Casella Waste Systems, Inc. Class A Stock

Hello, and welcome to the Casella Waste Systems, Inc. Second Quarter 2026 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

It is now my pleasure to introduce Vice President of Investor Relations and Finance, [ Henry Baby ].

Good morning, and thank you for joining us on the call. Today, we'll be discussing our second quarter 2026 results, which were released yesterday afternoon. This morning, I'm joined by Ned Coletta, President and Chief Executive Officer of Casella Waste Systems; Brad Helgeson, our Chief Financial Officer; Damian Ribar, our Chief Operating Officer; and Jason Mead, our Senior Vice President of Finance and Treasurer.

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 may make about the company's future expectations, plans, and prospects constitute forward-looking statements for the purpose of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by those forward-looking statements as a result of various important factors, including those discussed in the Risk Factors section of our most recent Form 10-K, which is on file with the SEC.

In addition, any forward-looking statements represent views only as of today and should not be relied upon as representing our views on any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change.

These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today, August 7, 2026. Also during this call, we may 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.

And with that, I'll turn it over to Ned Coletta to begin today's discussion.

Good morning, and thank you for joining us. I would like to first welcome Damian Ribar, our new Executive Vice President and Chief Operating Officer. Damian is joining us on the call this morning. Damian brings over 30 years of solid waste industry operating and finance experience and is an excellent addition to our already strong senior management team.

We are also joined by our new Vice President of Investor Relations and Finance, [ Henry Baby ]. Henry joins us after a 20-year career on the buy side, most recently as a small-cap generalist at William Blair.

We are pleased with our performance in the second quarter. Our team executed well across the business, delivering solid financial performance while also advancing our key strategic initiatives. Our disciplined operating approach, strong pricing execution, higher landfill volumes, and continued acquisition activity drove positive results during the quarter.

Our solid results in the quarter reflect the consistency of our operating model, the effectiveness of our dynamic fuel recovery fees, and the continued focus of our teams on safety, execution, and customer service. Revenue for the quarter was $543.7 million, up 16.9% year-over-year.

Growth was driven by contributions from acquisition and the base business, with strong pricing across our collection and disposal lines, volume growth at the landfills, and continued growth in our Resource Solutions segment.

Pricing continues to perform well and remains a core driver of our positive results. Solid waste pricing was up 5.5% overall, including 5.8% in the collection line of business and 4.7% in the disposal line of business. Equally as important, landfill tons were up 8.4% year-over-year in the quarter, reflecting the strength of our newly constituted post-collection sales team, internalization efforts, and our unique landfill asset positioning in the Northeast.

From a volume perspective, the quarter played out largely as we expected, with higher disposal volumes mainly offsetting lower collection volumes as we continue to prioritize price and profitability in the collection line of business. Volume trends followed the normal seasonal uptick through July and into early August, and we are well positioned as we move through the back half of the year.

On the cost side, our fuel recovery program worked effectively in the quarter, with floating fees fully offsetting the dollar increase in fuel costs across the business. This continues to be an important component of our ability to manage risk and produce stable and predictable operating results.

As previously discussed, our fuel recovery program is designed to recover costs. And as such, we experienced roughly 40 basis points of margin headwind as recovery fees and fuel grossed up revenues and costs, respectively.

As we have emphasized, our focus remains on disciplined execution at the operating level. Our teams continue to make progress with route optimization, fleet efficiency and automation, and we're seeing those efforts translate into results. Adjusted EBITDA of $123.2 million was up 12.5% year-over-year.

Safety is our first core value at Casella, and we continue to invest in key initiatives across the business. These efforts have resulted in better safety performance with our key OSHA metric improving 34% year-over-year. A huge thank you to everyone on the team for their focus and discipline.

We continue to deploy the Lytx in-cab AI technology across our fleet and it's helping to drive safer behavior through real-time coaching. Further, our expanded triage program continues to reduce workers' compensation costs and claims.

In the Mid-Atlantic region, we made significant progress on our integration efforts during the second quarter. As guided, we are on track to cut $5 million of operating costs in 2026 and another $10 million over the next 2 years. We completed the migration of our customers to our new lead to cash system and integrated customer payment portal in early May.

And our team quickly pivoted to driving operational synergies through route consolidations and automated truck conversions. With these early efforts, we have already eliminated 13 routes and the related trucks and labor from the business.

From a technology and efficiency standpoint, we're making great progress. From a customer side, we continue to invest in key platforms to improve experience, including the launch of our new customer payment portal in April, the new Casella phone app in May, and the new casella.com website in July. Everyone should check out these in the iPhone store and online.

These efforts are focused on improving customer experience through the development of robust e-commerce capabilities while also yielding cost efficiencies and enhancing our selling capabilities. We remain focused on reducing G&A costs, and we are on track with our previously identified $15 million in targeted savings over the next 3 years.

We expect these savings will come in 3 phases. With the first phase yielded in the second half of 2026, as we roll out credit card convenience fees. The second phase will be yielded in 2027 as we eliminate the cost of redundant systems. And the last phase, as we further automate back-office functions.

Across these initiatives, we are focusing on AI-enabled tools and investing in data infrastructure to support this capability. Over time, we expect these investments to generate additional leverage across our back office, yielding efficiency gains throughout the business.

I would also like to provide an update on our Hakes Construction and Demolition Landfill in New York. We expect to receive a permit in the third quarter to expand our airspace at this site.

With this permit expansion at our current run rates, we'll have roughly 20 years of valuable airspace at the site. In addition, we continue to make excellent progress on the expansion efforts at our Hyland, Juniper Ridge and Clinton landfills.

Acquisitions remain an important component of our growth strategy, and we've had a strong start to the year. We have completed 5 acquisitions so far in 2026, representing approximately $165 million of annualized revenues. We closed on one acquisition in early January, 3 on April 1. And then one tuck-in, in Pennsylvania on July 1.

These transactions continue to align well with our strategy of building density and adding key transfer stations and recycling facilities within our existing operating footprint. Our teams are making good progress on integration with an early focus on safety, onboarding our new team members, and executing integration plans. At the same time, our acquisition pipeline remains strong. And we have a number of tuck-in opportunities in later stages that fit well within our existing markets.

Overall, we feel very good about our execution year-to-date and our outlook for the remainder of the year. We're executing well against our core priorities, including improving our safety profile, pricing in excess of cost inflation, operational efficiency programs, yielding acquisition synergies, and delivering on new acquisitions.

At the same time, we're continuing to invest in the business in a disciplined way, particularly in technology and long-term efficiencies. I want to thank our employees for their continued focus on safety, service and customer execution.

With that, I'll turn it over to Brad to walk through the financials in more detail.

Thanks, Ned. Good morning, everyone. Revenues in the second quarter were $543.7 million, up $78.4 million or 16.9% year-over-year, with $46.2 million from acquisitions, including rollover, and $32.2 million from same-store growth or 6.9%.

Solid waste revenues were up 18.4% year-over-year, with price up 5.5% and volume down 0.6%. Within solid waste, price in the collection line of business was up 5.8% in the quarter, led by 7% price in roll-off and 7% price in frontload commercial and volume was down 1.4%. Price in the disposal line of business was up 4.7%, including 4% third-party price at landfills and 5.1% at transfer stations.

Landfill volumes overall were up 86,000 tons or 8.4% in the quarter, with internalized volume up 24,000 tons and third-party volume up 62,000 tons. Landfill activity was strong this spring, and we expect this to continue through the second half. In 2026, we anticipate improved year-over-year third-party landfill pricing of 4% to 5% consistent with our guidance expectation for 5% price growth overall in the solid waste business.

Resource Solutions revenues were up 10.7% year-over-year, with recycling and other processing revenues up 5.5%, and national accounts up 17.1%, including 4.3% price and 6.4% volume growth. Overall, we generated $11.6 million in additional revenue in the quarter from higher cost recovery fees, including those tied to fuel prices. As Ned mentioned, we successfully offset all of the dollar increase in fuel costs in the quarter with higher related fees.

Adjusted EBITDA was $123.2 million in the quarter, up $13.7 million or 12.5% year-over-year, with $7.5 million of contribution from acquisitions, including rollover and 5.7% organic growth. Adjusted EBITDA margin was 22.7% in the quarter, down 80 basis points year-over-year.

Bridging the year-over-year change in adjusted EBITDA margin, fuel represented a 40 basis point negative impact as higher fee revenue offsetting higher fuel expense dilutive margins. And Resource Solutions with a 70 basis point headwind year-over-year against a strong EBITDA comparable in Q2 2025. With higher recycling volumes last year from a competitor undergoing a facility retrofit, the previously announced closure of the organic facility in Maine in Q3, and lower margins in national accounts.

Excluding fuel and Resource Solutions, the business expanded margins by 30 basis points, driven by the benefits of higher landfill volumes and positive price cost spread across the collection business. In the Mid-Atlantic, we've completed our systems integrations and are well into route consolidations, as Ned discussed.

We expect to begin to see the benefit of these cost reductions in margins in the second half of this year as the mid-Atlantic transitions to a long-term margin tailwind as we execute on our strategy with this increasingly integrated business.

Cost of operations were $364.9 million in the quarter, up $56.9 million year-over-year, with $34.1 million of the increase from acquisitions and $22.8 million in the base business, including higher fuel costs, which we covered with our fuel recovery program.

General and administrative costs were $63.2 million in the quarter, up $8.6 million year-over-year, but down 10 basis points as a percentage of revenue. Depreciation and amortization costs were up $11.5 million year-over-year, with $9.9 million resulting from acquisition activity in the past 12 months, including the amortization of acquired intangibles.

Adjusted net income was $25.3 million in the quarter, or $0.40 per diluted share, up $1.1 million and $0.02 per share. GAAP net income was lower by $1.4 million in the quarter on higher depreciation and amortization, interest, and the organics facility closure costs. Net cash provided by operating activities was $161 million in the first 6 months of the year, up $21.4 million year-over-year, or 15.3%, driven by EBITDA growth.

Adjusted free cash flow was $78.1 million for the first 6 months of the year, up 10.3%. Capital expenditures were $122.3 million, with $20.6 million of upfront investment in recent acquisitions. Overall, capital expenditures were relatively flat year-over-year, but with a higher mix of recurring spend, which is reflected in adjusted free cash flow and less for acquisitions.

As of June 30, we had $1.35 billion of debt and $25 million of cash, with our consolidated net leverage ratio for purposes of our bank covenants at 2.7x. We have approximately $500 million in available liquidity, which will enable us to be opportunistic in continuing to execute on our growth strategy and robust acquisition pipeline.

As announced in our press release yesterday, we raised our revenue guidance to a range of $2.09 billion to $2.11 billion, an increase of $30 million, reflecting our acquisition activity to date and higher expected fuel recovery fees associated with elevated fuel costs. This updated revenue assumes that fuel remains elevated around current levels for the balance of the year.

We reaffirmed our adjusted EBITDA guidance range of $473 million to $483 million, our adjusted free cash flow range of $200 million to $210 million, and our net cash provided by operating activities range of $370 million to $380 million, as the business is performing in line with our expectations, and we remain well positioned relative to our internal plan for the year.

From an EBITDA margin standpoint, the impact of higher fuel recovery fees and costs, as well as a modest dilutive impact from the acquisitions closed to date, weighed on margins by approximately 40 to 50 basis points, implying flat to 40 basis points of margin improvement across the rest of the business, consistent with our outlook at the beginning of the year.

We lowered our GAAP net income guidance to a range of $0 million to $6 million, reflecting higher forecasted amortization expense and income tax provision. If you recall, we currently do not pay federal cash taxes. And with advantaged tax structuring of our acquisition activity and benefits of the new tax law, we do not expect to be a cash taxpayer for several years into the future.

With that, operator, would you please open the line for Q&A?

[Operator Instructions] Our first question comes from the line of Adam Bubes with Goldman Sachs.

Brad, I think you said underlying margins were 30 basis points in the business, excluding fuel and the national accounts headwind. Does that include M&A dilution? I think you normally target 50 basis points of underlying margin expansion just from price cost or just trying to get all the moving pieces on the underlying piece.

Yes, it does include acquisitions netted within that. So if you pull that out, I mean, acquisitions were a bit of a dilutive impact as well. The base business performed well in excess of 50 basis points of margin expansion.

Great. I appreciate the clarification there. And now that systems integration is complete in the Mid-Atlantic, can you just update us on how that business is performing on key metrics like volumes, price, margins? And how do you expect the Mid-Atlantic margin cadence to trend over the remainder of the year?

Yes. Margins in the segment, and you'll see this in the 10-Q that we filed later, were relatively flat in the quarter year-over-year, we're up slightly year-over-year. We really do expect, though, for the margins to start to move in the positive direction in Q3, Q4, and then especially into next year.

Pricing was actually pretty good in the Mid-Atlantic. We were just from the top of my head, a little over 4% price. So a touch below the rest of the business, but we are getting some price. I think an important achievement in the quarter was us getting our floating fuel fees in place to cover our fuel costs.

Sometimes there's a little bit of a delay of us getting those fees in place for acquired customers, but we did a good job making sure that at least we are covered from that standpoint.

Yes. And price looking at the quarter, Brad, is up 4.7% in the Mid-Atlantic. But one of the important things to note is the timing. So we got through our systems integration work in the second week of May, and a lot of training, a lot of work with our teams down there to really get everyone comfortable in the new system, ensuring that our trucks were routed, dispatched, we're giving the right level of service to our customers.

And then, kind of in late June and coming into July, that's when we started to put routes together businesses together. And this is going to be a 5-plus month process. It doesn't all happen at once. There's a lot of people impacted, from our dispatchers, our drivers, our ops people, to our customers, our customer care reps.

So there's a lot going on there and all the building blocks are there. We're just ticking through one market by market. So there's not a lot of that tailwind in the quarter, but it really is starting to show in July as we're getting those trucks off the road, as I talked about earlier. So a really exciting time down in that market.

Another thing that you mentioned, and it is important, now that we're on the unified platform that has all of our legacy profitability tools and pricing tools, we really get a lot more visibility of our book of business, and we're starting a thoughtful approach to understand customer by customer, the profitability, and if any adjustments need to be made over time.

Great. Appreciate the color. And last one for me. Just on landfill volumes. I mean, you touched on it briefly, but can you just expand on what's driving the performance there? Because really sharp acceleration, I think, 8% volumes. What are you seeing on that line item? And how should we think about it going forward?

Yes. I mean we're seeing healthy volumes in the market generally, indicating a relatively healthy economy. And kind of taking a step back, I mean, the dynamic in the Northeast is that landfill capacity is coming out of the market, and you have more and more tons looking for less and less landfill capacity.

Waste-to-energy capacity. I mean one of the most key facilities in the New York market, it has announced its closure at the end of 2026, the Hudson Falls Incinerator, owned by WIN. And it sits right in the middle of our market area, and part of the market where there are already some pretty tight constraints, just north of Albany. Albany has announced plans to close their landfill. They're starting to build out a transfer station, which will be another leg of tightening in that marketplace.

So that blip, we'll call it a flip over the last couple of years with the 1 construction demo landfill closing on Long Island. We've had such great trends since that point in time. I mean our construction demo tons were up close to 17% in the quarter as we're getting flows back into mainly Hakes, but some of our other sites as well.

But we had strong trends across MSW and special waste as well. And I really attribute both of those to two different things. One, our work -- our hard work by our team over the last 1.5 years to get internalization increased, to get the right transportation lanes in place, the right assets and waste flowing. But also the reconstitution of our landfill sales team.

Liza Casella has done a great job. We've got Chris Rains now on the team as our Chief Revenue Officer. The 2 of them have partnered up and really rebuilt that effort from the ground up and are doing a great job. It's very organized. We're coming to market in an efficient way and really getting the flows back to sites.

And our next question comes from the line of James Schumm with TD Cowen.

So you guys aren't getting really much credit for your growth these days via the stock price. And just sort of wondering, does it give you pause? Or do you sort of reconsider the growth versus margin debate at this point?

I recognize that fuel fees are diluted to margins and so the EBITDA margin guidance steps down a little bit. But just curious, if you guys contemplate if we're not going to get credit for all this growth, do we back off on M&A a little bit and try to get the margins up? Or how are you guys thinking about that?

Yes. I think you can look at it through an even different lens than that. We've gone through a transition period in the last, let's say, 2 years from a regional company to an enterprise. And we need to have scalable functions in this business that allow us to take on the growth while getting margin accretion, because these truly are accretive acquisitions that add density, add integration and vertical integration into the business.

But as we've added revenues over the last couple of years, $1 revenue adds more people. And it really needs to be scalable systems, scalable process that allow us to get that leverage. And we've done just such great jobs behind the scenes, from our tech team to our business teams to our finance, across the board to really get the foundation in place.

And we're on the cusp of unlocking a lot of that from automated processes, from sales to customer care to finance with our new systems processes. We've brought in some really talented leaders who have deep experience in larger organizations that understand the power of scale.

So I think we look at it through that lens, like we don't need to tap the brakes, but we do need to unlock synergy value and scale from acquisitions faster. And that's our goal as a management team over the coming quarters, coming years.

Okay. That makes sense. And then just if you could help me with some of the third quarter margin considerations, I think you said fuel was a 40 basis point headwind in the second quarter. How should we be thinking about that? I think Brad said maybe ex all the items, it would be 50 basis points underlying improvement in the second quarter. So could we think about something similar in the third quarter and then back out a similar 40 basis points for fuel? So I guess that's part one of the question.

And then the other consideration that you guys mentioned was Resource Solutions sort of had that benefit last year, with the closure of, I guess, a MRF. So what was the benefit last year in 3 quarters? So what do you think the headwind is going to be from that this year?

So a couple of questions in there. So I think the year-over-year comparison, taking Resource Solutions first should be easier in the third quarter. The volume that we benefited from last year won't be quite that comparable headwind in the third quarter that it was in the second quarter.

We do -- we will still see the impact of having closed the organics processing facility in Maine in the third quarter last year. So that's going to be a year-over-year impact extending into the third quarter. And that was something we talked about at the beginning of the year with our overall guidance expectation.

I think fuel, as we said -- I mean, fuel, we're assuming that the prices remain elevated. I mean who knows what it does? We don't have a crystal ball, but we thought it'd be as simple to assume that prices remain certainly where they are, and we haven't really seen any evidence that they're moving lower materially. So that will remain a headwind based on our guidance for the rest of the year. Overall, for the year, fuel is probably a 30 basis point headwind, '26 over '25. So you can kind of factor that into your model.

