connecticut. The operation was offline for part of 2024, but is now up and running. As planned, it will take a few weeks to calibrate the new system, but we are excited to have that project complete. In our national accounts business, we grew volumes by over 4% in 2024. Our sales organization won new municipal, commercial, industrial, and institutional accounts while also growing our service with existing accounts. Given the expertise of our team, our expanding operating footprint, and our sales pipeline, we are positioned well to continue to grow this resource management offering. This marks the fiftieth year of the company, and as I reflect on where we started, from the simple beginnings Doug started with that one truck, and the construction of our first recycling facility in 1977, I feel absolutely blessed to have been a part of this so incredibly proud of what we have been able to achieve collectively. We are the product of hard work and perseverance of so many people over the years. As we look ahead, this is the best team that I have worked with. It is exceptional. We have a lot of momentum going into 2025. And I look forward to our continued execution and growth. Now, I will pass it on to Brad to go through some of the financial details.

Thanks, John, and good morning, everyone. Revenues in the fourth quarter were $427.5 million, up $67.9 million or 18.9% year-over-year, with $50.1 million from acquisitions, including rollover, and $17.8 million from organic growth, or 4.9%. Solid waste revenues were up 21.4% year-over-year, with acquisition growth of 17.8%, price up 5.4%, and volumes down 1.8%. Within solid waste, price in the collection line of business was up 6.2% and volume down 0.7%. Price was up 7.3% in the front-load commercial business, up 6.1% in residential, and up 5% in roll-off. Volume declines were concentrated in our mid-Atlantic region, those that recently acquired businesses, with a higher rate of churn as we work to improve the quality of revenue and margins. Collection volume was flat to positive elsewhere in our footprint, across all lines of business. Revenues in the disposal line of business were up 1.4% year-over-year, with transfer and transportation revenue up 5.8%, and landfill revenue down 5%. Landfill price growth of 3.2% was offset by lower volume, of 8.2% in revenue terms. MSW tons into the landfills were up 4.8% in the quarter, but we saw continued weakness in special waste, C&D, and other tons with those streams down 11.8% year-over-year. The average price per ton at the landfill was up 5.1% year-over-year, reflecting a mix shift away from lower-priced streams as we help align on price in the face of volume pressure and prioritize preserving our valuable airspace. Resource solutions revenues were up 9.7% year-over-year, with recycling and other processing revenue up 8.1% and national accounts up 10.7%. Within processing operations, price was up 10.7% driven by an increase of 13% in average commodity revenue over Q4 last year. Commodity prices overall remain firm so far this year, with recent softness in the fiber market largely offsetting strength in plastics and aluminum. Processing volume and revenue terms was down 2.5% driven by the municipal biosolids business as we have been more price sensitive in renewing municipal contracts in light of processing capacity constraints. I would like to note that the Willimantic recycling facility came back online as scheduled in January, and following a shakeout period, we expect the facility to roughly double processing speed initially, allowing us to reduce operating costs by going from two shifts to one. Adjusted EBITDA was $95 million in the quarter, up $12.8 million or 15.6% year-over-year, $11.5 million from acquisitions, including rollover, and $1.3 million from organic growth. Adjusted EBITDA margins were 22.2% in the quarter, down 60 basis points year-over-year. Bridging the year-over-year change in adjusted EBITDA margin in the quarter, higher annual and long-term incentive compensation expense, driven by the strong adjusted free cash flow generation in 2024, impacted EBITDA in the quarter by approximately $5.5 million, representing 125 basis points of margin headwind as the adjustment to the full-year accrual was concentrated in the fourth quarter, magnifying the impact. Margins across the rest of the base business were up 55 basis points, and acquisitions represented a further tailwind of 10 basis points in the quarter. Cost of operations were $285.6 million in the quarter, up $46.5 million year-over-year, $35.3 million of the increase from acquisitions, and $11.2 million in the base business. Cost of operations in the base business were down approximately 30 basis points as a percentage of revenue in the quarter, reflecting continued operating leverage in the collection business and lower landfill costs such as leachate. General and administrative costs were $52.2 million in the quarter, up $9.1 million year-over-year. For fiscal year 2024, G&A costs were down 10 basis points as a percentage of revenue. In gross dollars, this expense line reflects increased spend to support our growth and invest in the technology that will enable us to scale effectively. But in percentage terms, we expect to continue to gain leverage here over time as we grow. Depreciation and amortization costs were up $11.7 million year-over-year, with all of that increase or $12.4 million resulting from the recent acquisition, including the amortization of acquired intangibles.

