Casella Waste Systems (NASDAQ:CWST) reported higher third-quarter revenue and adjusted earnings before interest, taxes, depreciation and amortization, but its adjusted EBITDA margin declined as fuel costs, slower-than-expected progress in the Mid-Atlantic and lower-margin acquisitions weighed on results.
The waste and recycling company raised its 2026 revenue guidance while maintaining its adjusted free cash flow outlook. Management also outlined a plan to lift adjusted EBITDA margins by at least 300 basis points to 26% or more by the end of 2029.
Revenue rose 15.2% from a year earlier to $559.2 million, including $41.3 million from acquisitions and $32.6 million from same-store growth. Adjusted EBITDA increased 11.4% to $133.5 million, while the adjusted EBITDA margin fell 80 basis points to 23.9%.
Adjusted net income declined to $22.3 million, or $0.35 per diluted share, from $27.4 million, or $0.43 per share, a year earlier. Casella reported a GAAP net loss of $7 million, including the effects of charges discussed by management.
Pricing Gains Offset Volume Declines
Solid waste revenue increased 16.1%, with pricing up 5.5% and volume down 1%. Collection pricing rose 5.9%, while collection volume declined 2.1%. Chief Financial Officer Brad Helgeson said the lower collection volume largely reflected the company’s deliberate focus on improving the quality of its customer base.
Landfill volumes increased 5.3%, including an 8.5% rise in third-party volume. Resource Solutions revenue grew 11.5%, supported by a 16.8% increase in national accounts revenue.
Helgeson said fuel was responsible for an estimated 50-basis-point drag on the company’s adjusted EBITDA margin, even though higher fees fully offset the dollar increase in fuel costs. The Mid-Atlantic region and Resource Solutions operations each accounted for another approximately 50-basis-point headwind, while recent acquisitions contributed a 40-basis-point drag.
Those pressures were partly offset by reduced accruals for variable incentive compensation after results through the first nine months fell short of internal benchmarks. Helgeson said the adjustment benefited the quarterly margin by about 120 basis points.
Margin Plan and Mid-Atlantic Changes
President and Chief Executive Officer Ned Coletta said the company’s “300 in three” plan focuses on revenue quality, operational productivity, back-office efficiency and a review of underperforming assets. The program incorporates previously announced goals of $15 million in Mid-Atlantic operational synergies and $15 million in general and administrative savings.
Colella said the 2029 margin target applies regardless of changes in fuel prices or acquisitions. The company changed its fuel surcharge formula in September to include a margin-recovery component, he said. Helgeson added that the company’s model does not assume fuel price improvement and that management expects more of the margin gains in 2028 and 2029 than in 2027.
As part of the portfolio review, Coletta said each business unit has been directed to generate at least 15% operating income. Businesses without a path to that level could be sold or closed, he said. Potential sales would involve tens of millions, rather than hundreds of millions, of dollars in revenue.
Management said Mid-Atlantic margin improvement fell short of internal expectations during the quarter, but the region’s adjusted EBITDA margin rose approximately 150 basis points from August through October. October’s margin was more than 300 basis points higher than a year earlier.
Colella attributed earlier delays to shortcomings in regional leadership and said pricing, fuel surcharge and route changes began to take hold in August and September. The company hired Dean DiValerio as regional vice president in October. Helgeson said Casella expects the region to finish 2026 at about a 19% EBITDA margin and exceed 20% in 2027, with an eventual goal of roughly 25%.
Guidance and Landfill Plans
Casella raised its 2026 revenue outlook to $2.10 billion to $2.11 billion, a $5 million increase at the midpoint, reflecting higher expected fuel recovery fees. It narrowed adjusted EBITDA guidance to $475 million to $481 million and reaffirmed adjusted free cash flow guidance of $200 million to $210 million. The company lowered its GAAP outlook to a net loss of $10 million to $4 million, reflecting third-quarter charges.
For 2027, Helgeson projected approximately 5% organic revenue growth and another 2% from revenue rolling over from acquisitions completed in the first nine months of 2026. Excluding future acquisitions, management expects roughly 7% total revenue growth, approximately 10% adjusted EBITDA growth and 50 to 100 basis points of margin improvement.
Casella received a permit in September to expand its Hakes Landfill in New York, providing roughly 20 years of airspace at the current run rate, Coletta said. The company abandoned its proposed Granite State Landfill in New Hampshire after an unsuccessful legal appeal and recorded a $13.6 million write-off of development costs.
Casella also plans to end operations at its North Country Landfill in New Hampshire on December 31, 2026. Coletta said the company has already shifted close to two-thirds of the site’s waste over the past two years and expects to move remaining volumes to other sites.
The company completed six acquisitions in the first nine months of the year, representing more than $170 million in annualized revenue. Coletta said Casella may take a small step back in deal count to give teams time to integrate purchases, but he does not expect a major change in its acquisition strategy.
About Casella Waste Systems (NASDAQ:CWST)
Casella Waste Systems is a regional solid waste services company that provides collection, transfer, disposal, recycling and resource management services. Its customers include residential, commercial, municipal and industrial clients. The company operates primarily in the northeastern United States, with services across states including Vermont, New Hampshire, New York, Maine, Massachusetts, Connecticut and Pennsylvania. Its operations also include recycling and organics services designed to recover materials and manage waste.
