Casella Waste Systems, Inc. Announces Second Quarter 2023 Results and Updates Fiscal Year 2023 Guidance

• Solid second quarter financial results, driven by the Company's operating efficiency programs and execution against its growth strategy.
• The Company raised its revenue, Adjusted EBITDA, net cash provided by operating activities, and Adjusted Free Cash Flow guidance ranges and updated its net income guidance range for the fiscal year ending December 31, 2023 ("fiscal year 2023").

RUTLAND, Vt., July 27, 2023 (GLOBE NEWSWIRE) -- Casella Waste Systems, Inc. (NASDAQ: CWST), a regional solid waste, recycling and resource management services company, today reported its financial results for the three and six month periods ended June 30, 2023.

Highlights for the Three Months and Year-to-Date Period Ended June 30, 2023:

• Revenues were $289.6 million for the quarter, up $6.0 million, or up 2.1%, from the same period in 2022.
• Overall solid waste pricing for the quarter was up 7.7% from the same period in 2022, primarily a result of 8.2% higher collection pricing and 7.1% higher disposal pricing.
• Net income was $5.5 million for the quarter, down $(12.3) million, or down (69.2)%, from the same period in 2022. Net income was negatively impacted by several non-recurring items in the quarter, including a $6.2 million legal settlement charge, an $8.2 million loss from termination of bridge financing, and other one-time costs described in the Adjusted Net Income reconciliation.
• Adjusted EBITDA, a non-GAAP measure, was $72.2 million for the quarter, up $3.7 million, or up 5.5%, from the same period in 2022.
• Net cash provided by operating activities was $83.2 million for the year-to-date period, down $(9.1) million, or down (9.8)%, from the same period in 2022.
• Adjusted Free Cash Flow, a non-GAAP measure, was $49.0 million for the year-to-date period, up $2.8 million, or up 6.0%, from the same period in 2022.
• The Company closed on the acquisition of select operations from GFL Environmental Inc. ("GFL") on June 30, 2023, and signed an asset purchase agreement on June 9, 2023 to acquire the assets of Consolidated Waste Services, LLC and its affiliates (dba “Twin Bridges”).
  

"We executed well in the second quarter against our operating initiatives and growth strategies, which helped to drive meaningful Adjusted EBITDA growth and margin expansion, despite significant recycling headwinds with commodity prices down 53% year-over-year,” said John W. Casella, Chairman and CEO of Casella Waste Systems, Inc.

“This is an exciting period of growth for our organization," Casella said. "As announced on June 30th, we closed on the acquisition of select operations from GFL, which is a great opportunity to expand our footprint into the Mid-Atlantic and provides a new geographic platform for long-term growth. We are off to a great start servicing our new customers in Pennsylvania, Delaware, and Maryland and would like to once again welcome our new Casella team members onboard. We also look forward to additional growth opportunities, including the previously announced pending acquisition of Twin Bridges."

"The business is performing well as we continue to focus on our core operating strategies," Casella said. "Our ongoing investments in adding automated trucks to our fleet, implementing route optimization software, and installing onboard computers are driving value through safety and operating efficiencies. In addition, pricing has helped to offset cost inflation, with collection pricing up 8.2% and overall solid waste pricing up 7.7% in the second quarter. We expect the strength in our solid waste line-of-business to continue over the remainder of this year and help drive consolidated margin expansion for the year."

"Upgrades at our Boston material recovery facility are now complete and the operation is expected to contribute positively to overall results in the second half of this year. We invested approximately $20 million into new, state-of-the-art recycling processing equipment and technology that aims to enhance material recovery and quality, while enhancing our safety profile and increasing throughput," Casella said.

For the quarter, revenues were $289.6 million, up $6.0 million, or up 2.1%, from the same period in 2022, with revenue growth mainly driven by: positive collection and disposal pricing; the roll-over impact from acquisitions closed in prior periods along with a newly closed acquisition; and higher sustainability recycling adjustment fees; partially offset by lower commodity prices and lower solid waste volumes.

