Sure. Good when you are. Good? Hey, everyone. Good morning. Welcome to day two of the Bank of America conference. For you that don't know, I'm Michael Feniger. I'm the Machinery, Engineering, and Environmental Services analyst at B of A. It's just a fancy way of saying I cover the waste sector. Today, we have Casella Waste. We have five of the public waste companies at the conference. Today, joining us this morning is Casella Waste. You know, I'm joined by Jason and Charlie of Casella. Jason, maybe just to start out because for those in the room that obviously know of, you know, the industry leader and Waste Management, which is in, I think, you know, 40 of 50 states in the U.S., maybe you can just give us a high level of where Casella Waste kind of fits in the landscape of the overall waste industry. Yeah, sure thing, and thanks for having us, Mike. We're happy to be here. Casella Waste, we operate in the Northeastern U.S., in the seven Northeastern states. This past year was a bit of a milestone year for us. We clicked over $1 billion in annual revenues for the first time in the company's history, along with over $100 million in Adjusted Free Cash Flow. Being positioned in the Northeast, we have great strategic positioning from a disposal perspective. We have nine landfills positioned throughout the Northeast, over 50 collection operations and transfer stations throughout the Northeast. We've been growing, which we'll get into here in a little bit, I'm sure, but we've been growing both organically, through price and volume-related growth, as well as through M&A, which has been really exciting for us. You know, being an operator in the Northeast is a bit unique, in terms of the overall disposal landscape. It's a little bit different than the rest of the country from a public policy perspective. There is a shortfall of landfill capacity in the Northeast, waste tends to move further distances to reach ultimate disposal. As I mentioned, having nine disposal facilities and over 50 transfer stations in the Northeast, positions us well to execute in that, in a bit of a unique market. Thanks, Jason. Maybe just to drill down on that, because I do think as you hear from other waste companies at the conference, your landfill assets is kind of unique to Casella in terms of your size. Can you kind of explain to us how disposal capacity has evolved in the Northeast over the years, and where that positions you guys going forward? Sure. As a function of public policy in the Northeast, there's only been one new landfill in the last 30 or so years, and some states actually have moratoriums from a disposal perspective or incinerator perspective. As you would imagine, sites have closed over the last, particularly over the last 10 years. We've seen about three and a half million tons of annual capacity come out of the Northeastern market, which was close to about 10% of the overall disposal capacity in the Northeast. A significant chunk of disposal capacity has come out of the market, and that's been a function of sites just reaching the end of their useful life, not being able to expand further on their geographic footprint. Some other closures that have been selective throughout the Northeast from either, the choice of the company to close the facility based on the return profile of the site on a go-forward basis, or from a regulatory perspective as well. Casella having nine landfills and about 15%-20% of the overall annual disposal capacity in the Northeast positions us quite well from a market presence perspective. We're seeing continuing disposal capacity tightness as there are a handful of additional landfills that are expected to close over the next three-five years. There's another two+ million tons that are expected to come out of the market over that period. Waste continues to move further distances from where it is originated on average throughout the Northeast. It can move as far away as Alabama for Massachusetts on train out to Ohio, other states throughout the US outside of the Northeast or just longer distances via truck within the Northeast as well. There's not a lot of direct drive off of a collection route into an incinerator or landfill. It's often consolidated at a transfer station and then moved further distances. With that in mind, given the scarcity value of the landfill asset in the Northeast, inflation, and the regulatory environment, we've been able to advance a lot of price, rightfully so, in that market, not only to third parties that bring their volumes to us, but also back to our own customers at the curb. That makes sense. Maybe you can kind of talk a little bit what you've seen with landfill pricing going back a few years to now that we're seeing the scarcity asset, disposal closing, and just touching on it 'cause you are in the North-Northeast. I believe you do get New York, but you're not in the collection market if I'm not mistaken. Maybe explain how you guys think about that and the logic there? Yeah. Correct. 2022 was a pretty good reflection of what we're able to do from a pricing perspective, and we feel that there's great runway ahead of us from a disposal price perspective as we look forward. In 2022, our average price per ton at the landfills was up over 7%, which is an indication of us blending up the quality of revenue at our sites, whether that's increasing select customers year- over -year in terms of their price point or replacing lower price streams with higher price streams. As you mentioned, we do accept waste in our facilities that are in Upstate New York, Vermont, Maine, and New Hampshire. Waste does move far distances, sometimes from the Greater New York City area up to our facilities, in Upstate New York as an example, as you mentioned. As we look forward, given the backdrop, we look forward to being able to continue to advance strong pricing. As I mentioned, it's important