CWST - NASDAQ

Good day, and thank you for standing by. Welcome to the Casella Waste Systems, Inc. Q3 2025 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brian Butler, VP of Investor Relations. Please go ahead.

Good morning, and thank you for joining us on the call today. We will be discussing our third quarter 2025 results, which were released yesterday afternoon. This morning, I'm joined with John Casella, chairman and chief executive of Casella Waste Systems, Ned Coletta, our president, Brad Helgeson, our chief financial officer, and Sean Steves, our senior vice president and chief operating officer of Casella Waste Operations. After a review of these results and an update on the company's activities and business environment, we'll be happy to take your questions. But first, please note 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 recent Form 10-Q, 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 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 if our views change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today, 10/31/2025. Also, during the call, we'll 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. With that, I'll turn it over to John.

Brian, and good morning, everyone. Welcome to our third quarter 2025 conference call. In Q3, the Casella team worked hard and stayed focused on executing our operating plans, delivering another strong quarter that reinforces our improved outlook for 2025. I'm extremely proud of the team for once again overcoming challenges and demonstrating the strength of our operating model and our strategic execution. Revenue and adjusted EBITDA were quarterly records at approximately $485 million and $120 million, with year-over-year growth driven by continued solid waste pricing strength, healthy landfill volumes, and meaningful contributions from our acquisition program. Year-to-date, adjusted free cash flow totaled $119 million, up 21% year-over-year, supported by EBITDA growth and stronger working capital performance. We remain on track to achieve our full-year free cash flow guidance, which was raised following our second-quarter results. Our solid waste operations delivered strong performance with pricing and landfill volumes continuing to drive margin expansion on a same-store basis. Integration of the Mid-Atlantic businesses is progressing well, with systems conversions and fleet optimization initiatives positioning the segment for further gains in Q4 and well into 2026. Our Resource Solutions segment continued to perform well, effectively managing commodity price headwinds with our risk management structures and overcoming third-party disruptions in the Boston market. We've completed eight acquisitions year-to-date, adding approximately $105 million in annualized revenue. We expect the Mountain State Waste transaction to close at the end of 2025, contributing an additional $30 million of annualized revenues. Our M&A strategy remains focused on a balanced mix of smaller tuck-in acquisitions and larger opportunities that expand our geographic footprint, such as Mountain State. With an active pipeline representing approximately $500 million in annualized revenues and a strong balance sheet, we are well-positioned to continue creating long-term shareholder value through disciplined strategic growth. Our third-quarter results highlight significant progress in resolving short-term challenges in the Mid-Atlantic segment and reinforce our confidence in achieving our enhanced 2025 guidance. The sustained operating and acquisition momentum provides a strong foundation for continued growth and value creation in 2026. We announced Casella's Sustainability Leadership Awards in Q3, recognizing customers who exemplify the power of partnership in reducing waste, increasing recycling, and advancing the circular economy. This year's recipients are Primo Brands, Dartmouth College, The Arc Oswego, and the University of Vermont Medical Center. That showcases what's possible when innovation and collaboration come together. We celebrate their achievements along with the dedication of our Casella team members who work alongside them to build real-world models of economic and environmental sustainability for the future. As announced in August, I'll be transitioning to the executive chairman role at the end of 2025, with Ned stepping into the CEO role. It's difficult to fully express how proud I am of what this team has accomplished. Over the past five decades, I've had the privilege of working alongside some of the most dedicated, hardworking people in our industry. Together, we built Casella into an industry leader defined by our core values that continue to guide us. While this will be my final quarterly earnings call as CEO, I'll continue to serve as chairman of the board, supporting Casella's long-term strategy, stakeholder relationships, and the culture that makes this company so special. I'm deeply grateful for everyone who has been a part of this journey, and I'm excited for the next chapter under Ned's leadership. It's really exciting when we look back at the past fifty years. And I can tell you how proud we are of what we have achieved over that fifty-year period of time. But I'm even more excited about what is going to happen under Ned's leadership in the future. With that, I'll turn it over to Brad to walk through the financials in more detail.