As a reference, DNA associated with acquisitions was approximately 25% of acquired revenues in the quarter. This compared to 14% in our base business. GAAP net income was $4.9 million in the quarter, up $6.7 million year-over-year, with the charge for the landfill, captain ear failure, have you Ontario County landfill in Q4 last year, compared to a partial recovery related to that event in Q4 this year. This recovery in the P&L resulted from a settlement payment from one of the contractors involved in capping, as well as an engineering assessment that more of the cap can be retained than originally estimated. I would like to take a moment to discuss the change in the calculation of our non-GAAP metrics, adjusted net income, adjusted EPS, and adjusted operating income. Beginning with our presentation of 2024 results and going forward, we will further adjust these metrics to exclude the amortization of acquired intangibles. As we have discussed in the past, this amortization expense significantly weighs on the income statement in the early years of an acquisition, with an amortization schedule, the expenses approximately 50% of the purchase price allocated to intangibles such as customer lists and non-competes in the first three years. We believe this change will present a much clearer picture of the underlying trends in our business performance as we execute on our acquisition growth strategies, which we believe is creating significant long-term value for our shareholders. On this basis, adjusted net income was $25.8 million in the quarter, up $8.7 million compared to the prior year, with acquisitions and organic growth driving this increase. Adjusted EPS was $0.41 in the quarter and $1.35 for fiscal year 2024. Our book income tax rate was 35.7% for the year, with nondeductible expenses and discrete items pushing the rate above our statutory rate. The reason this effective rate is higher than previous years is that lower GAAP net income in 2024, driven by acquisition-related expenses and amortization of intangibles, magnifies the impact of permanent differences and discrete items on the rate. We paid $6.8 million in cash taxes in 2024, which included overpayments that will be applied to 2025, and we expect to pay approximately $5 million again this year. We entered 2025 with an estimated $83 million in NOLs, which we expect will shield the vast majority of our federal tax liability in 2025. Assuming all else equal from a tax legislation and future acquisitions, we will begin to pay federal cap tax more meaningfully in 2026, but we expect to have more clarity on this outlook as the year progresses. Net cash provided by operating activities was $281.4 million in 2024, up $48.3 million year-over-year, mirroring our strong EBITDA growth for the year. Adjusted free cash flow was $158.3 million, up $30 million year-over-year or 23%. This came in above the high end of our guidance range, boosted by strong AR collections to finish the year with DSO of 36 days at December 31, down from 41 days the year prior. As I mentioned earlier this year, we struggled with collections at the operation acquired from GFL in our mid-Atlantic region, a result of the transition services period for the carve-out of that business. However, we have been able to make good progress on turning this around over the past several months, bringing DSO in the mid-Atlantic region down from 56 days at June 30 to 42 days at year-end. By comparison, the rest of Casella was at 35 days at December 31. So we still have a lot of work to do here, but it is certainly heading in the right direction. As of December 31, we had $1.1 billion of debt and $383 million of cash in our consolidated net leverage ratio for purposes of our bank covenants was 2.54 times. As of today, after acquisitions completed thus far in 2025, we maintained approximately $900 million of potential financing capacity between excess cash and undrawn revolver. As laid out in our press release yesterday, we announced financial guidance for 2025.

This guidance included revenue in the range of $1.775 to $1.805 billion or 15% growth at the midpoint. Adjusted EBITDA in the range of $410 million to $425 million or 16% growth at the midpoint, and adjusted free cash flow in the range of $165 million to $180 million. Our guidance ranges reflect acquisitions completed to date in 2025 and assume a stable economic environment for the balance of the year. While we expect to continue to be acquisitive this year, our guidance does not reflect any further acquisition activity nor does it assume any material changes in the inflation outlook or tariff policy. On the top line, our guidance includes $170 million from acquisitions or approximately 11% growth, which includes both rollover and the impact of approximately $40 million in annualized revenue acquired so far in Q1, and approximately 4% organic growth at the midpoint. In the solid waste business, we are planning pricing of approximately 5%, which we aim to cover and stay ahead of inflation. A reminder, we retain pricing flexibility across approximately two-thirds of our collection revenue, so we are well-positioned to respond to changing conditions if necessary as the year progresses.

