NedColetta: Yes. And I think a bit of this is a little bit conservatism as well. We’re just a few months into the year. The trends were really solid in the first-quarter. But there are also some things that led to that 150 basis point margin increase like the Boston MRF year-over-year comp. Last year, we were spending a lot of money to move materials around. This year, we didn’t have to move materials around, plus we had the benefit of the new system. So we’ll pick that up again in Q2, but that doesn’t recur in Q3 and Q4. So, I think as we look at the year, yes, we got off amazingly well with 150 basis points of margin enhancement. We kept guidance in that, you know, 40 basis point to 50 basis point improvement range just as we get more visibility on the year.
Adam Bubes: Got it. And you know, price-cost continues to be a nice tailwind for you. As we think about margin expansion runway going-forward, beyond price-cost, how significant is the opportunity from the productivity gains, the routing software, back office efficiency, fleet automation, you know, what should we think about the annual contribution from those initiatives?
NedColetta: Yes. Within our core business, it’s regenerative. And it’s – we still have quite a bit of work that we can do over the next few years on the fleet side from automation, conversions to front loads, route optimization. Sean has a team that’s continually working with our local teams to find opportunities. But where it gets really exciting is around acquisitions, either tuck-ins or new areas. And as we had laid out when we first did the acquisition of the Mid-Atlantic region, you know, there’s almost half of that fleet are rear load trucks. Now, it’s going to take us years to address because some of them are in specific municipal contracts and some of them may never get converted. But we’ve got a great track record of moving in and moving to automated fleets, which drives higher productivity, better safety profile and excellent returns.
And as I said earlier, we have 17 automated trucks on order this year that could possibly take off the road, you know, 25 to 30 or more rear load trucks as we get into specifics. So, you know, this is an opportunity that’s going to continue to add millions of dollars of operating cost-savings each year. On the back-office side, we brought in a new CIO last August, Keith Landau, who has 25 years of experience, most recently was a CTO at Deloitte and previous to that was in the waste industry. And Keith has hit the ground running. We’re doing an amazing job really rethinking some of our systems approach and back office and, you know, more to comment on this story over-time. We see there being a great opportunity to continue to shave G&A costs.
You know, over the last couple of years, Jason, as a percentage of revenues, we’ve come down maybe 80 basis points.
BradHelgeson: Over 100 basis points.
NedColetta: 100 basis-points over the last three years. So, it is coming out of the business, but there’s more room to go and we’ve got great opportunity to do so.
BradHelgeson: I mean, I’ll real quickly, add a data point to kind of underscore, you know, what Ned was talking about with the acquisitions. So, just a snapshot on the first quarter. You know, the acquisitions in the quarter, kind of digging into the cost of operations line, we’re 21% of revenue on direct labor. The base business was 14%. So, you know, that’s not exactly apples-to-apples as far as we acquired primarily collection operations and, you know, we have more of a diverse business mix in the base business. But really, that I think highlights the significance of the opportunity over time.
Adam Bubes: Got it. Really appreciate the color there. And then, one more quick one from me. You know, it sounds like guidance still embeds volumes of flat-to-down 1%. Do volumes have to improve ahead of normal seasonality for you to reach those numbers or is that just the comps getting easier and sticking with this current, you know, run-rate from here?
John Casella: I think the comps will get a bit easier in terms of volume through the year, you know. And obviously, just the way the math works, you know, we were down 2.8% solid waste and guiding to zero to down 1%. So, you know, that implies we’re expecting some recovery in that, you know. And we feel-good about that.
Adam Bubes: Got it. Thanks so much.
Operator: Thank you. Our next question comes from the line of Michael Feniger with Bank of America. Michael, your line is open.
John Casella: Good morning, Michael.
Michael Feniger: Am I up? Yes, thank you so much. I just was curious, Ned, on the M&A pipeline being active and robust. Is this more collection assets? Is there some integrated assets also kind of available? Just curious if you kind of get a sense of that pipeline and is that something you guys are actively pursuing? Or is this year more of an integration digestion given kind of the transformational year you guys had in ’23?
John Casella: Yes. Great question, Michael. Thank you. A much of our focus right now is on driving density and adjacencies. You know, really not looking at large new platforms in any serious way at this moment in time. We’re really looking at density, both in the legacy markets and now down into the Mid-Atlantic with strong tuck-ins, strong adjacent acquisitions. That’s our focus.
BradHelgeson: And clearly, I think Michael said it earlier, Michael, the – the Mid-Atlantic market has a tremendous amount of disposal capacity. So, the opportunities that we have there would be with transfer station and recycling facilities, you know, fully-integrated in terms of collection, transfer and recycling. So, nice opportunities for us to continue to build the collection, recycling and transfer portion of the business. So, right down the middle of the fairway. So, great opportunities from a growth standpoint there.