Revenues in the third quarter were $485.4 million, up $73.7 million or 17.9% year-over-year, with $53.4 million from acquisitions, including rollover, and $20.4 million from same-store growth or 4.9%. Solid waste revenues were up 20.6% year-over-year, with price up 4.6% and volume essentially flat, down 0.1%. Within solid waste, price in the collection line of business was up 4.7% in the quarter, led by 5.2% price in front-load commercial, and volume was essentially flat. Year-over-year volume trends continue to improve as we move through the year with indications of a relatively stable economy in our market. Price in the disposal line of business was up 4.6% and volume flat year-over-year. Results in the landfill business were strong, with same-store price up 3% and total tons up 11.7%, including higher third-party MSW and C&D volumes, nearly 20% growth in internalized volumes. Resource solutions revenues were up 7.8% year-over-year, with recycling and other processing revenue down 5%, impacted by lower commodity prices but national accounts up 16.5%. Within resource solutions processing operations, our average recycled commodity revenue per ton was down 29% year-over-year, with softer markets across the board and most commodities selling below five-year averages. Notwithstanding market pressures, our contract structures share this risk with our customers by adjusting tip fees in down markets. So the net impact of lower commodity prices on our revenue is only about $1 million. Processing volume in revenue terms was up 2.5%, driven by higher volumes at the Willimantic recycling facility. Within national accounts revenue, price was up 4.3% and volume up 8.6%. Adjusted EBITDA was $119.9 million in the quarter, up $16.9 million or 16.4% year-over-year, with contribution from acquisitions, including rollover, 8% organic. Adjusted EBITDA margin was 24.7% in the quarter, down approximately 30 basis points year-over-year. Bridging the year-over-year change in adjusted EBITDA margin, new acquisitions contributing at lower initial EBITDA margins than our overall business diluted margins by 100 basis points in the quarter. The base business, excluding newer acquisitions completed in the past twelve months, expanded margins on a same-store basis by 70 basis points, with landfill volumes representing a 60 basis point tailwind and the rest of our operations, including the Mid-Atlantic region, growing margins by 10 basis points year-over-year. As a reminder, when we acquire privately held companies, they often have lower EBITDA margins compared to Casella's consolidated average. This can initially dilute our margins on a year-over-year comparative basis. However, as we integrate these businesses, execute on synergies, and implement our operating practices and strategies, this becomes a margin expansion opportunity over time, which is regenerative as we continue to execute on our acquisition pipeline. Cost of operations were $315.3 million in the quarter, up $48.1 million year-over-year, with $39 million of the increase from acquisitions or approximately 74% of acquired revenue and $9 million in the base business. Excluding acquisitions, cost of operations were down 100 basis points as a percentage of revenue on a same-store basis. General and administrative costs were $57.3 million in the quarter, up $10.2 million year-over-year. As a percentage of revenue, G&A was up 40 basis points year-over-year, as we continue to invest in technology upgrades and integrated acquisitions. We have a strategy in place to begin generating meaningful leverage on the G&A line as we grow, and we expect this to become another driver of margin improvement in the future. More to come on this next quarter. Depreciation and amortization costs were up $19.7 million year-over-year, with $9.6 million resulting from the recent acquisition activity, including the amortization of acquired intangibles. Adjusted net income was $26.6 million in the quarter, or 42¢ per diluted share, up $4 million and down 2¢ per share. GAAP net income was up $4.2 million in the quarter, with the nonrecurring Southbridge Landfill closure charge in the third quarter last year. Net cash provided by operating activities was $233.2 million in the first nine months of 2025, up $61.6 million year-over-year, driven by EBITDA growth. DSO was essentially flat from June and year-end at thirty-five days. Adjusted free cash flow was $119.5 million year-to-date, a record for the first nine months, and representing approximately two-thirds of our full-year guidance. Capital expenditures were $187.8 million, up $61.4 million year-over-year, including $54 million upfront investment in recent acquisitions. As of September 30, we had $1.16 billion of debt and $193 million of cash. Our consolidated net leverage ratio for purposes of our bank covenants was 2.34 times, and our $700 million revolver remained undrawn. Our liquidity and leverage profile will enable us to be opportunistic in continuing to execute our growth strategy and robust acquisition pipeline. As announced in our press release yesterday, we raised the lower end of our revenue and adjusted EBITDA guidance for 2025, increasing the midpoints to $11.835 billion and $420 million, respectively, reflecting increased visibility and confidence in full-year results and underlying strength in the business. Recall that we already raised the lower end and midpoint on our cash flow guidance metrics at Q2, and we remain well on track for those. Looking ahead to 2026, we anticipate another year of strong growth across revenue, adjusted EBITDA, and cash flow. As you build your models for next year, we expect overall organic growth in the range of 4% to 5%, primarily driven by solid waste pricing and an incremental 3% or $60 million of rollover acquisition revenue, including contribution from Mountain State Waste, which we expect to close at the beginning of the year. This puts total revenue growth, excluding future acquisition activities that haven't yet closed, in the range of 7% to 8%. On the adjusted EBITDA line, we'll target 25 to 50 basis points of overall margin improvement, driven by pricing actions in excess of underlying cost inflation, operating enhancements in the Mid-Atlantic, including route synergies and automations enabled by truck deliveries and the completion of our ongoing system consolidation, benefits from our operating programs elsewhere in the business, and the rollover contribution from acquisitions. Specifically in the Mid-Atlantic, we're currently working towards improvements of at least $5 million on an annualized basis, which will contribute to our anticipated overall margin improvement. This puts total adjusted EBITDA growth, again before further acquisitions, at roughly 9% to 10%. In addition, we'll aim to generate leverage on this growth on the adjusted free cash flow line, targeting growth in our typical long-term range of 10% to 15%. And with that, I'll turn it over to Ned.