Solid waste volumes are expected to be flat to down 1%, with continued churn in our collection book of business reflected in that estimate, particularly with our new acquisitions in the mid-Atlantic region. Bridging 2024 adjusted EBITDA to our guidance, $30 million to $35 million of some acquisitions, and approximately $25 million or 7% is base business organic growth at the midpoint. Our adjusted EBITDA guidance implies a margin range of approximately flat to 40 basis points of margin improvement in 2025, with underlying base business margin expansion of approximately 50 basis points at the midpoint of guidance. This improvement is expected to be driven by strong pricing, ongoing operating improvements in our collection business, the benefit of the Willimantic recycling facility coming back online following the completion of that retrofit, and improved landfill volumes year-over-year, including the benefit of increased internalization of MSW tons from our existing operations in our Western region and the Royal acquisition. Partially offset by a headwind of approximately 10 basis points related to increased investment in technology. This base business margin expansion is expected to be partially offset by acquisitions contributing at a lower initial adjusted EBITDA margin than our consolidated margin, representing a headwind of approximately 30 to 40 basis points. We expect adjusted free cash flow to grow at approximately 9% at the midpoint, taking into account strong working capital performance to finish 2024, but our goal remains 10 to 15% annually, and we will work hard as a team to achieve it. Our guidance reflects investing significantly in the business, with capital expenditures of approximately $215 million, which includes approximately $45 million of upfront spend in connection with recent acquisitions. With that, we will turn it over to Ned.

Thanks, Brad, and good morning, everyone. As John mentioned, I am also extremely proud of our team and their continued advance of our key strategies throughout 2024. We made excellent progress with our growth initiatives, including organic sales growth, acquisitions, and long-term development projects. Our operating teams executed well, continuing to offset persistent inflation with our core programs and investments. Just as important, we continue to take the time to invest in our people to maintain and grow our winning culture and to ensure new team members understand and help to support our core values. On the acquisition growth front, our team was really busy in the fourth quarter and into early 2025, closing new transactions, integrating deals that were completed over the last year. As Sean mentioned, during 2024, we acquired eight businesses with over $200 million of annualized revenues, but this included three acquisitions with $100 million of annualized revenues in the fourth quarter alone. 2025 is off to a solid start, with three acquisitions completed year-to-date with approximately $40 million of annualized revenue. We remain selective with our acquisitions, focusing on opportunities that have the right strategic fit, can help advance our efforts to densify certain markets, drive additional vertical integration, or establish new adjacent market areas. Our team continues to do an excellent job successfully onboarding acquisitions, with an early focus on welcoming new team members, establishing our core values, and beginning to integrate the back office, sales, and operations. It was another successful year for our sales teams across the organization, where we continue to focus efforts on winning premier customers in important segments, where we can implement our resource management solutions, drive circularity, and create win-win long-term relationships. A few examples of this happened across the municipal, higher education, industrial, and multisite retail segments, where we contracted roughly $150 million of annualized revenues in 2024, with new revenues representing roughly 25% and renewals 75%. This is a huge accomplishment for the team across the entire business during the year. From an operating perspective, we continue to execute very well against our core programs, including automated truck conversions, route optimizations, and even extra revenues generated through our onboarding. During 2024, Sean and his team converted our automated 17 trucks, which eliminated 22 rear-load trucks from the road, which drove quite a bit of labor savings. We also rolled out 532 route wear systems to our fleet. We are sitting shy a little bit under 1,400 today. These efforts continue to boost safety, operating, and financial performance. Our recent acquisitions all present great opportunities to apply these same programs. As discussed last quarter, given the lingering softness in special waste and C&D volumes, we focused our efforts in the second half of 2024 on increasing landfill internalization across both newly acquired markets and markets entered over the last few years. To achieve this strategy, we purchased additional long-haul trucks and trailers and established new transportation lanes, mainly from four markets to our New York landfills. With these moves, we are driving an incremental 120,000 tons per year of internalization. We are working on additional opportunities for 2025 to create more internalization. Turning to development projects, as Brad mentioned, in January 2025, we completed the full technology and equipment upgrade at Willimantic for a recycle facility. This system is operating, and our team is very busy optimizing the equipment. Taking the site offline was a negative drag to the second half of 2024. However, we expect the project to generate roughly $4 million of EBITDA in 2025. We continue to evaluate other opportunities to advance our recycling and resource management infrastructure, with a focus on another recycling facility conversion in the near term. The first phase of investment at railcar at McKean Landfill was completed during the third quarter of 2024. To date, we have received roughly 7,500 tons of waste by rail at McKean. While the current infrastructure allows us to offload almost 5,000 tons per day of containerized solid waste, we are not rapidly ramping volumes to this site as we believe the site provides long-term risk management to preserve our flexibility in the disposal-constrained northeast markets. As we look ahead, our M&A pipeline continues to be various, with over 100 opportunities and roughly $700 million of revenues in various stages of diligence and development. The strength of our balance sheet and our robust liquidity positions us very well for continued return-focused growth. And with that, I would like to turn it back to the operator for questions. Thank you.

