Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Clean Harbors Inc (CLH, Financial) reported a stronger than expected first quarter performance, exceeding guidance with a 5% top line growth and a 7% increase in adjusted EBITDA.
- The Environmental Services segment saw a revenue increase of 10%, driven by both organic growth and strategic acquisitions such as Thompson and HEPACO.
- Technical Services business contributed significantly to the top line growth, with an 11% revenue increase and record Q1 drum volumes.
- Safety-Kleen Environmental Services generated record revenue growth of 9%, largely due to containerized waste and other core services.
- The company is optimistic about the future potential of the HEPACO acquisition and other strategic initiatives, expecting them to support continued momentum and growth.
Negative Points
- The SKSF segment faced a challenging demand environment at the beginning of the year, leading to lower pricing for base oil and lubricants, particularly in the noncontracted volumes sold in the spot market.
- Despite high volumes produced and sold, the pricing environment significantly impacted the year-over-year adjusted EBITDA comparison in the SKSF segment.
- Incineration utilization was at 79% for the quarter, affected by heavy maintenance schedules and weather disruptions, although this was in line with expectations.
- SG&A expenses as a percentage of revenue were slightly higher than the previous year's quarter, partly due to acquisition-related costs.
- Adjusted free cash flow was negative $118 million for the quarter, reflecting seasonal weakness and significant capital expenditures.
Q & A Highlights
Q: Given the strong performance in the Environmental Services (ES) segment, can you confirm if the growth was driven by volume and a positive price/cost spread?
A: Eric W. Gerstenberg, Co-CEO & Co-President of Clean Harbors, confirmed that the ES segment saw strong volume growth, particularly in drum growth across their network of TSDFs and incinerators. The company continues to implement a disciplined pricing approach that outpaces inflation.
Q: Can you discuss the billable hour utilization in Field Services?
A: Michael L. Battles, Co-CEO & Co-President, noted that the company has effectively utilized personnel, achieving mid- to upper 80s in billable hour utilization. This has been supported by reduced turnover and cross-utilization of staff across different services.
Q: What are the expectations for PFAS-related opportunities, especially with the need for a remediation MCL?
A: Eric W. Gerstenberg highlighted ongoing opportunities in PFAS-related areas despite the absence of a remediation MCL. The company is engaged in various PFAS-related activities, including drinking water treatment and industrial applications, with a growing pipeline in these areas.
Q: Could you provide an update on the M&A pipeline and potential deal flow over the next 12 to 24 months?
A: Michael L. Battles mentioned a strong M&A pipeline with recent significant acquisitions like HEPACO. The company continues to evaluate deals that make strategic and financial sense, supporting their Vision 2027 growth plan.
Q: How is the Safety-Kleen segment performing, particularly in terms of pricing and demand for base oil?
A: Michael L. Battles reported a recovery in base oil demand with rising market prices. The segment has shifted towards more value-added products, which tend to have less volatile pricing.
Q: What synergies and benefits are expected from the HEPACO acquisition?
A: Eric W. Gerstenberg discussed several synergies from the HEPACO acquisition, including expanded services in the rail industry, integration of assets and personnel, and enhanced national response capabilities. The acquisition is expected to significantly contribute to Clean Harbors' service offerings and customer base expansion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
