Executive Summary / Key Takeaways

• Casella Waste Systems (CWST) demonstrates robust financial performance, achieving record Q3 2025 revenues of $485 million and adjusted EBITDA of $120 million, underpinned by strong solid waste pricing and healthy landfill volumes. Year-to-date adjusted free cash flow reached $119 million, up 21% year-over-year.
• The company's strategic growth is driven by a disciplined M&A program, with eight acquisitions completed year-to-date 2025 adding approximately $105 million in annualized revenue, and a robust pipeline of over $500 million in annualized revenue opportunities.
• Operational enhancements, including fleet automation and routing optimization, are key to margin expansion, particularly as the Mid-Atlantic region transitions to Casella's core systems, with at least $5 million in annualized savings expected in 2026.
• Technological differentiators, such as upgraded recycling facilities and advanced PFAS treatment, enhance efficiency and sustainability, contributing to a competitive moat and supporting long-term value creation.
• Management projects continued strong growth in 2026, targeting 7-8% total revenue growth (excluding future M&A), 9-10% adjusted EBITDA growth, and 10-15% adjusted free cash flow growth, driven by pricing power, operational improvements, and rollover acquisition benefits.

From Regional Roots to Integrated Resource Management

Casella Waste Systems, Inc. has evolved significantly since its founding in 1975 as a single-truck operation in Vermont. Over five decades, the company, under the leadership of John Casella, expanded into a leading vertically integrated solid waste services provider across the Northeast and Mid-Atlantic regions. This journey reflects a consistent commitment to core values and a strategic vision for sustainable resource management. The company's growth has been particularly pronounced in recent years, marked by three consecutive years of over 20% adjusted EBITDA growth through 2024.

Casella's core business encompasses solid waste collection and disposal, transfer, recycling, and organics services for a diverse customer base including residential, commercial, municipal, institutional, and industrial clients. This vertically integrated model provides significant operational control and allows for optimized waste streams. As of October 15, 2025, the company operated 81 collection operations, 71 transfer stations, 32 recycling facilities, eight Subtitle D landfills, and three landfill gas-to-energy facilities.

In the competitive landscape, Casella operates alongside larger national players like Waste Management (WM), Republic Services (RSG), and Waste Connections (WCN). While these competitors boast broader geographic reach and superior economies of scale, Casella differentiates itself through its deep regional expertise, operational agility, and strong customer relationships in its core markets. The company's focus on integrated services and community partnerships allows it to tailor solutions effectively, particularly in areas with stringent local regulations. CWST's latest TTM EBITDA margin stands at 20.57%, reflecting solid profitability within its operational framework.

Technological Edge and Operational Innovation

Casella's commitment to technological differentiation and operational innovation is a cornerstone of its strategy, enhancing efficiency, safety, and environmental stewardship. The company has made significant investments in modernizing its fleet and processing infrastructure. A key initiative is the expansion of fleet automation, aiming to convert rear-load trucks to automated systems. This not only improves safety by keeping drivers inside the cab but also drives labor savings by reducing the need for helpers. In 2024, Casella added 17 automated trucks, eliminating 22 rear-loaders, and plans to add approximately 40 more automated trucks in 2025, eliminating over 50 rear-load trucks.

The company also leverages onboard computing and routing programs to optimize collection routes, reducing route days and driver headcount requirements. These technological advancements are critical for driving down operating costs and improving productivity across its collection business. Furthermore, Casella is making foundational changes to its back-office systems, including an upgrade to its long-term order-to-cash system, Soft-Pak, to improve scalability and analytics. This investment in IT infrastructure, while a short-term margin headwind, is expected to generate meaningful leverage on the General and Administrative (G&A) line as the company grows.

In its Resource Solutions segment, Casella has invested in state-of-the-art equipment for its recycling facilities. The upgraded Willimantic, Connecticut, recycling facility, which came back online in January 2025 after a full technology retrofit, is a prime example. This facility is expected to roughly double processing speed and reduce operating costs by transitioning from two shifts to one, contributing an estimated $4 million in incremental adjusted EBITDA in 2025.

Casella is also at the forefront of addressing emerging environmental challenges, such as per- and polyfluoroalkyl substances (PFAS). The company operates two facilities for processing PFAS, utilizing reverse osmosis and foam fractionation technologies. These facilities separate PFAS from leachate, which is then solidified in concrete and safely disposed of in landfills. This technological capability provides increased flexibility for leachate treatment and positions Casella as a leader in managing complex waste streams.

