Ladies and gentlemen, thank you for standing by. Welcome to the third quarter 2026 Casella Waste Systems call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you would need to press star one one on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Henry Baby, Vice President of Investor Relations and Finance. Please go ahead.
Good morning, and thank you for joining us on the call. Today, we'll be discussing our third quarter 2026 results, which were released yesterday afternoon. This morning, I'm joined by Ned Coletta, President and Chief Executive Officer of Casella Waste Systems, Brad Helgeson, our Chief Financial Officer, and Damian Ribar, our Chief Operating Officer. After a review of these results and an update on the company's activities and business environment, we'll be happy to take your questions. First, please note that various remarks we make about the company's future expectations, plans, and prospects constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in the risk factor section of our most recent Form 10-K, which is on file with the SEC. In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our views change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to today, November 10th, 2026. Also, during this call, we'll be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles.
Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures, to the extent they are available without unreasonable effort, are included in our press release on Form 8-K with the SEC. With that, I'll now turn it over to Ned Coletta to begin today's discussion.
Thanks, Henry. Good morning, and thank you for joining us today. Our team demonstrated strong operational discipline in the third quarter, delivering solid financial results across the business and advancing key long-term strategic initiatives despite significant macro headwinds like higher diesel costs. Our disciplined and strategic approach to targeted margin-accretive pricing, strict cost control, higher landfill volumes, and efficient acquisition integration drove sustained top-line momentum and further densified our operational footprint during the quarter. Our third quarter performance demonstrates the resiliency and consistency of our operating model, the effectiveness of our dynamic fuel recovery fees, and the continued focus of our teams on safety, execution, and customer service, allowing us to deliver solid financial results while delivering our long-term strategic and financial objectives.
To drive sustainable structural margin expansion, elevate overall earnings quality, and maximize long-term shareholder value, we are aggressively executing targeted operational efficiency initiatives, not only in the Mid-Atlantic region, but across our business. Through a disciplined combination of revenue optimization and structural cost rationalization, we are capturing scalable operating leverage to drive meaningful margin expansion and higher returns on capital in 2027 and beyond. While the pace of our plan to drive sustainable margin expansion in our Mid-Atlantic region fell slightly short of our internal expectations in the quarter, we still raised our revenue, narrowed Adjusted EBITDA, and reaffirmed cash flow guidance for 2026, given the overall strength of our balanced operations. Further, we remain fully confident in our multi-year roadmap to elevate our earnings quality, drive higher returns on capital, and create long-term shareholder value.
In 2021, we launched a long-term strategic plan with the financial objective of growing adjusted free cash flow at a rate of 10%-15% per year. We have overwhelmingly achieved this goal, with adjusted free cash flow growth of 17% per year from 2021 through 2025. During the same period, we also successfully scaled other key financial metrics, with revenue growth of 20% per year and Adjusted EBITDA growth of 20% per year. Our team has a strong, proven track record of executing strategic and financial priorities and remains highly focused on driving long-term shareholder value. In early August, we launched an updated multi-year strategic objective to increase our Adjusted EBITDA margins while maintaining a long-term goal to grow free cash flow 10%-15% per year.
This was not an entirely new plan, but was a framework to bring together key objectives under a unified and coherent company-wide program. As part of this effort, our team has developed a comprehensive margin expansion plan, and most importantly, we have already launched key building blocks for this plan. We call the plan 300 in three, where we are committing to increase Adjusted EBITDA margins by at least 300 basis points over the next three years, which will increase our Adjusted EBITDA margins to at least 26% by the end of 2029. To achieve these higher margins, we're focused in four key areas. One, enhancing the quality of revenue through enhanced process, standardization of fees, use of margin-accretive technology, and organizational design.
Point two, improving operational performance with a focus on driving structural productivity across key safety, training, and routing programs through targeted and AI-assisted process re-engineering, consistently exceeding our baseline operational standards. Number three, driving efficiencies in the back office and reducing G&A costs through process automation, leveraging AI and other technology, and enhanced organizational design. Number four, completing a portfolio review and addressing underperforming assets to improve capital allocation outcomes. Our Director of Executive Operations and Strategy, Grant Nishioka, is the program lead, with each of our four key areas led by our senior team, including Damian Ribar, Chris Rains, Keith Landau, and Brad Helgeson. This initiative includes and greatly extends the previously announced goals to generate $15 million of operational synergies in the Mid-Atlantic and $15 million of general administrative savings.
