Q4 2024 Earnings Summary
- The company expects a positive price/cost spread in 2025, targeting pricing of approximately 5% to outpace internal inflation of around 4% by at least 100 basis points in the solid waste business.
- There is significant growth opportunity in the national accounts business, with volumes up over 4% in 2024. The company is focusing on expanding into new markets from recent acquisitions, particularly in the Mid-Atlantic region, which presents significant opportunities in the industrial and distribution center segments.
- Despite the scheduled closure of the Ontario County landfill in 2028, the company anticipates no negative financial impact as it plans to redirect volumes to other facilities. They are pursuing a permit expansion at the Highland landfill to increase annual capacity from 460,000 tons to 1 million tons, and have opportunities at other sites like McKean.
- The company expects negative organic volume growth of flat to down 1% in 2025, particularly due to volume declines in the Mid-Atlantic region, indicating potential weakness in organic growth.
- Half of the projected EBITDA growth ($30 million to $35 million out of $60 million) is expected to come from acquisitions, suggesting heavy reliance on acquisitions for growth and potential challenges in sustaining organic growth.
- The upcoming closure of the Ontario County landfill in 2028 may impact the company's disposal capacity and poses operational risks, reflecting the complexity of maintaining and expanding landfill capacity in the Northeast.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | FY 2025 | no prior guidance | $1.775 bn–$1.805 bn, representing 15% growth at the midpoint | no prior guidance |
Adjusted EBITDA Growth | FY 2025 | 12%–15% | 16% growth (derived from a guidance range of $410M–$425M) | raised |
Adjusted Free Cash Flow Growth | FY 2025 | 10%–15% | Approximately 9% at the midpoint | lowered |
Capital Expenditures | FY 2025 | no prior guidance | Approximately $215 million, including $45 million upfront spend | no prior guidance |
Organic Growth | FY 2025 | no prior guidance | Approximately 4% | no prior guidance |
Pricing in Solid Waste Business | FY 2025 | 5% tailwinds | Approximately 5% | no change |
Solid Waste Volumes | FY 2025 | no prior guidance | Flat to down 1% | no prior guidance |
Adjusted EBITDA Margin | FY 2025 | Qualitative margin expansion mentioned | Flat to 40 basis points improvement; with underlying base business margin expansion of 50bps | no prior guidance |
Adjusted Free Cash Flow | FY 2025 | no prior guidance | Expected in the range of $165 million to $180 million | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
M&A and Acquisition Strategy | Q1–Q3 emphasized aggressive acquisition activity, a robust pipeline, and integration challenges with a focus on strategic fit and operational synergies. | Q4 maintained heavy reliance on acquisitions with 8 deals completed, an active pipeline of over 100 opportunities, and continued focus on effective integration and resource allocation. | Consistent focus on acquisitions with improved integration processes and ongoing pipeline management. |
Landfill Operations and Capacity Management | Q1–Q3 discussed facility closures (e.g., Brookhaven, Southbridge), capacity constraints, and planned expansions such as Juniper Ridge and technical initiatives at McKean, with emphasis on managing volume impacts and preserving airspace. | Q4 detailed the planned closure of the Ontario County facility, an expansion at Highland landfill, and updates on the McKean rail landfill, showing proactive capacity management and facility-specific strategy adjustments. | Recurring emphasis with new facility-specific updates—shifting from broader closures to proactive capacity expansions. |
Pricing Strategy and Margin Management | Q1–Q3 highlighted flexible pricing programs that outpaced inflation, margin improvements across lines of business, and strategic cost management to maintain favorable spreads despite inflation pressures. | Q4 reaffirmed efforts to maintain a 100 basis points positive spread, target 5% pricing in solid waste to outpace a 4% inflation rate, and adjust pricing strategies to drive margin improvements. | Consistently positive sentiment with stable execution of pricing strategies to manage inflation and sustain margin growth. |
Organic Volume Trends and Regional Market Dynamics | Q1–Q3 noted modest declines in solid waste volumes and C&D, highlighted recovery uncertainties, and identified the Mid-Atlantic region as a key growth opportunity despite integration challenges and regional volume disparities. | Q4 observed volume declines concentrated in the Mid-Atlantic due to shedding underperforming assets while noting flat to positive performance in other areas, with a strategic focus on improving revenue quality. | Recurring topic with a refined focus on quality over quantity, and clear regional distinctions in performance and strategy. |
Operational Efficiency and Workforce Optimization | Q1–Q3 documented significant investments in fleet automation (e.g., automated truck conversions, onboard computer deployments), route optimization, and back‑office technology upgrades to boost productivity and reduce labor costs. | Q4 continued similar initiatives with the automation of 17 trucks, rollout of route wear systems, and ongoing back‑office technology enhancements aimed at further improving operational efficiency and workforce optimization. | Consistent momentum in automation and process improvements; continued focus on operational efficiency and workforce optimization. |
Supply Chain and Fleet Replacement Challenges | Q1 and Q2 mentioned delays in truck deliveries and supply chain challenges impacting acquisition integration and efficiency, particularly in the Mid‑Atlantic region. | Q4 did not mention any specific information on supply chain or fleet replacement challenges. | No mention in Q4, suggesting a possible resolution or deprioritization of the topic compared to previous periods. |
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M&A Outlook for 2025
Q: How will M&A shape up in 2025?