In terms of the quarters, as you know, we don't get into specific quarterly guidance, but usually, the sequential trends historically can be a good starting point, a good guide. So I would look to the second to the third quarter last year, we've kind of a step down relative to the impact of fuel, but sequentially, a consistent improvement, plus or minus, this year compared to last year.

And just on that resource solutions benefit last year, did that like persist? Did that go into the fourth quarter? Or how did that sort of -- how long was that?

No. That competitor facility that was shut down in 1 of our markets came back online in the third quarter.

Our next question comes from the line of Tami Zakaria with JPMorgan. .

I wanted to get clarity on the updated revenue guidance, you're raising it by $30 million. Could you parse out how much of that $30 million raise is fuel versus M&A versus price versus volume? .

Sure. Yes. It's majority fuel, actually. So the acquisition that we closed on July 1, that Ned mentioned, that's about $15 million of annual revenue. So half of that, less than $10 million. The balance is fuel. We're assuming, again, that fuel does not decline over the course of the year, it just sort of stays relatively where it is. So based on that, and assuming our fuel fees continue to cover the higher fuel costs, that's a little over $20 million of the $30 million.

We haven't really updated our guidance for anything else in the underlying base business. I mean, frankly, the business is performing pretty close to how we expect it going into the year. So not a lot of material changes that would move us out of our guidance range, at least year-to-date.

Understood. And then a similar question, but on the EBITDA margin. The full year EBITDA margin guidance is now, I think, 30 bps lower than before. How much of that is M&A versus fuel? .

Most of it is fuel. A little bit of it is M&A. That's majority fuel.

And our next question comes from the line of Trevor Romeo with William Blair.

I had a couple maybe to start on M&A. So maybe one, it looked like you made one more tuck-in in the last quarter, about $15 million of revenue. Anything you'd call out on that business that you bought?

And then just thinking about your integrations that are ongoing for Star Waste and Mountain Waste, it's still probably early days there, but are you kind of realizing results from all of the platform unification and efficiency efforts you put in place? Just maybe update on how those processes are going for those two deals.

Yes. Thanks for the question. So early days on both of them, we've hit all the important marks from a safety, culture, training, people side, that's the early step. But frankly, we're probably a beat behind on integration because we've been so focused on putting Mid-Atlantic back together. It's just such a key initiative that unlocks so much value. So our tech team, our ops teams, are just in that marketplace working to get those pieces put back together, and then we'll kind of shift to both Mountain State Waste and Star.

They're both well-run businesses, there was no urgency to change anything immediately. It's more of, what are the next steps to get those synergies out of the business? And when we looked at our business plan and our road map and frankly, our team, we're focused in the Mid-Atlantic right now, and then on to that. But we're happy, early days. All the important stuff's working right, and we're in a good position to add more value in the coming quarters.

Okay. I mean just, I guess, along those lines, if you're kind of more focused on the Mid-Atlantic at the moment, what does that kind of say about your maybe second half M&A pipeline? It sounds like, generally, you still have a lot of opportunities out there. But are you maybe going to -- yes, go ahead.

Yes. What you'll see from us second half into early next year, a lot focus on very small tuck-ins that either overlay existing businesses or have a strategic asset like a transfer station that allows us to move waste and create more value. Nothing large coming. It's more of that typical kind of $10 million revenue type of $20 million revenue type of company that tucks in quite easily.

As an example, the company we bought on July 1, we had it day 1 onto our systems and our processes. So getting to that point where we're doing additions, getting them into our system, our data, our processes, day 1 -- up to day 30, will start to yield synergy value much, much faster.

So we'll get to that point, and that's really to my point earlier that we're talking about of how do we create more value? It's getting that scalability, getting those efficiencies faster. So we're doing that with these small deals day 1, and we're really focused there from an acquisition standpoint now through the end of the year.

Okay. That's helpful. And if I could maybe sneak 1 more quick one. kind of a big picture question on leadership. And I guess, welcome Damian to the call, first of all. But I think, Ned, you've made several key hires lately across the company, I think. And kind of feels like you've been very intentional about who you're hiring and where they're coming from and the kind of experience they have.

So maybe you could talk a little more about how you're thinking about the leadership team and kind of what you and they are focused on for evolving the company going forward?

Yes. Thank you for the question. This has been a period of change for Casella, where we've got some really talented team members, but we're growing very rapidly. And as we've moved from, say, $1 billion of revenues to $2 billion of revenues, we realized pretty quickly that a lot of the old ways of doing business internally didn't scale as effectively as they should or need to allow us to be successful into the future.

So we've been looking to fill roles with both internal candidates and some really talented external candidates that have been in scale enterprises, but also bring with them a mindset where they're amazing cultural fits. They believe in our value system as a company, but also have been in a role where they've helped to scale businesses and put in process discipline technology help move to the next level.

So we're really blessed as a team. We've got great balance right now. Our team is working well together. We're gelling around key initiatives. We've got great objectives in front of us. So it's an exciting time for us. We're -- energy is very, very good. And we came out of a Board meeting where we're able to showcase some of our great new team members and strategies coming from this year to next year.

And our next question comes from the line of Shlomo Rosenbaum with Stifel.

Ned, could you talk a little bit about what you've seen with the reconstituted landfill sales team. The progress they've made over there, what looks different right now than it did 18 months ago? And is there a potential for them to move the pricing beyond kind of the 4% to 5% targeted range for a third party? Or how are you thinking about that?

Yes. Right now, the team has come together. We've got great leadership from the team. As I mentioned earlier, it's slipped under Liza Casella, who's been our VP of Sales for years, and that responsibility is tucked under her. We've put a new director post collection sales in place. We've moved in a really talented sales lead from our hauling side of business.

And we've just started from the bottom up from a process discipline standpoint, following best practice from a sales standpoint, building out pipelines, working the market for both price and volumes, and building out a pipeline that stretches out several years. Some of these jobs, they take a long time to get through permitting and execution, especially on the special waste contaminated soil side.

So we're starting to fill back off that blank spot that existed in our pipeline, and we're working jobs. Now, from our vantage point, it's a balance, right? So we love to maximize price at the landfills. But many of these sites, the last ton in at the end of the day might have a 60% to 70% margin.

So we're also balancing that as well with the special waste pipeline, where many of our landfills have needs for soils. And if you don't have to go dig that soil out of the ground, but you can get paid for it, that's a much better place to be. So getting that balance of meeting our needs while pushing price in the market, you'll continue to see us doing that. We're around 4% this quarter. Working that up a bit to 5-plus percent, would I think be a pretty comfortable spot for us in 1 of our goals.

And then does the $5 million savings in the Mid-Atlantic that you're looking for this year, does that include the better targeted pricing that you're hoping to get? Or would the targeted pricing be incremental to that?

No, that's primarily a cost reduction. That's sort of the -- I hesitate to say low-hanging fruit because there's a lot of work, as Ned was describing. But that's the immediate opportunity for us taking cost out of the business by running the business with fewer routes after the integration.

Pricing, I think, is a longer-term opportunity, the way we look at it. With the data that we now have in place, the analytical tools that we have in place going into the back half, we're looking to drive price in that market. But we haven't put a specific dollar number on that opportunity, and that will play out, I think, over a period of a couple of years.

Okay. So the pricing is something that hasn't been quantified, and it's really incremental to anything that you're talking about right now? I just want to get that clear.

Correct. Yes, that's right.

Okay. And then just again, the pricing in the Mid-Atlantic, I think you said it was 4.7% in the quarter. Is that inclusive or exclusive of any fuel recovery fees?

So that does not include fuel recovery fees runs through a line you'd see in our -- it's down below that in our tables in the press release. I think we'd call it Jason, what's the exact language we use? Fuel surcharge and other fees, maybe?

Our next question comes from the line of Tyler Brown with Raymond James.

This is Ethan Rollins, on for Tyler. So I just wanted to ask, so the Northeastern market is clearly a longer haul market with a lot of transfer. Curious what you are seeing in the transportation markets, not only from a fuel, but for like core rate increases, given that market is very tight. How should we think about inflation in the context of the guide?

Yes. So each of -- so we have a balance between our own trucks that are running long-haul and third-party trucks are running long haul. So we have both within our business model today. With our third-party contractors who haul for us, there are fuel surcharge formulas within those contracts, and they kick in above set fuel levels. So every one of those has kicked in with this 50% increase in fuel over the last 4, 5 months here.

When we look at our fuel recovery program as a business, we are focused on recovering that cost of fuel to move our waste or recycling from transfer stations to end disposal sites. So that's included in what we're trying to accomplish within the cost offset. However, as we've mentioned, our fuel recovery fees do not recover margin, so they have a headwind there. But we've done a great job of offsetting any of that inflation.

To your second question of are we seeing inflationary pressures outside of fuel and long-haul trucking? Yes, a bit, but it's not outside of any other inflation in our book of business today. I mean, we've been through a multiyear cycle right now on inflationary pressures across all industries. And as you know, we're in a pretty unique spot. I mean as much as 70% of our collection line of business we can price at will, and we can really try to get inflation back to our customer base.

I think like all companies this spring, we're laser focused on trying to make sure fuel got back to our customers, and that was job number one. As far as any other kind of price increases, we'll get that back to the market if we see anything outsized.

And our next question comes from the line of Stephanie Moore with Jefferies. .

I was hoping you could give us an update on McKean. I think it's always helpful to get a sense of how that's ramping and then how I think long term, you're thinking about leveraging McKean in your portfolio just as the supply shortage dynamics in the Northeast continue to progress.

Thank you. So things at McKean are going well. As we've talked about over time, we haven't gone out and just made a big push from a third-party standpoint to ramp in significantly through the site. But the second quarter was actually kind of an exciting time into early July for McKean, where our new transfer station came online at McKean. So now we have capabilities to offload open gondolas on-site, whether they're filled with construction demo debris, contaminated soils, or even MSW that has Posi-Shell or Atmos on top of it to seal in the waste.

Our first Casella railcars were delivered a couple of weeks ago. So if you see some blue railcars on the track with CWXX on them, those are ours. So they're traveling around the Northeast now. So that's an exciting moment for us as well. We started moving intercompany waste in July from Massachusetts to McKean. So great movement there.

It's still a little bit slow, but this is long-term positioning for us. We'll start to see more and more waste flow from our facilities to McKean over time. We're also working on some specialty streams that we think could have some long-term value at the site. Much of the biosolids or sludges that were going through composting projects to land application now need to be placed in landfills and we're looking at strategies to get more of that to McKean over time, Stephanie.

All right. Thank you. I'm showing no further questions. So with that, I would like to hand the call back over to President and CEO, Ned Coletta, for any closing remarks.

Thank you, everyone, for joining us today. We appreciate the great questions on the call. And we look forward to speaking with everyone in early November to discuss our third quarter 2026 results. I hope everyone has a wonderful end to the summer, and thank you. Have a nice day.

Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.

Good day, and thank you for standing by. Welcome to the Casella Waste Systems, Inc. First Quarter 2026 Conference Call. [Operator Instructions] Please advise that today's conference is being recorded.

I'd now like to hand the conference over to your first speaker today, Jason Mead, Senior Vice President of Finance and Treasurer. Please go ahead.

Good morning, and thank you for joining us on the call. Today, we'll be discussing our first quarter 2026 results, which were released yesterday afternoon. This morning, I'm joined by Ned Coletta, President and Chief Executive Officer of Casella Waste Systems; and Brad Helgeson, our Chief Financial Officer.

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-K, 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 even if our views change. These forward-looking statements should not be relied upon as representing our views as any date subsequent to today, May 1, 2026.

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 efforts are included in our press release filed on Form 8-K with the SEC.

And with that, I'll now turn it over to Ned to begin today's discussion.

Good morning, and thank you, everyone, for joining us today. We are very pleased with our performance in the first quarter and the strong start it provides for 2026. Our team executed well across the business, delivering solid financial results and margin expansion that exceeded our budget while also advancing our strategic priorities. We combine disciplined positive pricing, steady core operations and meaningful acquisition activity to position the business for a strong year.

Importantly, the momentum we are seeing is broad-based. It reflects the consistency of our operating model and the continued focus of our teams on execution, safety and customer service. Revenues for the quarter were $457.3 million or up 9.6% year-over-year. Growth was driven by contributions from acquisitions and the base business with strong pricing across our collection, in disposal lines and continued strength in our Resource Solutions segment, particularly in national accounts. Pricing continues to perform well and remains a core driver of our results.

Solid waste pricing was up 5.1% overall, including 5.3% in the collection line of business and 4.7% in disposal. From a volume perspective, the quarter played out largely as we expected, with slightly negative volumes mainly due to the challenging winter weather across our footprint. Despite these headwinds, total landfill tons were up year-over-year, including increases in both MSW and C&D volumes with C&D volumes actually up 13% year-over-year to landfills. These results reflect the strength of our sales pipeline, all of our internalization efforts over the last 1.5 years and our unique landfill asset positioning in the Northeast.

Further, we are well positioned for the seasonal upswing in volumes that we see in the spring, and we've seen positive trends through April. On the cost side, our fuel recovery program worked effectively in the quarter with floating fees fully offsetting the increase in fuel costs across our business. This continues to be an important component of our ability to manage risk and produce stable and predictable operating results. As we've emphasized, our focus remains on disciplined execution to offering level. Our teams continue to make progress on route optimization, fleet efficiency and automation, and we're seeing those efforts translate into our results.

Adjusted EBITDA increased 12.3% year-over-year, and we delivered 50 basis points of margin expansion in the quarter. Safety is our first priority in our operations every day. And we continue to invest in safety initiatives, including the expansion of our Triage programs to minimize the cost associated with workers' compensation claims and the implementation of the Lytx in-cab AI technology across our entire fleet in 2026. The Lytx system is helping our drivers with real-time coaching to reduce unsafe behaviors. This leads to lower incidents and strengthens our overall safety culture.

These efforts have resulted in better safety performance with our key OSHA metric, TRIR, improving by 20% year-over-year. We have also attracted several excellent new leaders to Casella over the last several months, including Chris Rains as our new Chief Revenue Officer, joining in March. We're excited to have these accomplished executives join our team, adding key skills through our already strong leadership team.

In the Mid-Atlantic, we've made significant progress on our integration efforts. We've migrated nearly all customers to our new lead-to-cash system and integrated customer payment portal and we are on track to complete the remaining migration by the end of next week. This is an important milestone as it allows us to shift our focus from systems migration to the exciting work of recognizing operational synergies through route consolidations, automation and facility consolidations.

As guided, we're on track to cut $5 million of operating costs in 2026 and another $10 million over the next 2 years. From a technology and efficiency standpoint, we continue to make steady progress. On the customer side, we've been investing in key platforms to improve customer experience, including the launch of our new payment portal last month and the planned rollout of the new Casella app in the second quarter. We also continue to develop our e-commerce capabilities. These efforts are focused on improving the customer experience while also yielding cost efficiencies.

At the same time, we remain focused on reducing G&A costs, and we are on track with our previously announced $15 million in targeted G&A savings over the next 3 years. As mentioned last quarter, these savings will come in three phases with the first phase yielding in the second half of 2026 as we implement credit card convenience fees. The second phase will come in 2027 as we eliminate redundant system costs and the last phase will come throughout '27 and '28 as we automate back-office functions and take out costs. Across these initiatives, we're also focusing on AI-enabled tools in investing in data infrastructure to support further capabilities.

Over time, we expect these investments to generate additional leverage across our back office and yield additional efficiency gains. We continue to make great permitting progress on our expansion efforts at the Hakes and Hyland landfills in New York. With the Hakes permit expected by the third quarter of 2026 and the Hyland permit expected by the first quarter of 2027. As we previously mentioned, we're working to more than double the annual permit at Hyland from 460,000 tons a year to 1 million tons a year, while also working to add 60 years of capacity.

At the Hakes, C&D landfill, we're permitting a 10-plus year expansion. Additionally, we completed the new rail transfer station at the McKean landfill in the last month, allowing us now to accept materials from both gondolas and intermodal containers, including internalized MSW volumes from Massachusetts later this year. Our McKean land flow is a great rail option for the Northeastern waste that does not have access to local disposal. As a reminder, about 30% of the waste that's generated in the Northeast needs to be exported given the lack of disposal capacity in our markets.

The McKean landfill is proximate to dense populations in the Northeast and is one of only a few rail surf landfills that can service the market given the capital intensity and logistical complexity. Acquisitions remain an important component of our growth strategy, and we've had a strong start to the year. We have completed four acquisitions so far in 2026, representing approximately $150 million of annualized revenues. This includes the Star Waste acquisition which closed on April 1 and adds approximately $100 million of annualized revenues. These transactions continue to align well with our strategy of building density within our existing footprint.

Star Waste is an excellent example of that approach with strong overlap in Massachusetts and clear opportunities for integration and operational improvements. Our teams are making great progress on integration with an early focus on safety, onboarding our new team members in aligning integration plans. At the same time, our acquisition pipeline remains very strong, and we have our number of tuck-in opportunities in later stages that fit well within our existing markets.

Overall, we feel very good about our execution year-to-date, and we believe we have a solid outlook for the remainder of the year, including adjusted free cash flow growth of roughly 14% at the midpoint of guidance. Our business proved its resiliency in the quarter as we beat our budget, expanded margins by 65 basis points in the base business and fully recovered rapidly rising fuel costs. I want to thank our employees for their continued focus on safety, service and execution.

And with that, I'll turn it over to Brad to walk through the financials in more detail.

Thanks, Ned, and good morning, everyone. Revenues in the first quarter were $457.3 million, up $40.2 million, 9.6% year-over-year with $23.9 million from acquisitions, including rollover and $16.2 million from same-store growth or 3.9%. Solid waste revenues were up 10% year-over-year, with price up 5.1% and volume down 2.5%. Within solid waste, price in the collection line of business was up 5.3% in the quarter, led by 6.5% price at roll-off and 6% price in front load commercial.

As a reminder, our reported price figure represents realized price net of rollbacks, not gross price increases and is more comparable to what several of our peers report as yield. Collection volume was down 2.1%, with softer roll-off volumes in particular during a quarter of difficult weather. Price in the full line of business was up 4.7% including 4.3% third-party price at the landfills. Rental volumes overall were up 19,000 tons or 2.3% in the quarter, with internalize volume up 13,000 tons and third-party volume up 6,000 tons.

