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Casella Waste Systems, Inc. Announces Second Quarter 2022 Results and Raises Fiscal Year 2022 Guidance

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Casella Waste Systems, Inc.
Casella Waste Systems, Inc.
  • Strong second quarter financial results reflected further execution against the Company's operating efficiency programs, a continuation of robust pricing, and growth strategy.

  • The Company raised its revenue, net income, Adjusted EBITDA, net cash provided by operating activities, and Adjusted Free Cash Flow guidance ranges for the fiscal year ending December 31, 2022 ("fiscal year 2022").

  • Consolidated revenues surpass $1.0 billion for the twelve months ended June 30, 2022, marking the first time in the Company's history.

RUTLAND, Vt., July 28, 2022 (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, 2022.

Highlights for the Three Months and Year-to-Date Period Ended June 30, 2022:

  • Revenues were $283.7 million for the quarter, up $67.8 million, or up 31.4%, from the same period in 2021.

  • Overall solid waste pricing for the quarter was up 6.9%, driven by collection pricing, up 7.7%, and disposal pricing, up 5.7%, from the same period in 2021.

  • Net income was $17.8 million for the quarter, up $6.0 million, or up 51.0%, from the same period in 2021.

  • Adjusted EBITDA, a non-GAAP measure, was $68.5 million for the quarter, up $16.4 million, or up 31.4%, from the same period in 2021.

  • Net cash provided by operating activities was $92.3 million for the year-to-date period, up $13.2 million, or up 16.8%, from the same period in 2021.

  • Adjusted Free Cash Flow, a non-GAAP measure, was $46.2 million for the year-to-date period, up $8.6 million, or up 22.9%, from the same period in 2021.

  • Acquired 11 businesses with approximately $47 million of annualized revenues year-to-date.

“We had a strong quarter as our mature operating efficiency and pricing programs helped us to offset the impact of historically high inflation," said John W. Casella, Chairman and CEO of Casella Waste Systems, Inc. "As a result of these efforts, we grew quarterly Adjusted EBITDA by 31.4% year-over-year and increased year-to-date Adjusted Free Cash Flow by 22.9% year-over-year."

"Our core business is performing very well and driving growth, while our execution against our acquisition strategy has resulted in incremental growth," Casella said. "As of the twelve-months ended June 30, 2022, for the first time in the Company’s history, we exceeded $1.0 billion in annual revenues. This is a true milestone for the Company. I am proud of our continued execution and believe we have the right people and processes in place to continue delivering strong results over the remainder of the year."

"As we expected, our fuel cost recovery fees effectively helped to offset the impact of rising fuel costs in the quarter, while resulting in limited margin compression." Casella said. "Further, our nimble efforts to adjust our pricing programs early in the year resulted in a 7.7% increase in collection pricing and a 6.9% increase in solid waste pricing in the second quarter. These actions, combined with a continued focus on driving operating costs out of the business through our key initiatives, underscore our ability to offset the impact of inflation, and we expect margin expansion to build through the rest of the year."

“We continue to grow the business meaningfully through acquisitions. Year-to-date, we have closed on 11 strategic acquisitions with annualized revenues of approximately $47 million and continue to have a robust pipeline of opportunities. We remain disciplined in our approach and have the potential to close on additional deals this fiscal year." Casella said.

For the quarter, revenues were $283.7 million, up $67.8 million, or up 31.4%, from the same period in 2021, with revenue growth mainly driven by: the roll-over impact from acquisitions along with newly closed acquisitions; positive collection and disposal pricing; higher solid waste fuel cost recovery fees; higher solid waste volumes; higher recycled commodity prices; and higher pricing, fees and volumes within our Resource Solutions operating segment.

Net income was $17.8 million for the quarter, or $0.34 per diluted common share, up $6.0 million, or up 51.0%, as compared to net income of $11.8 million, or $0.23 per diluted common share, for the same period in 2021. Adjusted Net Income, a non-GAAP measure, was $18.6 million for the quarter, or $0.36 Adjusted Diluted Earnings Per Common Share, a non-GAAP measure, up $5.6 million, or up 42.9%, as compared to Adjusted Net Income of $13.0 million, or $0.25 Adjusted Diluted Earnings Per Common Share, for the same period in 2021.

