Casella Waste Systems, Inc.

Transcription

1 Casella Waste Systems, Inc. Jefferies Global Industrials Conference August 4, 204

2 Safe harbor statement Certain matters discussed in this presentation are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 995. These forward-looking statements can generally be identified as such by the context of the statements, including words such as believe, expect, anticipate, plan, may, will, would, intend, estimate, guidance and other similar expressions, whether in the negative or affirmative. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which we operate and management s beliefs and assumptions. We cannot guarantee that we actually will achieve the plans, intentions, expectations or guidance disclosed in the forwardlooking statements made. Such forward-looking statements, and all phases of our operations, involve a number of risks and uncertainties, any one or more of which could cause actual results to differ materially from those described in our forward-looking statements. Such risks and uncertainties include or relate to, among other things: adverse weather conditions that have negatively impacted and may continue to negatively impact our revenues and our operating margin; current economic conditions that have adversely affected and may continue to adversely affect our revenues and our operating margin; we may be unable to increase volumes at our landfills or improve our route profitability; our need to service our indebtedness may limit our ability to invest in our business; we may be unable to reduce costs or increase pricing or volumes sufficiently to achieve estimated Adjusted EBITDA and other targets; landfill operations and permit status may be affected by factors outside our control; we may be required to incur capital expenditures in excess of our estimates; fluctuations in energy pricing or the commodity pricing of our recyclables may make it more difficult for us to predict our results of operations or meet our estimates; we may incur environmental charges or asset impairments in the future; and our change in our fiscal year may not benefit our financial performance. There are a number of other important risks and uncertainties that could cause our actual results to differ materially from those indicated by such forward-looking statements. These additional risks and uncertainties include, without limitation, those detailed in Item A, Risk Factors in our Form 0-K for the year ended April 30, 204. We undertake no obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. Casella Waste Systems 2

3 Casella Waste Systems - Overview Casella provides integrated solid waste, recycling and resource services. $497.6mm of revenues for fiscal year ended Apr 30, 204. Integrated solid waste and recycling services in 6 northeast states. Casella s strategy focuses on resource transformation. Tying economic and environmental models together to create incremental value from traditional waste streams. Provide customers unique resource solutions through Zero-Sort recycling, organics, and clean energy programs. Casella Waste Systems 3

4 Company overview 6 Recycling Facilities 0 Disposal Facilities 35 Collection Operations 42 Transfer Stations 4 Landfill Gas-to-Energy Facilities Clinton LF 75k tons/yr 6.8mm tons capacity WasteUSA LF 600k tons/yr 5.8mm tons capacity Juniper Ridge LF No annual cap 24.9mm tons capacity NCES LF No annual cap 2.3mm tons capacity Hyland LF 32k tons/yr 5.8mm tons capacity McKean LF 32k tons/yr 2.mm tons capacity Ontario LF 98k tons/yr 3.3mm tons capacity Hakes LF 462k tons/yr 4.8mm tons capacity Chemung LF 200.5k tons/yr 6.9mm tons capacity Southbridge LF 405k tons/yr 7.2mm tons capacity Total disposal capacity includes permitted and permittable airspace estimates at each site as of April 30, 204. Annual capacity does not reflect the.5mm ton per year rail permit at McKean LF. Casella Waste Systems 4

5 Casella controls valuable northeast landfill assets 0 landfills in strategic locations across the Northeast. Added 80.mm tons of total long-term capacity at an avg. tipping fee over $30 per ton. Annual permitted capacity now at 3.9mm tons. Total Disposal Capacity (mm Tons) () Annual Landfill Disposal Volumes (mm Tons) () Fiscal year ended April 30, Fiscal year ended April 30, Total Disposal Capacity excludes MERC and all Closure Projects ; Annual Disposal Volumes only include amortizable tons at active landfills. Casella Waste Systems 5

6 Sourcing new landfill volumes is driving performance Adjusted EBITDA up in FY4 on higher landfill tons, better collection pricing, and improved operating execution. Revenue ($mm) Adjusted EBITDA and Margin ($mm) $476.4 $449.7 $454.7 $468.0 $455.3 $ % 24.2% $07.9 $ % 2.7% $00.0 $ % 9.% $95. $ Fisal year ending April 30, Fisal year ending April 30, Adjusted EBITDA equals earnings before interest, taxes, depreciation and amortization, adjusted for accretion, depletion of landfill operating lease obligations, gain on sale of assets, development project charge write-offs, legal settlement costs, tax settlement costs, bargain purchase gains, asset impairment charges, environmental remediation charges, severance and reorganization costs, expenses from divestiture, acquisition and financing costs, gains on the settlement of acquisition related contingent consideration, as well as losses on divestiture. Reconciled in the Appendix. Casella Waste Systems 6

