Casella Waste Systems, Inc. (CWST) Earnings

Management highlights

### Overall Financial and Operational Performance * Total Q2 2026 revenue hit $543.7 million, up 16.9% year-over-year: $46.2 million of growth came from acquisitions, and $32.2 million (6.9%) came from same-store organic growth. Adjusted EBITDA reached $123.2 million, up 12.5% year-over-year, with a 22.7% adjusted EBITDA margin (down 80 basis points year-over-year; excluding fuel and Resource Solutions headwinds, underlying margins expanded 30 basis points driven by higher landfill volumes and positive price-cost spreads). * The company's dynamic fuel recovery program fully offset all dollar increases in fuel costs during the quarter, though it created a 40 basis point margin headwind due to gross-up of revenue and costs. ### Safety and Technology Investments * Safety remains the company's top core value: the key OSHA safety metric improved 34% year-over-year, driven by investments including Lytics InCab AI technology across the fleet for real-time driver coaching, and an expanded workers' compensation triage program that reduced claim and injury costs. * The company launched new customer-facing digital tools: a new customer payment portal in April, a Casella mobile app in May, and a new corporate website in July, to improve customer experience, boost selling capabilities, and create long-term cost efficiencies. AI-enabled tools and data infrastructure investments are driving back-office automation to support long-term margin leverage. ### Acquisition and Integration Progress * The company completed five acquisitions in 2026 year-to-date, representing $165 million in annualized revenue, aligned with its strategy of building density and adding strategic assets (transfer stations, recycling facilities) within its existing Northeast/Mid-Atlantic footprint. The acquisition pipeline remains strong, with multiple tuck-in opportunities in late-stage development. * Mid-Atlantic acquisition integration is on track to hit cost targets: $5 million in 2026 operating cost cuts, and an additional $10 million over the next two years. Systems integration was completed in May, and route consolidation and automated truck conversion are already underway, with 13 redundant routes eliminated to date. * G&A cost reduction targets remain on track: $15 million in total savings over three years, with first-phase savings from credit card convenience fees rolling out in H2 2026, second-phase savings from redundant system elimination in 2027, and third-phase savings from further back-office automation. ### Landfill and Permitting Updates * The Hakes construction and demolition landfill in New York is expected to receive an airspace expansion permit in Q3 2026, which will extend the site's operational life to roughly 20 years at current run rates. Expansion projects are also progressing at the Highland, Juniper Ridge, and Clinton landfills. * The McKean site long-term positioning is progressing: a new on-site transfer station is now operational, the company's first owned rail cars have been delivered, and intercompany waste transport from Massachusetts to McKean began in July, supporting long-term capacity relief for the constrained Northeast market.

Guidance

* Revenue guidance was raised to $2.09 billion to $2.11 billion, a $30 million increase from prior guidance. Approximately $20+ million of the increase comes from higher expected fuel recovery fees due to persistently elevated current fuel prices, and less than $10 million comes from completed year-to-date acquisitions; underlying base business performance is in line with prior expectations. * Adjusted EBITDA guidance is maintained at $473 million to $483 million, adjusted free cash flow guidance is maintained at $200 million to $210 million, and net cash from operating activities guidance is maintained at $370 million to $380 million, as core business performance meets expectations. A 40-50 basis point margin headwind from higher fuel recovery fees and modest M&A dilution is offset by 0-40 basis points of underlying margin expansion across the core business, consistent with beginning-of-year outlooks. * GAAP net income guidance was lowered to a range of $0 to $6 million, reflecting higher forecasted amortization expense and income tax provision. * The company does not expect to be a federal cash taxpayer for several years due to acquisition tax structuring and provisions of new tax law.

Segment performance

1. Solid Waste Segment: Total segment revenue grew 18.4% year-over-year. Overall pricing increased 5.5%: collection pricing was up 5.8% (7% growth for both roll-off and front-load commercial), while disposal pricing was up 4.7% (4% for third-party landfill pricing, 5.1% for transfer station pricing). Overall solid waste volume decreased 0.6%: collection volume was down 1.4% as the company prioritized price and profitability, but total landfill volumes increased 8.4% year-over-year (86,000 additional tons, with 24,000 tons of internalized volume growth and 62,000 tons of third-party volume growth). The Solid Waste segment represents the majority of the company's total revenue. 2. Resource Solutions Segment: Total segment revenue grew 10.7% year-over-year: recycling and other processing revenue increased 5.5%, while national accounts revenue grew 17.1% (4.3% price growth, 6.4% volume growth). This segment represented a smaller share of total revenue, and faced a 70 basis point year-over-year adjusted EBITDA headwind in Q2 2026 due to strong year-ago comparables from a competitor's 2025 facility retrofit, the prior closure of the Maine organics facility, and lower national accounts margins.

Risks & headwinds

* Elevated fuel prices create ongoing modest margin headwinds, even as the company's fuel recovery program fully offsets nominal fuel cost increases, due to the gross-up structure of recovery fees. * Northeast landfill capacity tightening creates market opportunity, but also poses operational challenges as waste flows shift with closures of competing incinerator and landfill facilities. * Integration of large Mid-Atlantic acquisitions is a multi-quarter process, with synergy and margin benefits not expected to fully materialize until 2027, creating near-term margin pressure. * Uncertainty around future fuel price changes could impact full-year financial results if prices move materially away from current elevated levels assumed in guidance.

Analyst Q&A

• Q: The summary underlying margin gain of 30 basis points (excluding fuel and Resource Solutions headwinds) includes M&A dilution? What is the underlying performance of the base business, and what is the current status and margin outlook for the Mid-Atlantic business? /

  A: The 30 basis point gain does include net M&A dilution; excluding this dilution, the core base business delivered over 50 basis points of margin expansion, hitting the company's long-term target. Mid-Atlantic margins were flat year-over-year in Q2, with pricing up 4.7% (excluding fuel recovery fees). Margin improvements are expected to begin in H2 2026, and accelerate into 2027 as route consolidation progresses. The $5 million 2026 cost savings target is entirely from route cost reductions, with additional pricing upside being incremental and unquantified to date.\n\nQ: Given the stock price has not reflected the company's recent growth, would management consider pulling back on M&A to prioritize higher margins? / A: Management does not plan to tap the brakes on M&A. The company has recently transitioned from a regional to an enterprise-scale business, and is currently building scalable systems, processes, and leadership to unlock synergy and margin value from acquisitions faster. Acquisitions remain accretive and add strategic density and vertical integration to the existing footprint, so the focus is on accelerating value capture rather than slowing growth.\n\nQ: Of the $30 million increase in full-year revenue guidance, how much comes from fuel versus M&A versus other core business drivers? And how much of the full-year margin downward impact comes from fuel versus M&A? / A: Over $20 million of the revenue increase is from higher expected fuel recovery fees, with less than $10 million coming from the July 2026 tuck-in acquisition. There is no material change to guidance from underlying core business performance, which remains in line with expectations. Nearly all of the full-year margin downward revision is from the fuel headwind, with only a small portion from recent M&A dilution.\n\nQ: What is driving the sharp 8.4% year-over-year growth in landfill volumes, and how should this trend be expected to continue? / A: Volume growth is driven by two main factors: broad market capacity tightening in the Northeast, with multiple competing landfills and incinerators (including the upcoming end-2026 closure of the Hudson Falls Incinerator) exiting the market, and improved sales execution from the newly reconstituted landfill sales team. The company has seen particularly strong 17% year-over-year growth in construction and demolition volumes from shifted market flows, with broad strength across MSW and special waste, and this trend is expected to continue as capacity tightening persists.