Operating income was $31.7 million for the quarter, up $9.8 million, or up 44.5%, from the same period in 2021. Adjusted EBITDA was $68.5 million for the quarter, up $16.4 million, or up 31.4%, from the same period in 2021.

For the year-to-date period, revenues were $517.7 million, up $112.3 million, or up 27.7%, from the same period in 2021. Net income was $22.0 million, or $0.43 per diluted common share, for the year-to-date period, as compared to net income of $16.1 million, or $0.31 per diluted common share, for the same period in 2021. Adjusted Net Income was $24.4 million, or $0.47 Adjusted Diluted Earnings Per Common Share, for the year-to-date period, as compared to Adjusted Net Income of $17.8 million, or $0.35 Adjusted Diluted Earnings Per Common Share, for the same period in 2021.

Operating income was $41.9 million for the year-to-date period, up $7.9 million from the same period in 2021. Adjusted EBITDA was $114.0 million for the year-to-date period, up $23.1 million from the same period in 2021.

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 or other Non-GAAP performance measures to their most directly comparable GAAP measures.

Net cash provided by operating activities was $92.3 million for the year-to-date period, as compared to $79.0 million for the same period in 2021. Adjusted Free Cash Flow was $46.2 million for the year-to-date period, as compared to $37.6 million for the same period in 2021.

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 2022 Outlook

“Given our strong operating execution year-to-date and the expected positive contribution of acquisitions completed this year, we are updating fiscal year 2022 guidance ranges for the second time this year,” Casella said. “These guidance ranges assume a stable economic environment through the remainder of the year, including the current historically high inflationary environment. We expect our pricing, fuel cost recovery fees, and operating efficiency programs to allow us to outpace higher costs and drive margin expansion year-over-year.”

The Company raised guidance for fiscal year 2022 by estimating results in the following ranges:

  • Revenues between $1.035 billion and $1.050 billion (raised from a range of $1.005 billion to $1.020 billion);

  • Net income between $50 million and $54 million (raised from a range of $48 million to $52 million);

  • Adjusted EBITDA between $238 million and $242 million (raised from a range of $232 million to $236 million);

  • Net cash provided by operating activities between $208 million and $212 million (raised from a range of $204 million to $208 million); and

  • Adjusted Free Cash Flow between $106 million and $110 million (raised from a range of $104 million to $108 million).

Adjusted EBITDA and Adjusted Free Cash Flow related to fiscal year 2022 are described in the Reconciliation of Fiscal Year 2022 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 2022 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 29, 2022 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 northeastern United States. For further information, investors contact Jason Mead, Senior Vice President of Finance and Treasurer at (802) 772-2293; media contact Joseph Fusco, Vice President at (802) 772-2247; 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 2022, 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; it is challenging to predict the duration and scope of the novel coronavirus pandemic and its negative effect on the economy, our operations and financial results; the capping and 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; the Company may not be able to successfully integrate acquired businesses; 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:

 

 

Joseph Fusco
Vice President
(802) 772-2247
http://www.casella.com


CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per share data)

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues

$

283,666

 

 

$

215,875

 

 

$

517,693

 

 

$

405,406

 

Operating expenses:

 

 

 

 

 

 

 

Cost of operations

 

186,038

 

 

 

138,553

 

 

 

348,493

 

 

 

265,691

 

General and administration

 

33,562

 

 

 

29,212

 

 

 

63,354

 

 

 

56,343

 

Depreciation and amortization

 

31,150

 

 

 

24,337

 

 

 

60,579

 

 

 

47,019

 

Expense from acquisition activities

 

1,019

 

 

 

1,632

 

 

 

3,062

 

 

 

2,046

 

Southbridge Landfill closure charge

 

178

 

 

 

195

 

 

 

318

 

 

 

352

 

 

 

251,947

 

 

 

193,929

 

 

 

475,806

 

 

 

371,451

 

Operating income

 

