Okay, next up, we're honored to have with us today, virtually, Casella Waste. I'd like to introduce the CEO of Casella Waste, John Casella , and the CFO, Brad Helgeson . Casella is based in Rutland, Vermont, is the fifth largest waste service provider in the U.S., providing integrated waste services throughout the Northeast and Mid-Atlantic region. John Casella founded Casella in 1975, and Brad Helgeson joined at the end of 2023 after serving a successful tour at Covanta as a CFO since 2013. The company has 58 million shares in the A's and 1 million in the B's, trades around $95 for the A's at a little over $5.5 billion market cap, and $820 million of net debt. I'd like to welcome John Casella and Brad Helgeson virtually today. John Casella, we see you. We love you, and thank you for being here.
Maybe I'd just also like to welcome Brad Helgeson. Brad Helgeson, this is your first rodeo at Gabelli with Casella. You've been obviously with us at Covanta in the past. Very glad to have you aboard. Maybe could you just take a minute, Brad Helgeson, to tell us about how you foresee your experience, values, and leadership that guided at Covanta, how it will support and guide Casella. John Casella, can you hear us okay?
All right.
Tony, can you hear us now?
Yep. Yeah, loud and clear. Is that you, Brad Helgeson? Maybe you could give us just a quick hello and, you know, obviously welcome aboard and maybe give us a minute to tell us about yourself and how you see yourself coming into Casella and the opportunities you can provide.
Yeah, sure.
Yeah, sure.
Oh, we're working through some feedback here. Hold on.
Hey, we see you now, Brad Helgeson.
Okay, can you hear me?
Yep, loud and clear. Hear me?
No, no, no, we can't hear you. Sorry for the technical difficulties. All right. I think we have it. Tony?
Yep, I got you.
Okay, good.
Great. All right. Well, thanks for being with us, Brad Helgeson. Love, love to hear a little bit more about yourself and, what, what you see, going forward at Casella.
Yeah, yeah, thanks for the welcome. And you touched on a little bit of my background. So, just for everyone's benefit, I've kind of been in or around the industry for my entire career. I started off actually covering the sector as an analyst in investment banking 25 years ago and actually ironically worked a little bit with Casella at that time on a few deals. So I was in investment banking. I then joined a client in the mid-2000s in the, I'll call it the traditional solid waste business, you know, collection transfer landfill, and then joined Covanta in 2007 and was there for 15 years, including nine as CFO. So that's my background.
So, I'm very much still learning Casella, you know, but I come in knowing enough to be dangerous and, you know, I'm not starting from scratch. You know, as far as what I bring to the table, you know, first, I think it starts with a recognition that, you know, these guys have been hitting it out of the park, you know, for over a decade. So, you know, it's not like I'm coming in, you know, with a list of problems that need urgent attention, you know, but I do think I bring, you know, some new perspectives. You know, all of the team here has been together at Casella for a long time and they could probably use, you know, a few outside ideas.
It's really just about building, I think, the team. I mean, the strategy is right, the execution is right. But it's just become a lot. You know, Ned Coletta had two jobs, you know, when I joined, CFO and president. So, you know, I frankly view a lot of my role as just coming in, taking the CFO role and getting that off of Ned Coletta plate so Ned Coletta can focus on being, you know, a great president and focused on primarily our growth. So, it was really just a function of building out the team. You know, culturally, I think it's a great fit. Certainly I feel like it's a great fit. I mean, the culture here, you know, very hardworking. You know, the core values here, you know, are taken very seriously. It's a very flat organization.
You know, there's not a lot of egos. It's everyone's sort of on the same page and rowing in the same direction. Use a couple of clichés, but, you know, but it's really true. So, you know, I'm glad to be here and it's an exciting time to be here in the evolution of Casella, you know, with the company's growth trajectory, and, and the opportunity, you know, as a runway to continue to grow over the next 3 years-5 years and beyond, which is pretty unique, I think, among the publicly traded solid waste companies. You know, the idea that Casella can continue to grow organically, of course, but, but through M&A, in a way that is not straying from the middle of the fairway geographically, business-wise, strategically, you know, but can still move the needle.
So it's, you know, I'm happy to be here, I guess, is the summary.
That's a great background and I couldn't agree with you more, Brad Helgeson. We're lucky to have you at Casella and maybe over to John Casella. I think Brad Helgeson did a good job teeing you up here about, you know, the background in Casella and what differentiates it. Maybe you could expound on that and just tell us a little bit more about your business.
Yeah, thanks, Tony. It's, you wanna mute, Brad Helgeson? You, you did? Yeah.
