Clean Harbors(CLH) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Company revenue increased by 4% in Q1, totaling $55 million growth, with the Environmental Services (ES) segment contributing two-thirds of that growth [27][8] - Adjusted EBITDA for Q1 was$ 235 million, with a margin of 16.4%, slightly down year-over-year but in line with expectations [28][27] - Net income for Q1 was down compared to the same period last year, with earnings per share reported at $1.09 [29] Business Line Data and Key Metrics Changes - The ES segment saw a 3% increase in revenue and a 4% increase in adjusted EBITDA, driven by the acquisition of Hefeco and higher incineration utilization [9][8] - Safety Kleen Environmental Services (SKSS) revenue increased year-over-year, reflecting greater volumes and a shift to a higher Charge for Oil (CFO), although adjusted EBITDA decreased slightly [15][16] - Industrial Services revenue declined by 10% year-over-year due to refinery customers delaying spending and maintenance [12][13] Market Data and Key Metrics Changes - The total recordable incident rate (TRIR) for safety was reported at 0.46, marking the best quarter in the company's history [5][6] - Incineration utilization improved to 88% from 79% in Q1 2024, with incineration pricing rising more than 5% on a mix-adjusted basis [10][11] - The company processed 5,000 tons in its new kiln during Q1, with a goal to process over 28,000 tons for the year [11][19] Company Strategy and Development Direction - The company is focusing on internal and external growth opportunities, with a strong cash balance and low leverage to support its growth strategy [20][22] - There is an emphasis on capitalizing on synergies through M&A while also investing in expanding processing and recycling capabilities [20][21] - The company aims to stabilize the SKSS segment while maximizing the value of its assets and minimizing downside potential [24][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand for services, particularly in disposal and recycling, despite potential impacts from tariffs [22][70] - The company anticipates a strong second half of the year, with a robust pipeline of remediation and waste projects [24][22] - Management remains cautious about the industrial services segment but believes in the long-term prospects due to the necessity of the services provided [24][70] Other Important Information - The company ended Q1 with a cash balance approaching$ 600 million and a net debt to EBITDA ratio of approximately 2.1 times [29][30] - A credit rating upgrade by Moody's was received during the quarter, reflecting strong financial performance and capital policies [30][29] - Adjusted free cash flow for Q1 was negative $116 million, consistent with the previous year, primarily due to timing of incentive comp payments and seasonal working capital increases [31][30] Q&A Session Summary Question: Impact of weather on ES segment performance - Management indicated that weather negatively impacted Q1 performance, estimating a loss of$ 10 million to $12 million in EBITDA due to difficult conditions in January [41][42] Question: Guidance for Q2 and refinery turnarounds - Management confirmed that Q2 guidance does not include large-scale emergency response events and expects a better second half with over 150 planned refinery turnarounds [44][45] Question: Cyclicality of the ES segment - Management described the ES segment as recession-resistant, with continued strong growth expected in the second and third quarters [49][50] Question: Update on PFAS revenue growth - Management confirmed a strong pipeline for PFAS solutions, expecting revenue growth in the range of 15% to 20% for the year [59][60] Question: Base oil pricing and inventory status - Management acknowledged pressure on base oil pricing but highlighted successful pricing initiatives that doubled the average price charged for used oil collection [100][101] Question: M&A pipeline and current environment - Management noted that valuations remain high for assets, but the company is actively reviewing multiple deals while being selective [91][92]