in an inflationary environment and with a higher regulatory and compliance-related backdrop in the northeast as well, because there is a cost associated with that. Makes sense. Going back to what you commented earlier, you guys just generated $1 billion in revenue. I think you grew the top line close to 22% in 2022. I think for some people that might be new to waste or even new to your story, no one really typically associates 22% revenue growth with a waste company. Maybe kinda unpack the buckets of what's driving that type of growth in an industry that's kinda looked at as more of a mature, stable growth industry. Again, 22% growth in 2022 is pretty remarkable overall. It's been, you know, really part of our game plan over the last several years growing both organically and through acquisitions. In 2022, just over half of that 22% was organic growth. When you kinda break it down, solid waste pricing, just over 6%. You know, when you look at various fees, whether it's our environmental and energy fee, which is akin to a fuel surcharge, that, you know, adding other fees, our SRA fee pertaining to recycling, adding core price, just over 6% plus the fees, we're talking low teens or so. Then as kind of I alluded to, when you layer in acquisitions, we got a great footprint and opportunity to drive a lot of inorganic growth, which I would say is typically kind of more of tuck-in nature. Last year, we acquired 14 companies with annualized revenues of $51 million. Now we do have a little rollover, about $15 million or so of that $51 in 2023. I would say those are kind of the key kind of growth buckets breaking down the 22% top line growth. Charlie, just, that was really helpful. Just steady state, what do you feel like is the right algorithm that investors should think for Casella in terms of just volume, price, and, you know, your typical tuck in M&A that you kinda layer on top of that? Sure. When you look at our 2024 strategic plan, it calls for about 4.5%-7% organic growth, and the vast majority of that is going to be core price, which excludes fees, just pure price. This year in 2023, we're guiding to 6%-7% solid waste growth. On top of that, 50-100 basis points of solid waste volume growth. I think that kind of shows the real key buckets there. On our earnings call and press release, we mentioned that we have about $30 million of acquired revenues under LOI right now, which should be closing, you know, sometime probably in the second quarter or so. That just really kind of speaks to a lot of the inorganic acquisition growth activity we have. I think it's important to note that that $30 million under LOI that we noted with our earnings call is that is not incorporated into our guidance. We've never taken the approach of guiding to acquisitions that haven't closed yet. We're really excited about that potential for the year, and it's a nice potential building block for us as we think about the year, in addition to where we've guided. Yeah, as Charlie mentioned, it's another year of price in excess of inflation that drives top line revenue growth, 6%-7% solid waste price. Solid waste revenue growth, as Charlie mentioned, you know, 8%-12% solid waste revenue growth in the year is what we anticipate. As we look forward, depending on where inflation is over time, you know, we peg our pricing to that in terms of pricing in excess of inflation. That could moderate a little bit if price comes down. Given the backdrop in the northeast, given the flexibility of our book of business across our customer base, we anticipate that we will be able to advance robust pricing over an extended period of time. In terms of pricing in advance of inflation, some of your peers that investors will hear today have a certain component of their book tied to CPI. CPI moves up, 12 months later, they're able to get that reset in their contracts. You guys are a little different. I think in some ways, it's actually an advantage. Maybe you kinda just walk through, Jason, how you guys can react to that inflation, how we think about the book of business for Casella? Yeah. Our northeastern markets are a little bit different than our peers. Only about 10% of our collection revenues are tied to municipal contracts. About 30% of our collection revenues are tied to residential subscription business with individual homeowners. Then another 35% of our collection revenues or so is tied to commercial, smaller commercial businesses. Then the remainder being, roll-off business, whether that's industrial, construction-related, or compactors at larger commercial or industrial customers or institutional customers. Given that mix and that blend, we have the ability to price at will or introduce fees at will across about 70% of our collection revenues, which was key this past year as we flash back to 2022. You know, we kicked off the year with pricing in excess of where we had budgeted, where we planned, and we were very nimble from the get-go in 2022 in advancing price that was in excess of our budget, given the inflationary environment, as you would expect. As we enter 2023, as we indicated on our earnings call, you know, we've gone to market with pricing in excess of budget levels again this year, given how persistent inflation continues to be, to ensure that we can price in excess of inflation. As we monitor the year as it goes, we have the ability, if warranted, to advance price again on many of our customers, up to 70%. If we need to go back out mid-year or sooner or after, depending on how things proceed in the year, we could go out with a second round of pricing if need be. That is a little bit different from a municipal customer, where typically you have, just the one time per year in which, pricing is reset. In the adding one point there. Upwards of about 80% of our collection revenues price increases go out in January and early February. We, as Jason