Sorry.
Maybe.
Can you hear me now, Tony? Loud and clear.
I can't hear you.
How now?
Let me turn your volume up.
Oh, turn my volume up.
Here, we're doing a hearing test too, well.
Okay. I got it now, Tony.
Got it.
It's, it's wonderful. The technology is wonderful. It's great that we're able to communicate over Zoom, even though we're having the technical difficulties because we're getting 14 in of snow. It started last night and we're gonna get probably another 10 in today. So I'm not sure whether we would have actually made it to New York last night. So, it really, we all appreciate having the opportunity to be involved with the conference, you know, on a remote basis, notwithstanding the technical difficulties, but I think, I think we're there now. So, we're just delighted to have Brad Helgeson be a part of the team. We couldn't be more excited for him and for the company. He's gonna be a great addition. He fits in, as Brad Helgeson said, he fits in very nicely and is gonna be really complimentary to the team.
And he's gonna bring some new ideas and he's really fit in very nicely, very quickly. So it's exciting to have him on board. You know, a little bit more about Casella for those that may not be familiar. The reality of our overall solid waste strategy, you know, goes back to 1977 from a sustainability standpoint, establishing the first recycling facility and always having recycling be a major component of our waste management strategy as we've grown the business through M&A. I think that it's critically important because I think that from a disposal standpoint, the supply and demand imbalance in the Northeast, the regulatory environment, particularly in the Northeast, with recycling being a mandatory part of a waste management strategy, it's really served us well to be in a position where we, in fact, can provide those services to our customers.
And I think that, you know, clearly what's happening is that more and more companies, colleges and universities, industrial companies, municipalities are looking for help, trying to meet their sustainability goals. And, you know, we've got teams of people that have been in place now for a decade that are able to go out and help companies meet those goals. So it's a really powerful part of the business. And part of that goes to the premise that we have with regard to recycling being a part of the waste management strategy where Ned Coletta and the finance team put in place, you know, in 2015, our (SRA) fee where we're able to get a return on that invested capital irrespective of where commodity prices are.
So it's a really exciting breakthrough in 2015 where that risk profile is pushed back to our customers. And when you think about it, if we're operating in states where recycling is mandatory, it makes a great deal of sense that we should be able to get a return on the invested capital irrespective of what's happening in the commodity markets. And it's really worked very well for us. And we're now seeing recycling processing be more accretive from a free cash flow standpoint than disposal, because of the capital implications of disposal. So, you know, we've upgraded our MRF facility from a, you know, innovation technology standpoint. Last year was a $25 million upgrade to that facility.
It's really interesting because what happens is the change in the mix of recyclables where newspaper is, you know, a lot less newspaper in the stream today, a lot more corrugated. Technology innovation needs to change in order to increase throughput and to increase the quality of the material that we're selling into the market. We're installing robotics to utilize AI in that facility. And we're also gonna be upgrading our Willimantic facility as well. And exciting components, particularly from the implications of the free cash flow generation for those facilities. Also, you know, our foray into the Mid-Atlantic region really gives us another platform to continue to grow. And it's very exciting. We have about $800 million in the pipeline currently, having closed on the GFL assets in the Mid-Atlantic. It gives us another platform to continue to grow. And it's very exciting.
Some of those markets are very, you know, very good growth markets when you look at, some areas of Pennsylvania, the Allentown, Bethlehem area, Delaware, and, the Maryland, geographic regions are, you know, some of the, the better growing, parts of the, of the Mid-Atlantic. So we're very excited to be there. Significant opportunities for continued growth there. And I, it's clearly right down the middle of the fairway in terms of, you know, what we've been executing against over the last 10 years or so. It's very exciting to have those additional opportunities. You know, another couple of, you know, opportunities that we have in terms of organic growth over time, are waste by rail at our McKean facility. We're investing in the infrastructure this year to have that up and operational towards the end of 2025.
Excuse me, the end of 2024, beginning of 2025. We've got an expansion going at our Hyland facility. We have several RNG projects at the landfills as well, that in our model, what we've done is to partner up with experts in RNG and have them make the investment. We're, you know, we have a great opportunity to get the royalty streams from that without having to put the capital in it because our best utilization of capital at this point in time is to continue to grow the business. You know, one of the things that we're really proud of is, you know, as Brad Helgeson said, we have built a great culture.