31,719

 

 

 

21,946

 

 

 

41,887

 

 

 

33,955

 

Other expense (income):

 

 

 

 

 

 

 

Interest expense, net

 

5,656

 

 

 

5,230

 

 

 

10,821

 

 

 

10,634

 

Other income

 

(312

)

 

 

(510

)

 

 

(457

)

 

 

(648

)

Other expense, net

 

5,344

 

 

 

4,720

 

 

 

10,364

 

 

 

9,986

 

Income before income taxes

 

26,375

 

 

 

17,226

 

 

 

31,523

 

 

 

23,969

 

Provision for income taxes

 

8,579

 

 

 

5,443

 

 

 

9,537

 

 

 

7,875

 

Net income

$

17,796

 

 

$

11,783

 

 

$

21,986

 

 

$

16,094

 

Basic weighted average common shares outstanding

 

51,642

 

 

 

51,366

 

 

 

51,567

 

 

 

51,273

 

Basic earnings per common share

$

0.34

 

 

$

0.23

 

 

$

0.43

 

 

$

0.31

 

Diluted weighted average common shares outstanding

 

51,781

 

 

 

51,546

 

 

 

51,720

 

 

 

51,466

 

Diluted earnings per common share

$

0.34

 

 

$

0.23

 

 

$

0.43

 

 

$

0.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

 

 

June 30,
2022

 

December 31,
2021

 

(Unaudited)

 

 

ASSETS

 

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

39,309

 

$

33,809

Accounts receivable, net of allowance for credit losses

 

108,313

 

 

86,979

Other current assets

 

33,534

 

 

25,691

Total current assets

 

181,156

 

 

146,479

Property, plant and equipment, net of accumulated depreciation and amortization

 

668,381

 

 

644,604

Operating lease right-of-use assets

 

93,253

 

 

93,799

Goodwill

 

262,508

 

 

232,860

Intangible assets, net of accumulated amortization

 

96,762

 

 

93,723

Other non-current assets

 

68,659

 

 

72,115

Total assets

$

1,370,719

 

$

1,283,580

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Current maturities of debt

$

7,636

 

$

9,901

Current operating lease liabilities

 

6,425

 

 

7,307

Accounts payable

 

73,270

 

 

63,086

Other accrued liabilities

 

75,683

 

 

71,899

Total current liabilities

 

163,014

 

 

152,193

Debt, less current portion

 

575,556

 

 

542,503

Operating lease liabilities, less current portion

 

59,027

 

 

56,375

Other long-term liabilities

 

115,556

 

 

110,052

Total stockholders' equity

 

457,566

 

 

422,457

Total liabilities and stockholders' equity

$

1,370,719

 

$

1,283,580

 

 

 

 

 

 


CASELLA WASTE SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

 

 

Six Months Ended
June 30,

 

 

2022

 

 

 

2021

 

Cash Flows from Operating Activities:

 

 

 

Net income

$

21,986

 

 

$

16,094

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation and amortization

 

60,579

 

 

 

47,019

 

Interest accretion on landfill and environmental remediation liabilities

 

4,015

 

 

 

3,962

 

Amortization of debt issuance costs

 

924

 

 

 

1,144

 

Stock-based compensation

 

3,178

 

 

 

6,057

 

Operating lease right-of-use assets expense

 

6,824

 

 

 

6,407

 

Gain on sale of property and equipment

 

(269

)

 

 

(92

)

Non-cash expense from acquisition activities

 

645

 

 

 

1,022

 

Deferred income taxes

 

7,156

 

 

 

7,041

 

Changes in assets and liabilities, net of effects of acquisitions and divestitures

 

(12,787

)

 

 

(9,641

)

    Net cash provided by operating activities

 

92,251

 

 

 

79,013

 

Cash Flows from Investing Activities:

 

 

 

Acquisitions, net of cash acquired

 

(56,250

)

 

 

(5,481

)

Additions to property, plant and equipment

 

(54,868

)

 

 

(56,069

)

Proceeds from sale of property and equipment

 

507

 

 

 

403

 