Our team is very excited about this initiative, and we are well on our way to establishing measurable standards, enhancing monitoring through Power BI, and driving accountability at all levels of the organization. Revenue for the quarter was $559.2 million, up 15.2% year over year. This growth was driven by contributions from acquisitions and the base business, with strong pricing across our collection and disposal lines, and continued strength in the Resource Solutions segment. Pricing continues to perform well and remains a core driver of our positive results. Solid waste pricing was up 5.5% overall, including 5.9% in the collection line of business. In addition, landfill tons were up 5.3% year over year, reflecting the strength of our newly constituted post-collection sales team, internalization efforts, and our unique landfill asset positioning in the Northeast.
We are deploying technology across our business to systematically identify and capture non-standard service events, such as container overfills. By replacing manual tracking with real-time AI-enabled automatic tracking, we ensure full cost recovery for non-standard events, not only protecting our margins, but also driving high-margin ancillary revenue with virtually zero administrative overhead. Safety is our first priority at Casella, and we continue to invest in key safety initiatives. These efforts have resulted in better safety performance, with our key OSHA metric improving by nearly 50% year over year. We continue to deploy the Lytx in-cab AI technology across our fleet, and it helps to drive safer behavior through real-time coaching. Further, our expanded triage program continues to reduce workers' compensation costs and claims. On the cost side, our fuel recovery program worked effectively in the quarter, with floating fees fully offsetting the macro inflation from fuel.
This program continues to be an important component of our ability to manage risk and produce stable and predictable operating results. Our fuel recovery program was historically designed to recover costs, and as such, we experienced roughly 50 basis points of margin headwind as recovery fees and fuel grossed up revenues and costs respectively. Amid an otherwise highly successful Q3, we are also leaning on levers such as our fuel cost recovery programs and adjusting pricing strategies to cover the internal cost of inflation, and we are using our profitability analytics to configure pricing strategies to strike that balance between margins and customer retention. As we have emphasized, our focus remains on disciplined execution at the operating level. Our teams continue to make progress with route optimization, fleet efficiency, and automation, and we are seeing these operational initiatives yield tangible, measurable results across our business.
I am pleased to announce that the third quarter was an important turning point for the Mid-Atlantic region. While the pace of margin expansion was behind our internal expectations during the third quarter, margins hit an inflection point, and our concrete action steps have taken root, and we have yielded significant sequential improvements, with regional Adjusted EBITDA margins up approximately 150 basis points from August through October, and October margins were up over 300 basis points year over year. The most important step was hiring a new regional vice president and a new regional sales manager who are better aligned with our strategic vision and culture, as well as our core values, and possess the industry experience, leadership skills, and track record necessary to execute our strategic vision.
Our new regional vice president, Dean DiValerio, brings more than 30 years of experience in the solid waste and recycling industry, with a proven track record of leadership in these specific markets. We are excited to have him on board and have already felt the positive impact in his leadership. As stated last quarter, we have successfully implemented our new lead-to-cash system in the Mid-Atlantic, which has allowed the team to begin efforts to analyze customer profitability, implement targeted pricing programs, integrate routes across operations to drive efficiencies, and yield the expected synergies. In addition, we have completed the implementation of almost all of the floating fuel surcharges across the region. From a technology and efficiency standpoint, we continue to make steady progress.
On the customer side, we have invested in key platforms to improve experience, including the launch of our new customer payment portal this spring, the new Casella phone app in May, and the new casella.com website in July. These efforts are all focused on improving customer experience through the development of robust e-commerce capabilities while also yielding cost efficiencies and enhanced selling capabilities. As part of our plan to improve margins by 300 basis points over the next three years, we are focused on becoming more efficient in the back office and across our administrative functions. During the third quarter, we took two major steps to advance in this area. First, as previously announced, we successfully implemented credit card convenience fees and yielded the first benefits of the program in the month of October.
We expect to generate over $5 million per year of savings with this first phase of implementation. Secondarily, we initiated the strategic reorganization of our administrative functions to leverage recent targeted investments in AI, enterprise technology, and process automation, driving long-term and sustainable G&A reductions. We completed layoffs in September, and we expect to generate roughly $5 million per year of savings with this initial phase of the program. Across these initiatives, we remain focused on deploying AI-enabled tools and building the data infrastructure required to scale our platform efficiently. Over time, we expect these targeted investments to unlock structural back office leverage, drive business-wide efficiency gains, and deliver sustained operating margin expansion. In September, we received our permit to expand our Hakes Landfill in New York.
With this important permit expansion, and at our current run rate, we will have roughly 20 years of airspace at the site. This is a valuable expansion for us in an increasingly tight Northeast disposal market, which has seen several closures over the last few years. During the quarter, we also made the challenging decision to abandon our development efforts for the new Granite State Landfill in New Hampshire after an unsuccessful legal appeal associated with our permitting efforts. This was a tough decision after years of hard work by our team, led by John Casella, to advance the permits at the new greenfield site. However, we did not see a clear path to success given the politicization of the permitting process.
