Casella Waste Systems, a regional solid waste, recycling and resource management services company, reported its financial results for the three and twelve month periods ended December 31, 2018.
Image: Casella Waste Systems announces fourth quarter and fiscal year 2018 results. Photo: courtesy of andhu / FreeDigitalPhotos.net.
The Company also provided guidance for the fiscal year ending December 31, 2019. Highlights for the Three and Twelve Months Ended December 31, 2018:
Revenues were $174.7 million for the quarter, up $23.5 million, or 15.5%, from the same period in 2017. Revenues were $660.7 million for the fiscal year, up $61.4 million, or 10.2%, from fiscal year 2017.
Overall solid waste pricing for the quarter was up 4.5%, driven by strong collection pricing, up 5.6%, and robust landfill pricing, up 3.7%, from the same period in 2017.
Net loss was $(13.7) million for the quarter, as compared to net income of $20.0 million for the same period in 2017. Net income was $6.4 million for the fiscal year, as compared to net loss of $(21.8) million in fiscal year 2017.
Adjusted Net Income Attributable to Common Stockholders* was $4.1 million for the quarter, as compared to $4.6 million for the same period in 2017. Adjusted Net Income Attributable to Common Stockholders was $27.2 million for the fiscal year, as compared to $28.7 million in fiscal year 2017.
Adjusted EBITDA* was $33.8 million for the quarter, up $3.6 million, or 12.0%, from the same period in 2017. Adjusted EBITDA was $138.0 million for the fiscal year, up $9.0 million, or 7.0%, from fiscal year 2017.
Net cash provided by operating activities was $120.8 million for the fiscal year, up $13.3 million, or 12.4%, from fiscal year 2017.
Normalized Free Cash Flow* was $47.1 million for the fiscal year, up $8.3 million, or 21.3%, from fiscal year 2017.
“We had a strong operational quarter and a great year, as we continued to execute well against our key strategies as part of our 2021 plan,” said John W. Casella, Chairman and CEO of Casella Waste Systems, Inc. “We remain focused on driving cash flow growth by increasing landfill returns, improving collection profitability, creating incremental value through resource solutions, using technology to drive profitable growth and efficiencies, and efficiently allocating capital for strategic growth.”
“We continued to make substantial progress ramping up our strategic growth initiative in 2018, with the acquisition of 10 businesses with roughly $77 million of annualized revenues,” Casella said. “We have built strong process and discipline in our acquisition approach, and we plan to remain focused on acquiring well run businesses in strategic markets that will drive additional internalization to our landfills and leverage operating synergies. We expect revenue growth of approximately 5.5% in 2019 from the roll-over impact of acquisitions completed in 2018. Further, our acquisition pipeline remains robust entering 2019, and we believe that we are well positioned to again surpass our target to acquire or develop $20 million to $40 million of annualized revenues in 2019.”
“Given the strength of our cash flow growth and our robust acquisition activity to date, we are on track to outpace our Normalized Free Cash Flow growth targets set as part of our 2021 plan,” Casella said. “We are increasing our Normalized Free Cash Flow target range for fiscal year 2021 to between $65 million and $70 million, or roughly 10% to 15% per year of growth.”
“During 2018, strong operating performance in our integrated solid waste, customer solutions and organics operations more than offset the significant commodity pricing headwinds in our recycling business,” Casella said. “Our disciplined solid waste pricing programs continue to drive significant value, with collection pricing up 5.6% and landfill pricing up 3.7% year-over-year in the fourth quarter. Solid waste volumes were flat year-over-year in the fourth quarter, or up 0.5% excluding the negative volume headwind resulting from a fire related business interruption at a transfer station.”
“Our team has done a great job over the last several years working to off-take risk across our business, including recycling commodity pricing risk,” Casella said. “As recycled paper and cardboard commodity prices stabilized over the last six months, our trailing SRA fee and revenue share contracts, where applied, are now fully recovering lower commodity prices. Despite our average commodity revenue per ton being down roughly 18% year-over-year in the fourth quarter, our efforts to improve our recycling business model, reset pricing on legacy contracts, and reduce contamination all contributed to increasing operating income $0.7 million in the recycling business year-over-year in the fourth quarter. Looking forward to 2019, we expect recycling results to improve further as several third-party recycling processing contracts will reset over the next six months.”
For the fourth quarter, revenues were $174.7 million, up $23.5 million, or 15.5%, from the same period in 2017, with revenue growth mainly driven by robust collection, higher cost recovery fees, acquisition activity, and higher volumes in the organics and customer solutions lines-of-business, partially offset by lower recycling commodity pricing and volumes.
Net loss was $(13.7) million, or $(0.32) per diluted common share, as compared to net income of $20.0 million, or $0.46 per diluted common share for the same period in 2017. Adjusted Net income Attributable to Common Stockholders was $4.1 million, or $0.09 of Adjusted Diluted Earnings Per Common Share*, for the fourth quarter, compared to Adjusted Net Income Attributable to Common Stockholders of $4.6 million, or $0.11 of Adjusted Diluted Earnings Per Common Share, for the same period in 2017.