Thank you. Ladies and gentlemen, as a reminder to ask a question, withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Trevor Romeo with William Blair. Your line is open.

Taking the questions. Hi. Good morning. I really appreciate you. The first one was actually maybe just a follow-up on that, the M&A point, Ned, and kind of just thinking about the opportunity set and how 2025 could potentially shape up for M&A. You know, you had some really strong activity the last two years. Already closed three deals in 2025. Sounds like the pipeline is maybe a bit higher than you last quarter. We are just wondering if you could give us an update on what you are hearing from your discussions as far as willingness to sell, availability of targets, and then kind of from the buyer side, are you seeing any changes in competition for assets? Just kind of how you are expecting M&A to shape up this year.

Yeah. Thanks for the question. You know, pipelines as active, if not more active, than it has been. Ever? We continue to do quite a bit of work. John and I are busy always meeting with potential sellers and just doing what we do. I mean, one of the greatest sources of potential acquisitions for us is our national accounts team. That team has worked constructively for 25 years with hundreds of small hauling companies up and down the Eastern Seaboard, and it continues to present a great stream for us to collaborate with small independent businesses and have them know more about us and our culture and our integrity, and you know, that is really the best way to build that pipeline. You know, there are always some great opportunities that come through the banking process, but the ones that come directly to us and we can have a meeting of the minds, we really are the best acquisitions, and we love that. There are a lot of those in the pipeline right now. So we are in various stages with other opportunities, you know, throughout the northeast and down into the mid-Atlantic footprint and also looking at some adjacencies. We are excited for 2025. And it is great to get off to such a nice start as well with a couple of high-quality deals. There is a big focus, you know, with a few acquisitions in Pennsylvania, one in Maryland, one in New York, one in Massachusetts. So across the board, we are adding dense and great additions to the footprint.

Yeah. If anything, it is more intense. You know, normally, we do not do as much as in the fourth quarter as we have done, you know, this year. So it is really, really interesting. I think it is accelerating a bit.

Yeah. And, John, I should have actually mentioned this. We are always chasing what the bottleneck is, and for us, you know, making sure we have the right resources to integrate and successfully integrate and meet the pro forma is very important and the balance of our people. And with our growth, we continue to look at where we add resources across even our acquisition integration teams, back office, ops, HR, and IT. And we are really trying to do all the heavy lifting and make sure we continue to support a reasonable amount of growth.

Great. Thank you both for that. And then kind of on a similar theme, I guess, I believe at least kind of in the reporting that was out there, the acquisition you made in Eastern Massachusetts. You acquired a MRF that it sounds like it is pretty close to the Charlestown MRF you already have in Boston. But just kind of wondering if you could talk about your plans for that facility and what kind of synergy opportunities you would see there with your existing business.

Yeah. We were able to acquire a great business called Save That Stuff, which is a really nice brand. The Massachusetts Eric Levy started the company 35 years ago. His values, his team really align well with ours. And it is a hauling company and a recycling kind of resource management company. So great fit to Casella. You know, we have done an amazing job across the Massachusetts market, most especially Eastern Massachusetts, servicing high-end institutional industrial customers. And Eric had a lot of the same focus in his team over the years, so it is very complementary both on the hauling side where we have overlaps on routes. But then as you said on the processing side, it is a big overlap. Some of his processing capabilities probably be handled in our recycling facilities. And it gives us more additional space to handle some unique industrial streams going forward. So a great complementary acquisition. We are very excited.

Great. And then maybe just one more quick one for me, if you do not mind. Just wondering if you could kind of give an update on, you know, the Brookhaven situation in New York. Like we talked about the, you know, the impending close at the end of 2024. Now that we are past that point, can you kind of just give us an update on where things stand in the market and, you know, if you are still expecting a good portion of those volumes to come back to Casella in 2025.