In addition, we plan to end operations at our North Country Landfill in New Hampshire on December 31st, 2026, after over 30 years of operation servicing the residents and businesses of New Hampshire. We have been working hard for the last three years to shift volumes to alternative sites to ensure seamless closure at the site. We do remain open to working with the community to expand the site into the adjacent property that we own that has been used as a borrow pit over the last decade. In addition, we continue to make progress on the expansion efforts at our Highland, Juniper Ridge, and Clinton landfills. Acquisitions remain an important component of our growth strategy. We have completed six acquisitions year to date, representing over $170 million in annualized revenues. In September, we closed the solid waste acquisition in Pennsylvania with hauling and transfer operations.
These transactions continue to align with our strategy of building density and adding key transfer stations and recycling facilities within our existing footprint. Our teams are making great progress on integration, with an early focus on safety, onboarding of our new team, and aligning integration plans. At the same time, our acquisition pipeline remains highly active, with multiple late-stage tuck-in opportunities that align seamlessly with our core footprint, strategic growth objectives, and present strong operational synergies. Overall, we feel very good about our year-to-date execution and remain highly confident in our outlook for the rest of the year. I want to thank our employees for their continued focus on safety, service, and execution. With that, I'll turn it over to Brad to walk through the financials in more detail. Thank you.
Thanks, Ned, and good morning, everyone. Revenues in the third quarter were $559.2 million, up $73.9 million, or 15.2% year over year, with $41.3 million from acquisitions, including rollover, and $32.6 million from same-store growth, or 6.7%. Solid waste revenues were up 16.1% year over year, with price up 5.5% and volume down 1%. Within solid waste, price in the collection line of business was up 5.9% in the quarter, with strength across front load commercial at 6.6%, roll-off at 6.3%, and residential 5.3%. Collection volume was down 2.1%, with front load essentially flat, but approximately 3% lower volume in residential and roll-off. Largely reflecting our deliberate focus on improving the quality of our book of business. Price in the disposal line of business was up 4.8%, including 4.6% third-party price at landfills and 5% at transfer stations.
Landfill volumes overall were up 58,000 tons, or 5.3% in the quarter, with internalized volume up 2% and third-party volume up 8.5% year over year, or 12.8% on a revenue basis. Resource Solutions revenues were up 11.5% year over year, with recycling and other processing revenue up 6.6% and national accounts up 16.8%. Within Resource Solutions processing operations, our average recycled commodity revenue per ton was up close to 10% year over year, with strong fiber and metals prices partially offset by lower plastic prices. As is typical, higher commodity sales prices were partially offset by lower floating tip fees at the facilities, passing this commodity value back to our customers. Processing volume in revenue terms was down 2.9% year over year as a result of upgrade and maintenance work at a few facilities.
Overall, we generated over $11 million in additional revenue in the quarter from higher cost recovery fees, primarily tied to fuel prices. We again successfully offset all of the dollar increase in fuel costs with higher related fees in the quarter. Adjusted EBITDA was $133.5 million in the quarter, up $13.6 million, or 11.4% year over year, with $6.6 million of contribution from acquisitions, including rollover, and 5.9% organic growth. Adjusted EBITDA margin was 23.9% in the quarter, down 80 basis points year over year. Bridging the year-over-year change in Adjusted EBITDA margin, four specific items drove the decline in the quarter.
First, fuel represented an estimated 50 basis point negative impact, including the normal margin dilution of higher fee revenue covering higher expense, and a catch-up in the quarter related to higher fuel surcharges from subcontract haulers in national accounts, where we act in a broker capacity outside of our operating footprint. Second, the Mid-Atlantic region contributed approximately 50 basis points to the decline on a same-store basis, as the pace of progress on price action, implementation of standard Casella floating fuel fees, and cost synergy realization were temporarily outweighed by elevated fuel costs and broader inflationary pressures. Third, Resource Solutions operations also represented a 50 basis point margin headwind, with lower recycling volumes, as I mentioned, and the previously announced closure of the organics facility in Maine in Q4 last year, both of which are transitory.
Finally, recent acquisitions completed over the trailing 12 months contributed at lower initial margins than our existing business, creating a 40 basis point headwind in the quarter. This is typical, as we often acquire companies that are operating at lower margins before we fully integrate them and execute synergies. These headwinds were partially offset by a reduction in accruals for variable incentive compensation, as results through the first nine months fell short of our internal benchmarks. Cost of operations were $374.6 million in the quarter, up $59.3 million year over year, with $30.6 million of the increase from acquisitions and $28.7 million in the base business, including higher fuel costs, which we covered on a dollar basis with our fuel recovery program. General and administrative costs were $58.9 million in the quarter, up $1.6 million year over year.