But I often say that that's a journey with no destination because when you're growing the way that we're growing, we added about 1,000 people to last year, onboarded about 1,000 people. And consequently, you know, you're constantly training and retraining and talking to people about the core values. So it is somewhat of a journey with no destination, but nonetheless, one that's critically important, so that people have an understanding of, you know, how we wanna get the job done, what's important, what's not. And the other thing that we've invested in over the last few years too that's critically important, Tony, as you know, particularly from a transportation standpoint, you know, we changed our policies from a CDL standpoint to attract more kids out of high school. 35%, 35%-40% of the kids coming out of high school are not going on to college.
We need to attract as many of them to our industry. They're going into, you know, there'll be plumbers and carpenters. We need to attract, like I said, as many of them as we can to our industry. We put together our, our CDL school several years ago. We've got about 230 drivers through that school. You know, what we've found is that there's high retention with the people that have gotten the CDL for us. We'll pay for the CDL for one year of service after they graduate from the CDL school. It's just been a, you know, a terrific program for us. We've dramatically reduced the total, total number of openings that we have. It also gives you a sense of culture, has them, you know, here at the home office, for a couple of weeks as they go through the program.
So it's really worked very well. And then this year, we started up our diesel mechanic training school at the same facility. And that was just kicked off this year. And so it's an exciting time at Casella. The premises of what we've built the business on, from a practical standpoint in terms of being able to meet the needs of our customers from a sustainability standpoint, are really paying dividends. And the disposal capacity that we put in place in the Northeast, over the last decade, 100 million tons of disposal capacity, a number of different facilities in a market where disposal capacity from a supply and demand standpoint is gonna continue to be strained, for the next few years. There's no question in our mind that that's the case.
There's, you know, millions of tons that are leaving the Northeast today as we speak. We're gonna see more facilities closing in the Northeast, which is gonna have that supply and demand equation remain in place and intact, from our perspective, out into the future. So we're well positioned, from a balance sheet standpoint. Ned Coletta, Brad Helgeson, Jason Mead have done a great job with the balance sheet, getting that to a point where, you know, we're sub-3 x debt to EBITDA. We're in a position where we have a significant availability to continue the growth trajectory. You know, we're certainly very much excited about those opportunities as we look to the future.
John Casella, that's a great overview. Obviously, congratulations on all of your successes at Casella. You know, you've used to give a good backdrop of the dynamics that are in the Northeast that's unique to you as a public waste operator. Maybe you could talk about the inflationary environment, how you're able to, you know, outpace inflation and maybe what's a little different about what your region is like versus maybe the rest of the U.S.
Sure. I, I think that, you know, we've demonstrated and, Charlie Wohlhuter can get into some real details as well, Tony. We've, we've been able to offset inflation over the last couple of years and outpace inflation by, you know, 25-50 basis points in some cases. So it's, you know, our team has done a terrific job in terms of being able to keep up with it. And, you know, at the same time, I think, equally important, Sean Steves from an operating standpoint has continued to drive down our operating costs. It's not about just pricing and the ability to price, which is very important. And we've demonstrated the capability to do that very, very well and offset inflation, and then some.
But Sean Steves has done a fabulous job in driving down our operating costs of ops over the last few years using innovation, technology, taking rear-load trucks off the street. And you know, for every front load, excuse me, for every fully automated truck out there, we can take several rear loads off the road. And that is just immensely important, because with the rear loads, you could have two or three people on that truck from a labor standpoint. So not only does the work that Sean Steves's doing from an operating standpoint, you know, impact, you know, overall costs, it impacts safety, it impacts, you know, labor costs, it impacts retention, turnover, because we're putting new technology in place. That new technology is, you know, fully automated with a joystick.
A driver doesn't have to get out of the truck. When you replace a rear-load truck, you're replacing people that are on the back of the truck. So just a lot of implications from a safety standpoint, from a service perspective, and then obviously, translating to cost of ops, to complement what's happening from a pricing standpoint, what we're able to achieve from a pricing perspective. You know, Charlie Wohlhuter, you wanna add anything to that?
No, I mean, I, I think that's, that's a great rundown. As John Casella, you know, articulated, yeah, we do have great, nimble, flexible pricing programs. But however, you know, we really couple those with a lot of great initiatives on the operating side.
You know, John Casella and team, you were a sort of a trailblazer, I think. You and you mentioned this in your intro, with recycling prices and the (SRA) fee. Could you break down sort of the mechanics of the (SRA) fee in a little more detail and explain? I think you were sort of had a good foresight into how the industry was gonna play out and it's benefited you well, I think, through the recent dynamics in recycling.