Thank you, John, for your support as well as I'm preparing to take on this CEO role on January 1. By my account, this will be the 110th quarterly conference call that you've led as a CEO. What an incredible record for a legendary leader and mentor to all of us. We are all excited for you to take on the next chapter of your career after fifty years at the helm of Casella. And we look forward to your continued support in your new role as executive chairman. As highlighted in our earnings release yesterday, third-quarter results exceeded expectations for both revenue and adjusted EBITDA. Total revenues rose nearly 18% year-over-year, driven by strong 4.9% organic growth and continued contributions from acquisitions. Adjusted EBITDA reached $120 million in the quarter, up 16.4% year-over-year, with base margins before acquisitions expanding 70 basis points year-over-year. Our solid waste collection and disposal operations continue to perform well, supported by 4.6% pricing growth, higher landfill volumes driven by greater internalization and third-party activity, and ongoing improvements within the Mid-Atlantic segment. Landfill volumes, as Brad stated, were up 11.7% year-over-year, with roughly one-quarter of the increase driven by better sales performance and the remainder from increased volume internalization. On the permitting front, we've made solid progress on the expansion efforts at our Hakes and Highland landfills in New York, with permits expected over the next several quarters. We're working to more than double the annual permit at Highland from 460,000 tons a year to a million tons per year and also add close to sixty years of capacity at current run rates. At the Hakes landfill, we're permitting a ten-year or more expansion at current run rates. These expansions are important with the expected closures in New York over the next several years. Operationally, we completed multiple routing optimization projects during the quarter, reducing total route days by 10 and lowering driver headcount requirements, all the while maintaining service quality. Our delayed truck orders in the Mid-Atlantic have started to deliver, with 43 trucks arriving since July 1 and another 37 trucks expected to deliver in the fourth quarter or into early 2026. Most importantly, over 60% of these trucks are automated, which will allow us to rapidly convert operating efficiencies and labor reductions in addition to the expected savings from lower maintenance costs and eliminating truck rentals. The Mid-Atlantic integration, automation, and optimization initiatives continue to advance, and as Brad mentioned, we expect at least $5 million of savings in 2026, but the ultimate multiyear opportunity is much larger, and we're currently working to establish the cadence of these savings. The Resource Solutions segment delivered year-over-year adjusted EBITDA growth, reflecting strong national accounts performance and operational efficiencies from the upgraded Willimantic recycling facility. These gains, together with our resilient pricing structures, including the floating process and SRA fees, effectively mitigated the impact of weaker commodity prices. Our acquisition program remains a powerful engine of growth and value creation. We have closed on eight acquisitions year-to-date, representing roughly $105 million in annualized revenues. The pending acquisition of Mountain State Waste is expected to close at the end of 2025 and will add another $30 million of annualized revenues. We also have four smaller tuck-in deals under letter of intent totaling roughly $20 million of annualized revenues, which could close in late Q4 or into 2026. As Brad mentioned, our balance sheet remains strong, with total liquidity of roughly $866 million, giving us ample flexibility to continue executing our strategic growth and investment initiatives. Looking ahead to the remainder of 2025, our outlook remains positive, and we expect to finish the year strong, supporting midpoint increases in both our 2025 revenue and adjusted EBITDA guidance ranges. In addition, our early view of 2026 is positive, with sustained pricing strength, the rollover acquisition growth, and cost savings initiatives positioning us for another strong year of cash growth. With that, I'll turn it back to the operator for questions. Thank you.

Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. And our first question comes from Tyler Brown of Raymond James. Your line is open.

Good morning. Good morning. Hey, John. Just congrats again for everything over the years. I know this may be your last call, but I'm looking forward to keeping in touch over the future.

Absolutely. I look forward to supporting the team on a go-forward basis. So it's exciting. Very, very exciting. I'm sure we'll see you around. Hey.

Ned, Brad. Hey.

Conceptually, so there seems to be some concerns maybe in the market about the longer-term trajectory of margins for you guys? And I know that margins are down slightly year-to-date. There are a lot of moving pieces. But at a core level, again, kind of say excluding M&A, is there any reason to think that margins couldn't meaningfully accrete as time goes on? Again, just getting that unit revenue over unit cost spread. And then how would you characterize kind of a, quote, unquote, normal year? And then how should we think about the impact of M&A on that algorithm?

Yeah. So maybe I'll start off. This is Brad. So we don't see anything that will challenge what we've executed and what we expect with margins over time. Sort of taking a step back is we have acquired businesses, mostly collection businesses, you know, plus or minus, every deal is different. But those come in at roughly a 20% EBITDA margin on average. Our collection business overall in Casella is closer to a 30% margin business. So, you know, what we see when we acquire businesses is there's significant multiyear margin expansion opportunity. And so it's sort of this kind of constant recycling where in the current period, acquisitions may weigh on our margins because the deal is coming in initially at a lower margin. But then that becomes it sort of fuels the fire of, okay, as we implement our strategies and our operating programs and so forth, we can take those margins up 500, maybe even a thousand basis points over the long term. So that's the model. And we don't see any reason why something would derail us from those kind of basic economics.