The fourth quarter included: a $15.8 million Southbridge Landfill closure charge, $0.9 million of expense from acquisition activities and other items, and a $1.1 million impairment charge for the Company’s investment in RecycleRewards, Inc. The same period in 2017 included a $(16.1) million benefit from U.S tax reform; partially offset by $0.3 million Southbridge Landfill closure charge, $0.2 million of expense from acquisition activities and other items, and $0.2 million of tax effect.
Operating loss was $(5.1) million for the fourth quarter, as compared to operating income of $9.9 million for the same period in 2017. Adjusted Operating Income* was $11.6 million for the fourth quarter, up $1.3 million from the same period in 2017.
For the fiscal year, revenues were $660.7 million, up $61.4 million, or 10.2%, from fiscal year 2017, with revenue growth mainly driven by robust collection and disposal pricing, higher solid waste volumes, higher cost recovery fees, acquisition activity, and higher volumes in the organics and customer solutions lines-of-business, partially offset by lower recycling commodity pricing and volumes.
Net income was $6.4 million, or $0.15 per diluted common share, as compared to net loss of $(21.8) million, or $(0.52) per diluted common share, for fiscal year 2017. Adjusted Net Income Attributable to Common Stockholders was $27.2 million, or $0.61 of Adjusted Diluted Earnings Per Common Share, for the fiscal year, compared to Adjusted Net Income Attributable to Common Stockholders of $28.7 million, or $0.67 of Adjusted Diluted Earnings Per Common Share, for fiscal year 2017.
Operating income was $39.7 million for the fiscal year, as compared to operating loss of $(12.6) million in fiscal year 2017. Adjusted Operating Income was $52.1 million for the fiscal year, down $(0.7) million from fiscal year 2017.
2019 Outlook
“Our fiscal year 2019 budget is on track with the fiscal year 2021 strategic plan that we first introduced in August 2017, and reflects continued execution of our key strategies with the goal of driving additional shareholder value,” Casella said. “We expect strong growth again in 2019 despite the closure of the Southbridge Landfill in November 2018, driven by continued pricing execution, ramping up of tons at our landfills in New York, the roll-over impacts of acquisitions completed in 2018, and improvements in our recycling business as several legacy recycling contracts reset to further shift commodity risk to our customers and increase processing fees.”
The Company provided guidance for the fiscal year ending December 31, 2019 by estimating results in the following ranges:
Revenues between $710 million and $725 million (as compared to $660.7 million in fiscal year 2018);
Net income between $34 million and $38 million (as compared to $6.4 million in fiscal year 2018);
Adjusted EBITDA between $152 million and $156 million (as compared to $138.0 million in fiscal year 2018);
Net cash provided by operating activities between $119 million and $123 million (as compared to $120.8 million in fiscal year 2018); and
Normalized Free Cash Flow between $51 million and $55 million (as compared to $47.1 million in fiscal year 2018).
Adjusted EBITDA and Normalized Free Cash Flow related to the fiscal year ending December 31, 2019 are described in the Reconciliation of 2019 Outlook Non-GAAP Measures section of this press release. Net income and Net cash provided by operating activities are provided as the comparable GAAP measures to Adjusted EBITDA and Normalized Free Cash Flow, respectively, however these forward looking estimates for fiscal year 2019 do not contemplate any unanticipated or non-recurring impacts.
The Company provided the following assumptions that are built into its outlook:
Overall the Company expects revenue growth of between 7.5% and 9.7% in fiscal year 2019.
In the solid waste business, revenue growth of between 10.0% and 12%, with price growth from 3.5% to 4.5%, volume growth from 0.0% to 1.0%, 7.5% growth from acquisitions already completed, and roughly a 2.0% headwind from the Southbridge Landfill closure.
In the recycling business, overall revenue growth of between 2.0% and 5.0%, mainly driven by slightly higher recycling commodity prices, higher processing fees, and neutral to slightly higher volumes.
In the Other segment, overall revenue growth of between 1.0% and 2.0%, with growth in the industrial segment for the Customer Solutions group and higher volumes in the Organics group.
The budget includes approximately 5.5% revenue growth from the roll-over impact of acquisitions completed during fiscal year 2018, but does not include any acquisitions that have not yet been completed.
Capital expenditures of approximately $83 million, with roughly $8.5 million of non-recurring capital associated with acquisition integration and recycling facility upgrades. Payments on operating lease contracts of approximately $6.0 million.
Net cash provided by operating activities will be negatively impacted in 2019 as we plan to spend $13.5 million on landfill closure, site improvement and remediation expenditures associated with the Southbridge landfill closure and Potsdam remediation project.
No material changes in the regional economy from the last 12 months.
Source: Company Press Release.