The landfill business is strong coming out of the winter months, and we anticipate improved year-over-year third-party pricing in 2026 of 4% to 5%, consistent with our guidance expectation for 5% price growth overall in the solid waste business. You'll note that we are providing additional detail in our press release starting this quarter to break out disposal pricing volume between landfills and transfer stations. These metrics transfer stations give visibility to disposal market trends generally across our footprint, but not represent significant EBITDA contribution on a line of business basis in the same way that landfills do.

Resource Solutions revenues were up 8% year-over-year with recycling and other processing revenue down 2.7%, impacted by lower commodity prices and national accounts up 20.7%. Within Resource Solutions processing operations, our average recycled commodity revenue per ton was down 22% year-over-year though the market has stabilized, and we expect the negative year-over-year comparisons to moderate as we move through the year. 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 was only about $1 million.

Note that this full picture is not reflected in our processing price statistic because further offset is generated by our floating SRA fee, which shares risk with our collection customers at the curve and has passed back to the recycling facilities intercompany. Processing volume and revenue terms was up 6%. National Accounts continues to grow nicely with volume growth of 11.2% and price of 4.4%. It's worth noting the contribution of national accounts to our overall collection business.

As I mentioned, we reported a volume decline in third-party collection revenue in our solid waste business in the quarter, but this does not reflect the work that we do to service our national account sales with our own trucks, which is intercompany. Including this new business coming via national accounts, we would have added 1% to the collection volume statistic for the Solid Waste segment. We generated $3.6 million in additional revenue in the quarter from higher fees, including our floating fee programs for recycled commodity and fuel risk.

As Ned mentioned, we successfully covered all of the increase in fuel costs in the quarter with minimal lag as diesel prices rose quickly. Adjusted EBITDA was $97.1 million in the quarter, up $10.7 million or 12.3% year-over-year with $4.4 million of contribution from acquisitions, including rollover and over 7% organic growth. Adjusted EBITDA margin was 21.2% in the quarter, up approximately 50 basis points year-over-year overall.

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 15 basis points in the quarter. The base business, excluding new acquisitions completed in the past 12 months, expanded margins on a same-store basis by 65 basis points. Recall, the privately held businesses that we acquire typically operate at lower margins, which can create short-term margin dilution.

As we integrate these businesses, capture synergies and apply our operating model, they become margin expansion opportunities over time, creating a regenerative benefit as we continue to execute on our acquisition strategy. Cost of operations were $308.9 million in the quarter, up $28.5 million year-over-year, with $17.2 million of the increase from acquisitions and $11.3 million in the base business including $1.9 million from higher fuel costs, which we covered with our fuel recovery program.

General and administrative costs were $58.1 million in the quarter, up $1.6 million year-over-year. As I said last quarter, 2026 will be a pivotal year as we laid the groundwork with better systems and process for becoming more efficient in our back office and generating better scale as we continue to grow transitioning to lower G&A as a percentage of revenue beginning in 2027. Depreciation and amortization costs were up $6.5 million year-over-year with $5 million resulting from acquisition activity in the past 12 months, including the amortization of acquired intangibles.

Adjusted net income was $12.8 million in the quarter or $0.20 per diluted share, up $0.6 million and $0.01 per share. GAAP net income was lower by $0.7 million in the quarter on higher acquisition expenses and additional costs associated with the organics facility closure in the quarter. Net cash provided by operating activities was $62.3 million in the quarter, up $12.1 million year-over-year or 24%, driven by EBITDA growth. DSO was 34 days at March 31. Adjusted free cash flow was $30.7 million, up 5% year-over-year..

Capital expenditures were $50 million, down $5.5 million year-over-year with $9.2 million of upfront investment in recent acquisitions. As of March 31, we had $1.16 billion of debt and $127 million of cash with our consolidated net leverage ratio for purposes of our bank comes at 2.29x. On a pro forma basis for the acquisitions closed on April 1, including Star Waste, our leverage ticked up to approximately 2.75. We still have approximately $500 million in available liquidity, which will enable us to be opportunistic in continuing to execute on our growth strategy and robust acquisition pipeline.

As laid out in our press release yesterday, we updated financial guidance for 2026 to reflect acquisitions closed to date. We increased guidance for revenue to a range of $2.06 billion to $2.08 billion an increase of $90 million, adjusted EBITDA to a range of $473 million to $483 million, an increase of $18 million and adjusted free cash flow to a range of $200 million to $210 million, an increase of $5 million.

As a reminder, we completed the acquisition of Mountain State Waste on January 1 and it was included in our original guidance for the full year. We completed three more acquisitions, including Star Waste on April 1, so this guidance revision reflects approximately $120 million of new annualized revenue for 9 months of the year. Guidance further assumes adjusted EBITDA margins of approximately 20% and adjusted free cash flow with a typical conversion from EBITDA reflecting the incremental impact on net interest costs as we finance the transaction entirely with cash on hand and borrowing on our revolver.

We have not yet increased our guidance for the base business after the first quarter. However, we are well positioned relative to our internal plan, and we'll reevaluate guidance in future quarters.

With that, operator, would you please open the line for Q&A.

[Operator Instructions] And our first question comes from the line of Adam Bubes of Goldman Sachs.

I think you spoke about $30 million of cost reduction over 3 years between G&A and Mid-Atlantic synergies. I think that translates to something like 50 basis points of additional annual average margin expansion. I know there's always moving pieces and unanticipated bad guys. But all else equal, should we be thinking about a period of outsized margin expansion over the next couple ofyears?

It's Brad. Yes, I think you should. We've always talked about over time. And as you said, there are puts and takes in any given quarter or year. But, generally, we like to get 50 basis points of recurring margin expansion in the base business over time. Given the, I'll call it, pent-up synergy opportunity in the Mid-Atlantic, it's been delayed by certain factors and the opportunities we see to start to get to the G&A line as a percentage of revenue in a way that the company hasn't really been able to before. We do see an above brand margin improvement opportunity over the next 2 to 3 years, I think that's a fair assumption.

Great. And then you recently remarked, I think that the closure on Ontario could work out to be EBITDA neutral. Can you just talk about the moving pieces there? Presumably the closure could result in lost external tons and maybe longer transportation distances, but I think there are some offsets. So can you just help us think through the different moving pieces?

Yes, sure. And we'll work on additional information on this over the next several years. But right now, we plan to close the Ontario landfill in December 31, 2028. And as you're aware, we've been working on two important permit increases in New York for a number of years going on 5 to 6 years now. And the most important, Thailand, where we're moving the tonnage up from 460,000 tons to 1 million tons a year.

Ontario does roughly 750,000 to 800,000 tons a year. Mainly MSW, but there are C&D volumes that go into the site. So we will look as Ontario's winding down, we will look to shift volumes that were historically going into Ontario to both Hakes and Hyland and more and more of them into Hyland over that time period. And what's really important to note here is Ontario is our most expensive aerospace in the company to build and operate each year. And Hakes and Hyland represents some of the least expensive to build and operate each year.

So we'll have it in capital efficiency, we'll have operating efficiency, and as you can do the simple math, it doesn't track ton per ton. But as we look at it from an EBITDA standpoint, we should be pretty neutral during that period. On an operating income basis, we'll actually come out the other side with a benefit, it will improve both our operating income and net income as we close Ontario.

Great. And then last one for me. Can you just provide an update on where we are along the landfill gas program? I know you're not putting up dollars, but could still be a nice royalty stream. How are you thinking about the timing of the ramp there?

Yes. This has been an interesting journey. So the first thing to note, I think everyone on the line notices, but we should reinforce is that we chose many years ago to not develop and invest in RNG facilities ourselves. So we've chosen partners through selection processes to develop these sites and they've invested all of the capital to develop each of the sites and bring them online.

We've had mixed results, frankly. It's taken far longer for these developers to develop projects and come online successfully. And it's frankly a bit of complexity as well. As you know, managing the landfill and managing gas at the landfill appropriately within permit compliance doesn't always align with creating the best pipeline quality of gas. So we have four projects online today. We have our project at Juniper Ridge Maine, which is an RKMBP project. We have our project at North Country in New Hampshire. It's a Viridi project. And then we have two new projects that came online in Q1, both with Waga at our Chemung and Hyland landfills. And they're all kind of in shakedown stage right now, and they're generating -- we expect this year several million dollars of EBITDA from overall the portfolio of these assets.

There's a wide range of outcomes, and we'll be watching very closely over the next quarter or 2 quarters and getting additional information out to the Street. The Waga projects, in particular, appear to be operating very well in these early shakedown stages, but I think we're a little early to start calling the exact production levels of each of these. Just to give you a sense, like we're running 25,000 MMBtus a month at Chemung, Hyland, North Country right now in the shakedown phase, just to give you a sense of scale.

Our next question comes from the line of Trevor Romeo of William Blair.

I wanted to ask maybe one or two on Star Waste. So it sounds like a good deal. I guess, $100 million of revenue, but how should we think about the current margin profile for that business? And then I think they had done something like 8 acquisitions in the last 4 years themselves. So what are your thoughts on where they are from an operating efficiency perspective and how they kind of integrated the deals that they had done?

Yes. Trevor, it's Brad. So our assumption for guidance purposes and external conversation is about 20% EBITDA margin. I mean it's broadly consistent with other acquisitions that we've acquired I think like with most or all of our acquisitions, we're going to seek to get those margins up materially over time. Given in particular, where Star fits into our existing business in the Greater Boston area, growth opportunities that unlocks for us, particularly on the south side of Boston, we're actually really bullish on the opportunity to improve that business within the Casella footprint over time.

And on your integration point, the entrepreneur who funded -- founded Star [indiscernible] really did things the right way, hit a great team. They invested heavily in systems and process and they were integrating these small tuck-ins as they went along. And we bought a great company who's operating extremely well, has a strong management team, as I said, is a nice platform for growth into the future. This is not a fix it

one. Sometimes you buy companies that we spend quite a bit of time working on fixing things and having to overinvest to get them to a certain standard, this is backed by a great PE firm Clairvest, that is putting some excellent capital into it. As an example, they just completed a great retrofit to their construction and demo processing facility, transfer station and processing facility and had state-of-the-art technology in the facility. So we're buying something that's a very nice platform and integrates well with our business.

Yes. And you mentioned recent acquisitions the company has made something that's somewhat unique with this acquisition is they have some potential future acquisitions in their pipeline that will flow into our efforts going forward.

That's interesting. Okay. And maybe just a quick follow-up on Star again. I think you mentioned, I think the transfer station coming on in McKean could take volumes from Massachusetts now. So just in terms of kind of the disposal and maybe internalization opportunities with this deal, anything there or just maybe anything broadly on the synergy opportunities you could point out?

Yes. So in this first phase, we're looking at it as more of how do our trucks, Casella's trucks pre-acquisition route to their transfer station. can we take advantage of that from a route synergy standpoint. Initially, the materials from that transfer station will continue to go to third-party sites. They have attractive contracts with several third-party disposal sites.

We'll look at that long term to see if there's an internalization opportunity. But that's not one of the first phases of synergy. If we're able to advance permits in New Hampshire over the next several years and develop additional landfill capacity in New Hampshire, it would be very strong vertical integration there.

Yes. Okay. Great. If you don't mind, maybe one more quick one. Just on the national accounts business because I think obviously very strong growth there. I think that business has a sort of a margin mix impact. So if you think about that growing, call it, double the rate of the company. Maybe you could just remind us kind of the incremental margins on that business and whether that makes the 65 basis points of kind of base business margin you're talking about, maybe we keep them better on an underlying basis?

Yes, it's a good question. So we love that business. Obviously, as you alluded to, the growth profile, it's very little capital investment. It helps to drive business back across our solid waste segment to the extent that there are customers that are coming in to the national account sales effort that are serviced, ultimately by our own trucks. That's the kind of work that we love.

Really, the solutions-based sales effort aligns really well with Casella and our strengths and our focus areas. So it's a great business. The only footnote, I guess, from a financial standpoint is low market because it's low capital and the nature of the business. So on an EBITDA margin basis, it's mid-single digits, mid to upper single-digit EBITDA margin. So if you were to pull national accounts out that would be accretive to our EBITDA margin. But obviously, there are many other factors that lead us to think this is a great business that we want to push forward.

Our next question comes from the line of Tyler Brown of Raymond James.

I want to come back to the 4.3% landfill price number. I think that number last quarter was 2.5%. So that's a really nice acceleration. But can you kind of talk about what drove that acceleration? Was the issue more about last quarter being a bit lower? Or was it a more concerted effort this quarter? Just any color on that metric specifically?

Yes. So we're working hard to get more process and discipline around our sales efforts up and down the company and great new hire and Chris Rains. And about 1.5 years ago, our longtime lead of landfill sales stepped away, and that responsibility was kind of absorbed across a couple of other places. And we frankly didn't have enough management of pipeline, quality of revenue and what we're doing. And we rebuilt that through 2025, and we're working to further advance it now under Chris' leadership. So I think it's one part like -- we didn't get the job done as well as we could have gone it done.

And two, frankly, for a little bit there. There's a one rail move that was ramping up out of New Jersey that was putting a little downward pressure on the overall Northeastern environment, that rail move is full now as a third-party company is moving waste out of New Jersey out to Ohio really don't have a lot of excess capacity in that system. So they never directly took one of our customers, but generally probably a little bit of pressure on the overall environment as well.

Okay. Okay. That's helpful. And then quickly on Star. Just to be clear, they are not or at least not materially in heavily flow-controlled markets tied to the Massachusetts burner. So internalization could be an opportunity long term? I just want to understand that.

Yes. There is no flow control in those markets. But as with any major metropolitan market, traffic matters in the positioning of assets matter, so as Brad said earlier, we're really strong today, Boston, Boston North to the West, stars very strong to the south from the positioning of their hauling businesses.

And it really gives us the opportunity to grow in those markets. We've had the strongest organic collection growth over the last decade in the Greater Boston market. And you kind of think about this from our sustainability, our resource solutions approach, the integration with our state-of-the-art recycling facility in that market, we've sold a lot of really premier customers, and we've grown share of wallet. And we think we can kind of expand upon the success Star has had in a similar way over the next coming years.

Okay. Great. And then Brad, just to help us on Q2 margins. So I know that there's a normal step-up because it kind of unthaw, if you will, up in the Northeast. Revenue kind of takes a step up sequentially. But then you've got acquisitions that are dilutive by nature, fuel is dilutive by nature. Can you just give us any color on how we should think about margins either sequentially or year-over-year, just to kind of get us in the right spot.

Yes. So as you pointed out, sequentially, margins are much better in the second quarter and then advancing into the third quarter in our business, particularly given our geography. On a year-over-year basis, I mean you really mentioned the two main factors that we'll be dealing with this second quarter, which is fuel surcharges. I mean we'll see where fuel goes over the second quarter, but higher fuel costs that are covered by our recovery fees or, of course, margin dilutive and the acquisitions. So we'll see how the acquisitions impact things.

Another point I would make on the base business, just thinking about your modeling quarter-over-quarter is the synergies in the Mid-Atlantic and also actually the G&A savings that Ned had mentioned earlier, those will be more back-end loaded.

So we'll start to see, as we've completed the consolidation of the Mid-Atlantic onto our system. We're going to start to see those benefits in the second quarter of the synergy realization, but that's really a Q3 and Q4 story more so -- and then the convenience fees that Ned mentioned are entirely back-end loaded. So Q2, we'll see where we end up. There are some headwinds as you mentioned. But our focus is really on frankly, the third quarter and the fourth quarter for this year and then, of course, going into 2027.

Right. But if your kind of updated guidance is flattish on the margin line with the dilution. So is it -- is it crazy to think it could be slightly down in Q2 on a year-over-year basis, up sequentially though?

It's a really good question. That's not crazy to think that way.

But to be clear, the base business will be the positive acquisitions could weigh on it slightly negative. We weren't able to get fully under the hood on [ Star Waste ] and a [ DOJ ] process on the customers to wrap all of those things until really day 1, Tyler. We're digging in now and really looking at the progression of what we can do there. So as we said, probably little more overhang on margins of 20-ish percent to start with and look to improve from there.

Okay. I just want to make sure I had that. And then just last one, if I can, Ned. This is a bit of a periphery question, but I'm kind of curious about it. So I think in Massachusetts, there are a couple of larger landfills -- sorry, ash landfills that are set to close in coming years that are kind of related to some of the burners. How do you think that's going to play? And what do you think and how will they deal with that excess ash?

Yes. So it needs to go somewhere and it needs to go to Subtitle D landfill. So that will take up capacity in the marketplace is something that really hasn't been discussed. I can't get into a lot of details there, but we believe there's some real value working with some of our peers across the waste-to-energy business on certain of those streams, and it's an area that we've been actively engaged, and we think there's some value creation over time.

And hopefully, we'll have more to report. But it's a great point. I think the easiest part of the point is those landfills are closing or filling up. And that ash, the further you move it, the more expensive it gets, and we've got some great in-market solutions. Our McKean rail facility actually fits very, very well with some of the burn plants as well.

And Tyler, you mentioned Massachusetts landfills, but there's -- as a reminder, there's also a lot of ash that goes into the Brookhaven landfill on Long Island, which is going to be closing ash over the next few years.

Yes, that's as much as 400,000 tons a year that goes into that landfill today. And the Brookhaven landfill, that caused a little up when it was closing from a C&D standpoint, but it's still open for ash through the next 2 years and to be closed at that point in time.

And there's still -- and we talk about this sometimes, it ebbs and flows. As we look out over the next 10 years, there's still a lot of disposals coming offline in the Northeast. And as you pointed out, some of these sites are just taking ash.

But at any point in time, you could go through a year period of time where you have a little bit more capacity like we did in 2025 of rail, then that fills up, people look to the next phase of sites closing. So I think the long-term horizon is still the same as we've been talking about for years. There's a supply-demand imbalance in these markets and our in-market capacity is very valuable and we'll continue to have pricing power.

Our next question comes from the line of Jim Schumm of TD Cowen.

So that's actually my question is I wanted you guys to address a little bit more the supply/demand situation in the Northeast because I think a lot of investors are solely focused on rail or hearing rail is moving waste out and maybe you look at some of the landfill pricing recently, which is sub-5%, which maybe is not that impressive to some folks.

And there's a concern that landfill pricing is going to be depressed longer term. So I just wanted to get your views. We've talked about you've talked about a couple of moving parts. But like what is your longer-term view on your Northeast landfill pricing. From time to time, you are going to see these rail projects move waste out. But when you guys look at the closures, what does that mean for pricing in 2027, 2028, 2029, can you get -- is it more mid-single digits? Can you get upper single digits at some point? Or like how are you guys thinking about that?