But specifically, Brad, in the third quarter, acquisitions completed in the last twelve months weighed on our margins by 100 basis points. That's not concerning to us. As Brad said, I mean, it's expected. It's what we modeled. It's we knew was coming. But in the core business, we accreted margins 70 basis points, and you know, we did a great job converting on price, we did a great job executing on our sales funnel. Sean and his broader team continues to do great work on the ground operationally. We've got an amazing new safety leader that's joined Casella, Jeff Martin, that we're excited to have on our team. He's really making a positive early difference on our safety culture and advancing that in the right direction as well. So you know, the building blocks are there for us to continue to accrete margins and to improve. It really comes down to a bit of the acquisition cadence and how much that dilutes the core business.

Okay. And so as we just to be clear, going back to the '26 sketch, you're looking for 25 to 50 basis points next year, including M&A. Is that right?

Including the M&A that we've completed plus $20 million of LOIs are not in the '26 look. Yeah. Correct.

Okay. And then also just some clarification real quickly on the synergy capture in Mid-Atlantic. So I think you said $5 million. But to be clear there, does that include any benefits from, call it, surgical pricing opportunities? I know that the old ERP may be limited to that.

Yeah. Tyler, it does not include any pricing or margin lift. We're pretty early in our budgeting process this fall. We've just kicked things off. Brad tried to give an early snapshot of some of what we're seeing. We're also running through our multiyear strategic planning as well. So we really hope to kind of give some floating bricks building blocks into February along the lines of the work we're doing specifically along synergies, operating initiatives, some of the work in the back office as well. And give, you know, a couple-year horizon on what those building blocks look like and how we expect them to come in over the next couple of years. Right now, probably a little bit of a conservative look, but we're so early in budgeting that it'd be hard to get ahead of that.

Yeah. And then to put a little bit of a finer point on the I said you have at least $5 million of opportunity next year. That's really just what is right in front of us in terms of low-hanging fruit. You know, when we get the truck deliveries, you know, and complete the system conversion, the opportunities that we're going to be able to execute on relatively quickly, like, within months of the of 2026. As you said, it doesn't include, you know, broader opportunities, further synergies beyond that, and broader opportunities just to run the business better when we're on one system.

Okay. And then my last one, so it kind of actually segues a little bit, Ned, to what you're talking about. And I know maybe at heart, you're a bit of a scientist. So it's been a pretty interesting earnings season. I mean, you know, I cover a lot of different things, and we continue to hear whether it's trucking, even the aggregate business of all places. But there continues to be a lot of use cases for AI. And I'm just curious how that story fits in at Casella. It sounds like you guys are doing some longer-term planning. And I'm just curious if you see real-world application there. If it's in the truck, the back office, pricing, maintenance, maybe all of the above. But just, Ned, any broad thoughts there would be really helpful. Thanks. Yeah. Good question.

As Brad mentioned, I mean, we have so much focus right now on some foundational elements for systems. We brought in a great new CIO two years ago who had been at Deloitte in waste management for twenty years. And we've been focused on some really simple things, like a billing system consolidation, new payment portals for customers, our new app, website, e-commerce. There are some really foundational elements there. But as you know, a few years back, we rolled out a great new financial ERP as a company. We rolled out a new procurement system. And around those stable platforms, we're looking for AI opportunities to really streamline. One of the areas we're probably most excited about is we've put in some new communications tools at Casella over the last six months. Albeit, with a couple of small bumps in the road, but we're now at a point where the team can start to look at some of the automation features and AI features in that system to help us gain efficiencies. And I think we look to process first, and then there's a lot of automation to come into the future. But I think the next year plus for us is about these foundational changes to systems and process innovation, and then we'll look to start to reap a lot of efficiency from that point forward.

Interesting. Okay. Thank you guys very much. And, again, congrats, John. Thank you.

Thank you. And our next question comes from Trevor Romeo of William Blair. Your line is open.

Good morning, guys. Thanks for taking the questions. And I'll add my sincere congratulations to John and Ned here. Wanted to maybe pick up on a comment that I think Brad made during the prepared script, which was if I heard it right, I think 20% growth in internalized landfill volumes this quarter. I think that sounds like a pretty good number. You know, you've talked about some of your investments in trucking logistics, obviously, McKean before. Maybe you could just speak to what kind of success you saw this quarter and looking forward, you know, where you sit in the path of that internalization opportunity, how much room you have left?

Yeah. Thanks for the question. It's a great point Brad made, and a big focus of ours over the last twelve plus months as a management team. Beyond just operating synergies and automation and back-office synergies when we buy businesses, but many times, we have a great opportunity over the course of maybe even two to three years to internalize volumes. Many of the companies we buy might have longer-term contracts in place for third-party sites. And as they roll off, we look to optimize the system, get the right transfer assets in place, the right transportation assets in place, and see where it might fit in our landfill portfolio. So you're really seeing some of that harvesting happening from acquisitions that have been completed over the last couple of years, and it's great value creation and very large and accretive as well. And something we'll continue to look to into the future.

Great. Thanks, Ned. And then maybe just a question. Appreciate your comments already kind of on the Mid-Atlantic integration, but just maybe on M&A and integration broadly, I think we've gotten this question a couple of times. Maybe you could talk about your sort of your corporate development and integration team as you've scaled as an organization and done more M&A over time? Have you grown the size of those teams or made any changes to the way they operate? And is there anything you're learning from the current integration you can apply going forward to be more, more effective?

