enviri(US:NVRI)2022-02-26 01:05Financial Data and Key Metrics Changes - Harsco's continuing operations achieved a 20% growth in both revenue and adjusted EBITDA, with adjusted EPS increasing by 2.5 times compared to the previous year [11] - Q4 revenue from continuing operations rose by 7% year-over-year to $462 million, with adjusted EBITDA totaling $58 million [27] - For the full year, revenues from continuing operations increased to $1.8 billion, and adjusted EBITDA rose to $252 million, maintaining EBITDA margins just under 14% [34] Business Line Data and Key Metrics Changes - Environmental segment revenues totaled $268 million, with adjusted EBITDA of $49 million, reflecting a 9% revenue increase but a $3 million decrease in adjusted EBITDA year-over-year due to service mix and higher operating costs [31] - Clean Earth segment revenues reached $194 million, with adjusted EBITDA of $16 million, marking a 5% revenue increase compared to Q4 2020, driven by soil dredge services and industrial customers [32] Market Data and Key Metrics Changes - Demand in Environmental businesses improved post-COVID, although inflation and supply chain issues impacted results, particularly in the second half of the year [11] - The Rail business, now reported as discontinued operations, faced demand weakness, particularly in maintenance-of-way products, but is expected to see improved performance in 2022 [12][39] Company Strategy and Development Direction - The company aims to divest its Rail business to focus on becoming a single-thesis environmental solutions company, enhancing growth prospects and cash flow [15] - Harsco Environmental and Clean Earth are positioned as market leaders with strong growth potential, each expected to generate cash flow exceeding 10% of revenue [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from inflation, supply chain disruptions, and labor shortages, particularly in Clean Earth, but remains optimistic about demand recovery and strategic execution [21][62] - The outlook for 2022 includes ongoing growth in revenue and EBITDA, with a significant increase in cash flow anticipated, especially in Harsco Environmental [19] Other Important Information - The company reported a free cash flow deficit of $8 million for Q4, primarily due to Clean Earth's Oracle implementation affecting cash performance [30] - Harsco's funded pension status improved by $140 million, ending the year with a net leverage of 4.6 times and net debt of $1.3 billion [37] Q&A Session Summary Question: Why is the market not viewing the potential divestiture of US Ecology as a missed opportunity? - Management clarified that the focus for Clean Earth is on repurposing and recycling waste, not on hazardous landfilling, which does not align with their strategic goals [49] Question: What factors contributed to the guidance miss for 2022? - Management highlighted currency impacts, high energy prices affecting customer production, and the loss of a significant contract in the UK as key factors [53][55] Question: Is the labor shortage the main issue affecting Clean Earth's revenue guidance? - Management confirmed that the labor shortage is the primary issue, impacting their ability to meet demand, rather than a lack of underlying demand [70] Question: What is the outlook for the Rail business amid recent performance challenges? - Management expressed optimism about completing a sale of the Rail business this year, citing strong interest from potential buyers and expected demand recovery [77][81] Question: What is the expected growth rate for Clean Earth over the next few years? - Management indicated that volume growth is expected to be GDP plus a few points, with a target to double EBITDA in the Clean Earth business over the next three years [95] Question: How does the company plan to approach acquisitions in the future? - Management stated that while acquisitions are not a focus for this year, they aim to increase the platform through bolt-on acquisitions in the future [98]