NedColetta: And we’re generating, you know, the highest returns in our business right now, in our collection line of business, followed by recycling. So, you know, as we continue to invest in automation and route synergies, we just are getting great, great returns in those areas. Our playbook, our team, our muscle memory is very, very good. So, as we get into small tuck-ins and we integrate them into our business, it creates a lot of value quickly.
Michael Feniger: And Ned, I know you guys talked a lot about the onboarding and the route optimization. Just to kind of put a finer point on it, and I realize you’re going to be deploying that with your acquisitions. I mean, do you feel like you’re still in, like, early innings of this process? Is this more, you know, third, fourth or what you’re seeing now makes it feel like you’re kind of in the later innings of this process?
BradHelgeson: I think that – I would say – I would characterize it as being in the mid innings and probably a great deal of that is related to the M&A activity. So, you know, as we continue to grow from an M&A standpoint, we continue to provide opportunity for Sean and his team to, you know, bring efficiency, productivity to the businesses that we’re buying, Michael. So, you know, I think a little bit further ahead on the core business from, you know, from an efficiency standpoint, but still a little bit left to be done there as well.
Michael Feniger: Perfect. And just last one to squeeze in. I’d love to get, you know, Casella’s view on, you know, last Friday, you know, what we’re seeing out of the preliminary proposals around PFAS. Obviously, landfill and your disposal assets has been a great part of your story. Just what – I know it’s still early, and some of this isn’t finalized, I’d love to get a sense from you all how you’re kind of interpreting it and what that kind of means going-forward? What you’re kind of looking for going-forward? What we should be paying attention to? Thanks, everyone.
John Casella: Yes. It’s really interesting. This has been years in the making and we actually welcome federal regulation around this. It was getting kind of confusing state-by-state, district by district. So, to have some real clarity around with Circla and some of the recent rulings on groundwater standpoint as well and drinking water are really, I think, positives for the industry. And finally, the EPA has taken a stance that the manufacturers of these chemicals are responsible for them. And the users and the manufacturing products are responsible, not the passive receivers like landfills or wastewater treatment facilities or even the passive use in biosolid application for fertilizer. So, you know, from our vantage point, great first step. I’m sure there’s going to be more to this story, but it’s exactly what we’ve been saying for years.
BradHelgeson: I think the other piece of that too, Michael, with regard to Casella is, you know, not only, you know, do we have an RO plant in McKean that can take-out the PFAS, we also are doing foam fractionation pilot program with the State of Vermont in our Waste USA facility in Vermont, where we’ve seen significant positive results from that pilot program in terms of, you know, 98% removal on four or five components from a PFAS standpoint and about 65% on the fifth one. So, early stages of the pilot program. But again, we’re out in front from an innovation standpoint, trying to understand what kind of technology will take the PFAS out of our leachate on a go-forward basis. Two efforts in terms of technology and understanding of what it’s going to take to take the PFAS out of our leachate. So, again, out in front from an innovation standpoint.
NedColetta: That’s a great point. So the liability issue was really spoken to you by the recent Circla. But on the innovation side, as John said, the reality of on-the-ground, we want to take that PFAS out of leachate and our team has done an excellent job on the technology side, looking for cost efficient ways to do so. Okay. Thanks, Mike.
Operator: Our next question comes from the line of Tony Bancroft with GAMCO Investors.
John Casella: Good morning, Tony.
NedColetta: Hi, Tony.
Tony Bancroft: Yes, I’m sorry, I think I got cut-off. Good morning. Thank you for the call. Great job. You know, John and team, you guys have obviously done a fabulous job over the years. You know, you guys have did the recent acquisition for the Mid-Atlantic. I think you’re, you probably size-wise, there’s probably some capability to do something, again, some more transformational, particularly in the region you’re in. Is there something out there that you’re seeing or maybe looking to get into, another kind of business that’s somewhat aligned with, you know, the traditional business? Maybe just any just general thoughts on maybe longer-term view on things? Thank you.
BradHelgeson: Sure. I think that, you know, our view is that, you know, really right down the middle of the fairway. Our biggest opportunity is to add value in the existing business that we’re in. The $800 million that Ned talked about from an M&A standpoint is right down the middle of the fairway. We don’t see stepping out of our, you know, comfort zone and our capabilities as something that’s going to create significant shareholder value. Our execution of our strategy in terms of the M&A directly is, you know, the – clearly the way that we’re going to create the most shareholder value on a go forward basis. So, you’re not going to see us, you know, deviate from that strategy. There’s really no basis for it. We can create the most value in the existing business model.
Tony Bancroft: Great answer. Congratulations on all your successes. You’ve done wonderful. Thanks.
NedColetta: Thank you, Tony.
BradHelgeson: Thank you.