Yeah. Excellent question. Thank you. We've done quite a bit of work there. If you flashback several years ago, we were very much decentralized in our approach from a diligence and integration standpoint with acquisitions. We've built a great team. We have several amazing members of the team both from sourcing to diligence to integration work. We have a standardized collaborative tool that we use that helps us to manage that process. And we really started to recognize a lot of best practices, ways to manage risk, ways to gain efficiency in that process as we've stood up the standalone team over the last several years. And it's increased our capability to complete deals and complete them successfully. And that's really the most important thing. John had talked a little bit about where he plans to be spending time, but one of the most important places is on that front end of the acquisition pipeline. John is just so well regarded and respected throughout the industry. And, you know, he'll be focused a lot of time on that front end of the pipeline, and then we've got this amazing team stood up right behind him to focus on the diligence and integration efforts.

Okay. Thanks so much. I'll turn it over. Congrats again. Thank you.

Thank you. And our next question comes from Adam Bubes of Goldman Sachs. Your line is open.

Hi, good morning. Congrats, John, what a run. And congrats, Ned as well.

Thank you. I think you said core margins were up 70 basis points. 60 basis points related to landfill volumes. So that leaves around 10 basis points of sort of underlying margin expansion between the core business, including Mid-Atlantic. How do the Mid-Atlantic margins compare to this time versus last year and what sort of the true underlying solid waste margin expansion excluding that Mid-Atlantic headwind?

Yeah. It's Brad. The rate of change on the margins kind of year-over-year is really encouraging. So last year, the Mid-Atlantic on a year-over-year margin comparative basis, a headwind of about 100 basis points. You know, this quarter, it was 10 basis points. So we're really seeing things turn around there. I mean, we're not as you've heard us talk about, we're not nearly where we want to be and where we will be. But it's getting much better month after month. We're going to see delivery of, you know, additional trucks to the end of the year, which is going to be helpful as well. A lot of good things happening there.

Terrific. And thanks for the framework on 2026. I think you spoke about 25 to 50 basis points of margin expansion. It sounds like Mid-Atlantic is actually going to be a tailwind next year, not a headwind. So can you just help us think about the building blocks maybe between, you know, Mid-Atlantic, the core business ex Mid-Atlantic, and then M&A that sort of leads you to that 25 to 50 basis points?

Yeah. I mean, I think it's fair to think about the Mid-Atlantic next year as certainly a tailwind on a year-over-year basis from EBITDA margins. You know, as now, I'll hesitate from getting into too much detail because, you know, as Ned alluded to, we're just now in our budget process really drilling into the plan for only the Mid-Atlantic, but the rest of the business. So, you know, it's difficult to parse it real specifically, but we feel good about 25 to 50 basis points of overall margin improvement and Mid-Atlantic being a contributor to that.

And then last one for me. I might have missed it in the prepared remarks, but what was landfill pricing in the quarter? And rail-served capacity in the Northeast has had some impact on landfill pricing just based on ebbs and flows of capacity in the market. Is there scope for reacceleration in pricing off the current rate, and how do you think about timing of that?

Yep. So price in the landfills on a third-party basis was 3% same store. So that's same customer, same time. So, you know, it's a bit softer than it has been in years in the past. I think rail capacity entering the market is certainly part of that.

Great. Thanks so much. Thank you.

And our next question comes from James Schumm of TD Cowen. Your line is open.

Hey, good morning, guys. Nice quarter.

Morning. Good morning. Thank you.

Can you just help give us a little bit more color on the timeline for the Mid-Atlantic billing system? Like, when do you think you're going to have this fully resolved because my understanding is, like, you can't really reap the pricing benefits really until you get it all on one system and then figure out where you can price. Right? So what's the timeline? Is it the end of the year? Is it January? Is it Q1? Or is it later than that? How should we be thinking about that?

Yeah. We're about 50% through all of the customers today. And actually, next week, we'll get through a big, big chunk as well. And right now, conservatively, the Q1, it could be a little bit before that. So the system's work should be done by early Q1, kind of January, February. And then we've got a little bit more work to move on to our latest customer payment portal. And that will be the last step. And at that point in time, that entire business unit in the Mid-Atlantic will be on the most modern version of Casella's billing system and payment portal, and it'll allow us to do many things. One, as you said, we'll be able to use our tried and true profitability tools for customers, which give us more visibility in where we focus, and to ensure that we're really yielding the returns that we need to on each customer. But we'll also be able to really rapidly start to gain synergies in that business. So since certain of these businesses have been left on their own original billing systems, we haven't been able to consolidate across the eight plus acquisitions we've done in the last year. So we'll be able to rapidly consolidate routes, take trucks off the road, and at the same time, we have a lot of automated trucks showing up into that region, which accelerates this even further. So we laid out a conservative number for next year. But it will gain momentum. It's a flywheel that will gain momentum. We've done this many times before. Our team is very, very good at this. This is not recreating anything. There's not technology risk. It's more just a matter of we got to get the customers loaded into the system. We've got to do some quality control work, get them onto the payment portal, and then Sean and his team get to work and start consolidating these businesses through the '26.