Excluding the incentive compensation accrual adjustment for the first nine months, taken entirely in the quarter, G&A as a percentage of revenue was down 10 basis points year-over-year. Depreciation and amortization costs were up $9.2 million year-over-year, with $7.6 million resulting from acquisition activity in the past 12 months, including the amortization of acquired intangibles. There were a few new line items in the P&L in the quarter that I will explain. First, the write-off of capitalized development costs for the Granite State Landfill project in light of adverse legal decisions related to the permit, as Ned described, was $13.6 million, representing legal, engineering, and other costs incurred to develop the project since 2019.
Second, we incurred $1.4 million of organizational transformation costs, which in the quarter were related to severance, but in future periods may include other costs incurred to execute our transformation plans, such as consulting. These will be directly related to the organizational design and back-office efficiency legs of the 300 in three plan that Ned introduced. Third was $3.6 million of income from the monetization of investment tax credits generated at one of our landfill RNG projects. This amount was included below the operating income and Adjusted EBITDA lines in other income. If you recall, we have partnered with third parties to develop and operate RNG infrastructure at several of our landfill sites and have not invested any capital into these projects, but we nonetheless receive a share of the value of investment tax credits under our contracts.
We anticipate receiving at least another $10 million in cash from ITCs and other projects in 2027. Moving further down the income statement, the income tax provision and effective tax rate are unusual this quarter, which can happen when permanent differences and state tax valuation allowances are magnified by low book pre-tax income. However, this is just the accounting for the provision. From a cash tax perspective, we do not expect to pay any tax in 2026, and in fact should receive modest net refunds, nor do we expect to pay any federal cash tax for the foreseeable future, likely through the end of the decade. Adjusted net income was $22.3 million in the quarter, or $0.35 per diluted share, down $5.1 million and $0.08 per share. GAAP net loss in the quarter was $7 million, impacted by the specific items that I discussed.
Net cash provided by operating activities was $242 million in the first nine months, up $9 million year-over-year, driven by EBITDA growth and partially offset by higher net interest expense. Adjusted free cash flow was $111 million for the first nine months of the year, down 7%. Capital expenditures were $200.5 million, with $38.2 million of upfront investment in recent acquisitions and $10.3 million for large new infrastructure projects, the rail receiving capability at the McKean Landfill, and the new MRF construction in the Lehigh Valley of Pennsylvania. Overall, capital expenditures were higher year-over-year, but included a lower mix of spend on acquisitions and large special projects, resulting in a comparatively greater impact on adjusted free cash flow.
As of September 30, we had just under $1.4 billion of debt, with our consolidated net leverage ratio for purposes of our bank covenants at less than 2.8 x. We maintain strong financial flexibility with over $450 million in available liquidity, positioning us to pursue strategic growth opportunities while remaining rigorously disciplined in our capital deployment and return thresholds. As announced in our press release yesterday, we raised our revenue guidance to a range of $2.1 billion- $2.11 billion, an increase of $5 million at the midpoint, reflecting higher expected fuel recovery fees associated with elevated fuel costs. This updated revenue assumes that fuel remains elevated around current levels for the balance of the year.
We narrowed our Adjusted EBITDA guidance range to $475 million- $481 million, with increased visibility to full-year results, and reaffirmed our adjusted free cash flow range of $200 million-$210 million, and our net cash provided by operating activities range of $370 million-$380 million. We enter the fourth quarter with strong operational momentum and increased visibility into our financial performance, reinforcing our high level of confidence in our Q4 and full-year outlooks. We lowered our GAAP net income guidance to a range of a net loss of $10 million to a loss of $4 million, reflecting the charges recorded in Q3 that I described. Looking ahead to 2027, we anticipate another year of strong growth across revenue, Adjusted EBITDA, and cash flow.
As you build your models, we expect overall organic revenue growth of approximately 5%, primarily driven by solid waste pricing, and an incremental 2%, or approximately $40 million, of rollover acquisition revenue from deals closed during the first nine months this year. This revenue outlook assumes fuel costs and related floating fees remain elevated around current levels. While diesel futures predict a meaningful decline, and we certainly hope that plays out, we don't feel comfortable estimating that impact given the degree of uncertainty and volatility that exists right now. This puts total revenue growth, excluding any future acquisition activity, at approximately 7%.
On the Adjusted EBITDA line, we'll target 50- 100 basis points of overall margin improvement, driven by price-cost spread, full-year impact of revenue actions and operating enhancements in the Mid-Atlantic region in particular, and the initial phases of our organizational transformation and G&A reduction projects, including a full-year benefit from the credit card convenience fees implemented in September. This puts total Adjusted EBITDA growth, again, before any acquisitions, at approximately 10%. Looking beyond 2027, as Ned described, we have committed to raising Adjusted EBITDA margins by 300 basis points over the next three years. This translates to a margin of at least 26% in 2029. This plan will encompass many initiatives spanning pricing and sales, operational, organizational, and potentially shifting business mix.