Yes. Thanks for the question. So if we look at the last decade plus, pricing at the landfills has generally been mid-single digits in its range from a couple of lows for us and in 2025, the highs as much as 8% or 9% during that time period. And it really depends. I mean, you need to look at the book of business. So some of our outside years also have a relationship with big large contracts that might be renewing in those periods, and there might be step-ups in those contracts.

So they have a 5-year contract and the market continues to tighten over the 5 years, you might get some of those outsized pricing years around those resets. But generally, we're kind of stacking up that mid-single digits. And I think we feel really confident that if we can price at those levels, we'll have a great economic outcome and returns for shareholders. I said it to Tyler a minute ago, and I feel the same way. If you look at all the sites that we'll be closing over the next decade, there's not enough space for all of this waste in the marketplace.

So then you start to look at what are the alternatives. The best alternatives are in market, right, where you can use a truck, move the waste via long-haul trough to a landfill or to a waste-to-energy plant. The more expensive solution both capital and operating costs is to move it via rail. It's far more expensive, but it's the only viable option as in-market capacity comes out. So we see that as a tailwind for us over the next number of years as well. Sites will be closing.

We've got a great outlook on capacity. We have over 25 years at our sites today. We've got some important expansions in progress -- process that are working well, and we expect to land those in the next year. And we look at the backdrop, which should be positive over the next decade.

Okay. Great. And then I just wanted to ask you another question I get from investors a lot is you have this network of landfills in the Northeast and then you make this platform acquisition into the Mid-Atlantic and then you're growing west or southeast from there. But you don't really have any landfills in this -- in this area. So you kind of McKean in Pennsylvania, but what is the -- how should people think about your collection margins, what is the sort of the ultimate goal?

I mean can you earn 30% margins without a landfill in Mid-Atlantic geography? Or is it more like should we be thinking more like 25%? And I know that you guys have said it's closer to 20% right now, and let's think about 25%, I think, over the next couple of years. But longer term, is there upside to that 25% number?

Yes. So one of the things that's important to note is we use market-based pricing at all of our landfill or recycling facilities or transfer stations. So we charge our self market-based rates. So if you look at our collection business, say, in the Northeast, where it's vertically integrated, the margins produced by that collection business are apples-to-apples to Mid-Atlantic because we're charging intercompany market-based rates. And we generally generate about 30% EBITDA margins on our collection line of business.

In the Mid-Atlantic today, our margins are roughly 20%. This is not because we don't have landfills. This is because we have work to do. This is a business that the quality of the truck fleet was lacking. There wasn't enough density in certain parts, quality of revenue. And we've got strategies around each of these points, and we've laid out a plan for the next 3 years as we put more automated trucks in the fleet, collapse routes to add about $15 million of EBITDA to that market, which will translate to mid-20% margins.

Having landfills is a great thing and having the vertical integration. But what also is important is having the right transfer assets. So you can get your trucks off the road, consolidate waste and then be able to look to multiple disposal options. And much of our focus right now in the Mid-Atlantic is either on buying or developing the right transfer assets in that marketplace that will allow us to successfully continue to grow. And we've had some great progress here.

We've bought an excellent transfer station last year in the third quarter. We're working on some additional opportunities. We have a new recycling facility we just bought on April 1. We're working on developing another recycling facility ourselves. So you'll look to see that margin progression come up and we do look at over time is apples-to-apples, and we'll be able to have the trajectory, hopefully, over the number of years to get the same 30% margin level.

Yes. And I just sort of add on to that is not air market is created equal, of course, from a disposal perspective. So having the security of disposal capacity in our markets in New England, let's say, upstate New York is incredibly strategically valuable. You contrast that with the Mid-Atlantic Eastern Pennsylvania will be a great example, there's plenty of landfill capacity down there. We like the landfill business. It would help margins. We wouldn't turn down the opportunity to own landfill there, but it's not a strategic imperative. I think the focus, as Ned said, the focus down there is really going to be building out our transfer station network so that we can most efficiently access the disposal sites that are down there.

Our next question is Tami Zakaria of JPMorgan.

Congrats on the nice results. We've seen the CPI tick up lately. So can you remind us how any acceleration in the headline CPI impacts your pricing maybe on the entire parts of the portfolio? And is there a typical lag?

Yes. So, hey, Tami, it's Brad. It does impact our pricing on some of our business. most notably, municipal contracts, that direct relationship between the contract pricing and the underlying inflation index. But as a reminder, 75% of our collection business is open market, meaning we just have service agreements directly with customers where pricing is wherever we want to set it and whatever the market will bear and whatever is appropriate given our underlying cost inflation. So I would say, directionally, it impacts us, but actually not necessarily directly because we have total flexibility to react to the circumstances.

But I think higher CPI prints in a certain way to do allow maybe a bit more pricing spread. But as Brad said, 70%, 75% of our book of business, we can price it well, and we've shown that amazing flexibility over time. Last year, we talked about this. We saw our price/cost spread narrow more than we wanted to in the first half of the year. And we came out on a select group of customers with a second set of price increases in the last half of the year. And we thought that was an important thing to do to get that spread back to where we believe it should be. So we're trying to be really dynamic. But of course, the CPI print is something we're always looking at, but we're also looking at our own cost profile where we need to be.

Our next question comes from the line of Shlomo Rosenbaum of Stifel.

Net, it was just echoing that it was really good to see that third-party landfill pricing stepping back up. And you talked about two factors, one of your own, just putting in more effort and ensuring appropriate pricing and getting good business. And the other one was rail.

Just in terms of the impact over the last few quarters and then the turnaround, would you say that it was more a matter of turning around because the rail -- the competitor just kind of filled up already over there? And the other aspect I want to just dig a little bit into is, do you have a sense in terms of the comparison between the rail pricing and what you're getting at your own kind of transfer stations and tipping at the landfills?

Just at what point would it make more sense for someone else to add a lot more capital and just go ahead and add more capacity through rail. I guess what I'm trying to just get at is to understand the risk of kind of something just kind of popping up again? Or is it something that is unlikely because the amount of capital would be very expensive. And right now, given the comparability of cost is not worth it?

Yes. Great questions. So I'll start off with your first question around the pricing in the quarter and the pricing trajectory at our landfills. As I mentioned earlier, I think it was one part kind of pipeline management and quality of revenue we are seeking and managing the customer base. And one part looking at certain rail roof that was ramping up out of New Jersey over the last several years that they gave some negative pricing pressure to the overall marketplace.

If you look at -- there's only a few landfills that except railways from the Northeast or just railways in general. And a few of them have some excess capacity, but they're very expensive to get to, and it takes a long time in a lot of rail exchanges. A few of them are a bit closer to the market and more reasonably cost. And if we look at both sides of that equation, one, the capacity to actually move more railcars each day out of certain transfer stations, and two, the actual capacity at these landfills against their daily permits, you're seeing both sides that have constraint today. And the last factor, and we heard about one of our competitors talked about this on their earnings call last week.

Generally, I would say the major companies who have rail service landfills, including Casella, we're not looking at these as merchant sites where we're looking to get the lowest cost waste. We're looking at these as long-term defensive strategies to take care of our own customers. And we talked -- we heard this one company talk about how the vast majority of their rail move was really tied to their own tons in New York, state in New York City and looking to gain certainty there of cost and certainty of disposal.

And Casella looks at through the same lens and I know others do as well, where this isn't a merchant play to seek the bottom of the market. This is very capital intensive, very costly move to material. So coming back to your point, this one competitor is ramping up capacity. They're at capacity today on the transfer side forming the trains and they're generally at capacity at the landfill side. So they're going to look to returns and pricing quality. They don't have room for a lot more tons.

So I think through periods like this, what we do is we look at returns on our sites, and we're laser-focused on taking the right materials in at the right price and long-term return profiles because the scarcity is real, and you can't replicate any of these assets.

Okay. Great. Then I just wanted a little bit more tactically in the quarter, you drove that large EBITDA margin outperformance. And even though in the beginning of the year, you were talking about there being more margin expansion in the second half of the year. And really drove pretty good margin expansion this quarter. And I was wondering what went better than expected just from an operational perspective, like what surprised you? Or where were you able to really execute better than you thought you would?

One example of where we did a little bit better than we expected and better year-over-year was on the maintenance side. So in the Mid-Atlantic, where, as Ned was talking about, where just on the cusp of completing our system integration and...

Next week, Brad. Next week.

Next week. There you go. To be in a position to execute on our synergy plan. But we've also -- as we've been working on that, we've received delivery of a large number of trucks into that market. And so the ongoing maintenance costs, equipment rental for us to keep trucks on the road to keep customer service. We no longer have a need for those. So that's just one example, not necessarily the old story, but that's been a nice tailwind for us.

Okay. If I could just squeeze one more in. Would you mind just going over the volumes in terms of year-over-year growth along the various lines that are kind of cyclical. So the special ways to see indeed, the temporary poles, just the things that people are looking at to see where things are going cyclically.

Yes. So on the -- first off, on the collection side, the portion of our collection business that is most cyclically impacted is the roll-off business. The roll-off was down a little over 3% year-over-year. So that's something that we look at and point to for where the economy might be impacting us.

In our case, I think it was probably more weather than it was economy, but that's an area we look at. On the landfills, we saw MSW stronger. We saw C&D stronger. C&D would be a potentially economically cyclical volume stream. One area where we did see relative weakness year-over-year, which impacted us on mix was special waste volumes.

So again, that's another area where we don't have perfect knowledge on whether that's weather, whether that's uncertainty given the fact that we're at war and projects not moving forward, hard to know exactly, but that's another area where we may have seen it.

Yes. In a particularly cold winter, though, many of those jobs, whether they be infrastructure jobs or the start major construction projects where you're digging out contaminated soils or even just industrial jobs where you're dredging out industrial lagoons and things like that, like they're just not happening at the same pace in the winter and not to blame the weather, but when it gets really cold, you're just not doing that work.

Our next question comes from the line of Harold Antor of Jefferies.

This is Harold Antor on for Steph Moore. Just one for me. I guess just on the pricing front, I think you did 5.1% in the quarter and the guide at around 5%. So I guess, typically, 1Q is a high watermark. So I guess, will we expect I guess this implies kind of consistent pricing at these levels for the rest of the year.

I guess what's kind of driving that? Do you expect second half pricing to ramp just given improvement in the Mid-Atlantic? Anything there? And I guess just on -- could you remind us how churn performed in the quarter? I think the industry has been seeing better churn metrics in the quarter. So I just wanted to get a sense for what churn around for you guys and how that -- and if you're doing -- making any investments on the tech side that's improving that?

Yes. Hey, Harold, it's Brad. So we feel pretty good about the trend of pricing as we look forward to the end of the year. I guess a couple of points to highlight. One, and really, this is really a function of the price number that we report. We're not reporting the price increases that we go out with and then see that number erode as prices are rolled back over the course of the year.

I mean that's a net number of rollbacks. So it's not one that all else being equal, should deteriorate over the course of the year. The other important point I think for us right now is the Mid-Atlantic. So given where we are with systems consolidation, we've had very limited ability to assess pricing across the customer base, assess profitability and implement our pricing programs with the intelligence and specificity that we do in the rest of our business.

So we would expect that to be a consistent tailwind over the course of the second half of this year and into next year on pricing. As far as technology and Ned hinted at this in his prepared remarks, we're actually on the cusp of rolling out an app and really a different way of accessing the customer and meeting the customer where they want to do business, where they can pick up an app and sign up for service rather than picking up the phone.

Yes. In our digital customer engagement, e-commerce activities are right now across about 60% of our markets will be across 100% in the third quarter. And this is actually our fastest-growing sales channel, as you can imagine, and we're rejiggering our back office, our sales alignment to support the growth as well.

Our next question comes from the line of William Grippin of Barclays.

Great. I appreciate you squeezing me in. Just one quick one here. But given the Star Waste acquisition on April 1, and that was kind of a chunkier deal, could you just elaborate a little bit on how you're thinking about maybe balancing leverage versus further tuck-in M&A over the balance of the year and just your capacity to do that following Star Waste.

Yes. I mentioned in the prepared remarks that pro forma for Star and the other two acquisitions that we closed on April 1, we're at about 2.75 leverage. That has room to grow. We don't aspire to be highly levered. I think a key tenet of our capital allocation strategy and capital strategy generally has been to maintain moderate leverage to stay nimble and for risk management purposes.

That all being said, at [ 275 ], we do have capacity to move down a bit higher. And for immediate quickly emerging opportunities, we have about $500 million of available liquidity. So we're not done. We're looking at a lot of attractive opportunities. Our pipeline is healthy, and we'll see what we can cross over the course of the year.

I'm showing no further questions at this time. I will now turn it back to Ned Coletta for closing remarks.

Thank you, everyone, for joining us today. We look forward to speaking with you again in early August to discuss our second quarter results. Everyone, have a wonderful day and weekend. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good afternoon, everyone. This is Tami Zakaria, Head of Machinery, Engineering, Construction and Waste Equity Research at JPMorgan. It is our pleasure to host team Casella Waste with us today. We have Ned Coletta, CEO; and we have Brad Helgeson, CFO. Ned and Brad, welcome.

Thank you. Thank you for having us.

I think this is your first JPMorgan conference, right?

It is. For a number of years, we used to attend, I don't know, more than 10 years ago. So we're happy to be back.

Well, we are honored to have you here today. So let's dive into the Q&A. Before I start, I wanted to remind investors that this is being webcast and investors listening in online are able to submit questions. So if you submit a question, I'll pose it for you. And we'll open up to the audience in the last 10 minutes of this session if you have any questions for the team.

So with that out of the way, first question to you, Ned. As the new CEO, what are your top 3 priorities near term or over the next 12 months?

It's a great question and one I've gotten a few times over the last several months. I've been with Casella for 21 years, and I was the CFO for 12, the President for 3. So a lot of our strategy and a lot of our focus as a team, I helped to shape over that period of time. So there's not a right turn or a big deviation that's coming for me as CEO, and it's much of the same. But there are some focus points for me. And they're mainly people-oriented things that I wanted to do a little bit differently or I had ideas about. And the first is ensuring we have a safe and supported workforce and really doubling down on our safety programs, focusing on our engagement surveys and ensuring that our people had a voice up and down the organization. The second is also a cultural one where we've had the same core value system for 25, 30 years. And we're doing some modernization to it.

As an example, our first core value is service. I changed on my first day of work to safely service and just ensuring that our people know that they have stop work authority across the board, working on improving communication up and down the organization. We've grown from 4 years ago, we were 2,000 employees. Today, we're 5,500 employees. So as we've grown more rapidly, making sure our value system, our culture, our communication really works up and down the business and the last is just ensuring we're more purposeful with our work every day. We've had great strategic plans for years, but each of our major department heads, business leads, we're really rolling up strategic plans at all levels of the organization, ensuring this alignment of what we're doing, focus on the right investments, both in people resources and capital resources. So not a big shift, but a little bit of a shift in focus of like, let's just get back to some building blocks and making sure we're talking up and down the organization and hearing all of the voices we can.

So while we're at it, I think in the last week or so, there has been some personnel changes with the CFO -- COO departing. And I think you just hired a new CRO. Any comments on how you're thinking about these changes?

Yes. So our Head of Sales departed in the fall. He went on to another opportunity. But we looked at that as a real positive for us. We had really outgrown a number of his skills and experiences. We launched a solid search, and we were able to recruit an amazing new team member, Chris Rains, who started yesterday. Chris has spent 20 years at one of the major industry players and went on to work in a few different industries, both in operating roles and in sales and revenue roles. So we love that balance of someone who's run businesses, but also has a lot of customer focus. So it's something we've been lacking, I think.

There are a few segments where we've been very effective from an organic growth standpoint. One of the most notable is our large institutional industrial accounts. We grew them last year 17% organically and bringing some of the same discipline up and down the sales organization, especially as we're pivoting to more and more digital customer engagement, digital sales channels, both through our app, our website, really reenvisioning how we offer customer care and inside sales support. We're on a transformative journey.

Our second turnover in leadership was our Chief Operating Officer. And his name is Sean Steves, I'm really sorry to see him go. We've had a great partnership for years. He's been with the company for 8 years. And due to family reasons, he really wanted to get a lot closer to his parents and decided to leave and move on. And this is one that we're sad to see him go, but we're happy for him as well. He's got a great opportunity outside of the waste industry. We've launched the search. We've got a couple of great internal candidates. We already have a handful of external candidates. And we really think we're going to end up on the other side of this with an amazingly talented individual who can help us get more cost out of our business, be safer and drive value.

Great. So let's talk about Casella, the revenue mix. Could you remind us what your mix of revenues is from open markets versus restrictive contract markets? Is there an ideal mix or target that you have in mind?

Yes. So we're about 70% open market, which, as you know, Tami, allows us to really price flexibly as the environment, inflation, other factors evolve. The other 30-or-so percent would be large industrial customers, municipal customers, customers where we have a long-term contract. So we don't have a specific target. We actually like this mix because it affords us a lot of flexibility. But we also like the stability of having large municipal contracts. So I would say it's -- that mix that we have is pretty ideal from my perspective.

While we are on this topic, I think one theme that came up quite often this -- throughout the meetings today has been the spike in fuel prices. So could you remind us if you have fuel surcharges, how that flows through to the P&L, if there is a lag?

Yes. So the vast majority of our revenue is covered by a floating fuel surcharge. There's a slight lag, a lag of a month. So we take the high price point of the trailing 5 weeks and so there could be a lag as prices are moving quickly, but of course, we catch up when they move in the other direction. That covers the vast majority of our business. For the portion that's not covered by the floating fee, we go ahead and fix the price. We purchase forward on an annual basis, rolling that forward. So we're completely insulated at moments like this.

Understood. That's great to know. So let's talk about pricing. I think you guided to about 5% pricing in solid waste this year. Not too long ago, we've seen pricing in the high single-digit range when inflation was high. How do you expect pricing to trend in the medium term? Do you see it moderating further as inflation maybe moderates further? Or is mid-single digit sort of the run rate for now?

I mean we don't target a specific pricing level. We target the spread. So we want to make sure that we have a reasonable spread over our internal rate of inflation so that we can preserve and grow margins over time. Last year, actually, we rolled out our price increases in the beginning part of the year as we usually do. And we realized halfway through the year that it wasn't quite catching up or wasn't quite staying ahead of inflation the way we typically like to see. So we rolled out another small price increase in order to adjust that spread the way we want to see it. So I think from that perspective, it really is going to follow the rate of inflation.

And remind us, what is the target price cost spread? Is it like 100, 150 basis points or...?