Okay. Great. Thanks for all that color, Ned. And then I was just curious, were there any notable one-time unusual revenue benefits this quarter?

No. No.

Okay. Because the guidance, if I'm doing my math correctly, which may not be the case, it seems to be implying Q4 revenues of about $467 million. That seems to imply somewhat of a sharp drop-off in your annual growth rate, and just I know there's some seasonality in the fourth quarter, but it just seems like a fairly large slowdown relative to your historical performance. So I didn't know if that's conservatism or if there I don't know if is there anything to say there.

We start to comp a few acquisitions that were made in '24. So I don't know if that's part of what you're seeing. If you parse out organic and inorganic growth, that might be an area Brian can connect with you offline and walk through that.

Yeah. Typically, what you would see, it's hard to tell exactly the seasonality because you have acquisitions that are coming on that weren't there in the prior fourth quarter. This year, that's a little bit different because, yeah, in that pointed out Royal, for example. We closed Royal 10/01/2024. Exactly. So Royal is in the numbers on a comparable year-over-year basis in Q4. So a little more of the seasonality is exposed, if you will.

Yep. Makes sense. Okay. I'll turn it back. Thanks a lot for the answers, guys. Thank you.

Thank you. And our next question comes from William Griffin of Barclays. Your line is open.

Hey, good morning, everybody. I appreciate the time. And good to hear, you know, progress on the Mid-Atlantic integration continues here. Appreciate all the color that you've given on the billing system implementation so far. Just curious if you have sort of a preliminary view or look on how we could expect pricing in that region to evolve or potentially accelerate in 2026 as you kind of get this system fully implemented?

You know, it may be a little early to weigh in on that, and I don't mean to say that in a manner well. But I think we got to get into data. So we've been doing more just blanket-based reasonable price increases across this customer base. And the way we've run our business for many years is really detailed analytics. We understand each customer if we're making an adequate return. Making sure we're covering off the cost structure with that margin spread. And then trying to have dynamic features in place, like our energy and environmental fee, to pass fuel risk back to the customer and environmental risk. We use our SRA fee to pass back recycling commodity risk. Neither of those floating fees are in place predominantly across that market. We have been introducing with new customers, so we've got work there to get the floating fees in place to look at risk. And really, as I said a minute ago, we've got to get into our tried and true tools. We got to look at profitability, and there's a lot of work as we're integrating these routes to understand the true cost as well. Right now, the cost structure is a bit higher than it should be. So as that automation comes to the street, as we get consolidation of routes, this will be an iterative process into 2026. It may be several years until this entire picture is put together from pricing, profitability, and fees into that market. It's not something we're just going to pull a lever, you know, in Q2 and move everything.

And certainly, backward-looking, we've seen the Mid-Atlantic has been somewhat of a drag on our overall pricing stat. So, you know, without talking about specifically what we think the opportunity is going forward, we do know that our inability to put pricing forward in a lot of cases has been somewhat of a drag.

Got it. And then just have two quicker ones here, so I'll combine them. I guess, one, I noticed it sounds like the timing of the Mountain State waste closure was pushed out from Q4 to Q1. Just wondering if there's anything to note there. And then any impact on truck deliveries related to $2.32 tariffs? Sounds like those are on track, but just wanted to check.

There's nothing of note. It's just a normal regulatory process for Mountain States. There's really nothing to note there. And then what was the second part? And from tariffs?

Oh, yeah.

We're the majority of our equipment trucks, etcetera, all manufactured in North America. So we don't anticipate any particular impacts there at all. Yeah. We're a big Mac. At Kenworth.

Company. That's our two primary brands. If we've got some Peterbilts, you know, they're very limited in scope. And I know Peterbilt's looking to move capacity to the US manufacturing-wise, but that's not a primary brand for us. You know, the one as Sean said, you know, we really have worked hard over the last standardize our brand around two chassis, and they're both American-made. So we don't expect an impact there. Across the rest of the supply chain, we really haven't seen much if anything. There's a few very limited tariffs we've seen here or there. We've been tracking them very closely through our procurement team and pushing back and making sure if it does come through an invoice, there's proper documentation, and we understand if it's real or not.

Yeah. The other piece too is that the second half of this year, the disruption in the supply chain in terms of delivery of trucks has really eased, and we're now getting all of the equipment that we need and then some. So that whole issue has really gone away in the second half of the year. So we can get whatever we need from an equipment perspective, particularly trucks.

Alright. I appreciate that. John, Ned, congrats to you both, and happy Halloween, everybody.

Thank you.

And our next question comes from Shlomo Rosenbaum of Stifel. Your line is open.

Hi, thank you very much for taking my question. I just wanted to step back a little bit with the Mid-Atlantic, and it looks real great that the EBITDA margin drag going down from 85 basis points last quarter to 10 basis points this quarter should be done within whatever it is, five, six months. I just want to ask with, you know, having gone through, you know, some hiccups over there, and really winning into the acquisition kind of a stride. Where do you feel you are in terms of being able to integrate these deals? Like, if big deals come in, what would you say would be some, you know, key things that you could step back and say, hey, our execution is going to be better in the future versus what we saw now. Just, you know, anytime it goes through things, it's a running process. It's an iterative process. And do you feel you can do you know, your capabilities have increased over the last, you know, year because of that, you know, not within the way that you've built the team, but just in terms of, you know, on the ground capabilities and the cadence of the way things should go.