    Net cash used in investing activities

 

(110,611

)

 

 

(61,147

)

Cash Flows from Financing Activities:

 

 

 

Proceeds from debt borrowings

 

82,200

 

 

 

500

 

Principal payments on debt

 

(55,297

)

 

 

(5,643

)

Payments of debt issuance costs

 

(1,229

)

 

 

 

Payments of contingent consideration

 

(1,000

)

 

 

 

Proceeds from the exercise of share based awards

 

192

 

 

 

112

 

    Net cash provided by (used in) financing activities

 

24,866

 

 

 

(5,031

)

Net increase in cash and cash equivalents

 

6,506

 

 

 

12,835

 

Cash, cash equivalents and restricted cash, beginning of period

 

33,809

 

 

 

154,342

 

Cash, cash equivalents and restricted cash, end of period

$

40,315

 

 

$

167,177

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

Cash interest payments

$

9,648

 

 

$

9,701

 

Cash income tax payments

$

2,092

 

 

$

411

 

Non-current assets obtained through long-term financing obligations

$

4,190

 

 

$

5,894

 

Right-of-use assets obtained in exchange for operating lease obligations

$

5,194

 

 

$

1,251

 

 

 

 

 

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:

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income

$

17,796

 

 

$

11,783

 

 

$

21,986

 

 

$

16,094

 

Net income as a percentage of revenues

 

6.3

%

 

 

5.5

%

 

 

4.2

%

 

 

4.0

%

Provision for income taxes

 

8,579

 

 

 

5,443

 

 

 

9,537

 

 

 

7,875

 

Other income

 

(312

)

 

 

(510

)

 

 

(457

)

 

 

(648

)

Interest expense, net

 

5,656

 

 

 

5,230

 

 

 

10,821

 

 

 

10,634

 

Expense from acquisition activities (i)

 

1,019

 

 

 

1,632

 

 

 

3,062

 

 

 

2,046

 

Southbridge Landfill closure charge (ii)

 

178

 

 

 

195

 

 

 

318

 

 

 

352

 

Depreciation and amortization

 

31,150

 

 

 

24,337

 

 

 

60,579

 

 

 

47,019

 

Depletion of landfill operating lease obligations

 

2,334

 

 

 

1,977

 

 

 

4,147

 

 

 

3,581

 

Interest accretion on landfill and environmental remediation liabilities

 

2,050

 

 

 

2,005

 

 

 

4,015

 

 

 

3,962

 

Adjusted EBITDA

$

68,450

 

 

$

52,092

 

 

$

114,008

 

 

$

90,915

 

Adjusted EBITDA as a percentage of revenues

 

24.1

%

 

 

24.1

%

 

 

22.0

%

 

 

22.4

%

Depreciation and amortization

 

(31,150

)

 

 

(24,337

)

 

 

(60,579

)

 

 

(47,019

)

Depletion of landfill operating lease obligations

 

(2,334

)

 

 

(1,977

)

 

 

(4,147

)

 

 

(3,581

)

Interest accretion on landfill and environmental remediation liabilities

 

(2,050

)

 

 

(2,005

)

 

 

(4,015

)

 

 

(3,962

)

Adjusted Operating Income

$

32,916

 

 

$

23,773

 

 

$

45,267

 

 

$

36,353

 

Adjusted Operating Income as a percentage of revenues

 

11.6

%

 

 

11.0

%

 

 

8.7

%

 

 

9.0

%


 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income

$

17,796

 

 

$

11,783

 

 

$

21,986

 

 

$

16,094

 

Expense from acquisition activities (i)

 

1,019

 

 

 

1,632

 

 

 

3,062

 

 

 

2,046

 

Southbridge Landfill closure charge (ii)

 

178

 

 

 

195

 

 

 

318

 

 

 

352

 

Tax effect (iii)

 

(396

)

 

 

(597

)

 

 

(998

)

 

 

(728

)

Adjusted Net Income

$

18,597

 

 

$

13,013

 

 

$

24,368

 

 

$

17,764

 

 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

51,781

 

 

 

51,546

 

 

 