stated, we started the year off very strong. Depending upon where inflation trends, I think everyone has their own personal, I don't know, view, and who knows what the real consensus is to see what inflation is going to do this year. Again, we started off the year very strong, upwards of 80%. We feel we're in a pretty good position. Again, as Jason noted, we do, given our contract structures, have the ability to go out with a second round if needed and warranted. Yeah, let's talk about that, Charlie, 'cause I think the last two years, the industry's shown an amazing job of being nimble, going back to the street to price when fuel spiked, when labor spiked. I think coming into the year, the view was, we'll price early in the year and inflation will moderate, so the price versus cost spread widens. Just curious with what you guys are seeing just in your own business. Maybe talk about the cost inflation the business experienced in Q3, Q4, and maybe early 2023 when we think of, you know, labor, transportation. What's staying stubbornly high? Where are we kinda seeing some signs of moderation? How do we think of cost inflation for Casella right now? Last year, 2022, as the year progressed, you know, inflation started picking up, kind of peaked in the Q3, a little under 6% or so the way that we calculate our kinda unit cost inflation, which excludes fuel. We kinda saw that come down to just over 5% or so in the Q4. In terms of kind of the key buckets, maintenance, repair, parts, even materials, frankly at the landfill, liners, things like that, those unfortunately remain stubbornly high. We have seen, you know, some easing to a degree, in kind of labor, other areas, salaries, wages, things like that. In terms of, you know, where we are today, again, I think as Jason noted a minute ago or so, you know, we kind of price based upon where we're seeing inflation. We're gonna price in excess of that. You mentioned a really important, you know, comment a second ago, Charlie, based on the way that we calculate inflation excluding fuel. Fuel was obviously overall a big part of inflation in 2022, but we have a separate floating fee, like many companies do, that attempts to recover higher fuel cost. In the year, we experienced $27 million of higher fuel cost as a company, and we fully offset that through our energy and environmental fee. The energy component of that fee floats on a monthly basis, based on where diesel fuel prices are reported. So that while that was a great outcome in the year in terms of offsetting a significant amount of increased cost, it was a margin headwind. Yep. about 40 basis points in the year, in terms of higher revenues offsetting higher cost. It will be a bit of a headwind again in 2023, particularly in the Q1, since fuel prices didn't really fully ramp until later in the Q1 across our business in 2022. We have a great risk mitigating mechanism there, but it is a bit of a margin headwind for us. That said, just to comment on it as we look back at 2022, you know, in consolidation, our margins were down 30 basis points on the year. If you focus on solid waste, our solid waste margins were actually up 40 basis points, and that's inclusive of headwinds from fuel, as I mentioned, inclusive of acquisition integration-related headwinds. Typically, within the first one to two years of acquisitions. Post-acquisition, there's a little bit of margin dilution that occurs as we get the business integrated, get the pricing and operations up to our standard, up to market levels. So, although in consolidation, we experienced a bit of a, you know, a margin degradation in 2022, if you focus on solid waste, 40 bps of expansion. You look forward into 2023, you know, we're anticipating 70 to 90 basis points of- Of solid waste margin expansion. solid waste margin expansion and 50 basis points on a consolidated basis. Just to narrow in on that, Jason, that solid waste expansion because of some of the comps, I mean, is it not pinning you down in the quarters, but is it higher as we, as we exit 2023? Correct. Yeah, the first half of 2023, we do expect more of a margin headwind across our business, whether that's within our recycling business, as recycling commodity prices have come down, and we're able to offset about 80% of that volatility today, but that does present a headwind to us in the first half of 2023. In the back half of 2023, our anticipation is that recycling commodity prices will modestly recover a bit during that period, which will help. We exit a period of time which was a harder comp year-over-year, which is the first half of 2023 versus the first half of 2022 from a recycling perspective. On the solid waste side, as I mentioned, we have a bit of a tougher margin comp in the Q1 on fuel. Acquisitions, as Charlie mentioned a little while ago, we've got about $15.5 million of revenue rollover from acquisitions from 2022 into 2023. There is, typically, you know, a bit of margin dilution associated with acquisitions through their first year or so. The first half of the year with that rollover, there's 10-20 basis points of margin headwind during that period on the solid waste side of the business. I mean, the business is obviously absorbing, you know, recycling headwinds, cost inflation, and you guys have been pricing it to stay in front of it. Seems like you get that inflection in the margins really start to show up in the second half. Not putting you on the spot, but I mean, the visibility you have in waste and on the pricing and with the cost inflation that you're absorbing now, I mean, doesn't it set up for a pretty positive 2024 in terms of just the margin expansion when we think of this price cost dynamic? Then maybe Jason, just on that, you guys are the smaller small cap in a large cap space. Is there anything margin-wise when you look at your bigger peers that you say we can take some of those low-hanging