Yeah. I think that it started off slow, but Brookhaven is closed. For sure. One ten Sands and Gravel is taking some of that material, but our tons are up at our facilities as well. So up slightly. We would like to see them up more, but certainly moving in the right direction. So we think that we are likely to see continue to see improvement in 2025. But in fact, Brookhaven did close.

Yeah. It is closed for C&D. Yes. And so they are still taking that as Gerald. Yeah. Yeah.

Okay. Thank you both very much.

You are welcome. Thank you.

Please standby for our next question. Our next question comes from the line of Tyler Brown with Raymond James. Your line is open.

Hey. Good morning, guys.

Good morning, Tyler.

John. Fifty years. Going on. Says you could have been in the hotel business. Yeah. Just think. But, hey, just, Brad, real quick. Hey. Can you possibly help us with Q1? I am just wondering if all this weather is having an impact.

Not significantly. I mean, obviously, Q1, you know, we deal with weather every year. So I would not call out anything in particular that is different from historical trends.

Okay. And if anything, tourism is great this year, Tyler.

That is key season in twenty years in the northeast.

Okay. I know you probably enjoyed that. Can we you you guys did not mention it in the prepared remarks, but can we talk about Ontario? Basically, what kind of happened there? How will the wind down of that operation play out? Where are those tons going to be directed?

Yeah. I mean, I think that we have got, you know, four years to, you know, play that out. So I think that we will be able to move those tons to our other facilities. We will look at that from a transportation adjusted basis. And I think, you know, we are in a good position to close it out appropriately. But it is interesting because there is no alternative at this point in time. So it will be interesting to see what those transpire, anything could happen. I mean, we obviously believe at this point in time with the vote from the county that they are going to close in 2028, but that would not be the first time that there is a change in direction. But we are prepared we are prepared to close it out and, you know, financially, we do not think that that is going to be a negative impact at all.

So, Tyler, as you know, but maybe others do not know, it is within 20 miles of Seneca Meadows as well, which is the largest landfill in New York state, which may have some complexity in their future permitting as well. So we have been actively working on a permit expansion at our Highland Landfill for three years, where we are looking to take the annual permit from 460,000 tons a year to a million tons a year. And that process continues to move along really positively. We have got opportunities, of course, to McKean and some other sites. So as John said, you know, we have homes for our tons and for our customers. While not ideal, it just really shows a complex of maintaining and expanding capacity across the northeast.

Yeah. Okay. So can we talk a little bit more kind of in that same vein? It sounds like there is a sizable opportunity to internalize tons. I think you mentioned four markets. It sounds like you made headway in 2024, but I am a little unclear. Is that kind of already in the numbers? Is there more incremental benefit? Is that an EBITDA benefit, or is it just a defensive play?

Yeah. Sorry. So in our 2025 numbers, we do have that internalization benefit. Some of it was in Q4. You know, as you know, ordering long-haul trucks, trailers, all of that takes time. And if you look back over the last couple of years, in the northeast, we did not always make the decision with new markets to instantly internalize those tons or our landfills. In many cases, we kept it flowing to third-party sites. As we look at some of the headwinds in 2024, we have construction, demo, and special wave streams, we so we got to get moving. We got to get this waste into our own landfills, create maximum amount of cash value. So we started those moves through the summer, the late fall, coming into 2025, every one of those moves is happening in our guidance. There are other opportunities for us to do more. We are working on that, and we are making sure we are making the right return base decisions when we do that.

Okay. So then I will kind of bring it back to the bridge. Brad. So I think let us call it the bridge is $60 million of EBITDA year to year. Did I hear you right? Thirty to thirty-five of that is M&A? Is that right?

Yep.

Okay. So and I think you said the other part would represent roughly 7% organic growth. But it seems like you have got some positive idiosyncratic things, Willimantic, internalization, Brookhaven enclosure, etcetera. Now it sounds like you are also spending money on technology. We will talk about that in a second. But what are those pieces? Because it feels like that is pretty conservative. With those idiosyncratic benefits. Does that make sense?