7 FY4 results up significantly on strategic execution Adjusted EBITDA ($mm) FY4 results up on strong execution: Revenue growth +$42.3mm (or +9.3%) YOY. $87.8 +$7.3 $95. Adj. EBITDA up +$7.3mm (or +8.3%) YOY, with strongest growth in over 5 yrs. Free Cash Flow up +$3.5mm YOY. Improvement driven by higher landfill tons and strategic execution. Landfill tons up +350k (+9.7%) YOY. 2 Residential and Commercial collection price up +.9% YOY. Recycling Commodity tons up +6.2% YOY. FY3 FY4 Adjusted EBITDA defined on slide 6, and reconciled in the Appendix. 2 Excludes a +76k ton year-over-year increase in low priced soils at the Worcester landfill closure project. Casella Waste Systems 7

8 Focus in the near term to improve free cash flow Management focused in key areas to increase free cash flow and to reduce debt leverage:. Increasing landfill returns; 2. Driving additional profitability in collection operations; 3. Executing Eastern Region strategy; 4. Creating incremental value through Customer Solutions; and 5. Improving balance sheet and reducing risk. Casella Waste Systems 8

9 () Increasing landfill returns Focus in FY4 to increase volumes and capacity utilization. Landfill tons up +350k year-over-year in FY4. Disposal Adj. EBITDA up +$9.2mm YOY in FY4. Volume increases primarily driven by: () long-term contracted MSW volumes; (2) ramp-ups at Southbridge, NCES and WasteUSA; and (3) higher C&D volumes. Market dynamics are beginning to shift across our footprint area. Disposal site closures (and expected closures) will create a supply-demand imbalance. Roughly 2.7mm tons/yr of disposal capacity is expected to permanently close. The NY/PA market has over-capacity, but NYC Dept of Sanitation contracts will shift market dynamics in (roughly +.5mm tons/yr in NY landfills). Shifting strategic focus in FY5 to further enhance landfill returns. Maximize capacity utilization incremental tons have high margins. Increase pricing pricing power returning to the disposal market in the northeast. Improve asset positioning leverage $7.0mm rail grant at McKean to drive new volumes. Excluding Worcester soils closure project. Casella Waste Systems 9

10 Disposal market dynamics are shifting 6 Recycling Facilities 0 Disposal Facilities 35 Collection Operations 42 Transfer Stations 4 Landfill Gas-to-Energy Facilities Other disposal sites (closed or potential to close) Expected NYC waste flows Clinton LF 75k tons/yr 6.8mm tons capacity WasteUSA LF 600k tons/yr 5.8mm tons capacity Moretown LF 72k tons/yr, Closed 7/3 NCES LF No annual cap 2.3mm tons capacity Claremont WTE 73k tons/yr, Closed 9/3 Juniper Ridge LF No annual cap 24.9mm tons capacity PERC WTE 300k tons/yr, MERC WTE 300k tons/yr, Closed 2/2 Hyland LF 32k tons/yr 5.8mm tons capacity McKean LF 32k tons/yr 2.mm tons capacity Ontario LF 98k tons/yr 3.3mm tons capacity Hakes LF 462k tons/yr 4.8mm tons capacity Chemung LF 200.5k tons/yr 6.9mm tons capacity Total disposal capacity includes permitted and permittable airspace estimates at each site as of April 30, 204. Annual capacity does not reflect the.5mm ton per year rail permit at McKean LF. Albany LF 275k tons/yr Closing Southbridge LF 405k tons/yr 7.2mm tons capacity Casella Waste Systems Taunton LF 20k tons/yr Closing 205 Fall River LF 376k tons/yr, Closing 204 Granby LF - 235k tons/yr, Closed 3/4 S. Hadley LF 56k tons/yr, Closed 4/4 Barre LF - 94k tons/yr, Closing 205 Northampton LF 50k tons/yr, Closed 5/3 Chicopee LF - 365k tons/yr NYC Dept of Sanitation 0k 2k tons per day. Building 4 marine transfer stations to transload waste to rail (expect 2 built by early 205). Expect an additional.0m tons/yr to be disposed in NY. 0