fruits and apply it to our business? Sure. I think I don't wanna get too far ahead of myself on 2024, but depending on where inflation goes and how we, you know, continue to advance- Yeah price in the market and the effect of what we've, you know, executed thus far, there is potential there. Really further, you know, I think our operating programs and our operating initiatives, which have been a huge focus in terms of introducing more automation into the business. This is perhaps an area where we feel we're really able to accelerate. I don't wanna say compared to our peers because we all have our own initiatives, but, you know, automation is a big focus of ours on the collection side of the business in terms of introducing more features on trucks that better automate the service, that prevent our driver from having to get out of the truck so many times per day. It increases our safety profile, increases operating efficiencies, and we've also got more cameras on our trucks today too from a revenue capture perspective and claims exoneration perspective as well. More technology in our trucks and more automation in our trucks is a huge focus over the next couple of years. We've seen some really nice returns in a few of our markets where we've introduced those features over the last couple of years. Beyond that, from a recycling perspective, couple of exciting things to comment on there, that is, we've introduced robotic equipment along our processing lines at a couple of our facilities in 2023. I think that you'll see more of that as time goes on, which again, from a safety perspective, operating perspective, and in the case of recycling, quality perspective, we feel that is important. There's a nice return potential attached to those types of projects. You know, beyond that, focusing on things like turnover, right? That's important, and I'm sure our peers would feel the same. You know, ensuring that we are able to lower our turnover over time, and those automated processes will help with that. You know, also ensuring that we have great HR programs that attract and retain key frontline workers, such as our CDL training school that we've brought over 100 drivers through, paid for them to get their CDL license and brought them on board, and that's produced a high degree of stickiness with new drivers into our business. A lot to comment on there. Those are, you know, some of the high points I wanted to touch on, Mike. Makes sense, Jason. Just to touch on, in the Q4, I think as people are trying to gauge what's going on in the economy, I think you guys had land fill tons were a little bit lower than people expected. Can you just touch on what you saw there and what you're seeing in early 2023 just on the economy and demand in your regions? Sure. Yeah. The Q4, Our volumes were a little bit lighter than expected, and sometimes in the Northeast, the seasonality is a bit hard to predict and project. In December, in particular, volumes were lighter at a few of our sites. In the Q4, in total, our solid waste volumes from a revenue perspective were down about $1.8 million, which was lighter than what we had anticipated, and that did present a headwind in the Q4. However, as we look forward into January, we actually have recovered fully in excess of the solid waste volume degradation or decline that we saw in the Q4. January, interestingly enough, was a very strong volume month. We had about $2.8 million of positive solid waste volume growth in the month of January, which again, more than offset that $1.8 million in all of the Q4 in solid waste volume decline. That's a great way to start the year. We'll see how things progress and I don't think that there was one specific element that drove the solid waste volume decline in the Q4. I don't wanna pinpoint and hang it all up on weather. That might have been a small part of it. Sometimes projects move a little bit month to month, and sometimes the seasonality is just a bit odd in the Northeast and a bit different than other geographies, I suppose. Jason, just to wrap up. We kind of started the conversation talking about landfills as a key, you know, advantage for you guys. Do you have a project? Is it McKean? Is it? Maybe you could just highlight to everyone what that project really entails, because I think it kind of highlights what you're talking about with the scarcity asset and the scarcity value in the Northeast. Yeah, correct. That's a good way to kinda go full circle here to your point where given the disposal dynamics across the Northeast as the market continues to tighten and as there is a supply-demand imbalance, we have a sleepy landfill in Pennsylvania that we take less than 100,000 tons into per year that is 100% truck-served today. We are in process of investing in rail infrastructure at the site. There's a rail that runs basically right through the footprint of the site, and we view that as a great outlet, long-term disposal outlet for our customers across the Northeast and for the Northeast in terms of its proximity to many of the markets throughout the Northeast where waste is originated that needs to move. As I mentioned earlier, you know, we're seeing waste move very far distances from the Northeast, having a facility closer from our perspective could be advantageous. That is something we will continue to comment on, and we're looking forward to bringing that site online sometime in 2024. Its permit at the site would allow us to take in upwards of 1.6 million tons per year as compared to the 100,000 tons per year that we bring into the site today. That's not to say that that's all going to happen on day one. In all likelihood, there will be a modest ramp over time, you know, incrementally presenting a volume opportunity for us. Perfect. Let's wrap it up there. I wanna thank Casella for joining us today, and they're around for meetings. Thank you, everybody.