It does. You know, I would not characterize it as conservative. We think our guidance is appropriate. You know, but I think you highlight the fact that we have a number of levers at our disposal to, you know, to drive results year over year. You know? So let us see. The landfill internalization, which Ned just talked about. Notwithstanding our internalization efforts, we would expect the market, at least for C&D volumes, to improve year over year. You know, the pricing and collections operating cost improvements, you know, that obviously is our story year after year, and that is kind of what we are always pursuing. And then the Willimantic MRF, which is, you know, I would say that, you know, falls under the idiosyncratic category as you said. As Deb mentioned in his prepared remarks, that will be about a $4 million benefit year over year in 2025. But, you know, you know, there are it is a hard business sometimes, and things do not necessarily always come out the way you plan them. So we feel like our guidance is appropriate.

Okay. Perfect. And what is the technology spend? Ned? Are you what what is going on there?

Yeah. So, so, you know, as we continue to grow, we are always looking to see what types of processes, systems, what do we need to be just as successful in the next year than we were in the previous year. And a part of our business right now that is probably the least scalable are some of our systems. And we especially with the new acquisitions, and we have continued to invest both in capital and G&A, and an expense just on the IT side alone over the last couple of years is up around 20 basis points, and it will be up another 10 basis points the next year. We do not think that is a permanent spend. Just have some redundant spend with acquisitions where we are running old systems and our systems, and we are getting those onto our systems as fast as possible. And then we are doing an upgrade of our long-term order to cash system that we have used for 30 years called SoftPath. And we are in the process of modernizing and upgrading to the latest version. So we are not doing something crazy with a whole new system. This is the technology we have used for years. We are automating more of the connections to other systems. And this is millions of dollars in investment, not tens of millions of dollars. And we are, you know, we just need to get more scalable processes, scalable automation through our back office, through our systems, and a lot of focus there right now. So we are, you know, overinvesting a bit right now on the G&A side and a little bit more CapEx. But we are excited to get through that part of it. Also, will be a new customer portal. That is out in pilot market right now. A bit more digitization of the customer experience, which we think will help as well as we continue to scale.

Okay. Perfect. And then my last one and, Brad, you talked about it a little bit. I do get this question time to time around your NOL position and your cash tax paying position. So did you say that you would be a $5 million cash taxpayer in fiscal 2025? But that number could okay. That is right. So that number though on the federal side could go up substantially in 2026 or is it just too early and you guys will update it later?

Yeah. I mean, it is too early because a lot of this depends upon what happens with tax legislation and obviously a lot of the discussion with the new administration to implement some changes to the tax policy that certainly would be beneficial to us. But so I can best I can do is comment on all else being equal. So the tax law remains as it is today. Given that assumption, we would expect the NOLs to shield us through the rest of this year. And then in 2026, we would begin to pay federal tax more meaningfully.

But, Brad, on that topic, one of the things we have been really successful with with acquisitions is either doing asset or structuring stock purchases where we get the asset step-up value. And with that, you know, not every dollar on an income statement will convert to cash taxes. Even if we became, you know, we did not have NOL shielding us. So a lot of the acquisitions give us 15 years of runway of, you know, higher tax depreciation that will shield cash taxes into the future. So we will continue to focus there and try to structure acquisitions in a way that helps us to get tax value as well.

Yeah. That is a huge point. And, you know, I mentioned this in my prepared remarks. All else being equal really refers to two things. One is tax legislation, and the other is deal activity. And so the outlook that I talk about is assuming we do no other deals that are structured in a tax-advantaged way. Showing that is not our plan going forward.

Okay. Yep. Real structure matters. Okay. Cool. Thank you. Appreciate it.

Thanks, Tyler. You too.

Please standby for our next question. Our next question comes from the line of Adam Bubes with Goldman Sachs. Your line is open.

Hi. Good morning.

Good morning.

Given the acquisitions in the second half of 2024 and year-to-date, can you just sort of update us on the expanded collection fleet automation opportunity? You know, how much runway is there today now that we have sort of regenerated that opportunity? And I think looking back to 2021, direct labor costs were 150 basis points lower as a percent of sales. Is that sort of a good way to contextualize the potential margin opportunity from these initiatives?

I will take that first part, Adam. This is Sean. So in our mid-Atlantic area, we have a couple hundred opportunities that we are going to automate over the next three years. And our Hudson Valley area, we have opportunity as well. So it is going to keep the ops support team busy for three to five years. That is not counting anything else we acquired this year. So big pipeline of cost of ops reduction the next few years.

