Financial Data and Key Metrics - Consolidated revenues from continuing operations increased to $520 million, up 8% compared to the prior year quarter, driven by pricing and increased demand in Clean Earth and Harsco Environmental segments [6] - Adjusted EBITDA totaled $78 million, a 58% improvement from the prior year and a 24% sequential improvement, exceeding prior guidance [7] - Net leverage decreased to 4.6x at quarter-end, with expectations to decline to near 4x by year-end before considering asset sales [8] - Free cash flow for the quarter was negative $23 million, impacted by higher cash interest and capital spending, but operating cash flow within Harsco Environmental and Clean Earth was positive [59][60] Business Segment Performance Harsco Environmental (HE) - Segment revenues totaled $290 million, up 6% excluding foreign exchange impact, with adjusted EBITDA reaching $53 million [71] - Despite lower steel production in Europe and Latin America, strength in India and Turkey partially offset the decline [13] - Full-year EBITDA for HE is expected to be modestly above last year, with higher margins and free cash flow generation near $100 million [13] - Steel output at customer sites decreased approximately 6% year-on-year, but operational improvements and other services mitigated the impact [61] Clean Earth - Segment revenues totaled $231 million, up 13% year-over-year, driven by price increases and the Stericycle settlement [72] - Adjusted EBITDA increased $30 million year-on-year, with margins reaching 15% in the quarter [73] - Clean Earth delivered its fourth consecutive quarter of ~12% EBITDA margins, with expectations to progress toward a 15% target [4] - The business is capital-light, with cash flow conversion expected to be roughly 85% of EBITDA [4] Market and Strategic Focus - The company is focusing on PFAS remediation as a significant growth opportunity, leveraging thermal desorption and oxidation technologies [56][57] - Clean Earth's soil and dredge business saw the highest bookings since acquisition, with strong volume and mix improvement potential [40] - The company is actively working on reducing overhead and improving operational efficiency in Clean Earth, targeting a 15% EBITDA margin within 18-24 months [32][33] Management Commentary on Operating Environment and Outlook - Management highlighted strong pricing initiatives and operational efficiencies as key drivers of improved performance [65] - The company raised its full-year adjusted EBITDA guidance to $270-$285 million, up from $260-$275 million, reflecting a 21% year-on-year increase at the midpoint [74] - Management expects continued improvement in cash performance for the remainder of the year [60] Other Important Information - The company initiated the process of selling its Rail segment, with expectations to complete the sale by year-end [51] - The Network Rail contract amendment reduced financial exposure and extended the delivery schedule into 2025 [85] - The Stericycle settlement contributed to the strong Q2 performance, with incremental price increases expected in 2023 and 2024 [27][82] Q&A Session Summary Question: Price Realization in Clean Earth - Management confirmed that price increases implemented in 2022 and early 2023 drove Q2 benefits, with future increases likely to be annual events [37][38] Question: Growth Opportunities in Harsco Environmental - Management highlighted non-steel production-based services as a key growth area, with lower capital requirements and better returns [26] Question: Clean Earth Margin Expansion - Drivers for margin expansion include operating leverage from volume growth, overhead reduction, and a favorable mix shift toward higher-margin soil business [32][33] Question: Stericycle Settlement Impact - The settlement contributed to Q2 performance, with incremental benefits expected in 2023 and 2024 [27][82] Question: Rail Segment Divestiture - The company is focused on reducing risks associated with long-term contracts, including the Network Rail amendment, to facilitate the Rail segment sale [51][85]
enviri(NVRI) - 2023 Q2 - Earnings Call Transcript