Sure. So, as I said, Ned Coletta and the finance team, Jason Mead, the entire team in 2015 put the (SRA) fee in place. It fundamentally what it did was shifted the commodity price volatility risk to our customers, as opposed to having that risk, sitting with us. In high commodity prices, we were, you know, doing very well in low commodity prices. It just caused a great deal of volatility in our earnings. Being from our perspective, knowing that recycling was gonna continue to be an important part going forward from a sustainability standpoint, we knew we had to fix it. We had to figure out a way to fix it.
What we've done is to take the basket of commodities that we sell into the market and understand the algorithms of what happens if commodity price, that basket of commodity, commodities goes up or down $10 a share or $10 a ton, sorry. And that, that's clearly, that's clearly the perspective that we've been able to show our customers, both on the downside as well as on the upside. So we've been through a number of cycles, and it's been received very well. So when commodity prices go up, that fee on a bill goes down and vice versa. And consequently, our customer base has gotten used to it over the last decade, and they've seen, you know, their, their, that fee go down in good commodity prices and, and vice versa when commodity prices go up.
So it's really served us very well in taking the volatility out of the earnings. I don't know, Charlie Wohlhuter, anything to add to that?
Yeah, I think, you know, any, for any program to be sustainable, you know, it needs to be economic as well. And like John Casella said, you know, it takes the volatility out of the business. You know, the great thing about our industry and certainly our company is the steady predictability of earnings for cash flow, revenue, so on and so forth. And this just is another one of the many programs we have that supports that.
Yeah, I think that it goes to the, to the point that we were making earlier, Tony, where it's critically important that irrespective of what happens to commodity prices, in order for us to continue to invest in innovation and technology on the recycling side, we obviously need to get a return on that invested capital irrespective of what happens to commodity markets.
Yeah, I think that's.
I don't know, Brad Helgeson, anything to add?
Yeah, maybe if you hit, do you hit mute?
Right now.
Okay. Then anyway, so, yeah, you know, I think, you know, a good kind of case study actually was 2022 where, you know, commodity prices were, you sort of had multi-year low and a multi-year high within the same year. Now since 2023 and into 2024, we're, you know, looking at year-over-year increases in prices and kind of a steady increase, you know, which should provide us with a little bit of a tailwind this year. You know, but the case study was, you had pretty extreme volatility within one year, you know, with minimal impact on the company's results. I mean, look, we, on the margin, we do better with higher commodity prices, and on the margin, we don't make as much when they're lower. But, you know, as John Casella described, we share that, largely with our customers.
So for us, it's about earning, you know, a consistent, fair price in order to continue to make the investments in the recycling business and the processing equipment.
Yeah, that's a great point, Brad Helgeson, and a great example. Obviously, you have, your team benefited well from it. I'll open up the line to questions. Any questions from the audience? Sir, you can maybe wait for a microphone, sir. I'm sorry.
Yes, for a large and successful company as yours, in your view, what would be an example of a key performance indicator that's measurable within specifically the waste and environmental space?
I guess maybe you could expand on that question a little bit.
Is there some sort of indicator within the recycling space that could show how successful in terms of measurement of indicators within other indicators in order to compare to, say, your competitors? Is there some sort of indicator which you use within your business?
Sure, sure, fair, fair enough. Thanks for the additional explanation of the question. So as an example, we just invested just about $25 million in our recycling facility in Boston, which is in Charlestown. Our throughput for that facility is gonna increase by 40%. We're gonna improve our safety profile with AI and robotics where we're gonna minimize the number of people on the line sorting. Or some of those people are gonna move to more quality control as opposed to actually doing the work. The work will be done robotically. And that's a lot of work, a lot of movements, for people throughout an eight-hour shift. So a lot of safety implications. Facility is running very, very well. The quality of the material is another indication of how well you're doing from a recycling standpoint.
Are you able to move your material across all of the markets that are available to you? And, you know, the higher the quality material, which is really important, and the reason for the continued investment in the technology, is the higher, obviously, the value you're gonna get for the commodities that you're selling into the marketplace. So increased quality is a clear indication of the value in terms of the investment. And then the throughput, you know, increased by 40% at that facility is pretty dramatic from a financial underpinning perspective. And then I can't take away at all the impacts from a safety perspective to our people. Eliminating some of the redundant work through robotics is gonna, and we're only in the early stages of that.
I think we're gonna continue to see more and more of that as time goes on.
John Casella, that's a great overview of the recycling and your capabilities there. I'm sorry we're running out of time. You guys have been so generous to give us some of your time. You've had extreme growth in the last few years and done a wonderful job. And hope to have you back next year. Thanks so much, John Casella, Brad Helgeson, and Charlie Wohlhuter.
Thank you, Tony. Appreciate having the opportunity. Thanks much.
Great.