Casella abandons Granite State landfill plan, targets 26% margin

By Rebecca Stone

Casella set a public target of at least 26% EBITDA margin by the end of 2029, a 300-basis-point improvement over three years, during a third-quarter earnings call Tuesday. The waste collection and landfill operator has begun the company-wide program, CEO Ned Coletta said.

The company also removed the proposed Granite State Landfill in Dalton, New Hampshire, from its development plan. Casella recorded a $13.6 million quarterly write-off for development costs, including legal and engineering work since 2019.

The greenfield project would have helped ease capacity pressure at North Country Environmental Services Landfill in Bethlehem, New Hampshire, which Casella said in October it would close a year early, partly because of airspace factors.

What does the 300 in 3 plan require?

CEO Ned Coletta said “300 in 3” brings key objectives into a unified company-wide framework rather than creating an entirely new plan. It may reshape Casella’s approach to mergers and acquisitions and its business mix, while building on a separate goal to grow free cash flow by 10% to 15% annually.

The program will likely span operations, pricing and sales, and organizational changes. Its timing and structure appear to respond to demands from activist investor Jana Partners, which wants Casella to commit to a 27% EBITDA margin by 2029 and hire a performance-improvement consultant. Executives did not name Jana or reference investor pressure during the earnings call.

CFO Brad Helgeson said: “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.”

How will Casella reach the margin target?

Casella has already cut jobs in its back-office and administrative operations. September layoffs reflected the company’s targeted investments in AI, enterprise technology and process automation, Coletta said. The company recorded $1.4 million in third-quarter organizational-transformation costs, mainly severance, and set a goal to save $15 million in general and administrative costs.

Future periods may include consulting expenses tied directly to organizational design and back-office efficiency, Helgeson said. The company may also incur other costs to execute its transformation plans.

Coletta set a new requirement that every business unit generate at least 15% operating income. Several units fall below that threshold, although he said some have strategies to reach it. If a unit cannot show a viable path, Casella may sell it or close it over time, which Coletta said could produce higher capital outcomes.

Casella also revised its fuel surcharge to include a margin-recovery component that will help in up and down markets, Coletta said. It standardized fees across the business for extra pickups and overloaded containers.

The company implemented credit-card convenience fees announced earlier in the year, and the fees began yielding results in October, Coletta said. Casella remains on track to generate more than $5 million per year in savings in the region by year-end, a goal the company mentioned in Q2.

Can the Mid-Atlantic operation deliver?

Coletta said the 300 in 3 program greatly extends Casella’s existing goal of $15 million in operational synergies in the Mid-Atlantic. The company replaced some regional leaders, appointing a new regional vice president and regional sales manager.

Coletta expressed disappointment with the prior team’s handling of the Mid-Atlantic integration. He said the new team implemented pricing programs and route integrations more quickly after those efforts had lagged.

Casella expects the Mid-Atlantic business to produce an approximately 19% EBITDA margin by year-end. That operation includes the collection business and McKean Landfill in Pennsylvania.

Why did the Dalton permit fail?

Strong opposition from residents and activist groups led Casella to withdraw a key wetlands permit application for the Dalton project, The New Hampshire Bulletin reported in June. Coletta called the abandonment a challenging decision and said the company “did not see a clear path to success given the politicization of the permitting process.”

Dalton remained a proposed greenfield facility, not an operating landfill. Its cancellation removes that expansion option from Casella’s development pipeline as the company moves ahead with the earlier closure of North Country Environmental Services in Bethlehem.

What did the third quarter change?

Casella slightly missed analysts’ expectations for third-quarter revenue and adjusted EBITDA. Coletta expressed high confidence in the company’s operating plans for the year and lifted full-year revenue guidance slightly to $2.1 billion to $2.11 billion.

The company now estimates a net loss of $10 million to $4 million, compared with its previous estimate of net income of up to $6 million.

Casella has closed the regulatory route for Dalton by withdrawing the wetlands application and abandoning the project. The next market decision is its 15% operating-income test: units that cannot show a path to that threshold face possible sale or closure over time.