As we think about the cadence of this margin expansion year-to-year, our preliminary outlook for 2027 implies that the benefit realization will be weighted towards 2028 and 2029, given the nature of the initiatives. With that, operator, would you please open the line for Q&A?
Q&A. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from Tyler Brown with Raymond James. Your line is open.
Hey, good morning, guys.
Good morning.
Good morning.
Hey. Ned, obviously really interested to see the 300 basis point improvement target. I was just kind of hoping that you could unpack some of the assumptions in there. Does that assume that fuel normalizes? Does it assume the dilution from, call it, normal course M&A? Does it kind of assume you get to 11% SG&A? Is there a change in the mix of the business? Just try to unpack some of maybe the key underlying assumptions in there.
Yeah. I'll start, and Brad, definitely hop in. From my perspective, it's get to 26% Adjusted EBITDA margins by 2029, no matter what. That's the way we're looking at this. If fuel goes up, fuel goes down, we're still looking to get to that target. If we do acquisitions, we're still looking to get to that target. We have concrete goals around G&A, and we believe there's some great opportunity within the G&A line. As I laid out, it's kind of four baskets. On the quality of revenue, we've got some really clear margin-enhancing projects there. The first is, our fuel surcharge historically has had no margin recovery component. We changed our formula in September to actually now have a margin recovery component. That will help us in both up and down markets.
We've also put in minimum standards across our entire business on fees like extra pickups, overloaded containers, things like that. We're starting to drive an AI-enabled technology to automate that process and ensure we have the right recovery across the business. Our new billing system has excellent profitability analytics that we're utilizing across the market. We can go through each of our different initiatives, but coming down to the fourth, which is completing a portfolio review and addressing underperforming assets, I set a standard this summer with our team that every business unit in the company needs to generate at least 15% operating income. Each of them's a little different. We have several that are below that target today, and we have some great strategies to get to that level.
But if we can't see a pathway, we may choose to sell some businesses or even close them over time. We believe that will lead to higher capital outcomes over time.
Yeah. Tyler, a few more points. In our model, we're not assuming any fuel price improvement. So, obviously, the exact level of margins will be dependent upon fuel prices in part. But as Ned said, we're sort of revising the structure of our fuel fees to try and, I guess, minimize the margin impact of higher fuel prices. I should also say, we're going to be overshooting this margin target. Certainly, 300 basis points is the target that we're laying out and we're committing to publicly, but internally, we're shooting for a much higher level. Things go wrong in this business, and things go well. It's impossible to predict. So we want to make sure that our plan ensures we get to 300, taking into account things that maybe go wrong. You mentioned acquisitions. I mean, historically, those have been dilutive to margins.
We may look at acquisitions a little bit differently than we have in the past. I mean, this isn't brand new, the focus on EBITDA margin, but it is a little bit of a pivot in terms of our emphasis. Where in the past we might have sacrificed margin for free cash flow growth or other strategic benefits, we'll be more focused on margin probably with acquisitions going forward. The other G&A, we're not putting out a specific G&A target. I mean, we talked about that in the past. One data point I would throw out there is the $15 million of G&A reduction that we've put out there. That brings us down to close to 11%. So, that's kind of the informal target that we're looking to achieve over the next couple of years as a first step.
Okay, perfect. Great detail. So, Ned, this kind of comes back in a similar vein, but what would be the general top line assumption in there at an organic level? Because you mentioned rebalancing the portfolio, let's call it maybe shaping. Should we still think about, and you kind of talked about it for 2027, that mid-single digit number? Is that a pretty good, at least directional starting point off into 2028 and 2029 as well?
Yeah, it is a directional starting point. I mean, it is based on our desire to stay ahead of inflation as it exists today. Obviously, we do not know what is going to happen to inflation, and we will be constructing our price plans year to year based on the inflationary outlook in part. It is a bit of a wild card, but I think that is an appropriate starting point.
Okay. Then just, Brad, quickly, just a couple cleanups. On the variable comp accrual, was that about 120 basis point good guy in Q3? I assume, you are below 100%, so there will be a variable comp headwind in 2027, presumably?
Yes to both. Yeah, you did good quick math. It is about 120 basis points of benefit. Assuming we hit and exceed our plan in 2027, by nature of the program, you will pay out more in variable incentive comp, and that will be a headwind if it is netted within our guidance that we just gave.
Okay. Then the last one on the ITC credits, just to be crystal clear, those are not in EBITDA, but they are cash flow?
Correct.
Okay. All right. I will turn it over. Thank you, guys.
Thank you. The next question is going to come from William Grippin with Barclays. Your line is open.