A: The pipeline for mergers and acquisitions is more active than ever, with strong opportunities across the Northeast and Mid-Atlantic regions. The company has already closed three deals in '25 and expects to continue adding density and expanding its footprint through acquisitions. Many opportunities come directly from collaborations with small independent businesses via their national accounts team. -
Internalization of Waste Volumes
Q: What's the benefit of internalizing waste volumes?
A: By internalizing waste into their own landfills, the company is improving margins and creating cash value. They began shifting waste from third-party sites to their own landfills in late '24, and these benefits are included in the 2025 guidance. They expect incremental margins of 50% to 75% on additional tons coming into their landfills. -
Ontario Landfill Closure Impact
Q: What's the impact of the Ontario landfill closure?
A: The Ontario County landfill is scheduled to close in 2028, but the company is prepared to transition waste to other facilities over the next four years. They are working on a permit expansion at their Highland landfill to increase capacity and do not expect a negative financial impact from the closure. -
Technology Investment and Systems Upgrades
Q: What's the plan for technology investment?
A: The company is investing in modernizing and upgrading its order-to-cash system to enhance scalability and automation. This includes increased spending on IT, a new customer portal, and integrating acquisitions onto their systems. The investment involves millions—not tens of millions—of dollars and aims to improve efficiency and support growth. -
EBITDA Growth Drivers for 2025
Q: How will EBITDA grow year-over-year in 2025?
A: They expect approximately $60 million of EBITDA growth year-over-year, with $30 to $35 million coming from M&A. The remaining growth represents roughly 7% organic growth, driven by factors like internalization benefits, pricing improvements, and the Willimantic facility contributing about $4 million. -
Price-Cost Spread and Inflation Expectations
Q: What's expected for the price-cost spread in 2025?
A: The company anticipates internal inflation of around 4% and aims to maintain a positive price-cost spread of 100 basis points, targeting at least 50 to 100 basis points ahead of inflation in the solid waste business. -
Cash Tax Paying Position
Q: What is the cash tax position for 2025?
A: The company expects to pay about $5 million in cash taxes in fiscal 2025, with the potential for this number to increase in 2026 depending on tax legislation and deal activity. They note that deal structures providing tax advantages can affect future cash taxes. -
Fleet Automation and Labor Cost Reduction
Q: What's the opportunity with fleet automation?
A: There are significant opportunities to automate collection fleets, especially in the Mid-Atlantic and Hudson Valley areas, with plans to automate a couple of hundred routes over the next three years. This automation reduces direct labor costs—potentially lowering labor expenses by 50 basis points—and improves safety by reducing reliance on helpers. -
National Accounts Business Growth
Q: How is the national accounts business contributing to growth?
A: The national accounts business continues to grow nicely, up high single digits in 2025. Expansion into new markets like the Mid-Atlantic offers significant opportunities, especially in industrial sectors with numerous distribution centers. This segment serves as a volume engine and provides sticky, high-margin customer relationships. -
Volume Outlook and Shedding Low-Margin Customers
Q: Why is the 2025 volume outlook flat to down 1%?
A: The slight decline in volume is due to intentionally shedding low-margin customers, particularly in recently acquired markets like the Mid-Atlantic. In legacy markets, volumes are stable or slightly up. The focus is on driving price improvements and enhancing margins. -
PFAS Handling at Landfills
Q: How is the company handling PFAS at landfills?
A: The company is proactively addressing PFAS by implementing technologies like reverse osmosis and foam fractionation at their facilities. These technologies separate PFAS from leachate, allowing for solidification and safe disposal. This approach improves flexibility in managing leachate and complies with regulatory requirements. -
Potential for Large Transformational M&A
Q: Is there potential for large transformational M&A?
A: While remaining focused on strategic tuck-in acquisitions along the Eastern Seaboard, the company is open to evaluating larger opportunities if they arise. Their strategy isn't to actively pursue large transformational deals but to continue executing on their current growth plans.