11 (2) Driving additional profitability in collection operations Collection pricing programs continue to drive value. Residential and commercial pricing remained strong at +.9% for FY4. The roll-off market has shown early signs of rebounding, with growth in select markets. Local market leaders matter in the hauling business. Driving towards a local market centric approach; one-size-fits-all approach is not effective. Shifted management of key decisions/programs to local teams pricing, routing, marketing, and service offerings. Replaced/upgraded over 35% of our local managers in last 8 months. Team working to further improve collection profitability. Pricing continued focus on pricing discipline. Quality of revenue shifting focus from volumes to quality of revenue. Route profitability - eliminating route days to reduce cost and improve asset utilization. Fleet optimization upgrading fleet for route applications and solving lingering fleet issues. Casella Waste Systems

12 (3) Executing eastern region strategy Significantly improved asset positioning and financial performance. Adj. EBITDA margins improve from 5.5% in FY3 to 2.4% in FY4. Settled North Country landfill litigation in Jan 202. Ramped tons to site after closing Maine Energy and acquiring BBI in Dec 202. Sold Maine Energy for $6.7mm in Nov 202. Facility permanently closed in Dec 202. Waste redirected through newly constructed Westbrook transfer station to other sites, including North Country and Juniper Ridge landfills Acquired BBI in Dec 202. Owned/operated 7 hauling & transfer facilities that overlap CWST s operations. +85k tons of internalization benefit to landfills and recycling facilities. Sold BioFuels for $2.0mm in Jul Capital intensive C&D processing operation with low margins. Purchase price for Maine Energy to be paid over 20 years. 2 Purchase price to be paid over 5 years. 3 Adjusted EBITDA is reconciled to net income as follows; in the second full 2 months of combined operations following closing, we estimate net income to be $2.0 million, plus estimated depreciation and amortization of $2.9 million which equals estimated Adjusted EBITDA of $4.9 million. Casella Waste Systems 2

13 (3) Executing eastern region strategy cont d. Expanded Southbridge landfill in Jan 203. Received permit to increase annual permit limit to 405k tons per year. Ramped up tons to roughly 360k tons per year in FY4. Received MSW permit at Juniper Ridge landfill in Feb 204. Received a permit to receive up to 82k tons per year of in-state MSW. New Concord, NH contract started in Jul year hauling/disposal/recycling contract; with disposal contract starting in Jan 205. Expect to internalize roughly 30k tons per year. Expiration of Ogden put-or-pay contract. Out-of-market disposal contract expires Dec 3, 204. Paying $3.7mm/yr higher disposal costs than current market rates. Casella Waste Systems 3

14 (4) Creating incremental value through resource solutions Zero-Sort Recycling Casella operates 5 Zero-Sort MRFs in our integrated footprint. Mature facilities operating at ~95% of capacity; adding a new MRF in Lewiston, ME in FY5. Recycling volumes up +6.2% and ACR down -3.% in FY4. Casella Organics Business model is primarily focused on transforming Biosolids into renewable products for fertilization and landscaping. Working with partners to transform Source Separated Organics into energy or compost. Customer Solutions Focus on creating resource solutions for Industrial, Municipal, Institutional, and multi-location Retail customers. Experiencing strong growth in the Industrial segment (lower margins with high FCF). Shipped tons from MRFs on a same store basis. Casella Waste Systems 4

15 (5) Improving balance sheet and reducing risk Divestitures reduced risk, improved cash flows and reduced leverage. Mar 20 sold non-integrated recycling facilities outside northeast for $34.mm; used proceeds to pay down debt and reduce leverage. Dec 202 sold Maine Energy for $6.7mm; eliminated negative cash flow operation. Jul 203 sold BioFuels for $2.0mm; eliminated negative cash flow operation. Dec 203 sold 50% stake in US GreenFiber for $3.5mm; eliminated non-integrated, negative cash flow operation. Jan 204 ceased development of landfill gas pipeline project; NPV negative project. Sept 202 equity offering reduced balance sheet risk and refinancings improved cash flows. Leverage remains heightened, but maintain adequate head-room to covenants. Cash interest reduced by >$20.0mm/yr with refinancings & divestitures over last 3 years. Current balance sheet provides flexibility to execute strategy. Next major debt maturity is Senior Secured Revolving Credit Facility in Mar 206. US GreenFiber sold for $8.0mm gross proceeds, with $3.5mm net proceeds for Casella s 50% equity interest. Casella Waste Systems 5