Excellent. Thanks for the opportunity, and good morning. Just a quick question here just on fuel surcharges. Just more of a clarifying point, but it looked like the surcharges within the solid waste business actually declined quarter-on-quarter. Obviously, would have thought that would have maybe been a bit higher sequentially, just given what fuel did. Could you just elaborate on that a little bit?
Yeah. Hey, Will, it is Brad. It is a little misleading because the fee line includes primarily fuel, but also the SRA, which is the floating recycled commodity price fee that we charge to our recycling collection customers. So it is within the solid waste segment. The fuel fee only was up close to $1 million sequentially, Q2 to Q3, so 7.5%, 8%. The SRA was actually down because commodity prices are higher.
Yep. Makes sense. Thank you. I guess just wanted to put I know you are maintaining the midpoint of the guidance for Adjusted EBITDA, but it looks like you closed some additional acquisitions in the quarter. Was that already included when you updated the guide last quarter? Just trying to understand the puts and takes, I guess, relative to maybe what is additional versus maybe what were some additional headwinds, like in the Mid-Atlantic.
Yeah. I would say those are below the threshold of materiality. The small deals closed in the, obviously, in the back half of the year. So they were not technically reflected in the guidance previously, but were not material enough to move us out of the range.
Got it. I appreciate it. That is all for me.
Thank you.
Thank you. Our next question is going to come from Trevor Romeo with William Blair. Your line's open.
Hey, good morning, guys. Thank you for taking my questions and for all the detail on the call. I wanted to follow up on, I think, on your comments about maybe changing the M&A strategy, just kind of pivoting a little bit. I mean, just in terms of what you're thinking, is it changing sort of regional focus, the Northeast versus Mid-Atlantic? Is it focusing on maybe businesses that might be more profitable already when you buy them? And just overall, would you anticipate the volume of M&A kind of coming down with more focus on the efficiency side, or can you do the same level of M&A while kind of being more focused? Any more details on that part of your strategy would be great.
Not a huge pivot in strategy. You'll continue to see us focus on both tuck-in acquisitions, the ability to vertically integrate more, and adjacencies in the business. I think the thing we will focus more on as a team, now that we have a stable set of systems and processes, our speed to integration and speed to synergies is paramount for us. So, we may take a small step back in the number of deals we're doing to ensure that our teams have the bandwidth to complete integrations in a timely manner, but nothing material. We've been targeting, let's say, $150 million of acquired revenues in a year, is generally what we'd like to do, and we've set up our teams and processes around that.
We don't see a huge shift in that, but each year it ebbs and flows, and the quality of opportunities and how it fits with our business is truly the governing factor. But with our lead-to-cash implementation completed, we really are in a great spot. All the acquisitions we completed this year, especially in the Mid-Atlantic, have been quickly onboarded into our new systems environment, which has allowed our teams to accelerate, one, profitability analytics on customers and fee implementations, but also driving operational synergies. So that cadence is really important for us.
Okay, great, Ned. Just to kind of emphasize again, I mean, clearly, I think you will still see M&A-driven growth, and that is all part of achieving the 26% margins by 2029.
Yes. Very much clearly. It is not like 26, but you may have an acquisition. It is a 26% Adjusted EBITDA margin target in 2029.
Yeah. It is important to think about the fact that I think as we become more scalable in our back office and with our organizational structure, M&A growth layered on top of that is going to be a margin driver as well. Now, that is not necessarily in our model today, but it is another positive factor that should help margins over time.
Great. Thank you, guys. Then just a quick follow-up, I guess, on the Mid-Atlantic. I mean, first of all, in the quarter, I guess, could you maybe give a little more detail on specifically what kind of fell short of your expectations? Then separately, on the October improvement and beyond, I guess, that is encouraging. So maybe a little bit more on kind of the management changes and bringing Dean on and more color on what would be different about the new approach.
Yeah. We had a leadership team there that I deeply trusted, and unfortunately, they let me down. It is kind of the simplest way to say it. We had all of the tools in place, we had all of the support in place, we had the systems, we had the trucks on the ground, we had everything we needed to accelerate our pace June, July, throughout the summer, and our team fumbled. We did everything we could to help them recover that fumble. We had teams from our home office on the ground working with them, and we were just lacking the leadership discipline, the detailed nature of project management needed, and truly the accountability through the business.
It came at kind of a tough time because Damian joined our team in mid-July, and I struggled to change that team right at that point in time when he was landing. He and I got our heads together, and him and Dean have worked together previously very successfully. Dean is very, very highly regarded in the industry, and we are lucky for him to step in to help us. Our programs, when we made a management change this summer and we started to work directly with the teams market by market, initiative by initiative, we started to gain the momentum we expected. It is amazing. I mean, that sequential increase from August to October, it is a little bit hard from the outside looking in to realize how much that is. If you think about our business, it always slows through the fall.