Net income was $5.5 million for the quarter, or $0.10 per diluted common share, down $(12.3) million, or down (69.2)%, as compared to net income of $17.8 million, or $0.34 per diluted common share, for the same period in 2022. Adjusted Net Income, a non-GAAP measure, was $18.8 million for the quarter, or $0.36 Adjusted Diluted Earnings Per Common Share, a non-GAAP measure, up $0.2 million, or up 1.3%, as compared to Adjusted Net Income of $18.6 million, or $0.36 Adjusted Diluted Earnings Per Common Share, for the same period in 2022.

The current quarter included several non-recurring items including a $6.2 million legal settlement charge in connection with the settlement of a class action litigation matter relating to the Fair Labor Standards Act of 1938 ("FLSA") and state wage and hours laws, an $8.2 million loss from termination of bridge financing for the secured and unsecured bridge loans associated with the financings of the acquisition of select operations from GFL and the pending acquisition of Twin Bridges, and other one-time costs described in the Adjusted Net Income reconciliation.

Operating income was $22.6 million for the quarter, down $(9.1) million, or down (28.7)%, from the same period in 2022. Adjusted EBITDA was $72.2 million for the quarter, up $3.7 million, or up 5.5%, from the same period in 2022.

For the year-to-date period, revenues were $552.2 million, up $34.5 million, or up 6.7%, from the same period in 2022. Net income was $9.0 million, or $0.17 per diluted common share, for the year-to-date period, as compared to net income of $22.0 million, or $0.43 per diluted common share, for the same period in 2022. Adjusted Net Income was $24.1 million, or $0.46 Adjusted Diluted Earnings Per Common Share, for the year-to-date period, as compared to Adjusted Net Income of $24.4 million, or $0.47 Adjusted Diluted Earnings Per Common Share, for the same period in 2022.

Operating income was $32.9 million for the year-to-date period, down $(9.0) million from the same period in 2022. Adjusted EBITDA was $122.8 million for the year-to-date period, up $8.8 million from the same period in 2022, or up 7.8% from the same period in 2022.

Please refer to "Non-GAAP Performance Measures" included in "Reconciliation of Certain Non-GAAP Measures" below for additional information and reconciliations of Adjusted Net Income, Adjusted Diluted Earnings Per Common Share, Adjusted EBITDA and other non-GAAP performance measures to their most directly comparable GAAP measures.

Net cash provided by operating activities was $83.2 million for the year-to-date period, as compared to $92.3 million for the same period in 2022, with the year-over-year variance mainly driven by working capital timing differences. Adjusted Free Cash Flow was $49.0 million for the year-to-date period, as compared to $46.2 million for the same period in 2022.

Please refer to "Non-GAAP Liquidity Measures" included in "Reconciliation of Certain Non-GAAP Measures" below for additional information and reconciliation of Adjusted Free Cash Flow to its most directly comparable GAAP measure.

Fiscal Year 2023 Outlook

"Given the expected contribution from acquisitions closed through the first half of this year and the expectation that our solid waste operations continue to perform at budget during the remainder of the year, we are updating our fiscal year 2023 guidance ranges that were first announced in mid-February and reaffirmed in April," Casella said. "These updated guidance ranges now include the contribution from the acquisition of select operations from GFL, which closed on June 30, 2023, and assume a stable economic environment through the remainder of the year. These guidance ranges do not include the potential impact from the pending acquisition of Twin Bridges."

The Company raised guidance for fiscal year 2023 by estimating results in the following ranges:

• Revenues between $1.240 billion and $1.265 billion (raised from a range of $1.150 billion to $1.180 billion);
• Adjusted EBITDA between $289 million and $295 million (raised from a range of $266 million to $272 million);
• Net cash provided by operating activities between $231 million and $237 million (raised from a range of $227 million to $233 million); and
• Adjusted Free Cash Flow between $123 million and $129 million (raised from a range of $119 million to $125 million).

The Company updated certain guidance for fiscal year 2023 by estimating results in the following range:

• Net income between $41 million and $47 million (updated from a range of $56 million to $62 million).
  