51,720

 

 

 

51,466

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

$

0.34

 

 

$

0.23

 

 

$

0.43

 

 

$

0.31

 

Expense from acquisition activities (i)

 

0.03

 

 

 

0.03

 

 

 

0.06

 

 

 

0.04

 

Southbridge Landfill closure charge (ii)

 

 

 

 

 

 

 

0.01

 

 

 

0.01

 

Tax effect (iii)

 

(0.01

)

 

 

(0.01

)

 

 

(0.03

)

 

 

(0.01

)

Adjusted Diluted Earnings Per Common Share

$

0.36

 

 

$

0.25

 

 

$

0.47

 

 

$

0.35

 

(i)  Expense from acquisition activities is primarily legal, consulting or other similar costs incurred during the period associated with due diligence and the acquisition and integration of acquired businesses or select development projects as part of the Company’s strategic growth initiative.

(ii)  Southbridge Landfill closure charge are expenses related to the unplanned early closure of the Southbridge Landfill along with associated legal activities. The Company initiated the unplanned, premature closure of the Southbridge Landfill in the fiscal year ended December 31, 2017 due to the significant capital investment required to obtain expansion permits and for future development coupled with an uncertain regulatory environment. The unplanned closure of the Southbridge Landfill reduced the economic useful life of the assets from prior estimates by approximately ten years. The Company expects to incur certain costs through completion of the closure process.

(iii)  Tax effect of the adjustments is an aggregate of the current and deferred tax impact of each adjustment, including the impact to the effective tax rate, current provision and deferred provision. The computation considers all relevant impacts of the adjustments, including available net operating loss carryforwards and the impact on the remaining valuation allowance.

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:        

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net cash provided by operating activities

$

67,537

 

 

$

46,866

 

 

$

92,251

 

 

$

79,013

 

Capital expenditures

 

(41,958

)

 

 

(29,237

)

 

 

(54,868

)

 

 

(56,069

)

Proceeds from sale of property and equipment

 

362

 

 

 

280

 

 

 

507

 

 

 

403

 

Southbridge Landfill closure and Potsdam environmental remediation (i)

 

1,052

 

 

 

2,143

 

 

 

1,954

 

 

 

2,534

 

Cash outlays from acquisition activities (ii)

 

1,310

 

 

 

756

 

 

 

2,416

 

 

 

1,024

 

Post acquisition and development project capital expenditures (iii)

 

1,620

 

 

 

1,231

 

 

 

3,988

 

 

 

4,278

 

Waste USA Landfill phase VI capital expenditures (iv)

 

 

 

 

5,339

 

 

 

 

 

 

6,439

 

Adjusted Free Cash Flow

$

29,923

 

 

$

27,378

 

 

$

46,248

 

 

$

37,622

 

(i)  Southbridge Landfill closure and Potsdam environmental remediation are cash outlays associated with the unplanned closure of the Southbridge Landfill and the Company's portion of costs associated with environmental remediation at Potsdam, which are added back when calculating Adjusted Free Cash Flow due to their non-recurring nature and the significance of the related cash flows. The Company initiated the unplanned closure of the Southbridge Landfill in the fiscal year ended December 31, 2017 and expects to incur cash outlays through completion of the closure and environmental remediation process. The Potsdam site was deemed a Superfund site in 2000 and is not associated with current operations.

(ii)  Cash outlays from acquisition activities are cash outlays for transaction and integration costs relating to specific acquisition transactions and include legal, environmental, valuation and consulting as well as asset, workforce and system integration costs as part of the Company’s strategic growth initiative.

(iii)  Post acquisition and development project capital expenditures are (x) acquisition related capital expenditures that are necessary to optimize strategic synergies associated with integrating newly acquired operations as contemplated by the discounted cash flow return analysis conducted by management as part of the acquisition investment decision; and (y) non-routine development investments that are expected to provide long-term returns. Acquisition related capital expenditures include costs required to achieve initial operating synergies and integrate operations.