During a slowing period, to have that acceleration really shows our initiatives landing. We see them in the numbers. We have the right attitude, the right strategy in the market. I made the change as fast as I could, and we have got the right leadership team now. We have got the right objectives on the ground, and frankly, we are seeing it in the numbers.
All right, guys. Thanks a lot. I appreciate it.
Thank you.
Our next question will come from Jim Schumm with TD Cowen. Your line is open.
Thank you. Good morning, guys. Ned, thank you for the candid comments on the Mid-Atlantic. Just following up on that, what gives you confidence that the team or the strategy in place now will deliver? Is it that the October results have sort of borne that out, and that is what gives you confidence? Then in terms of just falling short there, was it more that you just were not taking the truck routes out, or just general inefficiencies? I am just trying to get a sense of what gives you confidence going forward.
Yeah. It is not a hope situation. It is a very tangible result situation. While we have a new leadership team on the ground, we landed all these actions in August and September. Dean joined us the first week of October and is in a really great place to lead these initiatives going forward and have the right structure and accountability. I will give you some examples. We got through the rest of our standardized fuel surcharges in the region. We did not have enough fuel surcharges going out across the customer base to cover the explosive increase in diesel. We got through most of the book of business on pricing for 2026. Those initiatives were lagging, and they should have been completed in the spring. We completed them in August and September.
We got through not all of the reroutes and synergies, but we got through a number of them September into October. They are very tangible activities that we can see in the numbers and understand the direct impact versus just saying, "Hey, we have a new team and everything's going to be okay." These were specific actions, and we know what the outcomes are.
Okay. Thanks for that. Then maybe just talk about the decision to close the New Hampshire landfill a year early. Does that have any future impact on collection pricing in that area? Does that have any impact on your McKean landfill strategy going forward?
Yeah, great question. When you get to the end of the life of a landfill, you are trying to glide the ship to the runway and the plane to the runway, and you are looking at a lot of factors of, is there more value to be yielded operating a site another month, another year? Or are you best served to just wrap it up and get as much cost out as quickly as you can? We assessed this summer, given where the airspace was at the site, that it was best to wrap it up this year. When we look at that, our accruals are in line, and we are feeling pretty good about where we are. There is not a huge kind of cost hit coming. This is something that has been accrued for the closure.
We are talking to some local groups throughout the area who would be excited to see the site continue to expand over time. It is something we would be really interested in working on if that came to pass. We have got a borrow area and a lot of acreage next to this landfill that could make a really compelling expansion for the state of New Hampshire. However, we have shifted our efforts to either truck or rail efforts to move that waste out of New Hampshire and into other viable airspace over time. So, the cost profile is going to be a little bit higher, but you have to recognize that we have moved close to 2/3 of the waste out of that site over the last two years. This is not a cliff coming in 2027. It is an activity that has been ongoing for a couple years.
Okay, great. Thank you very much.
Thank you.
Our next question is going to come from Aadit Shrestha with Stifel. Your line is open.
Hi. Thank you for taking my questions. Just going back to Mid-Atlantic margins, could you just discuss how the margins actually looked in 2Q 2026 and now in 3Q 2026 versus 3Q 2025? Maybe just in terms of longer term, by 2029, how should we think about the margins? Should that approach sort of your other regions? It is close to 30%, and some are even 40%.
Yeah. I'll take that first. Our expectation for this year, 2026, is it will end up at about a 19% EBITDA margin for the Mid-Atlantic region. So, that's the collection business that we've put together and the McKean Landfill. We'll certainly be over 20% next year. Then, we've talked about many times, our expectation at a high level is that this should be a 25%-ish margin business over time. Our collection business elsewhere in Casella, so our eastern region or western region, runs at about a 30% EBITDA margin. So, we're not necessarily banking on getting to that level. But I think mid-20s is a very reasonable and achievable goal.
Great. Thank you. And just switching gears here, you had really good third-party tons at the landfill. Maybe could you just break that out between what you saw in C&D versus special waste and MSW?
Yeah. So, we really saw strength across the board. MSW was up, C&D was up, and special waste was up. So, it was really kind of broad-based. As Ned mentioned earlier, really, I think a testament to a lot of the changes we've made to strengthen our sales efforts.
Yeah. We've had several new contracts we've won that are multi-year contracts that the sales team has done a great job bringing in. Special waste side, we've really revamped our go-to-market strategy. Our special waste engineering team has become more customer-centric and supportive of the process. We're thrilled about that. And then construction and demo, we've found a few new channels to better vertically integrate and also some new market areas of opportunity. So, these are sustainable changes, and we're really excited about it. It's not just a pop in the one quarter. These are long-term changes to the flow of waste through our business.