16 Fiscal year end change better matches business cycle Moving fiscal year end to Dec 3 st better matches our business cycle. New fiscal year will begin with slow winter months; allowing catch-up if necessary. Revenues ramp during spring (not at year end), enabling more effective forecasting. Strongest months will occur during summer months and early fall. Budgeting in late fall enables capital purchases in Dec through Jan; allowing for new assets to be in place before seasonally strong periods. Fiscal year change effective on Jan, 205. Plan to report an 8-month transition period ending Dec 3, 204. Plan to report current Q (7/3/4) & Q2 (0/3/4) during 8-month transition period. Casella Waste Systems 6

17 Free Cash Flow projected to be materially higher in CY205 Expect to complete balance sheet clean-up and asset repositioning during the 8-month transition period ending Dec 3, 204. $9.0mm of environmental remediation and closure payments at 3 sites. $3.0mm of capital spending on new contracts/facilities, rail siding at McKean landfill, and gas treatment facility to reduce operating costs. Revenue ($mm) Adj EBITDA & Margin ($mm),2 Free Cash Flow ($mm),3 $455.3 $497.6 $530.0 to $ % 9.% $87.8 $ % $07.0 to $03.0 $.3 $8.0 to $4.0 FY203 FY204 CY205 Guidance FY203 FY204 CY205 Guidance FY203 FY204 CY205 $(2.2) Guidance Reflects guidance provided on June 25, 204; FY203 and FY204 are for the 2-months ended April 30, 203 and 204, respectively; while CY205 reflects our new reporting period for the 2-months ending December 3, 205 (effective Jan, 205). 2 Adjusted EBITDA defined on slide 6, and reconciled in the Appendix. 3 Free Cash Flow equals net cash provided by operating activities, less capital expenditures (excluding acquisition related capital expenditures), less payments on landfill operating leases, less assets acquired through financing leases, plus proceeds from the sale of property and equipment, plus contributions from non-controlling interest holders. Casella Waste Systems 7

18 Casella s value drivers Valuable integrated solid waste assets in disposal limited Northeast markets. Management focused on increasing Free Cash Flow and reducing debt. FY4 results demonstrate strong execution of plan. Near term focus of team: Improving landfill returns; Driving profitability of collection operations; Executing Eastern Region strategy; Creating value through Resource Solutions. Casella Waste Systems 8

19 Appendix Casella Waste Systems 9

20 Non-GAAP reconciliation of Adjusted EBITDA Non-GAAP Reconciliation of Adjusted EBITDA to Net Income (Loss) ($ in thousands) Fiscal Year Ended April Net (loss) income $ (27,404) $ (54,463) $ (77,592) $ 38,428 $ (3,858) $ (68,024) Loss (income) from discontinued operations, net (284) 4, ,98 38 (2,476) Gain on disposal of discontinued operations, net (725) (43,590) (,80) (63) Loss from continuing operations before discontinued operations $ (27,3) $ (49,983) $ (77,703) $ (2,964) $ (4,900) $ (70,563) (Benefit) provision for income taxes,799 (2,526),593 (23,723) 3,06 6,22 Other expense (income), net (436) 23,50 20,0 0,626 2,355,366 Interest expense, net 37,863 4,429 44,966 45,489 44,08 33,083 Expense from divestiture, acquisition and financing costs 44, Depreciation and amortization 60,339 56,576 58,45 58,2 63,509 68,342 Severance and reorganization charges 586 3, ,370 Tax settlement costs Asset impairment charge 7,455-40,746 3,654-54,036 Legal settlement - -, Gain on settlement of acquisition related contingent consideration (,058) Development project charges, Bargain purchase gain (2,975) - - Gain on sale of assets (3,502) - - Environmental remediation charges ,356 One-time discretionary bonus charge , Depletion of landfill operating lease obligations 9,948 9,372 8,482 7,878 6,867 6,46 Interest accretion on landfill and environmental remediation liabilities 3,985 3,675 3,479 3,33 3,506 3,262 Adjusted EBITDA $ 95,09 $ 87,842 $ 0,578 $ 00,033 $ 08,980 $ 07,880 Casella Waste Systems 20