Clean Harbors(US:CLH)2022-05-04 19:28Financial Data and Key Metrics Changes - Revenue increased by 45% in Q1 2022, driven by the addition of HPC and healthy organic growth in legacy businesses, with topline growth excluding HPC at 22% [27] - Adjusted EBITDA rose by 39% year-over-year, reaching $180.3 million [27] - SG&A expense as a percentage of revenue improved by 220 basis points to 12.9%, attributed to effective cost controls and leveraging HPC revenue [28] - Cash and short-term marketable securities at quarter-end were $415 million, with debt over $2.5 billion and a leverage ratio of approximately 3 times [30] Business Line Data and Key Metrics Changes - Environmental Services revenue grew by 45% in Q1, reflecting the HPC acquisition and strong organic growth, with legacy industrial service revenue (excluding HPC) growing by 24% [11][12] - Safety Kleen Environmental revenue increased by 9% year-over-year [12] - SKSS segment revenue was up 44%, driven by healthy production levels and higher pricing [17] Market Data and Key Metrics Changes - Incineration utilization improved to 85% from 80% year-over-year, with average incineration pricing up 2% [15] - Revenue from COVID decontamination work totaled approximately $9 million, down from $28 million in Q1 2021 [16] - Waste oil collection volumes grew by 13% to 53 million gallons [17] Company Strategy and Development Direction - The company is focusing on integrating HPC and cross-selling opportunities, with a renewed emphasis on branding and service simplification [19][20] - Capital allocation strategy prioritizes internal investments to expand throughput in disposal, recycling, and re-refining, with ongoing evaluations for bolt-on acquisitions [22] - The company anticipates strong demand driven by trends such as US infrastructure spending and re-shoring of industries [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in strong demand across all verticals, despite potential macroeconomic slowdowns [41] - The company is optimistic about achieving strong profitable growth and robust free cash flow in 2022, supported by pricing and cost reduction strategies [25][39] - Management highlighted a culture of accountability and continuous improvement as key drivers of results [25] Other Important Information - The company concluded Q1 with a total recordable incident rate (TRIR) of 0.97, emphasizing safety as a core value [6] - The company expects adjusted free cash flow in the range of $250 million to $290 million for 2022 [38] Q&A Session Summary Question: How is the company thinking about key verticals in the coming year? - Management noted strong market demand across all verticals, with waste streams experiencing increased deferred revenue [41] Question: What is the current staffing situation? - Management rated staffing levels at a 7 or 8 out of 10, indicating reliance on subcontracted labor which pressures margins [42][43] Question: What is the market share in Industrial and Field Services? - Management indicated a leadership position in emergency response capabilities but did not provide specific market share percentages [46] Question: When will the mix of blended products in the Safety Kleen segment normalize? - Management expects improvements in volumes by mid-May, with a return to growth in the following year [49][50] Question: What are the expectations for EBITDA guidance? - Management confirmed that the raised guidance reflects better-than-expected Q1 results and strong Q2 expectations [54] Question: What are the cost reduction strategies in light of inflation? - Management emphasized ongoing cost containment efforts, including consolidating sites and leveraging operational efficiencies [65][66] Question: What is the outlook for the environmental services market in the next few years? - Management anticipates increased outsourcing and demand driven by environmental regulations and infrastructure needs [88]