(iv)  Waste USA Landfill phase VI capital expenditures related to the Company's landfill in Coventry, Vermont ("Waste USA Landfill") phase VI construction and development that are added back when calculating Adjusted Free Cash Flow due to the specific nature of this investment in the development of long-term infrastructure which is different from landfill construction investments in the normal course of operations. This investment at the Waste USA Landfill is unique because the Company is investing in long-term infrastructure over an estimated four year period that will not yield a positive economic benefit until 2023 and extending over approximately 20 years.

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 2022 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 2022:

 

(Estimated) Fiscal Year
Ending December 31, 2022

Net income

$50,000 - $54,000

Provision for income taxes

22,000

Other income

(1,000)

Interest expense, net

22,000

Expense from acquisition activities

3,000

Southbridge Landfill closure charge

1,000

Depreciation and amortization

126,000

Depletion of landfill operating lease obligations

8,000

Interest accretion on landfill and environmental remediation liabilities

7,000

Adjusted EBITDA

$238,000 - $242,000


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 2022:

 

(Estimated) Fiscal Year
Ending December 31, 2022

Net cash provided by operating activities

$208,000 - $212,000

Capital expenditures

(130,000)

Proceeds from sale of property and equipment

500

Southbridge Landfill closure and Potsdam environmental remediation

5,000

Cash outlays from acquisition activities

2,500

Post acquisition and development project capital expenditures

20,000

Adjusted Free Cash Flow

$106,000 - $110,000

(i)  See footnotes for Non-GAAP Performance Measures and Non-GAAP Liquidity Measures included in the Reconciliation of Certain Non-GAAP Measures for further disclosure over the nature of the various adjustments to estimated Adjusted EBITDA and estimated Adjusted Free Cash Flow.

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, 2022 and 2021 are as follows:

 

Three Months Ended June 30,

 

2022

 

% of Total
Revenues

 

2021

 

% of Total
Revenues

Collection

$

137,261

 

48.4

%

 

$

107,327

 

49.7

%

Disposal

 

60,204

 

21.2

%

 

 

49,173

 

22.8

%

Power generation

 

1,753

 

0.6

%

 

 

1,100

 

0.5

%

Processing

 

2,929

 

1.1

%

 

 

2,310

 

1.1

%

Solid waste operations

 

202,147

 

71.3

%

 

 

159,910

 

74.1

%

Processing

 

33,867

 

11.9

%

 

 

21,031

 

9.7

%

Non-processing

 

47,652

 

16.8

%

 

 

34,934

 

16.2

%

Resource Solutions operations

 

81,519

 

28.7

%

 

 

55,965

 

25.9

%

Total revenues

$

283,666

 

100.0

%

 

$

215,875

 

100.0

%


 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 


2022

 

% of Total
Revenues

 


2021

 

% of Total
Revenues

Collection

$

256,793

 

49.6

%

 

$

204,796

 

50.5

%

Disposal

 

103,356

 

20.0

%

 

 

87,026

 

21.5

%

Power generation

 

4,407

 

0.9

%

 

 

2,403

 

0.6

%

Processing

 

4,749

 

0.8

%

 

 

3,794

 

0.9

%

Solid waste operations

 

369,305

 

71.3

%

 

 

298,019

 

73.5

%

Processing

 

61,263

 

11.9

%

 

 

38,302

 

9.5

%

Non-processing

 

87,125

 

16.8

%

 

 

69,085

 

17.0

%

Resource Solutions operations

 

148,388

 

28.7

%

 

 

107,387

 

26.5

%

Total revenues

$

517,693

 

100.0

%

 

$

405,406

 

100.0

%


Components of revenue growth for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 are as follows:

 

Amount

 

% of
Related
Business

 

% of
Operations

 

% of Total
Company

Solid waste operations:

 

 

 

 

 

 

 

Collection

$

8,289

 

 

7.7

%

 

5.2

%

 

3.8

%

Disposal

 

2,793

 

 

5.7

%

 

1.7

%

 

1.3

%

Solid waste price

 

11,082

 

 

 

 

6.9

%

 

5.1

%

Collection

 

(679

)

 

 

 

(0.4

)%

 

