Release Date: October 30, 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 15% increase in adjusted EBITDA in the Environmental Services (ES) segment, driven by a 13% increase in revenue.
- The company achieved a record level of drum waste into its facilities, indicating strong demand for its disposal services.
- The acquisition of HEPACO contributed significantly to field services growth, with a 68% increase in top-line revenue.
- The new state-of-the-art incinerator in Kimball is on track to begin operations, expected to enhance capacity and efficiency.
- Clean Harbors Inc (CLH) is well-positioned for future growth with a robust pipeline of acquisition candidates and a strong balance sheet.
Negative Points
- The Safety-Kleen Sustainability Solutions (SKSS) segment experienced weaker-than-expected demand and pricing, particularly in September, impacting overall performance.
- Corporate costs increased due to acquisitions, insurance, and healthcare expenses, partially offsetting cost reduction efforts.
- The industrial services segment faced challenges due to a weaker-than-expected fall turnaround season, affecting revenue.
- The company had to idle its California re-refinery due to inventory buildup and market conditions, indicating operational challenges.
- Clean Harbors Inc (CLH) revised its 2024 adjusted EBITDA guidance downward due to market conditions in the SKSS segment.
Q & A Highlights
Q: Can you discuss the Q3 performance and the implied Q4 guidance, particularly regarding the SKSS segment?
A: Eric Gerstenberg, Co-President and Co-CEO, explained that the core Environmental Services (ES) business performed strongly, but the SKSS segment faced challenges due to a decline in base oil prices. The guidance cut is primarily attributed to SKSS, with actions being taken to manage costs and stabilize the segment.
Q: Do you need to collect 69 million gallons of oil, and will the actions taken help SKSS return to $200 million in EBITDA by 2025?
A: Eric Gerstenberg stated that they are pushing to adjust their pay-for-oil model, which may reduce collected gallons. While $200 million in EBITDA for 2025 is aggressive, they are taking steps to improve from 2024 results.
Q: What are the key drivers for 2025, and how do you see the ES and SKSS segments performing?
A: Michael Battles, Co-President and Co-CEO, expects mid-single-digit organic revenue growth and mid to high single-digit EBITDA growth, with ES likely outperforming SKSS. Factors like PFAS, M&A, and pricing dynamics are expected to drive growth.
Q: How long will it take to work through the excess inventory in SKSS, and what impact will it have on margins?
A: Eric Dugas, CFO, noted that it will likely take into 2025 to right-size inventory levels. The unit cost at the California refinery is higher, which will squeeze margins in Q4, but improvements are expected next year.
Q: Can you provide an update on the HEPACO acquisition and its integration?
A: Eric Dugas reported that the HEPACO acquisition is ahead of schedule in terms of synergies and integration, with the business performing well. The integration of the billing system caused some delays, but they expect to resolve these issues moving into 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