We like to target a minimum of 50 basis points. There have been points in time where that spread has been wider, particularly in more rapid inflation environments, but we'd like to hit that at least 50 basis points.

Understood. Let's talk about volume. Your expectation is flat to down this year. Volume has been pretty elusive for the waste industry for at least a couple of years now, if you take out the natural disaster tailwinds. What is the steady state or long-term volume growth algo for you because you're more Northeast focused. How should we think about the run rate volume growth that you could target for the business?

Yes. I mean being in the Northeast, of course, we're dealing with steadier growth, population, economic activity. We just don't see the booms and busts that exist in some other areas of the country. We have not -- stepping back, we haven't prioritized volume. And frankly, I think that goes for all of our certainly large publicly traded peers. We prioritized quality of revenue, margin and making sure that we're pricing the work appropriately. And that has come on the margin at the expense of volume.

Long term, as you said, we're flat to down 1%. We were closer to down 1% last year. This year, we're targeting plus or minus flat. We think an appropriate place to be for us long term is marginally positive. We think that in our markets with our business, it's certainly -- we're certainly capable of growing the business. Again, with that priority of making sure that we're pricing the work appropriately. We're not chasing volume.

Understood. Let's talk about your landfill ownership. You have some expiring ownership -- landfill assets, and then you're expecting some extension in some other assets. So just for the audience, can you help us catch up what we should be looking for over the next 3 years?

Sure. So we -- all of our landfills are in New England and New York. And this is a marketplace where from a public policy standpoint, over the last, let's say, 30 to 40 years, politicians and regulators have really looked towards recycling, circularity of reducing waste that's disposed of. And those programs have made a difference. But let's face it, we're a disposable society, both at the residential side, the business side, there's still a lot of waste. And we've only seen one new greenfield landfill in the last 35 years. At the same time, we've seen about 25% of all of the annual capacity come offline as sites have permanently closed. And they may have closed just because you've got a river that borders up against their neighborhood or whatever it might be, they just reached the end of life. And the solution in the Northeast has not been to create new capacity from a public policy standpoint. It's been to export the waste to other states.

So at the same time, sites are closing, especially in the last 5 to 10 years, we've seen about 25% of all the waste produced in the Northeast. It's about 30 million tons a year produced in New England and New York. About 25% of that now is going on railcars and moving to states like Ohio or Alabama, very, very far away. So that's an expensive proposition, as you can imagine, both from a capital standpoint and from an operating expense standpoint. Casella today has the leading landfill position in the Northeast. We have over 20 years on average of capacity across our portfolio. Keeping that waste in the market gives us a higher yield at the sites versus spending more of the dollars. Like if you generate waste, say, in Eastern Massachusetts, to bring it to disposal, we say in the industry, you have T&D cost, transport and disposal. And that's the market clearing rate, the T&D.

So if you're bringing it to a nearby site, you're going to spend less on transportation, you're going to yield more on disposal. If you're bringing it halfway across the country on a railcar, you're going to spend the vast majority on transportation and yield far less on disposal. So from Casella's vantage point today, as you said, we have one site that's closing at the end of 2028, Ontario Landfill, New York. We've been working on a site that's nearby called Highland. It's been an operating site we've had in our portfolio for 30 years. We're very close to more than doubling the annual capacity and more than tripling the size of the site. We expect to receive that permit in the next 4 quarters.

So we'll have a really nice offset. Ontario will close, Highland will come online, and it will give us a great backdrop to shift tons. Ontario is our highest cost site today to build and operate. Highland is our lowest cost site to build and operate. So we actually expect a situation where EBITDA is roughly flat, but we have higher cash flows and higher operating income after that transition.

We have one other site in New Hampshire that we've been working really hard to maintain our North Country landfill. It ultimately runs out of space at the end of '27. We've been working a 3-pronged strategy: one, developing a new landfill in the next town over, a greenfield site; two, working on expanding on to land that Casella owns at North Country; and three, we've bought a large property on the CSX mainline in Central New Hampshire, and we're permitting a transfer station to move waste out of New Hampshire to our rail-served landfill in Pennsylvania.

So one way or another, this will shake out. But there's not a large negative financial outcome there where we've ramped that New Hampshire landfill down over the last 3 and we only expect to do $2 million of EBITDA at the site. So less than half of 1%. But if we can get the expansion opportunity in the state, we could have a really nice tailwind and step up on the alternative of having to rail the low amount of volume today out to McKean is not a negative for us.

So a lot going on with landfills in the Northeast. I'd like to say that public policy backdrop that's allowed us to have this leading position, really great returns at our sites, a lot of pricing power over the last decade plus. We're not immune to the regulatory backdrop as well. It's complex for us, and we see that at a site like North Country.

With all this scarcity or expiring landfill capacity, at least in some locations, could this be a positive for disposal -- tipping fees or disposal fees and you could see a lift in pricing?

We think so, yes. I mean, certainly, over the long term, I mean what we've seen over the past couple of decades really is as significant capacity has come out of the market in the Northeast, that has pressured disposal prices to move higher. What has happened over that period of time is disposal prices move higher. All of a sudden now, it makes sense to rail to Ohio or Alabama, whereas historically, it didn't. When that capacity then is introduced into the market, it taps the brakes on pricing. But then as more capacity comes out of the market, we would expect that trend to resume. I should also note that as the market becomes more reliant on rail export, rail is not an inexpensive solution, nor do we expect it to become inexpensive. So long term, that would certainly help to drive prices higher, we think.

So I received a follow-up question probably for you, Brad. Going back to that volume comment, Investors sometimes ask whether the weakness in housing construction is in part responsible for the lack of volume we've seen in the waste industry in general. And so if residential construction picks up, that could be a volume tailwind down the line. What is your response to that?

It could be. But I lived through kind of the big decline in 2008 through 2012 and entering that, Casella had close to 20% exposure to construction and demo debris. And when that decline happened, it was a painful headwind that was hard to offset. We purposely have remixed our business over the last decade plus to limit ourselves to only 10% exposure to construction and demo. A lot of our business model, if you get to know us and know about our team is managing risk. We do a lot of things where we're not trying to get the absolute upside, but we're trying to get steady returns in all market cycles. So we do have some limited exposure. But from a business plan standpoint, we're not trying to play that top side of the market at all. And frankly, like in the Northeast or United States and Mid-Atlantic, they're a little slower growing markets anyways from a new household formation and much more of our revenues derived from small, medium, large businesses and steadier sources.

That's super helpful. Let's talk about M&A. We've known Casella as a successful integrator that acquired small waste companies to unlock value and complement your organic growth over the years. In the most recent years, we saw somewhat of a slowdown in terms of M&A revenue accretion. Can you remind us how to think about the TAM for M&A as it relates to your Northeast-based footprint?

Yes. We've done an amazing job over the last number of years. I think I've acquired 80 businesses thereabouts over the last 6 or 7 years. In 2023, we acquired $330 million of revenues. 2024, $215 million of revenues and last year, $115 million. So you're right. 2025 was a year where we had a little bit less acquired revenues. But it's mainly because a few deals are slipping into '26. We're shaping up really well. We had a deal that closed on the first day of the year, sets us up well as $30 million of acquired revenues. But we're really tracking to a year where right now, things are far along our pipeline. We'll acquire $150 million to $180 million of revenues, opportunity to do even more than that. None of that's in our current guidance right now. We only include acquisitions after we successfully complete them into our guidance.

If we look at the addressable market, we typically talk about $500 million being in our pipeline of revenues, but those are direct conversations we're having with sellers. The addressable market is in billions of dollars of acquisition opportunity. We're generally focused right now on overlays to our current market. So where we have tuck-in opportunities, adjacencies to our current markets, we're not looking to hop far away into new geographies. There's a lot of opportunity for us to drive value on top of businesses we already own.

Is there a way to think about the framework for M&A in terms of payback period or ROI or a multiple -- specific multiple range you are willing to pay?

Yes. I mean the multiple for us is an output, not an input. So we look at really every investment we make exactly the same way. It's unlevered after-tax IRR. And that's acquisitions, that's new CapEx, that's a municipal contract, whatever it is. So at a minimum, we look to get before synergies, a low teens IRR calculated on that basis, and we calculate every deal exactly the same way. As we realize synergies and depending on the acquisition, we look to get that return well into the teens and higher.

And one of the areas we've actually yielded a lot of value is just on tax structure. So the vast majority of acquisitions we make are either asset deals or sole owner LLCs or complicated restructuring like F reorgs, where we yield all of the tax assets. And it really helps us to shield a significant amount of taxes and into the future as well. We've got some great tax assets that really help to create more leverage on acquired businesses into our cash flows.

Perfect. Let's open it up to the audience. If anyone has a question, please raise your hand, and we'll get a mic to you. While we wait for a question from the audience, I wanted to -- related to that M&A topic, I think a couple of years ago, you bought some assets in the Mid-Atlantic region. Can you recap what was the motivation to go into Mid-Atlantic? What kind of savings you expected and sort of a scorecard like what you expected then versus where you are today?

Yes. So we've done a great job developing markets the Northeastern United States. But as we start to look around and into the next 20 years, starting to step into some new geographies and new nodes of growth, we thought was important from a business planning standpoint. So when this platform of assets came up for sale, GFL was divesting 11 operations, it was a perfect fit for us because if we go [indiscernible]. The gray dots on this map are the businesses we bought from GFL, we've actually done 10 acquisitions since then, all of the blue dots. And you can see the new market formation starting to gain density. Some of these are transfer stations or recycling facilities starting to build the set of assets to bring a set of -- a full set of solutions to customers.

So I think the strategy is playing very, very well. From a system standpoint, we are a little bit delayed in getting everything moved to our legacy systems. We decided to do a full upgrade of our legacy systems and then implement on to them with both the initial acquisition and the next acquisitions. We're 95% through that. No technical risk. We just have to move one more business unit and flip to our new PCI-compliant payment portal. And once that's done, we actually have been waiting to put a lot of these businesses together. We've got about $15 million of cost savings that have been parked waiting for us to get through the systems integration. So this spring, we're starting to unlock a lot of operating value that's collapsing operations, that's collapsing routes, getting more automation on the street. So it will be a real tailwind for us over the next couple of years, but we're really pleased with the move we made.

That's great to know. I wanted to ask you about your SG&A. I think you've mentioned in the past that this year is going to be pivotal in a way that would lead to multiyear cost improvements. Elaborate on that for us. Is there a way to quantify what is your ideal SG&A rate maybe 3 years down the road?

Yes. So today, as a percentage of revenue, we're a little over 12% on the G&A line. Our much larger publicly traded peers are around 10%. So that there's a lot of room for us to improve. Essentially, we can become a lot more efficient in the back office, a lot more scalable by implementing technology. Some of that is somewhat complicated. Some of it is really, really easy. So for example, with the upgrade of our payment portal in conjunction with our system consolidation, all of a sudden, we'll be able to charge convenience fees to customers who want to use a credit card. Relatively low-hanging fruit, but a significant drag on G&A right now, just paying those merchant fees. So that's just one example.

We have about $15 million of cash costs teed up to come out of the business over the next, we say 3 years, but we should do better than that. So that's kind of one step. But then really the more powerful step, I think, is once we become more automated, we're leveraging technology in a way that we're not today, then we become much more scalable. And as we're growing revenue, particularly through acquisitions, we should see that G&A as a percentage of revenue move down, whereas last few years, really, it's been flat because new acquisitions have required a lot of additional manual effort in the back office.

Great. Related to -- somewhat related to this topic, I think you've quantified about $5 million of savings in the Mid-Atlantic region this year. Tell us about that. What are the buckets of the savings? And more importantly, why $5 million? What could be sources of upside to this target?

So this was $5 million of realization in this year. And as I talked about a minute ago, we have about $15 million of operating cost savings that we've in the Mid-Atlantic over the next couple of years. So if we have $5 million this year, it's a larger number on a run rate basis. And we think this will probably come out a little faster than 3 years, as Brad said earlier, but trying to be a bit conservative here. If we look at just our growth algorithm for the next several years, on the organic side, it's more of the same. It's a price/cost spread of 50 basis points or more. We do this through our open markets, our great pricing programs, fee programs, along with a lot of good cost operating programs.

Then we've got those 2 self-help buckets, the synergies coming out of the Mid-Atlantic, some of the G&A cost benefits of the automation and investments we've made in the back office and then you start to add on the acquisition growth. And that's -- for the last 10-plus years, we've done 15% to 20% free cash flow growth a year. Last 5 years, we've done over 20%. And it's a balance between the organic formula and then the acquisitions and shaping up into the year, $5 million of synergies coming out of Mid-Atlantic, part of us having a successful 2026.

That is awesome to hear. One question, probably somewhat of a long-term question. Could you go beyond the Northeast and Mid-Atlantic through M&A? Could you not be a regional and become more national? Why or why not?

We could, but it's one step at a time. I mean if we look at our strategic plan today, a lot of the focus where we're doing new market development or we're working on developing relationships are with providers and other waste industry participants who are inside our existing markets or into adjacent markets. You can drive a lot more value and leverage by doing that. If we were to jump 1,000 miles away and have a satellite, it'd be hard to create value for a number of years, and it would be a big distraction. So as a management team, we just don't see the value in that in the near term. But over time, we assume we'll keep adding adjacencies in a logical way and build our business up to multiple regions.

So a question on your Resource Solutions business. I think it's quite unique in the sense it keeps you relatively insulated from the volatility in commodity prices, much more so than some of your peers. So for those new to the story, could you unpack that? What drives -- what's the business model behind this Resource Solutions business that keeps it less volatile than maybe some of your peers?

Yes. Our Resource Solutions business is made up of a few components. One is our national accounts, big large multisite retail or industrial customers where we're bringing circularity solutions and really driving some significant growth. But the other side of the business is the processing business and we've really differentiated ourselves over the last decade plus where both for -- there's 2 types of customers that come into our recycling processing centers, third-party trucks and our own trucks. For third-party trucks, we have floating fees. So in high commodity markets, we might share some revenues with them. In low commodity markets, they're always paying us a flat fee.

So as an example, if we have a threshold of $120, if commodity prices fall to $80 a ton, we charge $40. So we make the $120 in all scenarios. So we've passed 100% of the commodity risk back to third parties who come into our processing facilities. We've done the same thing through our hauling business, which is really, really unique. So we have a floating fee on almost all of our residential and commercial customers' bills. So it's almost like a fuel surcharge. If commodity prices are dropping, that fee goes up. And we took a tiny bit of commodity risk and split it up among millions of customers. So they might have pennies or dollars of risk on their bills. But for us, we can always guarantee that we're going to have the same high level of returns in our recycling business. So in a down commodity market like this, Casella has very little downside risk, and we're still generating high returns at our recycling facilities.

Great. Any questions from the audience? I think we have about a couple of more minutes. I want to touch on 2 topics very quickly. One is capital allocation. We saw modest buybacks. So no buybacks?

No buybacks now.

And that's not in the cards?

Not for the foreseeable future. Yes. I mean we think we have a very long runway to continue to acquire right down the middle of the fairway, if you will, in terms of geography, strategic fit, opportunities for us to extract synergies as we build market density and grow adjacent to our geographic footprint. So we think that's a much more compelling opportunity for our shareholders than returning the capital at this point.

And we have close to $800 million of liquidity. So we've got a great balance sheet. We're levered at 2.3x, great availability. And this positions us to be really opportunistic for the right acquisition opportunities, which we believe drives a lot higher returns in the midterm for shareholders.

And lastly, we have seen some inclement weather in the Northeast. Any comments?

Yes. So we mentioned this on our earnings call in February. We operate a business outdoors every day. So we hate to talk about the weather, but it was one of the coldest winters in the last 25 years. I think we ran the stats. It was 20% colder than the average winter in the last 10 years. So that leads to a little bit less economic activity. It leads to a little bit lower productivity. On the flip side, we service almost every major ski area across the Northeast, and it was a really great winter. A lot of economic activity there, a lot less snow out West.

So you always have puts and takes. And when we come down to it, having the toughest couple of months at the beginning of the year, January, February, gives us a lot of time to execute our business strategy, and we put a really solid guidance range out for the year, had a lot of confidence in it to be able to outperform for the year. So yes, it's tough. I feel for our team members on those very, very cold days, and we just have to take it a bit slower and safer.

I think that's all the time we had today. Thank you, Ned and Brad, thanks for joining. We hope to host you next year.

Thank you.

Thank you for having us.

Good day, and thank you for standing by. Welcome to the Casella Waste Systems, Inc. Fourth Quarter 2025 Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Brian Butler, Vice President of Investor Relations. Please go ahead.

Thank you, Marvin. Good morning, and thank you for joining us on the call. Today, we'll be discussing our fourth quarter and full year 2025 results, which were released yesterday afternoon.

This morning, I'm joined with Ned Coletta, President and Chief Executive Officer of Casella Waste Systems; Brad Helgeson, our Chief Financial Officer; and Sean Steves, our Senior Vice President and Chief Operating Officer. 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 may 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 on our most recent Form 10-K 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 even if our views change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today, February 20, 2026.

Also during this 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 that they are available without unreasonable effort, are included in our press release filed on Form 8-K with the SEC. And with that, I'll now turn it over to Ned Coletta to begin our discussion.

Thanks, Brian. Good morning from [ Rutland ], Vermont. As my first earnings call as CEO, I want to begin by saying how honored I am to lead this exceptional team into the next chapter of Casella's growth. I'm energized by the opportunities ahead and confident in our ability to continue building long-term value for our shareholders, customers and employees.

We closed the fourth quarter with performance that reflects sustained organic growth meaningful operating improvement and continued strategic momentum across the business. For the full year 2025, revenues increased 18%, adjusted EBITDA increased 17% and adjusted free cash flow increased 14%. This marks our fifth consecutive year of double-digit growth across each of these 3 metrics, a testament to the durability of our business model and the strength of our strategic plan. Importantly, adjusted EBITDA margins, excluding acquisitions, expanded 55 basis points year-over-year.

Margin improvement was driven by disciplined collection pricing, higher landfill volumes, operational efficiencies and synergy realization from prior acquisitions. We completed 9 acquisitions in 2025, representing over $115 million in annualized revenues. We started 2026 strong. And on January 1, we closed a [ Mountain State Waste ] acquisition, which adds approximately another $30 million in annualized revenues and expands our Mid-Atlantic segment into the West Virginia market.

Our balance sheet remains a strategic advantage for us. We finished the year at 2.3x levered with over $700 million in liquidity to fund future growth. Our acquisition pipeline remains robust with opportunities to further densify within our existing footprint and growth options to selectively expand into geographically adjacent markets that align with our strategic plan.

Now looking at our 2025 segment performance. In our solid waste collection and disposal operations revenues increased 20.3%, driven by disciplined organic growth and another strong year of acquisitions. Base collection and disposal margins excluding acquisition impacts, increased 170 basis points year-over-year as we generated a positive price to cost spread, continued acquisition integration efforts drove higher landfill volumes, mainly through internalization and generate cost savings through operational optimization initiatives.

In the second half of 2025, vehicle deliveries improved as expected and we received 40 automated trucks that have been -- that were delayed earlier in the year. We expect these vehicles along with the associated labor efficiencies and route optimization to generate more than $5 million of savings in 2026.

Our team did a great job in the second half of 2025 advancing the key acquisition integration and system conversion initiatives in our Mid-Atlantic region. We have substantially completed the migration of customers from acquired building systems to the integrated Casella lead-to-cash system and we expect the remaining migration work to be completed by the end of the first quarter or very early in the second quarter. Once completed, we can start the real exciting work of rolling out additional automated trucks, consolidating routes and optimizing pricing and profitability.

We continue to make permitting progress on our expansion efforts at our [ Hakes ] and Highland landfills in New York, with the [ Hague ] permit expected in the next couple of quarters and higher impairment expected within the year. We are working to more than double the annual permanent Highland from 460,000 tons a year to 1 million tons. And we would also add close to 60 years of capacity at current run rates. At the [ Hakes C&D ] landfill, we're permitting a 10-plus year expansion.

These expansions are important with the expected closures in New York over the next several years, including the expected closure of the Ontario County landfill at the end of 2028. The McKean Landfill rail upgrade project remains on track for completion in the second quarter of 2026. This will allow us to offload municipal solid waste, contaminated soils and C&D materials from gondolas at the landfill.

Our Resource Solutions segment also delivered a strong year with revenues up 9.1% and segment adjusted EBITDA up 9.6%. This reflects strong national accounts performance and operational efficiencies from the upgraded Willimantic recycling facility. While current recycled commodity prices are trading at roughly 20% below 10-year averages, our effective risk management programs passed much of this commodity volatility back to our customers through the floating processing and SRA fees. These tried and true programs are effectively offsetting about 80% of all commodity downside risk, helping us to generate consistent returns on our recycling business in all market cycles.

Pivoting into 2026, we exited the year with strong momentum and a solid setup for this year. Our frontline team has done an amazing job this winter, providing solid customer service through one of the coldest and snowiest winters we've experienced in over a decade. Despite these operational headwinds from the bad winter weather, we remain very confident in our outlook driven by sustained pricing strength, continued self-help cost initiatives, automation benefits, in a very attractive acquisition pipeline over $500 million of annualized revenues. We're focused on both densification and strategic expansion opportunities.

Our team is laser-focused on improving safety and employee engagement in 2026. We've added several key new safety and HR leaders to organization. We're focused on process improvements, and we're investing in key systems such as AI-enabled onboard truck technology. With that, I'll turn it over to Brad to provide additional details on the fourth quarter performance and financial results.

Thanks, Ned. Good morning, everyone. Revenues in the fourth quarter were $469.1 million, up $41.6 million or 9.7% year-over-year with $23.1 million from acquisitions, including rollover and $18.5 million from same-store growth or 4.3%.

Solid waste revenues were up 9.9% year-over-year with price up 4.4% and volume down 1.1%. Within solid waste, price in the collection line of business was up 4.6% in the quarter, led by 5.3% price in front load commercial and volume was down slightly at 0.3% with modestly positive volume in front load and residential, but weakness in roll-off, down 5.2%.

Price in the disposal line of business was up 4.1% and third-party volume down 4.5% year-over-year. However, this stated volume decline is misleading for a couple of reasons. First, results in the landfill -- at the landfills were steady, with same-store price up 2.5% and total tons up 1.7% and including nearly 10% growth in internalized volumes. Our reported numbers only refer to third-party volumes. Second, the decline was also largely driven by the transfer station and transportation businesses with little net impact to EBITDA. The important point here is that the landfill business is healthy, and we're confident heading into next year, as I'll discuss in a few minutes.

Resource Solutions revenues were up 9.1% year-over-year with recycling and other processing revenue down 1.4%, impacted by lower commodity prices and national accounts up 15.6%. Within Resource Solutions processing operations, our average recycled commodity revenue per ton was down 27% year-over-year with softer markets across the board and most commodities selling below 5-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 was less than $1 million. Processing volume and revenue terms was up 12%, driven by higher volumes at the Willimantic recycling facility, which was down for its upgrade in the fourth quarter last year. Within national accounts revenue, was up 3% and volume up 9%.

Adjusted EBITDA was $107 million in the quarter, up $12 million or 12.7% year-over-year, with $3.3 million of contribution from acquisitions, including rollover and 9% organic growth. Adjusted EBITDA margin was 22.8% in the quarter, up approximately 60 basis points year-over-year.

Bridging the year-over-year change in adjusted EBITDA margin, new acquisitions contributing at lower initial EBITDA margins in our overall business diluted margins by 40 basis points in the quarter. The base business, excluding new acquisitions completed in the past 12 months, expanded margins on a same-store basis by 100 basis points, driven by the collection business across our footprint, including the Mid-Atlantic.

Recall the privately held businesses that we acquire typically operate at lower margins, which can create short-term margin dilution. As we integrate these businesses, capture synergies and apply our operating model they become margin expansion opportunities over time, creating a regenerative benefit as we continue to execute our acquisition strategy.

Cost of operations were $313.8 million in the quarter, up $27.2 million year-over-year, with $17.4 million of the increase from acquisitions and $9.8 million in the base business. Excluding acquisitions, cost of operations were down 60 basis points as a percentage of revenue on a same-store basis.

General and administrative costs were $55.9 million in the quarter, up $3.7 million year-over-year. As a percentage of revenue, G&A was down 30 basis points year-over-year, reflecting increased IT spend but also favorable incentive comp accrual adjustments. From a G&A standpoint, '26 will be a pivotal year as we lay the groundwork with better systems and process for becoming more efficient in our back office and generating better scale as we continue to grow. Our goal is to begin to benefit EBITDA margins with lower G&A as a percentage of revenue in 2027 and for this to become a consistent tailwind to margins for years beyond that.

Depreciation and amortization costs were up $13.3 million year-over-year with $4.2 million resulting from the recent acquisition activity, including the amortization of acquired intangibles. You'll note that we isolated a charge on our income statement and adjusted EBITDA reconciliation this quarter for the accrual of closure costs at our [ Hawk Ridge ] organic facility in Maine. With the ban on land application of organics and Maine to make economic sense for us to close this facility and redirect material primarily to our landfills.

We anticipate approximately $3 million of additional costs related to the closure of the site in 2026, which will not impact adjusted EBITDA. Adjusted net income was $18.9 million in the quarter or $0.30 per diluted share, down $3.4 million or $0.05 per share. GAAP net income was down $7.4 million in the quarter.

Net cash provided by operating activities was $329.8 million in 2025, up $48.4 million or 17% year-over-year, largely driven by EBITDA growth. [indiscernible] was essentially flat from September and last year at 36 days. Adjusted free cash flow was $179.9 million in 2025, up 14% year-over-year.

Capital expenditures were $245.1 million, up $41.8 million year-over-year, including $66 million of upfront investment in recent acquisitions. As of December 31, we had $1.17 billion of debt and $124 million of cash. Our consolidated leverage ratio for purposes of our bank covenants was 2.34x and our $700 million revolver remained undrawn. Our liquidity and leverage profile will enable us to be opportunistic in continuing to execute on our growth strategy and robust acquisition pipeline.

As laid out in our press release yesterday, we announced financial guidance for 2026. This guidance included revenue in the range of $1.97 billion to $1.99 billion or 8% growth at the midpoint. Adjusted EBITDA in the range of $455 million to $465 million or 9% growth at the midpoint and adjusted free cash flow in the range of $195 million to $205 million or 11% growth at the midpoint. All of this is consistent with our preliminary outlook as communicated on our third quarter conference call in October.

Our guidance ranges reflect acquisitions completed to date including Mountain State Waste, which closed on January 1 and assume a stable economic environment for the balance of the year. While we expect to continue to be acquisitive this year, our guidance does not reflect any further acquisition activity.

On the top line, our guidance includes approximately $60 million from acquisitions or 3% growth, which includes rollover and the [ Mountain State Waste ] and approximately 4.5% organic growth at the midpoint. In the solid waste business, we're planning pricing of approximately 5%, which we aim to cover and stay ahead of inflation. As a reminder, we retained pricing flexibility across approximately 2/3 of our collection revenue so we are well positioned to respond to changing conditions, if necessary, as the year progresses.

Solid waste volumes are expected to be approximately flat, plus or minus, with continued churn in our collection book of business reflected in that estimate, particularly as we integrate new acquisitions. Bridging 2025 adjusted EBITDA to our guidance, $10 million to $15 million is from acquisitions, and approximately $25 million or 6% is base business organic growth at the midpoint.

Our adjusted EBITDA guidance range implies approximately flat margins to 40 basis points of margin improvement in 2026 and which is largely the base business. This improvement is expected to be driven by strong, consistent pricing, benefits from integration and synergy realization with our acquisitions in the Mid-Atlantic region, ongoing operating improvements in our collection business and higher overall landfill volumes year-over-year. These drivers are expected to be partially offset by the closure of our [ Hackbridge ] organics facility and lower volumes at our North Country Landfill in New Hampshire as we ramped down volume ahead of anticipated closure at the end of next year.

We expect adjusted free cash flow to grow at approximately 11% at the midpoint of guidance, driven by adjusted EBITDA growth and reflecting capital expenditures of approximately $260 million, which includes approximately $65 million of upfront spend in connection with recent acquisitions, and a small remaining investment to complete rail access capability at the McKean landfill. With that, I'll turn it back over to Ned for some closing comments.

We're turning over to the operator right now for questions. Thank you.

[Operator Instructions]. And our first question comes from the line of Tyler Brown of Raymond James.

Congrats on everything. But I want to kind of start just to ask you a really big picture question. So -- can you just help us shape a little bit about your vision for Casella, say, over the next 5 years? I mean do you want to speed up, slow down M&A? Are you looking to do bigger deals, smaller deals? Are you really focused on self-help? I'm going to leave it pretty open ended, but just -- what's your message to shareholders and employees about your vision for Casella?

Yes. Thanks, Tyler, for throwing a hard ball for the first question. I appreciate that. So not a lot changes in many ways. So [ John ] and I, as you know, have had an amazing partnership for many years and much of the strategy of the company, we've shaped together with senior team. So there's not a right turn coming and no one should expect that. We're focused on the same building blocks that have created a lot of value for shareholders over many years.

This year, myself, I'm focused on a few different things, making sure our workforce is safe and engaged, and we're really continuing our investment in our safety staff, our processes, technology there. We're also focused on upping our game from an HR standpoint and as we've grown dramatically, making sure that are all of our employees really understand our culture, what makes us special and why we're such a great company to work for and how to support each other.

We're also focused on internal and communications and just making sure that we all know each other, and we have great ways to communicate up and down the organization as we've grown. And the last point kind of gets to what you're talking about. For many years, we've had excellent strategic plans as a company and it's really directed a lot of our success for the long term.

But just really making sure our employees live in both the daily work they need to get done and also looking to the future and looking over the next 3 to 5 years into strategy and into key programs from a self-help standpoint or our growth initiatives and just ensuring we have alignment up and down our management team in those areas.

So as I started with, no major right turn, we're going to be focused on the same major building blocks driving incremental value through our landfills through additional permit capacity and cost reductions, better utilization, additional profitability, our collection line of business, pricing, automation, optimization, driving value through our Resource Solutions business as we've done very, very well over time.

And then the growth initiatives, both on acquisitions and development, our pipeline is very, very good right now. We've got a lot of great opportunities for '26. I think it will be a nice solid year for us on the acquisition growth side. So overall, much of the same, but a lot of excitement in the company right now. We exited the year in a great spot and a lot of smiles around and people working very hard.

Excellent. Okay. That was fantastic. And then you gave some good color on the Mid-Atlantic. It sounds like the new system is going to be fully rolled out by, call it, Q2. It sounds like the new trucks are landing, but is it right that you're only baking in about $5 million of synergies into the guide?

Yes, we're probably a touch conservative. We have completed almost all of the systems integration work. There's a little bit left to be done. It'll be done kind of early here in the first quarter. No risk around it. It's just migrating from the legacy customer billing portal into our in-suite portal, and that will be completed and will allow us to start to collapse routes, gain synergies on the street, get more of those automated trucks out and gain some real efficiencies in the back office.

But we're being a touch conservative for a few reasons. One, we got to get this work done. It's not all going to show up this year, but we're also doubling up on many costs as well. We're running multiple systems at the same point in time. We're investing both CapEx dollars, but also operating dollars in a lot of this transition and migration work that's running through our income statement. So there's more to come here. As we've said, this is a multiyear opportunity and will be a positive tailwind for a couple of years.

Right. So it's probably operational opportunity routing, et cetera. But then longer term, there's some opportunity to surgically price. Is that right? And any thoughts about what that could mean?

Yes. I mean, certainly, when we have all the businesses running on the same system, we'll have a much better ability to assess customer profitability, route profitability and price accordingly and they're doing the rest of the business. So that will be a big opportunity going forward.

I think it would be a little premature for us to put a dollar number on that, but you can imagine what that opportunity could be. And then going forward kind of beyond this initial wave of see facility consolidations, long-term route consolidation opportunities as we continue to fill in densifying that market with tuck-ins. There's a long list of opportunities that will extend far beyond 2026.

Okay. So '27 sounds good on that front. But Brad, you also made an interesting comment about G&A leverage starting in '27. I mean I know you guys run a couple of hundred basis points higher than maybe peers. But can you talk about what are we talking about quantum wise from a G&A leverage perspective, '27, '28, '29, I mean however you guys want to frame that?

Yes. I mean we run a little over 12%. The industry benchmark with our admittedly much larger peers, is closer to 10%. So that's the long-term goal. That's sort of our North Star. I think the first step for us over the next, call it, 3 to 5 years, will be to get -- go from 12% down to below 11% and then keep the trade enrolling. But we have a number of opportunities and projects that we have lined up in different areas this year to start to get some benefits in the numbers in 2027. As I said, '26 is sort of a pivotal year for laying a lot of groundwork for what we're going to be able to realize going forward.

Our next question comes from the line of Tami Zakaria of JPMorgan.

I wanted to follow up on that volume comment you made. Just from a modeling perspective, could you provide some color on volume growth as we see the [ 4 ] quarters this year?

Yes. I'll turn it over to Brad in a second, but I wanted to make -- Brad mentioned this in his prepared comments, but I want to double down on it. Stats are as good as the set is. So like if you look at our volume stat in the fourth quarter, especially on the landfills, it looks a little weak.

But it only looks at third-party bonds. It doesn't look at overall volumes coming into our landfills. And as Brad said, with very strong remixing at our landfills from third-party customers to intercompany customers. So our tons were actually up 1.7%, while our volume stat was down.

So that statistic doesn't tell the full story because it just look at third-party revenues. And if you look at that rolling into this year, Brad, and take that as a backdrop, we actually had a pretty good volume quarter in the fourth quarter. It might not have showed up in the stat on the third-party side.

Yes. And looking ahead to 2026, we do expect landfill third-party volumes to be positive for growth. So I think what you saw here this year was a little bit of a blip as we shifted really to emphasize more internalization where we could. On the collection side, just to give kind of the full volume picture, we're looking at flat growth-ish. We're hoping to bend the curve and start to grow the business organically via volume.

As we've acquired so heavily in the last few years, there's been a churn that's been ongoing. And volume on the collection side has been a net negative as we've -- like everybody else, as we've prioritized price and making sure we have appropriate margins and returns from our customers. But we think we have the ability to grow this business in our markets, particularly in the Atlantic as we get our feet under us there going forward.

Understood. That's very helpful. And one more question -- follow-up question on the G&A comments you made. I think you said this year is a pivotal year that would pave the way for a multiyear cost improvement. The goal is to get to for like the industry average 10% is. Is there a way to frame how you get there? Do we see some accelerated basis point improvement next couple of years and then it's sort of eases into a 10% range? Any way to sort of frame the opportunity here?

Let me maybe frame it at sort of a high level. Our back-office processes at Casella are very, very manual intensive and don't offer us much scale as we continue to grow. So we grow the business, we have to add more people. As we improve the technology, the utilization of technology and the tools available to the team, consolidating our billing system, which we've talked about a lot, we're putting in a new maintenance system as we speak.

We're getting -- ramping up utilization of our procurement system. So there are many things kind of below the surface that we're working on that will -- when we come out of 2026, it's not going to be magically on January 1, 2027. But the process we're going through is to end up where we're much more scalable and we can really grow or rather shrink that percentage of revenue as we grow.

And it's even a little more pointed than that where many of these programs started in early '25. And both in '25 and '26, we've had doubled up costs because in some certain cases, we're running multiple systems at the same time. We have additional staffing during these transitions. So there's definitely not just the efficiencies that Brad's talking about, but there are just some redundant costs in the business right now as we're making this technology transformation.

But like many things, very well thought out, not -- there are areas of large technology risk as we talked about before, which is upgrading tried-and-true systems we've had before in improving integrations and really gaining efficiencies.

Our next question comes from the line of Adam Bubes of Goldman Sachs.

You talked about -- you talked about the volume performance including some more internalization rather than taking third-party tons, I think I understand the benefits of internalization all else equal. But can you just talk about the decision to make that trade-off the economics for substituting external volumes for internal volumes? And then longer term, how do you balance the opportunity to drive internalization with the need for backup capacity in the Northeast?

Yes. Over the last couple of years, we are running a little bit short on landfill volumes at some of our key sites, especially through New York [indiscernible]. Typically, you want to run a landfill, say, 85% to 95% full in a year, and we're a bit short to that. In 2025, a lot of our effort shifted to getting the transportation lanes in place, equipment in place, integrating acquisitions, getting those tons into our landfill sites. And as we exited 2025, we've got a lot of that work done. And it was exciting because it gives more stability to the business.

If we can control more of the tons through vertical integration, it creates more stable lasting value over time. But we also were filling up our sites. So as we are making some of those moves, we had to exit some third-party tons from our landfills, hence, a little bit of that negative third-party stat. But overall, we had more tons coming into our landfill sites in a really nice mix improvement as well. So that's something we're in a pretty good spot right now. '26 will not see a shift like that where we're remixing again. We'll be focused very much on quality of revenue at the landfills and driving higher returns and moving up the average price point.

Great. And then I know still early, but hoping to get your initial thoughts on where the internal and external tons at your Ontario landfill could head post-2028. And any cost implications that we should keep in mind during that process?

Yes. So this is something we're still mapping out and we'll get more information to shareholders, but this has been a non closure point for us for a couple of years. So we've been building up to this. We feel good about our balance sheet accruals and the glide rate getting to that end point. We don't expect charges or something like that. We expect all of these costs to be accrued for appropriately leading up to that closure.

The site is taking at about 850,000 tons a year of waste as we currently speak. As we've been talking about for several quarters, we've been actively working on expansion at our Highland landfill in New York for close to 5 years, if you can believe that. And we're very close to the end of that process, and we'll be going from 60,000 tons to 1 million tons a year. So quite a few of those tons from Ontario will move over to Highland. And the highest quality revenue times will move over.

We've also been in the early stages of some other expansion work that could help with some of those additional tons in the market, we may shed some of those times as well. But as we're mapping this through, we'd like to be in a situation where our quality of revenue improves, our returns improve and we don't see any sort of major step down from an EBITDA standpoint at that end of 2028 coming into 2029.

Yes. And Ned, just to add on to that. I mean that referred to returns. I mean, Ontario has been a great disposal outlet for us and our customers for a number of years. It's on a volume basis, our current volume base is our largest site. But it's also a very, very expensive site to run from a cash flow perspective and from an EBIT and net income perspective. So as we reblend that over time, move some volume to Highland, move it to some other places, I think coming through that we may end up with or [indiscernible] [ May ]. We expect to end up with a much better cash flow and earnings profile from those tons.

Our next question comes from the line of Trevor Romeo of William Blair.

A couple for me here. I guess first one is on M&A and kind of your outlook here. I think if you look back at the last few years, you kind of added double-digit percentages to revenue from M&A. I think you're coming into this year with maybe a little bit less than the past few years.

So just in terms of what's in your pipeline now, are there any bigger deals out there? Do you see opportunity to get towards those kind of double-digit M&A contributions this year? Or you think it would be more likely to be a little bit less than the elevated levels for the past few years where you stand today?

Yes. Great question. We have had several very strong years in 2023, 2024 were above average years. We're well above $300 million of acquired revenues in 2023, 2024, around $250 million of acquired revenues. In this last year, around $115-ish million or so. [ Motta Wade ], we thought was going to land in December and end up landing in January. So that would have brought us a little closer to $150 million. But where we sit today, our pipeline is really good in the advanced stage.

We've got a number of high-quality companies we've been working with for a period of time. Several of which are a little bit larger, and we would hope to kind of press that 150 level -- $150 million of revenues in 2026 and hopefully maybe get above $200 million if the pipeline continues to develop. But from our vantage point, it comes down to quality of strategic fit.

You never talk about the deals you don't land. And there are several of those in 2025 that we did a lot of work on. And they just didn't work out for either compliance reasons or pricing or whatever it might be. And as a management team, [ John ] and I have said this for a lot of years. We're not just buying companies to buy them. We're buying to make money and to make returns and advance our business model and we stay true to that.

So from having the discipline to be able to walk away it's something we've always maintained, and that's why we don't guide acquisitions. You don't want to get in that position where you feel like you have to do something that's not the right value adder. So from our vantage point, we're seeing a really good spot right now.

Our team, our acquisition team, the broader management team has been working hard. John Casella in his role stepping into Executive Chairman. We're spending a lot of time working on sourcing acquisitions and continuing to build the pipeline, which is amazing for our team that he can continue to do that. So we're excited about the year and excited about the glide rate into '27.

Yes. And just Trevor, from a modeling perspective, and I think you alluded to this in your question, a light rollover number coming into this year because, number one, at $115 million plus or minus of annualized revenue acquired last year. This is a relatively light year for us compared to what's kind of become our run rate. But also, it was front-end loaded. So we actually saw most of that acquisition revenue in 2025. So very little about $30 million rolling over into 2026.

Yes. All right. I appreciate that. It's good to hear that still opportunities that John is still active in the [indiscernible]. Sure. And real quick, kind of had a question on the guide. I think Brad, you mentioned the [ Hawk Grid ] facility closure, some of those tons being redirected to your landfills, does that kind of capture all the economics? Or are you expecting kind of [indiscernible] impact there on the and the North Country rent you mentioned too, and just help us in that impact the factor there?

Yes. You're breaking up a little bit, so let me know if I missed something here. But the [ Hawk bridge ], it was a relatively -- a relatively small facility. So we'll see some headwind from that in 2026, and that's baked into our guidance. But net of moving some of those materials to our landfills, I would say it won't be significant. North Country from a margin and dollar standpoint will be more significant. That probably represents a headwind of 20 basis points to our EBITDA margin as we ramp down that volume planning for the end of that facility's life in 2027.

Our next question comes from the line of Jim Schumm of TD Cowen.

So I just want to I just wanted to make sure I have the Mid-Atlantic story down correctly. So it sounded like Ned said in the prepared remarks that you have a $5 million benefit for the new automated trucks in 2026. And so I'm assuming -- or maybe this is incorrect, but is that $5 million benefit that's from like a labor reduction of the removing bodies off the back of the trucks that you're not assuming any like operational benefit from routes and stuff, right?

So you've got $5 million that you know about and that you complete your migration in the next coming days. And then that gives you the opportunity to sort of look at and see what sort of size what the next opportunity is, which you have not baked in any of that into your 2026 guidance. Is that correct?

So I'd describe it a little bit differently, and Sean Steves is sitting here, so you can keep me honest. But there's a couple of components. One is, as you said, getting the automated side load trucks on the street, replacing [ real ] load trucks and immediate productivity and labor savings that come from that. But it's also combining routes.

So once we can combine systems, we can eliminate routes for businesses that are operating today in the same market overlapping each other. So the way I think I described it last quarter was the $5 million includes that initial list of -- as soon as we flip the switch on the system, we're going to go after these routes in this market and these number of routes in that market. That's just the tip of the iceberg, I think, is the point we're trying to make over time is we'll be able to get more routing opportunities, facility consolidations and of course, it's regenerative as we continue to acquire in the market.

And just hitting that one step further, Brad, Almost all of the G&A of back office savings already eaten up in the year by redundant systems, by the investment we're making. So the savings are coming, but there -- in the year, we've got that doubled up cost as we're doing this work in the marketplace. So then that's why it starts to show up more in late '26 into '27.

Okay. I just -- because my understanding was you've got these 2 systems. And I think you guys said in the past that you could be running like 2 trucks basically in the same neighborhood, but you're not really sure because you don't have the visibility on it because you're on 2 different systems. So if that's the case, then operationally, you wouldn't be able to remove -- necessarily remove those duplicate or redundant routes yet. Am I not thinking about that the right way?

You're close. It's -- so as we've acquired businesses, we've left many of them in the Mid-Atlantic on their own, we call order-to-cash system. So from of taking orders from customers through dispatching routing the trucks and building and collecting cash here on different systems. We're almost completed moving all of those businesses on to the upgraded Casella system. So all of that work will be done in the same system.

When they're on different systems, you couldn't start to collapse customers' routes because you're running through different order systems, dispatch, routing systems. Now they're on the same platform. We've got one or 2 more steps that need to be made in the first quarter. And then that allows us to have all those customers in the same database we start to reestablish routes, optimize, consolidate trucks at the same time, automated trucks are arising, which allow us to gain more efficiencies.

So all of that works together to the $5 million number it will be bigger over time as we get rid of those redundant G&A costs are in the year, and we also get the next leg of this strategy.

Okay. And I would assume that given the work that you had in the redundant systems that from an M&A standpoint, in the Mid-Atlantic, I would have thought that perhaps you slowed down the M&A in the Mid-Atlantic just because you kind of had your hands full. Is that fair? Do you now ramp up M&A when you have these sort of systems sorted out? Is that fair?

Yes. We hit the brakes a touch that is there. We've done another 10 acquisitions in the Mid-Atlantic since we brought on the GFL platform 2 years ago. we have continued to build density. We've got a great slide in our investor deck that shows those additional acquisitions we've done over the last 2 years in the market.

But you're right. The gold standard is we acquired a business either within the first month or the first 2 months, it comes on to our integrated systems. We start to collapse routes, we get cost out and we generate synergies faster. We were not in that mode the last few years. And so we've got some built-up opportunity now. For a little bit, it was an overhang. Now it's great opportunity. We still have the work to be done, and we'll gain those synergies. And as you said, as new acquisitions come in, they'll come on to the modern Casella system within the first couple of months and we'll be able to drive synergy value faster.

Our next question comes from the line of Benjamin Moore of Jefferies.

I wanted to circle back on the Mid-Atlantic opportunity, particularly as it relates to pricing. You touched on this a little bit earlier with the question, but I wanted to get a sense of how you view the overall pricing opportunity in the Mid-Atlantic. I think there's a couple of dynamics -- a couple of, I guess, aspects to it.

So there's certainly having the systems in place, which you noted, allowing for dynamic pricing. But also, can you talk a little bit about maybe how the pricing in that region compares to other regions? And then also talk about timing. Is this something that you have to effectively do at the start of the year. Can you make these changes maybe as 2026 progresses? Or is this more of a 2027 opportunity? Just kind of wanted to drill down on that opportunity a little bit more?

Yes. Maybe I'll start off filling in some of the numbers and then hand it to Ned to talk about the strategy going forward. But we -- overall pricing across lines of business, we were about 3% in the Mid-Atlantic this year. So we've got on pricing, of course, but we were in a position to price as aggressively for lack of a better word, where it's where it's warranted because we couldn't really figure out exactly where it was warranted.

So if you just do that math, 3% versus our -- the rest of our business, which is north of 5%, blending down to the high 4s in the fourth quarter, you can kind of pencil out the theoretical opportunity. How that plays out, of course, will depend on some factors in the market and what we find out. Timing-wise, I think that work will really begin, call it, midyear after we're done with the integrations onto the [indiscernible] system and can really dig into the pricing analytics. But beyond that, it's -- as I think I mentioned earlier, it's certainly premature to put a dollar number on it, but Ned, any thoughts?

Yes. This is one of the main reasons why it's important to be on our system besides surrounding. We've got great tools we've developed over the years to understand customer by customer profitability and returns. And we want to make sure if we're going to put assets to work either part of the capacity of a truck or dumpsters or whatever it may be, that we're making an adequate return for that work.

And as the Mid-Atlantic business is built and until all of these customers are on to the integrated Casella systems, we have not had a perfect view of profitability or return to those customers, as we said. So we've been doing some work, of course, to understand where we need to drive price and why and how to stay front of inflation. But it's not done to the same rigor that we've been doing historically across our book of business in ensuring we have the right quality of revenue.

So all of those great practices and how we run our business day to day and how we generate solid margins and returns through our collection line of business, all those tools will be brought to bear in that marketplace this year into the future. And let's face it, it's about a 20% EBITDA margin business today. And generally, our hauling businesses as a company are north of 30%.

So there's a lot of opportunity there. I don't think we can say we map it out exactly this much per year, but we know the opportunities there to improve quality of revenue, to improve efficiency on the street, to have integrations of route, integrations of business units, there's a lot there. And we look at it as this amazing opportunity. It's a tailwind for us right now. We have these tools. We have to get this work done, and now let's go get it done.

Our next question comes from the line of Shlomo Rosenbaum of Stifel.

Could you -- just to start, can you talk a little bit -- you've had really good national accounts revenue growth over the last couple of quarters. Can you talk a little bit more about that and what might be driving that?

Yes. It comes from a couple of different buckets. It really has been a strong point for us. And there are several different avenues that we're growing that business. One is more just traditional multisite retail maybe broker work. And that's a little bit less exciting. We definitely look for quality of resi and we look for opportunities to have overlaps to our hauling businesses where that might be the channel of growth into our integrated collection business.

But probably the more exciting part is our industrial business. The higher margin we're delivering differentiated services, and we've been growing very, very fast into that segment. So both of them are areas of growth. But I think from our vantage point, if we can get the vertical integration and the revenues are recognized through the National Accounts group into our integrated hauling landfill business. That's amazing.

We try to under-index just pure brokered work that we're not servicing and then industrial service work, that's where our sales efforts, our ability to drive value from an operating standpoint, that's where we really shine. And we've had many years in a row of 10-plus percent growth, and we continue to drive a lot of value for our customers and our shareholders in that segment.

One comment about it is people who are new to Casella sometimes ask why comparing our margins to some of our larger competitors, why is there a differential? This is part of the answer. Our national accounts business, which is a nice growth engine, which is obviously little to no capital investment. So a great returning business, it does have a lower EBITDA margin [indiscernible] because it's functionally a brokerage business. So that's kind of a factor where we make a decision to, okay, just probably is downward pressure on our margins on a comparative basis. But it's a great fit, and it fits within our broader business, as Ned described.

Yes. I just read in the numbers. Our industrial business grew about 17% in the year. So this is more value-added services, higher margin. So that's the larger growth engine in national accounts and where we've been driving more sales and operating focus.

Okay. Great. And then -- is there a way to dimensionalize the impact of weather in the first quarter? Because there's obviously been a significant impact, and you guys are more concentrated in where we have had more of the kind of severe weather.

Yes, it's funny. We learned a long time ago, try not to make a lot of excuses about the weather. Let's face it, the men and women who work for Casella, they're out there in the cold, the rain, the snow, the ice, every day taking care of our customers and working very, very hard. However, we did take a look because we've been living this for the last couple of months, and it has been cold, it has been snowy and Brian Butler ran [ some ] SaaS for us.

And the snowfall across our markets is up 10% versus 10-year averages, but the temperatures of 20% below 10-year averages and it has been cold. Our team has just done such an amazing job. I mean being out there, 4:00 in the morning, servicing stops with negative 20-degree temperatures is not easy on our people. It's not easy on productivity, it's not easy on equipment. It's just been -- from a safety standpoint, our safety stats are some of the best we've had in a decade.

And the team is just doing such a great job there, buckling down, paying attention, really being focused, being deliberative in their work and trying not to have injuries or accidents. So hats off to the entire team because you're right. This has not been an easy start to the year. But as we sit around, look at our numbers, look at our stats, look at our productivity of the business, we're doing pretty good.

Given this backdrop, and it didn't cause us to change our view on the year, and we're probably a touch behind in January where we want to be. But given those challenges, you look at it, you get a big blizzard a big snowstorm, economic activity just falls off. You have less roll-off pulls. You have less tons into the landfills, you have less consumption, less people go to work and then the productivity is a bit tougher as well.

So it has been a bit of a headwind, but we're from Vermont, we're used to it, and we've brought a lot of those safety practices across our new markets, and we're trying to make sure as we operate in the snow and ice and other markets, we do the same things we've done well for 50 years.

Okay. Then I just want to make sure I understand your commentary on the Ontario closure. Are you communicating that because of the actions you're taking you don't expect to have an EBITDA impact going from '28 to '29 like you might see a revenue impact. But given the mix of what you're doing, you're trying to kind of structure it so that you won't have an EBITDA impact. Am I understanding that right?

Sort of. So we're -- as Ned mentioned, we're developing a plan to try and smooth it to the extent that we can in a way that makes sense operationally and with our reported financial results. I would say, though, that it's much less an EBITDA issue as it is a landfill amortization, EBIT and cash flow issue. On those lines, on that basis, Ontario is extremely expensive to run, much more expensive than any of our other sites. So what you may have is if you think about steady revenue or steady EBITDA or maybe up, maybe down, we'll figure that out. But the underlying earnings and cash flow of that EBITDA will be much, much better.

Okay. And then finally, is there any update on what's going on with New Hampshire's amended [ House bill 707 ]. Is there any -- has anything changed over the last couple of months on that?

Yes. New Hampshire is a very complex situation for us today. As you know, we've been working for several years now to develop the new [ Granite State ] landfill in Dalton, our efforts are strong there. We continue to fight on 2 fronts from a legal standpoint. Challenges where our permit was denied for dormancy and we filed appeals for that, where we don't think that accurate and will continue to fight. We think there's a lot of value to be created at the [ Granite State ] landfill. And we feel like our legal standing is strong, and we'll continue to work to move that permit for.

One of the areas that John Casella has been heading up for a few years and continues to make a lot of progress is on 707 as you mentioned, and really looking at getting local control amended where we can advanced permitting at our existing North Country Landfill. There was a settlement agreement years ago, which does not allow us to expand the landfill beyond its current footprint.

However, we own many acres around this landfill. We could have a very efficient, capital efficient good expansion into those areas. It would make a ton of sense for us, our shareholders, the citizens of New Hampshire to develop that capacity over time. It would be as much needed for New Hampshire and let's say at the Northeast over the next 20 years to expand that site.

So it's one at [ Quirks ], where there's a little bit too much local politics around expanding good quality existing sites. And that's the work we've been doing with the legislature. And frankly, the good senators and representatives of New Hampshire have been working to fix because they look at a site like North Country and they say, this is something that we should have the experts in the environmental agencies working on versus being governed by local politics, we need to look at capacity like that and really think through the long-term benefits to society. It's very hard to replicate this.

So where we sit today, as I said earlier, something John had is a big passion project as his, and it's another area he's continuing to help the team and looking to advance that. Not a lot more to say right now other than we're excited. We hope that bill does advance and it allows us to create additional airspace at North Country.

If it doesn't, as I said earlier, we continue to push hard on the Granite State site. And we're also developing some transfer capacity at the state. We're working on a rail transfer station. We're looking at other ways to move waste around the state of the anchor to meet the ongoing needs of our customers over time. But it's a complex situation. and something we're very much focused on having a good outcome for shareholders.

[Operator Instructions] Our next question comes from the line of Bill Grippin of Barclays.

Great. I just wanted to come back first through some of the comments you made on sort of your M&A outlook. And I think you mentioned there could be a couple of larger opportunities coming about, are those opportunities that have come about as a result of your sort of expanded Mid-Atlantic footprint? Or are these kind of within the Northeast? And then along those lines, how do you think about your ability to internalize tons as you continue to grow and acquire in the Mid-Atlantic region?

Thanks, Will. So it's a little early to get into the details on a few of these opportunities we're looking at until they mature a bit more. But we're working both in the legacy markets in the Northeast and down into the Mid-Atlantic as well. And we really like opportunities that are $50 million of revenues or $100 million of revenues.

We find them to be great complements to our existing business and rightsize to integrate effectively and we're hopeful to convert a few deals in that size this year. So it's a little hard to get ahead, but hopefully, some more exciting information here as we step into the year on that front well.

Yes. Understood. Appreciate that. And then just a follow-up on landfill pricing. I think you mentioned same-store price was up around 2.5%. And I think last quarter, if I remember, it was around [ 3 ], I guess in my sort of mental framework, that feels light, just given some of the capacity constraints we continue to talk about in the Northeast. Could you talk about maybe some of the underpinnings of that kind of 2.5% to 3% same-store landfill price? And maybe just looking out several years, how do you think that could trend?

Yes. We've come off an interesting period in the Northeast. I mean, while in the long term, the market is supply constrained and we'll continue to see sites closing. Over the last couple of years, we've seen a few new rail moves opened up out of the Northeast out of the broader New York, New Jersey markets, which have moved some tons around in the marketplace.

We have not directly lost customers, but there have been some decent amount of volumes that flowed out in the Northeast, we just put a little bit of a lid on pricing over the last 2 years. As I said earlier in my commentary, we're running pretty much full right now or as full as we want to be. So we're back to the point for the first time, I think, in 2 years, where quality of revenue driving returns is a big, big focus of our team.

We're running fuller because we've done a great job getting internalization to our landfills, getting those transportation lanes opened up. But now it's time, as you said, to start to advance pricing and focus on quality of revenue. And it's -- everyone's looking out 10 years and saying, where is this market going to be? And you can't just build a transfer station or advance the strategy in 12 months' time, these take a long time.

So as some of these new opportunities opened up over the last couple of years, we did see a little bit of a in the market. Now we're back to a position, I feel like we've been in for the last decade where let's focus on quality of revenue.

I'm showing more further questions at this time. I would now like to turn it back to Ned Coletta, for closing remarks.

Thank you very much. In closing, I want to reiterate how proud I am of the team and how excited I am to lead Casella into our next 50 years of growth and achievement. We've built a company defined by disciplined execution, thoughtful growth, long-term value creation, all grounded in our mission of safe, sustainable waste services. Thank you for joining us today. We look forward to speaking with you next quarter as we continue delivering on our mission. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Casella Waste Systems, Inc. Q3 2025 Conference Call. [Operator Instructions] 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.

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, October 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.

Thanks, Brian, and good morning, everyone. Welcome to our third quarter 2025 conference call. In Q3, the Casella team worked hard, 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, 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 8 acquisitions year-to-date, adding approximately $105 million in annualized revenue. We expect the Mountain State Waste transaction to close at the beginning of 2026, contributing an additional $30 million of annualized revenues. Our M&A strategy remains focused on 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 '25 guidance.

The sustained operating and acquisition momentum provides a strong foundation for continued growth and value creation in 2026. In Q3, we announced Casella's Sustainability Leadership Awards, recognizing customers who exemplify the power of partnership and reducing waste, increasing recycling and advancing the circular economy. This year's recipients or Primo brands, Dartmouth College,]indiscernible] and the University of Vermont Medical Center. That showcases what's possible when innovation and collaboration comes together. We celebrate their achievements along with the dedication of our Casella team members who work alongside of them to build real-world models of economic and environmental sustainability for the future.

As announced in August, I'll be transitioning to 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 5 decades, I've had the privilege of working alongside some of the most dedicated, hard-working people in our industry. Together, we've 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 really for the next chapter under Ned's leadership. It's really exciting when we look back and the past 50 years, and I can tell you how proud we are -- what we have achieved over that 50-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.

Thanks, John. 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 markets. 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 and 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 5-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 was 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 and 8% organic revenue. 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 new acquisitions completed in the past 12 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 acquired 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 call 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 $0.42 per diluted share, up $0.4 million and down $0.02 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 9 months of 2025, up $61.6 million year-over-year, largely by EBITDA. DSO was essentially flat from June and year-end at 35 days.

Adjusted free cash flow was $119.5 million year-to-date, a record for the first 9 months and representing approximately 2/3 of our full year guidance. Capital expenditures were $187.8 million, up $61.4 million year-over-year, including $54 million of upfront investment in recent acquisitions. As of September 30, we had $1.16 billion of debt and $193 million of cash. Our net consolidated -- our consolidated net leverage ratio for purposes of our bank covenants was 2.34x and our $700 million revolver remained undrawn. Our liquidity and leverage profile will enable us to be opportunistic in continuing to execute on our growth strategy and robust acquisition pipeline.

As announced in our press release yesterday, we raised the low end of our revenue and adjusted EBITDA guidance for 2025, increasing the midpoints to $1.835 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 midpoints 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 book total revenue growth, excluding future acquisition activity that hasn'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 rep 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 improvement of at least $5 million on an annualized basis, which will contribute to our anticipated overall margin improvement. This was 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.

Thanks, Brad, and good morning, everyone. Thank you, John, for your support as well as I'm preparing to take on the CEO role on January 1. By my count, this will be the 110th quarterly conference call that you've led us as 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 50 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 a 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 continued 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 1/4 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 Hyland landfills in New York with permits expected over the next several quarters.

We are working to more than double the annual permit at Hyland from 460,000 tons a year to 1 million tons per year and also add close to 60 years of capacity at current run rates. At the Hakes landfill, we're permitting a 10-year or more expansion at current run rates. These expansions are important with the expected closures in New York over the next several years. The McKean rail facility upgrade project, which will enable gondola offloading remains on track for completion in the first half of 2026.

Operationally, we completed multiple routing optimization projects during the quarter, reducing total route days by 10 and lowering driver headcount reductions by 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 processing and SRA fees effectively mitigate the impact of weaker commodity prices. Our acquisition program remains a powerful engine of growth and value creation. We have closed on 8 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 and will add another $30 million of annualized revenues. We also have 4 smaller tuck-in deals under [ letter in 10 ] 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 flow growth.

With that, I'll turn it back to the operator for questions. Thank you.

[Operator Instructions] And our first question comes from Tyler Brown of Raymond James.

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 in 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're on. Ned, Brad conceptually, so there seems to be some concerns maybe in the market about the longer-term trajectory of margins 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 rev over unit cost spread? And then how would you characterize kind of a "normal year," and then how should we think about the impact of M&A on that algorithm? .

Yes. Tyler, 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, as we acquire businesses, most of collection businesses, 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 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 deals coming in initially at a lower margin, but then that becomes a sort of fuel to 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 1,000 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 12 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 what we knew was coming. But in the core business, we accreted margins 70 basis points. And we did a great job converting on price. We did a great job executing on our sales funnel Sean and his broader team and team to do great work on the ground operationally. We've got an amazing new safety leader that's drilling to sell it, Jeff Martin, that we're excited to have on our team is really making a positive early difference on our safe culture and advancing that in the right direction as well.

So 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 Mountain State Waste, yes. .

Okay. And to be clear, the $20 million of LOIs are not in the '26 look?

Yes. 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 maybe limited that.

Yes, Tyler. It does not include any pricing or margin lift. We're pretty early in our budgeting processes 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 of long synergies, operating initiatives, some of the work in the back office as well and give a couple of 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.

Yes. And just to put a little bit of 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. When we get the truck deliveries and complete the system conversion the opportunities that we're going to be able to execute on relatively quickly, like within months of 2026. As you said, it doesn't include broader opportunities, further synergies beyond that and broader opportunities just to run the business better when we're on that system.

Yes. Okay. And then my last 1 -- so it kind of actually segues a little bit 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, 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, and 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.

Yes. Good question. As Brad mentioned, I mean, we have so much focus right now on some foundational elements of our systems. We brought in a great new CIO 2 years ago. who had been at Deloitte and Waste Management for 20 years. And we've been focused on some really simple things like 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 that we're probably most excited about is we've put in some new communications tools that can sell out over the last 6 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 Casella is about these foundational changes to systems. And process innovation, and then we'll look to start to reap a lot of efficiencies from that point forward.

And our next question comes from Trevor Romeo of William Blair.

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've talked about some of your investments in trucking logistics, obviously, McKeen before. Maybe you could just speak to what kind of success you saw this quarter? And looking forward, where you sit in the path of that internalization opportunity, how much room you have left?

Yes. Thanks for the question. It's a great point, Brad made, and a big focus of ours over the last 12-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 2 to 3 years to internalize volumes. Many of the companies we buy might have longer-term contracts in place with 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 you 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 margin accretive as well and something we'll continue to look to into the future.

Okay. Great, Ned. and then maybe just a question -- I 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 just anything you're learning from the current integration you can apply going forward to be more effective?

Yes, excellent question. Thank you. We've done quite a bit of work there. If you flash back several years ago, we were very much decentralized in our approach from a diligence integration standpoint with acquisitions. We've built a great team. We have several amazing members of that team, both from sourcing to diligence, to integration work. We have a standardized collaborative tools 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 stand-alone 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 has talked a little bit about where he plans to be spending time, but one of the most important place is is on that front end of the acquisition pipeline. John is just so well regarded and respected throughout the industry. And 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.

And our next question comes from Adam Bubes of Goldman Sachs. .

Congrats Sean, what a run, and congrats Ned as well. I think you said core margins were up 70 basis points, 60 basis points related to landfill volume. So that will use around 10 basis points of sort of underlying margin expansion between the core business, including Mid-Atlantic. How do the Mid-Atlantic margins compare this time versus last year? And what sort of the true underlying solid waste margin expansion excluding that Mid-Atlantic headwind?

Adam, it's Brad. And 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, was a headwind of about 100 basis points. 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 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 tailwind next year, not a headwind. So can you just help us think about the building blocks, maybe between Mid-Atlantic, the core business ex Mid-Atlantic? And then M&A that sort of leads you to that 25 to 50 basis points?

Yes. I think it's fair to think about the Mid-Atlantic next year as a -- certainly a tailwind on a year-over-year basis from EBITDA margins. I'll hesitate from getting into too much detail because as Ned alluded to, we're just now in our budget process, really drilling into the plan for not only the Mid-Atlantic, but the rest of the business. So 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 1 for me. I might have missed it in the prepared remarks, but what was the landfill pricing in the quarter and rail serve capacity in the Northeast has had some impact on landfill pricing, just based on the ebbs and flows of capacity in the market, is there a scope for reacceleration in pricing off the current rate? And how do you think about timing of that?

Yes. So price in the landfills on a third-party basis was 3% same-store. So that's same customer, same time. So 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. .

And the next question comes from James Schumm of TD Cowen.

Nice quarter. Can you just help give us a little bit more color on the time line 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 -- you can't reap the pricing benefits really until you get it all on 1 system and then figure out where you can price, right? So what's the time line? Is it the end of the year? Or is it January? Is it end of Q1? Or is it later than that? How should we be thinking about that? .

Yes. 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 end of Q1, it could be a little bit before that. So the systems work should be done but 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, payment portal, and it will 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 will give us more visibility and 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 A+ 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's -- it will gain momentum. It's a flywheel that would gain momentum. We've done this many times before. our team is very, very good at this. There's not re-creating anything. There's not technology risk. It's more just a matter of we got to get the customers load 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 first half of '26.

Okay. Great. And then I was just curious, were there any notable onetime 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 don't know if that's conservatism or the -- I don't know if is there anything to say there?

We start to comp a few acquisitions that were made in Q3 of '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 -- and Brian can connect with you offline and walk through that.

Yes. 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 pointed out, Royal, for example. We closed Royal.

October 1.

Yes, 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.

And our next question comes from William Grippin of Barclays.

I appreciate the time. And good to hear progress on the Mid-Atlantic integration continues here. I 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?

It may be a little early to weigh in on that, and I don't mean to to say that in that manner, Will, 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 the automation comes to the Street as we get consolidation of routes. So this will be an iterative process into 2026 and maybe several years this entire picture is put together from pricing, profitability and fees into that market. It's not something we're just going to pull lever in Q2 and move everything.

And certainly, backward looking we've seen the Mid-Atlantic has been somewhat of a drag on our overall -- so 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 I just have 2 quick ones here. So I'll combine them. I guess, one, I noticed sounds like the timing of the Mountain State waste closure was pushed out from 4Q to 1Q. Just wondering if there's anything to note there? And then any impact on truck deliveries related to 232 tariffs. It 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 State. So there's really nothing to note there. And then what was the second part

On truck tariffs? .

Yes. We -- the majority of our equipment, trucks, et cetera, all manufactured in North America. So we don't .

In the United States .

In the United States. So we don't anticipate any particular impacts there at all. .

Yes. We're a big Mac can work company. That's our 2 primary brands. If we've got some [ Peterbilts ], they're very limited in scope. And I know there are Peterbilt is looking to move capacity to the U.S. manufacturing wise, but that's not a primary brand for us. The 1 -- as John said, we really have worked hard over the last decade to standardize our brand around 2 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.

Yes. The other piece, too, is that towards 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.

And our next question comes from Shlomo Rosenbaum of Stifel.

I just wanted to step back a little bit with the Mid-Atlantic and it looks really great that the EBITDA margin drag going down from 85 basis points last quarter to 10 basis points this quarter should be done with [indiscernible] 5, 6 months. I just wanted to ask with having gone through some to today and really winning into the acquisition kind of stride -- where do you feel you are in terms of being able to integrate these deals? Like a big deals come in, what would you say would be some 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 any time you go through things, it's a learning process, it's an iterative process. And do you feel you -- your capabilities have increased over the last year because of that notwithstanding the way that you've built the team, but just in terms of underground capabilities and the cadence of the way things should go? .

Yes. There's 2 unique things in the Mid-Atlantic. One, we bought assets extracted out of another company. And that's different. We've done that 1 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 talk by a certain role for a lot of years in the company. Every company we bought, we put on to our billing system as fast as possible.

And in the Mid-Atlantic, 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 want to see what the AMCS platform could do and to see if it 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 2025 to get onto our core tried-and-true system, and we've been running fast. And you guys check things out sometimes. We made a tiny, I guess, decision back then 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 systems as fast as possible. .

I think the other aspect of that is that we also really have come out of that even stronger and has really developed over the last probably 6 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 we're going to close the gap in terms of margins. We're going to do everything that we set out to do. And yes, there are some lessons learned, no question about it. We need to have a bigger bench strength support the acquisition opportunities that we have. We've learned that. We're doing it. So that's right, there are a few lessons learned, for sure.

Yes. But it's interesting. I mean, we've done 80-plus acquisitions in the last 5 years, 5-plus years. And we've yielded the synergies hit our model in every case. 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, and 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 we'll continue to drive a lot of value. .

Okay. Great. And then just going over those 2 landfills where you're deep in the permitting repermitting 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 [indiscernible].

We feel very confident. I mean, I think that there's anyone who's developed capacity in the Northeast is Casella over the last 25 years. I think our record goes without saying we're very confident in getting through the process. I think the biggest challenge with our Hyland 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 and 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 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.

Yes. And this is a big deal, too. bringing on this much new disposal capacity in the Northeast versus having to rail 1,000 miles away or 2,000 miles away is a really big value creation point for shareholders. So we're excited to get through these processes. We're down to the last those,and as John said, we're very confident. I 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, is that increase your ability to internalize? Is it the fact that the other landfills in the region are running out of capacity. Like when would we start to see that start to increasingly add value to your operations?

I think that it's probably end of '26, '27 time frame. I think, but a lot of that depends on how much disposal capacity comes out of the Northeast market. Right now, we have Ontario coming out at the end of '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 it's very hard to predict when that's going to happen. But all indications are that we're going to be losing capacity in the Northeast, not gaining capacity.

Yes, and within...

The exception of what capacity we're putting in place, we're going to be losing capacity in the Northeast.

And within a very short distance of Hyland and Hakes, there are 3 sites that will be closing in the next 2 to 3 years from the Buffalo market to the Finger Lakes to the greater Albany market. That whole tier of New York is losing a significant landfill capacity over the next several years as we're ramping up these sites. So our timing should be good, not as '26 gain, but it will be a great organic growth engine for us over the next couple of years. .

And our next question comes from Tony Bancroft of Gabelli Funds.

John, congratulations on all your success. You did a wonderful job and built a amazing company, and Ned could be more well deserved. My question is sort of more 30,000 feet bigger picture. Is this -- given all the surging power needs for AI data centers in the Northeast grid. How do you see Casella's 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 figured out the declining capacity in the Northeast longer term. How do you see that impacting your landfills with energy demand and also on the waste side with the E&P waste in the Northeast as well. Just want to get your longer-term view.

Sure. I mean I think that we've taken a different tact from a strategic standpoint in terms of the RNG facilities where 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 the $35 million or $50 million investment is really being invested by third parties. We're simply selling the gas. So not going to really have a significant positive or negative to Casella on a go-forward basis, Tony.

Today, it's about 1% of our EBITDA, our energy both in landfill gas energy and RNG. And as John said, we made 1,000% of right strategic decision by not developing those facilities on our own. But we've got 3 new facilities coming online in the next few months, our North Country facility in New Hampshire, we have a third party is ramping an RNG facility there, and we have 2 Wage facilities coming online in New York, Thailand and Simon. We haven't modeled much for 2026 impacts for these, but they could become more material. And there's a lot of really high-quality methane coming off those landfills and definitely be something we'll keep visibility on it. It'd be very accretive, 100% margin. So it's exactly what you want with no investment. So it will be exciting to see those trains ramp up.

And our next question comes from Stephanie Moore of Jefferies.

I wanted to I wanted to follow up on McKean. I know that you've said that you did have some plans to at 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 any updates in terms of that building now, timing of completion and then just general general overall thoughts in terms of timing of those investments and then the ability to start to really push volumes through here over the next 24, 36 months, et cetera?

Sure. I think that, first of all, the facility is operational. We're the entire team out there has gotten some made experience over the last 6 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 olio facility. We're looking also at our Willimantic. But it's probably when we'll see -- begin to see a little bit of activity -- 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 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 we're excited about it. But again, it's a longer-term significant impact on a positive basis to the company.

[Operator Instructions] And our next question comes from James Schumm, it's a follow-up from TD Cowen.

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?.

Yes. Thanks for the question. So Pennsylvania is a state with a lot of landfills. So you've 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 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 serve 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 move it via truck versus rail. But if you can have the right linkage to write long-term contracts or connection to Casella asset, that could be a long-term value creator for our shareholders.

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 us this morning. And 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. .

This concludes today's conference call. Thank you for participating, and you may now disconnect.