(0.3

)%

Disposal

 

3,049

 

 

 

 

1.9

%

 

1.4

%

Processing

 

235

 

 

 

 

0.1

%

 

0.1

%

Solid waste volume

 

2,605

 

 

 

 

1.6

%

 

1.2

%

Surcharges and other fees

 

8,433

 

 

 

 

5.3

%

 

4.0

%

Commodity price and volume

 

741

 

 

 

 

0.5

%

 

0.3

%

Acquisitions

 

19,378

 

 

 

 

12.1

%

 

9.0

%

Closed operations

 

(2

)

 

 

 

%

 

%

Total solid waste operations

 

42,237

 

 

 

 

26.4

%

 

19.6

%

Resource Solutions operations:

 

 

 

 

 

 

 

Price

 

4,830

 

 

 

 

8.6

%

 

2.2

%

Volume

 

2,833

 

 

 

 

5.1

%

 

1.3

%

Surcharges and other fees

 

667

 

 

 

 

1.2

%

 

0.3

%

Acquisitions

 

17,224

 

 

 

 

30.8

%

 

8.0

%

Total Resource Solutions operations

 

25,554

 

 

 

 

45.7

%

 

11.8

%

Total company

$

67,791

 

 

 

 

 

 

31.4

%


Solid waste internalization rates by region for the three and six months ended June 30, 2022 and 2021 are as follows:

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2022

 

2021

 

2022

 

2021

Eastern region

38.9

%

 

52.6

%

 

39.3

%

 

51.4

%

Western region

59.6

%

 

59.9

%

 

57.9

%

 

60.6

%

Solid waste internalization

49.4

%

 

56.4

%

 

48.6

%

 

56.2

%


Components of capital expenditures (i) for the three and six months ended June 30, 2022 and 2021 are as follows:

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

2022

 

2021

 

2022

 

2021

Growth capital expenditures:

 

 

 

 

 

 

 

Post acquisition and development project

$

1,620

 

$

1,231

 

$

3,988

 

$

4,278

Waste USA Landfill phase VI

 

 

 

5,339

 

 

 

 

6,439

Other

 

1,719

 

 

4,655

 

 

2,486

 

 

6,394

Growth capital expenditures

 

3,339

 

 

11,225

 

 

6,474

 

 

17,111

Replacement capital expenditures:

 

 

 

 

 

 

 

Landfill development

 

11,302

 

 

7,476

 

 

12,862

 

 

8,765

Vehicles, machinery, equipment and containers

 

22,852

 

 

8,175

 

 

29,524

 

 

25,743

Facilities

 

3,080

 

 

1,019

 

 

4,225

 

 

1,669

Other

 

1,385

 

 

1,342

 

 

1,783

 

 

2,781

Replacement capital expenditures

 

38,619

 

 

18,012

 

 

48,394

 

 

38,958

Capital expenditures

$

41,958

 

$

29,237

 

$

54,868

 

$

56,069

(i)   The Company's capital expenditures are broadly defined as pertaining to either growth or replacement activities. Growth capital expenditures are defined as costs related to development projects, organic business growth, and the integration of newly acquired operations. Growth capital expenditures include costs related to the following: 1) post acquisition and development projects that are necessary to optimize strategic synergies associated with integrating newly acquired operations as contemplated by the discounted cash flow return analysis conducted by management as part of the acquisition investment decision as well as non-routine development investments that are expected to provide long-term returns and includes the capital expenditures required to achieve initial operating synergies and integrate operations; 2) Waste USA Landfill phase VI construction and development for long-term infrastructure, which is unique and different from landfill construction investments in the normal course of operations because the Company is investing in long-term infrastructure over an estimated four year period that will not yield a positive economic benefit until 2023 and extending over approximately 20 years; and 3) development of new airspace, permit expansions, and new recycling contracts, equipment added directly as a result of organic business growth and infrastructure added to increase throughput at transfer stations and recycling facilities. Replacement capital expenditures are defined as landfill cell construction costs not related to expansion airspace, costs for normal permit renewals, and replacement costs for equipment due to age or obsolescence.