And on the direct labor point, you hit the nail exactly on the head. When we automate routes, you know, we many times are taking rear-load trucks off the road where we have drivers and helpers, and as an example, this last year, I talked about how we eliminated 22 rear-load trucks on the road. We took 27 headcount out, and that is because they are helpers as well. So as we look at automation opportunities, especially in the mid-Atlantic, our direct labor is running, you know, 500 basis points higher than in historical markets. We got that really speaks to the story of many rear-load routes that are not as efficient and many routes that have helpers, which, you know, we would also not like to see from a safety standpoint. We really want everyone to be inside the truck. We would like automation to occur. And so it is a big focus for Sean and his team. You hit it exactly right. We want to get that direct labor number down.

Yeah. And labor is the biggest factor, but not only are we taking helpers off the back of trucks, we are taking trucks off the road. So you really see the benefit up and down the cost stack in terms of fuel, maintenance, etcetera, all the costs associated with a routed truck. Yeah. The rear-load line business is the oldest from a fleet age perspective as well. So there is a multitude of benefits to automate.

Terrific. And then revisiting the internalization opportunity, can you just help us think about the economics in terms of incremental travel costs versus tip fee savings? And what is the magnitude of incremental opportunities that you are looking at for internalization?

Yeah. So if a landfill is full, then you are really talking about the difference of what you could internalize that ton at versus, you know, the third-party ton you may be taking out. We are really looking at sites that did not run full in 2024. We have excess capacity. So if we can land additional internalized tons, the variable cost of putting another ton into a landfill can be quite small. Of course, you have got the capital investment of building out that additional capacity. And to your point, the trucking cost to get it there. So each one of these situations, we will look at individually. But these are nice incremental margin decisions, you know, 50 to 75% on an incremental ton that is coming into a landfill.

And then last one for me. Just want to talk about your national accounts business for a moment. It continues to grow really nicely. I think up high single digits in 2025. Can you just talk about how you think about the growth algorithm in that business going forward and the magnitude of cross-selling efforts on recently acquired assets? Thank you.

Certainly. Great point, Adam. You know, one of the biggest opportunities for us in the mid-Atlantic is the industrial component from a major account standpoint. It is very, very right there. There is a tremendous amount of distribution centers. I think it is the distribution center for the Northeast and that Allentown Bethlehem area. Many, many facilities. So there is a big runway there from a national account standpoint with the industrial component. I think that we have been very successful with the municipal team too. We know, I think that we knocked out four, five, six contracts in the fourth quarter from a municipal standpoint as well where we were successful from a bidding perspective. So the team is really doing well. We have got some big opportunities in terms of the expanded footprint. So we are looking forward to it. We know how to do that work. The team has been very successful, you know, providing those services to large industrial customers where we can put five to ten people inside the facilities to help them with their waste and recycling component.

And, John, you know, one interesting thing is, you know, when we talk about price volume, we talk about where the revenues rec guys. And our national accounts team, you know, owns the customer relationship in many instances and then has our own truck service those customers. So you look at the growth there, while our volumes are slightly down in the collection line of business, we are actually feeding a lot of intercompany growth with Windows accounts through a national accounts group, whether they be industrial or institutional. Exactly. So it is a story that we could probably tell a little better going forward, but it is a great point because that has been a real volume engine for us when you see some of the small declines in landfill volumes or just some of the churn in subscription residential. We are really not focusing enough on this huge amount of wins that we are having with premier customers down in national accounts.

Thanks so much. Appreciate the call.

Yeah. Thank you. Standby for our next question. Our next question comes from the line of Brian Butler with Stifel. Your line is open.

Hey. Good morning. Thanks for taking the question. Just the first one, just when you look at, like, the price cost spread, it looks positive going into 2025. Maybe we could talk about where internal inflation was in the fourth quarter and kind of what is built into the 2025 outlook?

Yeah. Brian, it is Brad. As we finish 2024 and heading into 2025 at our expectations, we broadly expect to be in the area of 4% inflation. So, really, what we are targeting is 100 basis points of positive spread at least in the solid waste business. I mean, that is what we tend to target, you know, to be at least 50 or 100 basis points ahead of inflation. It is hard to measure it sometimes precisely, but we feel like we are about 4% right now.

Okay. Great. And then considering the M&A levels you guys have had, when you think about the flat to down 1% volume outlook for 2025, how much of that is shedding from some of the acquired ad or customers that are just kind of underperforming versus there is any other, you know, weakness there.