Thank you. Just to follow up, in terms of 2027, your outlook for 5% organic growth, just to be clear, that does not include any sort of impact from fuel. How should we think about your volume going into the year?
It does reflect fuel to the extent that prices remain around where they are today. I think that means that you will have limited, certainly Q2, Q3, Q4, you would have limited year-over-year improvement in the fuel fee line. But we would, at current prices, expect a year-over-year increase in revenue in Q1, just given the timing of the fuel price increases this year.
From a volume perspective, we are still working on our plans and working through our budgets this month, so probably a little premature to talk about that. I would say that with the addition of Chris Rains to the team, the structure that he is bringing, we talked about landfill sales, but really this applies to the whole business. The structure that he and his team are bringing to the sales function, directionally, we should certainly see better volume trends than we have seen in the past.
I think our goal would be, and whether we will get there in 2027, not sure, but our goal would be to hold flat or modestly improve the volume in our business as we are continuing to improve the mix of our book of business from a price perspective.
All right. Thank you for taking my questions.
Thank you.
The next question will come from Adam Bubes with Goldman Sachs. Your line is open.
Hi. Good morning. On the Ontario landfill, just wondering how you are thinking about where those tons ultimately get routed, the timing of the expected ramp down. I know you have talked about the ultimate impact being EBITDA neutral, but to introduce the 26% margin target, I just imagine you have a high degree of confidence in the outcome there. So, wondering if you can just talk about the updated plan and if that has become more visible over the last quarter or so.
Yeah. So, one step on that plan has become more visible, which is permit expansion at the Hakes Landfill. Ontario today takes in both construction and demo debris, special waste, and municipal solid waste. So, long-term viable homes for each of those streams is important. The Hakes landfill has extra capacity against its annual permit, so we are looking to redirect several transfer stations over the next two years out of Ontario and into Hakes. The Highland landfill expansion is the next important building block. As you may recall, we are expanding that site from 460,000 tons a year to 1 million tons a year. So Ontario's permit, 918,000 tons a year. We have not been running at that level. Last 12 months, we are about 850,000 tons a year of amortizable waste coming into the site. So, we are going to find some home at Hakes.
We'll find a home at Highland once we receive that permit. We expect to receive that the first half of 2027. We will start to ramp down Ontario into both Hakes and Highland. Frankly, there are going to be some third parties who will have to find a different home in the marketplace. As we look at the balance between the heightened cost profile to Ontario, it's a very expensive site to run, very expensive site to build. Highland is one of our cheapest sites to run and build, so that's one gain. Two, pricing capabilities in the marketplace as permanent capacity comes out. We look at this glide rate coming into 2028 and 2029, we expect this to not be a margin hit to our business.
As we said in the past, Ontario closing is going to be very accretive to operating income and net income. As you laid out, it'll be a headwind we have to overcome to Adjusted EBITDA, and that's factored into our thinking about the targets.
Got it. All very clear. Just a follow-up on the portfolio review. When you look at the specific regions that you referenced that might be under your return or margin hurdles today, can you just help us think through the ultimate magnitude of what those actions could be on a revenue standpoint?
Yeah. We're not talking hundreds of millions of dollars of revenue. We're talking tens of millions of dollars of revenues that we're targeting that maybe belong with a different partner across the industry. I don't want to get into specifics today because we haven't completed our portfolio review, but you should not expect large-scale sales, but really trimming up the portfolio in some areas that might fit better with others in the industry.
Great. Thanks so much.
Thank you.
The next question will come from Tami Zakaria with JPMorgan. Your line's open.
Hi, this is Alec McGuire on for Tami. Thank you for taking the question and squeezing me in here. Just a quick one from me. Regarding the Mid-Atlantic margin up 300 basis points in October, can you comment on how volume and pricing trended within October in that region? I am trying to understand whether this 300 basis point was purely cost savings driven or also from top line improvement as well. Thanks.
Yeah, it was a little bit of for 300 basis points, it was a little bit of contribution from different things. The ink is just now dry, candidly, on our October results, and we haven't finished our price volume analysis for the month to know exactly what pricing was. But certainly, we know that we began to implement, as Ned was walking through, began to implement significant price increases. We implemented our floating fuel fees, some of which we saw the benefit from in October, some of which we'll see over the course of November, December, and costs contributed as well. Really, there isn't a simple answer. It wasn't all price, it wasn't all cost.
Okay. Thank you. Understood. I'll pass it on.
Thank you.
I am showing no further questions at this time. I will now turn the call back over to Ned for closing remarks.
Thank you, everyone, for joining us today. We look forward to speaking with you in mid-February to discuss our fourth quarter 2026 results and our outlook for 2027. Thank you, and have a wonderful day.
This concludes today's conference call. Thank you for participating, and you may now disconnect.