Yeah. You know, there's two unique things in the Mid-Atlantic. One, we bought assets extracted out of another company. And that's different. We've done that one other time in the past and had wild success. This time, it's a little bit more complicated with the transition services agreement and lack of visibility. But more importantly, John and I stuck by a certain rule for a lot of years in the company. Every company we bought, we put onto our billing system as fast as possible. And in the Mid-Atlantic, you know, we made a bad decision. I mean, that's what it is. We left it on its billing system. We left it alone, and we realized we just didn't have enough visibility. And at the time, it was the right decision because we really wanted to see what the AMCS platform could do and to see if there was something that we could leverage other parts of Casella. But it turned out to not have a lot of features that we need to run an effective business from profitability analytics to ease of extracting data and analysis. So we made the pivot decision in, you know, 2025 to get onto our core tried and true system, and we've been running fast. And, you know, you got to check things out sometimes. We made a tiny, I guess, you know, decision back then that that's turned into something a little bit harder, but we're back to our core basics, which is get every acquisition onto the Casella tried and true system as fast as possible.

I think the other aspect of that is that we also really have come out of that even stronger. And that's really developed over the last probably six months, the entire business development team, the integration team, more development there, looking at where we can strengthen those teams for the future. So I think that there's no question that there's some lessons learned coming out of that. But clearly, we're really excited about it. I think at this point in time too, another factor is building bench strength. We're doing that internally now from an HR standpoint. And we've got 10 Casella people in the Mid-Atlantic at this point in time. So we're very confident about where we're going in the Mid-Atlantic. We're going to close the gap in terms of margins. We're going to do everything that we set out to do. And, yeah, there's some lessons learned. No question about it. We need to have a bigger bench strength to support the acquisition opportunities that we have. We've learned that. Doing it. So you know, Ned's right. There are a few lessons learned. For sure.

Yeah. But it's interesting. I mean, we've done 80 plus acquisitions in the last five years. Five plus years. And you know, we've yielded the synergies, hit our models, in every case. You know, once or twice, it takes a little bit longer, but we do a really good job. We do a postmortem on every deal. We measure ourselves. We hold ourselves accountable. We learn from it. And it's actually something I would say is a real core strength of our team. And there should be a lot of investor confidence around this part of our growth strategy going forward. It's something we're good at and will continue to drive a lot of value.

Okay. Great. And then just going over those two landfills for your deep in the permitting, you know, re-permitting process, how confident are you on that to get over the finish line? We're just hearing so many stories about, like, nightmares in terms of getting these things done. So I just want to ask.

No. I think so. I think so. We feel very confident. I mean, I think that there's anyone who's developed capacity in the Northeast of Casella over the last twenty-five years. I think our record goes without saying. We're very confident in getting through the process. I think the biggest challenge with our Highland facility was making sure that we got through the host community. We're through that, obviously, and now we're working on the DEC permitting. Expect to, as Ned said, probably in the next few quarters, expect to have that permit in place. And the same thing with Hakes as well. So, you know, the Northeast is a challenge from a disposal capacity standpoint. It continues to be a challenge. It's not easy. I certainly don't want to give you that impression, but we're very confident that we're going to have success there.

Yeah. And this is a big deal too. Bringing on this much new disposal capacity in the Northeast versus having to rail a thousand miles away or 2,000 miles away is a really big value creation point for shareholders. So you know, we're excited to get through these processes. We're down to the last throats. And we're, as John said, we're very confident. Can't predict the exact month or date, but we're close.

And can you just talk a little bit as the capacity comes on, does that increase your ability to internalize? Is it the fact that other landfills in the region are running out of capacity? Like, when would we start to see that, you know, start to increasingly add value to your operations?

I think that it's probably, you know, '26, twenty-seven, you know, time frame, I think. But a lot of that depends on how much disposal capacity comes out of the Northeast market. You know, right now, we have Ontario coming out at the '28. It could change. There's also the potential of significantly more capacity closing in the Northeast as well. So when those events happen, we're going to be in a position with the capacity that we have to really take advantage of it. So you know, it's very hard to predict when that's going to happen, but you know, all indications are that we're going to be losing capacity in the Northeast. Yeah. Gaining capacity. And with the exception of what capacity we're putting in place, going to be losing capacity in the Northeast.

And within very short distance of Highland and Hakes, there are three sites that will be closing in the next two to three years from the Buffalo market to the Finger Lakes to the Greater Albany market. That whole tier of New York is losing significant landfill capacity over the next several years as we're ramping up these sites. So our timing should be good. It's not a '26 gain, but it'll be a great organic growth engine for us over the next couple of years.

Great. Thank you.

Thank you. And our next question comes from Tony Bancroft of Gabelli Funds. Your line is open.