Adjusted EBITDA and Adjusted Free Cash Flow related to fiscal year 2023 are described in the Reconciliation of Fiscal Year 2023 Outlook Non-GAAP Measures section of this press release. Net income and Net cash provided by operating activities are provided as the most directly comparable GAAP measures to Adjusted EBITDA and Adjusted Free Cash Flow, respectively, however these forward-looking estimates for fiscal year 2023 do not contemplate any unanticipated or non-recurring impacts.

Conference call to discuss quarter

The Company will host a conference call to discuss these results on Friday, July 28, 2023 at 10:00 a.m. Eastern Time. Individuals interested in participating in the call should register for the call by clicking here to obtain a dial in number and unique passcode. Alternatively upon registration, the website linked above provides an option for the conference provider to call the registrant's phone line, enabling participation on the call.

The call will also be webcast; to listen, participants should visit the company’s website at http://ir.casella.com and follow the appropriate link to the webcast. A replay of the call will be available on the Company's website and accessible using the same link.

About Casella Waste Systems, Inc.

Casella Waste Systems, Inc., headquartered in Rutland, Vermont, provides resource management expertise and services to residential, commercial, municipal, institutional and industrial customers, primarily in the areas of solid waste collection and disposal, transfer, recycling and organics services in the eastern United States. For further information, investors contact Jason Mead, Senior Vice President of Finance and Treasurer at (802) 772-2293; media contact Jeff Weld, Director of Communications at (802) 772-2234; or visit the Company’s website at http://www.casella.com.

Safe Harbor Statement

Certain matters discussed in this press release, including, but not limited to, the statements regarding our intentions, beliefs or current expectations concerning, among other things, our financial performance; financial condition; operations and services; prospects; growth; strategies; anticipated impacts from future or completed acquisitions; and guidance for fiscal year 2023, are “forward-looking statements” intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such by the context of the statements, including words such as “believe,” “expect,” “anticipate,” “plan,” “may,” “would,” “intend,” “estimate,” "will," “guidance” and other similar expressions, whether in the negative or affirmative. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates and management’s beliefs and assumptions. The Company cannot guarantee that it actually will achieve the financial results, plans, intentions, expectations or guidance disclosed in the forward-looking statements made. Such forward-looking statements, and all phases of the Company's operations, involve a number of risks and uncertainties, any one or more of which could cause actual results to differ materially from those described in its forward-looking statements.

Such risks and uncertainties include or relate to, among other things, the following: the Company may be unable to adequately increase prices or drive operating efficiencies to adequately offset increased costs and inflationary pressures, including increased fuel prices and wages; it is difficult to determine the timing or future impact of a sustained economic slowdown that could negatively affect our operations and financial results; the closure of the Subtitle D landfill located in Southbridge, Massachusetts ("Southbridge Landfill") could result in material unexpected costs; recent changes in solid waste laws of the State of Maine may result in lower revenues or higher operating costs; adverse weather conditions may negatively impact the Company's revenues and its operating margin; the Company may be unable to increase volumes at its landfills or improve its route profitability; the Company may be unable to reduce costs or increase pricing or volumes sufficiently to achieve estimated Adjusted EBITDA and other targets; landfill operations and permit status may be affected by factors outside the Company's control; the Company may be required to incur capital expenditures in excess of its estimates; the Company's insurance coverage and self-insurance reserves may be inadequate to cover all of its significant risk exposures; fluctuations in energy pricing or the commodity pricing of its recyclables may make it more difficult for the Company to predict its results of operations or meet its estimates; the Company may be unable to achieve its acquisition or development targets on favorable pricing or at all, including due to the failure to satisfy all closing conditions and to receive required regulatory approvals that may prevent closing of any announced transaction; the Company may not be able to successfully integrate and recognize the expected financial benefits from acquired businesses, including the completed acquisition of select solid waste operations from GFL; and the Company may incur environmental charges or asset impairments in the future.

There are a number of other important risks and uncertainties that could cause the Company's actual results to differ materially from those indicated by such forward-looking statements. These additional risks and uncertainties include, without limitation, those detailed in Item 1A. “Risk Factors” in the Company's most recently filed Form 10-K and in other filings that the Company may make with the Securities and Exchange Commission in the future.