Strategic Expansion and Financial Momentum

Casella's disciplined growth strategy is a powerful engine for value creation, combining strategic acquisitions with organic initiatives. In the nine months ended September 30, 2025, the company completed eight acquisitions, adding approximately $105 million in annualized revenue. This follows a period of significant expansion in 2024, where eight acquisitions contributed over $200 million in annualized revenue. The pending acquisition of Mountain State Waste is expected to further expand Casella's footprint into West Virginia by the end of 2025, adding another $30 million in annualized revenues.

The company's financial performance reflects the success of these strategies. In Q3 2025, revenues reached a quarterly record of $485.35 million, an 18.9% increase year-over-year. Adjusted EBITDA also hit a quarterly record of $119.9 million, up 16.4% year-over-year. This growth was driven by strong solid waste pricing, which increased 4.6% in Q3 2025, and healthy landfill volumes, up 11.7% year-over-year. The base business, excluding newer acquisitions, expanded margins by 70 basis points in Q3 2025, with landfill volumes providing a 60 basis point tailwind.

A key area of focus for Casella is the integration of its Mid-Atlantic businesses, which initially presented "growing pains" due to system transitions and fleet upgrades. An early decision to retain the acquired billing system proved inefficient, leading to a pivot to Casella's core Soft-Pak system. This transition, coupled with the delivery of 43 new trucks since July 1, 2025 (with another 37 expected by early 2026), is expected to yield at least $5 million in annualized savings in 2026 from route synergies and automation. This turnaround in the Mid-Atlantic region is already evident, with its year-over-year margin impact improving from a 100 basis point headwind to a 10 basis point headwind in Q3 2025.

Casella's liquidity remains robust, with $192.70 million in cash and cash equivalents and $673.40 million of available capacity under its $700 million revolving credit facility as of September 30, 2025. The company's consolidated net leverage ratio of 2.34 times is well within its covenant requirements. This strong financial position provides ample flexibility to continue executing its growth strategy and robust M&A pipeline.

Outlook and Risk Considerations

Management's outlook for 2025 and 2026 signals continued confidence in Casella's growth trajectory. The company raised the lower end of its 2025 revenue and adjusted EBITDA guidance, with midpoints increasing to $1.835 billion and $420 million, respectively. For 2026, Casella anticipates 4-5% organic growth, primarily driven by solid waste pricing, and an incremental 3% or $60 million from rollover acquisitions, leading to total revenue growth of 7-8% (excluding future M&A). Adjusted EBITDA growth is targeted at 9-10%, with 25-50 basis points of overall margin improvement, and adjusted free cash flow is expected to grow by 10-15%.

A critical component of Casella's long-term strategy is securing disposal capacity in the Northeast, a region facing ongoing challenges with landfill closures. The company is making solid progress on expansion efforts at its Hakes and Highland landfills in New York, with permits expected over the next several quarters. The Highland landfill permit is expected to more than double its annual capacity to one million tons per year and add approximately sixty years of capacity. These expansions are vital, especially with three competitor sites in New York expected to close in the next two to three years. The McKean Landfill, operational since mid-2024, serves as a strategic long-term risk management asset, providing significant untapped capacity for disposal-constrained markets.

Despite the positive outlook, Casella faces several risks. Legal and regulatory proceedings, such as the Granite State Landfill permit denial and the North Country Environmental Services deficiency letter, highlight the complexities of operating in a highly regulated industry. Inflationary pressures on costs, particularly labor and fuel, remain a concern, though the company's flexible pricing structures and fuel cost recovery programs aim to mitigate these impacts. Commodity price volatility for recycled materials also presents a risk, although contract structures are designed to share this risk with customers. The ongoing integration of acquired businesses, while ultimately beneficial, can present short-term operational challenges and higher costs, as seen in the Mid-Atlantic region.

Conclusion

Casella Waste Systems stands as a compelling investment in the waste management sector, leveraging its vertically integrated model and strategic M&A to drive consistent growth. The company's history of disciplined expansion, coupled with a proactive approach to operational and technological innovation, underpins its strong financial performance. The successful turnaround in the Mid-Atlantic integration, alongside significant landfill capacity expansions and a robust acquisition pipeline, positions Casella for sustained value creation.

With a clear roadmap for margin improvement, continued pricing power, and a strategic focus on enhancing its technological capabilities and regional market density, Casella is well-equipped to capitalize on industry trends and competitive dynamics. The company's ability to convert challenges into opportunities, as demonstrated by its response to integration hurdles and environmental regulations, reinforces its long-term investment thesis. Investors looking for a company with a proven track record of growth and a clear strategy for future expansion in essential services should consider Casella Waste Systems.