I would say all of it. You know, in the fourth quarter, in the collection line of business, as I mentioned in my prepared remarks, you know, in our legacy footprint, I will call it, volume was actually flat to up across all the lines of business. You know, so we are seeing real stability there, and a modest level of growth depending on the market and the line of business. So really that volume decline is concentrated in particularly in the mid-Atlantic, you know, as we, you know, I am never quite sure what the term intentionally shed means, but, you know, we are focused on driving price at, you know, with some of those customers that, you know, where we think that pricing gives them appropriate and margins are not where they need to be.

I will come back to the point that we talked about a minute ago as well. You look at multisite retail, industrial, institutional, municipal across those segments, we actually have an internal goal to grow those volumes in those segments. And we have got a stretch goal as well. We have organized our sales force and put additional resources on the ground from strategic account managers and some specific sales resources to help do that, and we have shown a lot of success in that area. So, you know, that is I think we are trying to get a little more information out there because those are the types of customers that are very, very we can create more value for them and do really well margin-wise as well.

Alright. Great. And then one last one. Can you talk maybe about how you are thinking about PFAS at the landfill and kind of in handling that, especially, you know, in New England that is very regulatory focused.

Sure. I mean, I think that we are in front of it. We have got two facilities up at our processing PFAS. One is reverse osmosis and the other one in our Waste USA facility is foam fractionation, facilities up and operational. You know, we are excited about the results. I think we are doing a pilot program right now with the agency in Vermont. I believe they are excited about the operations and the efficacy of the technology. It is a, you know, separates the PFAS, and then we solidify it and put it back in the landfills, solidify it in concrete and put it back in the landfill. But the technology is there. We know how to do it. Now we are just really kind of tweaking it to see what is the lowest cost technology that can really do the job. And we will be applying it to our other facilities at this point, Brian. It is likely that we are going to see it at our facilities, and it just gives us more flexibility to be able to take our leachate to many different municipal sewage treatment facilities.

Alright. Great. Thanks for taking my questions.

You got it.

Please standby for our next question. Our next question comes from the line of Tony Vanqualt with Gamco Investors. Your line is open.

Good morning, gents. Well done. You know, you guys have just grown rapidly in these last few years, and you really done a great job of integrating your acquisitions. You know, I sort of I guess I had asked this before, but just any thoughts on potential, you know, further large large maybe transformational M&A that you could do? Would you want to do? What is there a potential funnel of that out there? Just maybe just give us any updated thoughts just based on all of your success.

I think that, you know, we are likely you are likely to see us stay toward knitting in terms of what we have said historically, which is strategically up and down the Eastern Seaboard. But that does not mean that there would not be a much larger opportunity that came available that we would take a look at. So I think it is fair to say, Tony, that we will continue to do continue to execute on the tuck-ins over the top of the mid-Atlantic and the Northeast. And then, you know, drive ourselves, you know, down the Eastern Seaboard as we have done with the GFL acquisition. And again, you never know what is going to come available and, you know, what opportunities are going to be in front of you. So you never say never, but that is not our strategy is not all of a sudden to go and look differently. If those opportunities come to us, then certainly we will look at it, you know. And we cannot pick and choose when somebody wants to monetize their business.

But what we can do is get much better at integrating and have the resources and ability to scale, like, so as every acquisition goes by, we gain best practices. We gain better structure. Better, you know, ways of doing diligence. We really have built a great team there. And many of our business leads across the organization dig in for their night jobs, helping us to successfully acquire businesses and integrate them as well. So, you know, it is really kind of core competency, I think.

I think the other thing that we have done as well, Tony, is training is really important. Maintaining one culture on a go-forward basis is extremely important. And we have made the investment over the last three years in HR. We have made the investment in training facilities. We bought the college a number of years ago. We have revamped the training center. We have got three separate training areas that can train up to 180 people in one part of the facility. So that is a critical component on a go-forward basis, especially when you are adding the total number of employees doing core values training, leadership training, helping people understand how we want to run the business critically important, particularly as we grow the way we have grown. We have added a thousand people in the last, you know, ten months. So a critical component and something that we have already made the investment in.

Great job. Congratulations, Sean. I am a fifty, and well done team.

Thank you. Thank you, Tony.

Thank you. Ladies and gentlemen, I am showing no further questions in the queue. I would now like to turn the call back to John for closing remarks.

Great. Thank you very much, everyone, for joining us this morning, and we look forward to discussing our first quarter 2025 results in April. Thanks, everybody. Have a great day.