The Company undertakes no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.

Investors:

Jason Mead
Senior Vice President of Finance & Treasurer
(802) 772-2293

Media:

Jeff Weld
Director of Communications
(802) 772-2234
http://www.casella.com

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF CERTAIN NON-GAAP MEASURES
(In thousands)

Non-GAAP Performance Measures

In addition to disclosing financial results prepared in accordance with generally accepted accounting principles in the United States ("GAAP"), the Company also presents non-GAAP performance measures such as Adjusted EBITDA, Adjusted EBITDA as a percentage of revenues, Adjusted Operating Income, Adjusted Operating Income as a percentage of revenues, Adjusted Net Income and Adjusted Diluted Earnings Per Common Share that provide an understanding of operational performance because it considers them important supplemental measures of the Company's performance that are frequently used by securities analysts, investors and other interested parties in the evaluation of the Company's results. The Company also believes that identifying the impact of certain items as adjustments provides more transparency and comparability across periods. Management uses these non-GAAP performance measures to further understand its “core operating performance” and believes its “core operating performance” is helpful in understanding its ongoing performance in the ordinary course of operations. The Company believes that providing such non-GAAP performance measures to investors, in addition to corresponding income statement measures, affords investors the benefit of viewing the Company’s performance using the same financial metrics that the management team uses in making many key decisions and understanding how the core business and its results of operations has performed. The tables below set forth such performance measures on an adjusted basis to exclude such items:

Non-GAAP Liquidity Measures

In addition to disclosing financial results prepared in accordance with GAAP, the Company also presents non-GAAP liquidity measures such as Adjusted Free Cash Flow that provide an understanding of the Company's liquidity because it considers them important supplemental measures of its liquidity that are frequently used by securities analysts, investors and other interested parties in the evaluation of the Company's cash flow generation from its core operations that are then available to be deployed for strategic acquisitions, growth investments, development projects, unusual landfill closures, site improvement and remediation, and strengthening the Company’s balance sheet through paying down debt. The Company also believes that identifying the impact of certain items as adjustments provides more transparency and comparability across periods. Management uses non-GAAP liquidity measures to understand the Company’s cash flow provided by operating activities after certain expenditures along with its consolidated net leverage and believes that these measures demonstrate the Company’s ability to execute on its strategic initiatives. The Company believes that providing such non-GAAP liquidity measures to investors, in addition to corresponding cash flow statement measures, affords investors the benefit of viewing the Company’s liquidity using the same financial metrics that the management team uses in making many key decisions and understanding how the core business and cash flow generation has performed. The table below, on an adjusted basis to exclude certain items, sets forth such liquidity measures:

Non-GAAP financial measures are not in accordance with or an alternative for GAAP. Adjusted EBITDA, Adjusted EBITDA as a percentage of revenues, Adjusted Operating Income, Adjusted Operating Income as a percentage of revenues, Adjusted Net Income, Adjusted Diluted Earnings Per Common Share, and Adjusted Free Cash Flow should not be considered in isolation from or as a substitute for financial information presented in accordance with GAAP, and may be different from Adjusted EBITDA, Adjusted EBITDA as a percentage of revenues, Adjusted Operating Income, Adjusted Operating Income as a percentage of revenues, Adjusted Net Income, Adjusted Diluted Earnings Per Common Share, and Adjusted Free Cash Flow presented by other companies.

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED RECONCILIATION OF FISCAL YEAR 2023 OUTLOOK NON-GAAP MEASURES
(In thousands)

Following is a reconciliation of the Company's estimated Adjusted EBITDA(i) from estimated Net income for fiscal year 2023:

Following is a reconciliation of the Company's estimated Adjusted Free Cash Flow(i) from estimated Net cash provided by operating activities for fiscal year 2023:

CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED SUPPLEMENTAL DATA TABLES
(In thousands)

Amounts of total revenues attributable to services provided for the three and six months ended June 30, 2023 and 2022 are as follows:

Components of revenue growth for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 are as follows:

Components of capital expenditures (i) for the three and six months ended June 30, 2023 and 2022 are as follows: