Casella Waste Systems' Q3 2025: Contradictions Emerge in Mid-Atlantic Pricing, Synergy Realization, and Landfill Growth Strategies

Date of Call: October 31, 2025

Financials Results

• Revenue: $485.4M in Q3 2025, up $73.7M or 17.9% YOY (includes $53.4M from acquisitions and $20.4M same-store growth / 4.9% organic)
• EPS: $0.42 per diluted share (adjusted), down $0.02 YOY; adjusted net income $26.6M, up $0.4M YOY
• Operating Margin: Adjusted EBITDA margin 24.7% in Q3 2025, down ~30 basis points YOY

Guidance:

• Raised 2025 midpoints to Revenue $1.835B and Adjusted EBITDA $420M after Q3 results
• Remain on track to achieve full-year free cash flow guidance (YTD adjusted free cash flow $119.5M, ~2/3 of guidance)
• 2026 outlook: organic growth 4–5%; +3% (~$60M) rollover acquisition revenue including Mountain State; total revenue growth ~7–8% (excl. future M&A)
• Target adjusted EBITDA margin improvement 25–50 bps in 2026; Mid-Atlantic expected to contribute at least $5M of annualized savings
• Target adjusted free cash flow growth in the long-term range of 10–15%.

Business Commentary:

* Revenue and Earnings Performance: - Casella Waste Systems reported revenue of $485.4 million for Q3 2025, up 17.9% year-over-year, driven by strong solid waste pricing, healthy landfill volumes, and contributions from acquisitions. - Adjusted EBITDA reached $119.9 million, up 16.4% year-over-year, reflecting contributions from acquisitions and operational efficiencies.

• Margin Expansion and Acquisition Impact:
• Adjusted EBITDA margin was 24.7%, down 30 basis points year-over-year, due to the dilution effect of new acquisitions at lower initial margins.

• The base business excluding recent acquisitions showed margin expansion of 70 basis points, attributed to landfill volumes and operational enhancements.

• Strategic Growth and Integration:

• The company completed eight acquisitions year-to-date, contributing approximately $105 million in annualized revenue, with an additional $30 million expected from the Mountain State Waste acquisition.

• Integration and optimization efforts in the Mid-Atlantic region are expected to yield at least $5 million in annualized savings starting in 2026.

• Landfill and Pricing Dynamics:

• Landfill volumes were up 11.7% year-over-year, with increased internalization and stronger third-party volumes.
• Pricing in the landfill business showed a 3% same-store price increase, despite softer commodity prices in the resource solutions segment.

Sentiment Analysis:

Overall Tone: Positive

• Management: “Revenue and adjusted EBITDA were quarterly records at approximately $485 million and $120 million.” CFO: “We raised the lower end of our revenue and adjusted EBITDA guidance…increasing the midpoints to $1.835 billion and $420 million.” CEO/CFO: “We remain on track to achieve our full-year free cash flow guidance.” (Paraphrased from prepared remarks and guidance statements.)

Q&A:

• Question from Tyler Brown (Raymond James): Excluding M&A, is there any reason margins couldn’t meaningfully accrete over time? How should we think about a 'normal year' and the impact of M&A on margins? Does the 25–50 bps 2026 target include M&A? Does the $5M Mid-Atlantic synergy include pricing? Also, thoughts on AI opportunities?
  Response: Primary takeaway: Acquisitions initially dilute margins (recent deals reduced margins ~100 bps) but provide multi-year margin expansion as integrations complete; 25–50 bps target for 2026 includes closed M&A (including Mountain State); the $5M Mid-Atlantic savings excludes pricing upside; AI will follow foundational systems work—first consolidate billing/ERP/procurement, then pursue automation and efficiency gains.

• Question from Trevor Romeo (William Blair): You reported ~20% growth in internalized landfill volumes this quarter—what drove that and how much runway remains? Also, how have you scaled your corporate development and integration capabilities as M&A activity increased?
  Response: Primary takeaway: Internalization is harvesting volumes from recent acquisitions (2–3 year opportunity), is highly margin accretive, and the company has built a standardized, standalone sourcing/diligence/integration team with improved tools and process to increase deal throughput and integration effectiveness.

• Question from Adam Samuel Bubes (Goldman Sachs): Mid-Atlantic margin drag fell from ~100 bps last year to ~10 bps this quarter—how should we think about the building blocks to the 25–50 bps target and landfill pricing/rail impacts?
  Response: Primary takeaway: Mid-Atlantic is turning into a margin tailwind for 2026 and is a contributor to the 25–50 bps target; landfill same-store pricing was +3% in the quarter and increased rail-served capacity is dampening landfill pricing pressure.

• Question from James Joseph Schumm (TD Cowen): Timeline for fully resolving the Mid-Atlantic billing system conversion—when will you be able to realize pricing benefits? Any notable one-time revenue items this quarter?
  Response: Primary takeaway: Mid-Atlantic conversion ~50% complete; conservative timeline is completion by end of Q1 2026 (systems ready in Jan–Feb) enabling customer profitability analytics and rapid synergies; there were no notable one-time revenue benefits in the quarter.

• Question from William Griffin (Barclays): How might pricing in the Mid-Atlantic evolve as systems are implemented in 2026? Any update on Mountain State closing timing and impact of 232 tariffs on truck deliveries?
  Response: Primary takeaway: Too early to quantify pricing acceleration—need consolidated data and profitability analysis first; Mountain State expected to close in early 2026 per normal regulatory timing; truck supply is largely U.S.-manufactured (Mack/Kenworth) so tariffs are not expected to be a material issue.

• Question from Shloma Rosenbaum (Stifel): Given hiccups in Mid-Atlantic integrations, how has your integration capability improved and how confident are you on permitting progress at Highland and Hake’s?
  Response: Primary takeaway: Lessons learned led to refocusing on rapid migration to Casella's billing system and building bench strength; the team is stronger, repeatable integration playbook is in place, and management is confident permits for Highland and Hake’s are near (expected over the next several quarters).

• Question from Tony Bancroft (Gabelli Funds): With rising power demand (e.g., AI/data centers), how do you view landfill-gas-to-energy (R&G) opportunities and longer-term impact on landfills?
  Response: Primary takeaway: Energy sales are ~1% of EBITDA today; Casella largely sells gas to third-party developers (minimal capital exposure), so potential R&G ramps are high-margin and accretive with limited company capital required.

• Question from Stephanie Benjamin Moore (Jefferies): Updates on McKean (transfer station/rail facility) timing, buildout, and timing to push meaningful volumes through over the next 24–36 months?
  Response: Primary takeaway: McKean is operational and commissioning; modest volume ramp expected beginning ~Q2 2026, with pace dependent on regional disposal dynamics—long-term the asset improves competitiveness and provides strategic rail-served capacity.

• Question from James Joseph Schumm (TD Cowen) follow-up: Could you acquire collection operations in Western PA/Cleveland and send tons to McKean, or use McKean rail to serve Mid-Atlantic operations?
  Response: Primary takeaway: Rail economics can enable longer-haul moves but trucking is typically economical only for nearby volumes (PA weight limits and lower truck payloads reduce truck economics); targeted rail-linked transfer stations or long-term contracts could create value but require capital and the right proximity.

Contradiction Point 1

Mid-Atlantic Pricing Opportunities

It involves differing expectations regarding the impact of system integration on pricing opportunities in the Mid-Atlantic region, which could affect revenue and profit expectations.

How do you assess pricing opportunities in the Mid-Atlantic region post-integration? - [Adam Samuel Bubes](Goldman Sachs)

2025Q3: Our ability to optimize pricing post-integration of billing systems will take time. This region has been a drag on overall pricing, and we expect opportunities post-integration. - [Ned Coletta](CEO)

Why is the Mid-Atlantic region lagging, and how could ERP implementation impact pricing in that market? - [Patrick Tyler Brown](Raymond James & Associates)

2025Q2: Pricing visibility and elasticity improvements are expected post-migration. - [Edmond R. Coletta](COO)

Contradiction Point 2

Mid-Atlantic Synergy Realization

It involves differing expectations regarding the timing and realization of synergies in the Mid-Atlantic region, which could impact operational efficiency and profitability.

How will M&A affect Casella's long-term margins? - [Tyler Brown](Raymond James)

2025Q3: Integration challenges are expected but managed. The core business accreted margins by 70 basis points. - [Ned Coletta](CEO)

Are the Mid-Atlantic issues due to slower synergy realization or incremental costs? - [Adam Samuel Bubes](Goldman Sachs Group)

2025Q2: It's a case of slower synergy realization due to truck delays and system conversions. Significant trucks are expected soon to help execute synergies. - [Edmond R. Coletta](COO)

Contradiction Point 3

Landfill Volume Growth and Internalization Strategy

It involves the company's strategy for landfill volume growth through internalization, which has financial implications for operations and future revenue projections.

Can you clarify internalized landfill volumes and their impact on operations? - [Trevor Romeo](William Blair)

2025Q3: Recent internalized volume growth is due to acquisitions yielding margin accretive opportunities. This is a significant part of our growth strategy. - [Ned Coletta](CEO)

Can you break down how much of the Q1 landfill volume increase was due to recovering C&D volumes versus internalization? How much remaining landfill capacity is available for internalization? - [Adam Bubes](Goldman Sachs)

2025Q1: Approximately one-third of the landfill volume recovery was from recapturing C&D tons in the New York market, with two-thirds from internalization efforts and improved sales strategies. - [Edmond Coletta](COO)

Contradiction Point 4

Mid-Atlantic Integration and Pricing Strategy

It pertains to the company's integration and pricing strategy in the Mid-Atlantic region, which affects operational efficiency and revenue generation.

Can you provide an update on the Mid-Atlantic billing system implementation timeline? - [James Joseph Schumm](TD Cowen)

2025Q3: We're about 50% through, with a conservative end of Q1 2026 completion. - [Ned Coletta](CEO)

How much of the Q1 acquisition-driven annualized revenue is incremental to annual rollover guidance? - [James Schumm](TD Cowen)

2025Q1: The integration of the former GFL and the Mid-Atlantic assets is on track. We now expect that we'll complete our integration of systems and billing in the Mid-Atlantic in the second quarter of 2026. - [Jason Mead](SVP of Finance and Treasurer)

Contradiction Point 5

M&A Impact on Casella's Long-Term Margins

It highlights differing perspectives on the impact of M&A on Casella's long-term margins, which is crucial for understanding the company's growth strategy and financial outlook.

How will M&A impact Casella's long-term margins? - [Tyler Brown](Raymond James)

2025Q3: We expect Mid-Atlantic to be a tailwind next year. - [Brad Helgeson](CFO)

What is the current M&A pipeline, and how might 2025 M&A opportunities develop considering seller willingness and buyer competition? - [Trevor Romeo](William Blair)

2024Q4: The M&A pipeline is very active, with over 100 opportunities and $700 million in potential revenues. We continue to focus on acquisitions in the Northeast and Mid-Atlantic. - [Ned Coletta](CEO)