Good morning, gentlemen. Thank you. And John, congratulations on all your successes. You did a wonderful job and built an amazing company, and that could be more well-deserved. My question is for more 30,000 feet bigger picture, you know, as is this given all the surging power needs for AI data centers, you know, in the Northeast grid. How do you see Casella's, you know, landfill to gas energy capacity? Again, this is sort of longer term. I understand this is a small portion of the business, but bigger picture, just sort of like your, you know, you figured out the declining capacity in the Northeast longer term. Yeah. How do you see that impacting your landfills with, you know, energy demand and also on the waste side, you know, with the E&P waste, you know, in the Northeast as well. Wanna get your longer-term view.

Sure. I mean, I think that we've taken a different tack, you know, from a strategic standpoint in terms of the, you know, the RNG facilities where, you know, we are basically selling our gas to RNG developers. And really have taken a much different perspective about the long-term volatility of that aspect of the business. So we're going to be steady stream in terms of the value that we create. The capital investment, whether it's a $35 or $50 million investment, is really being invested by third parties. We're simply selling the gas. So that's not going to really have a significant positive or negative to Casella on a go-forward basis, Tony.

You know, today, it's about 1% of our EBITDA. Our energy sales, both in landfill gas energy and in the RNG. As John said, we made a thousand percent the right strategic decision by not developing those facilities on our own. But we've got three new facilities coming online in the next few months. Our North Country facility in New Hampshire, we have a third party who's ramping an RNG facility there. And we have two Waga facilities coming online in New York, Highland and Chemung. We haven't modeled much for 2026 impacts for these. But they could become more material. And, you know, there's a lot of really high-quality methane coming off those landfills and, you know, definitely be something we'll keep visibility on it. It'd be very accretive, 100% margin. So it's, you know, exactly what you want with no investment. So it'd be exciting to see those streams ramp up.

Great job, gents. Thanks so much.

Thank you. Thank you, Tony.

Thank you. And our next question comes from Stephanie Moore of Jefferies. Your line is open.

Good morning. I wanted to follow-up on McKean. I know that you've said that you know, you did have some plans to add a transfer station and do a little bit of building at that site. Just to move forward with that asset. If you could talk a little bit about, you know, any updates in terms of that building now, timing of completion, and then just general overall thoughts in terms of timing of those investments and then, you know, the ability to start to really push volumes through here over the next, you know, twenty-four, thirty-six months, etcetera. Thank you.

Sure. I think that, you know, first of all, the facility is up and operational. We're, you know, the entire team out there has gotten some great experience over the last, you know, six months or so in terms of handling different types of waste to the facility. We have not aggressively tried to move waste to the facility. We're looking at internalizing some of our own rail served out of our Holyoke facility. We're looking also at our Willimantic. But it's probably, you know, Q2 2026 when we'll begin to see a little bit more activity. But, again, a lot of it depends on what happens from a disposal capacity standpoint, how much capacity comes out of the market and when. We also, you know, recognize that our facility at McKean also is the closest facility to the waste generation in the Northeast as well from a rail perspective. So our turn times are going to be good compared to some of the other alternatives that are further away. So excited about it. But, again, it's a longer-term, significant impact on a positive basis to the company.

Great. Well, I appreciate all the color today. Thank you, guys. Have a good weekend.

Thank you. Bye. You too.

Thank you. And as a reminder, if you have a question, please press 11. And our next question comes from James Schumm. It's a follow-up from TD Cowen.

Hey. Thanks, guys. Stephanie just asked my question on McKean, but maybe coming at it from a different angle. So like, I know you've been sort of using this or reserving this as a strategic backup for Northeast volumes. But I believe it's your largest permitted volume landfill. So would you consider acquiring collection operations in Western PA or Cleveland and send those tons there? Or could you use McKean's Rail Access to serve your Mid-Atlantic operations?

Yeah. Thanks for the question. So Pennsylvania is a state with a lot of landfills. So you got to really be pretty local to a landfill from a truck standpoint to have it make sense to bring in volumes. And that's why it's been a slow site for the last decade as we brought in really just proximate waste into that site from the surrounding communities in Pennsylvania. As we look at an opportunity to truck it further in Pennsylvania, it gets complicated quickly because you can't get overweight permits in Pennsylvania over the road. So you're really only hauling, like, 20, 22 tons in a 53-foot trailer. So it makes it a little more costly. That's why the rail side of this is exciting. We continue to look at opportunities both in the Northeast and in the Mid-Atlantic region for rail-served transfer stations or even development opportunities to get those direct linkages. So that will be something we'll continue to do into the future. It is more capital intensive to move waste via rail than via truck. So it's always our preference to, you know, move it via truck versus rail. But if you can have the right linkage, the right long-term contract, or connection to a Casella asset, that could be a long-term value creator for shareholders.

Okay. Great. Thank you.

Thank you. I'm showing no further questions at this time. I'd like to turn it back to John Casella for closing remarks.

I'd like to thank everyone for joining this morning. Ned and Brad look forward to discussing our fourth quarter 2025 earnings and our 2026 guidance with everyone in February. Have a great day. Have a great Halloween.

And thanks, everyone.