By the numbers
Q1 revenue: $1.38B
Up 5.3% year over year, led by organic growth in the Environmental Services segment
Q1 net income: $69.8M
Down 3.5% year over year
Adjusted Q1 EBITDA: $230M
Up $15M year over year and above expectations set in Clean Harbors’ Q4 earnings call
- Economic picture: It was an “even stronger than expected” quarter, due in part to demand from Clean Harbors’ environmental services segment, said co-CEO Eric Gerstenberg during the Q1 earnings call Wednesday.
- Segment trends: Q1 adjusted earnings before interest, taxes, depreciation and amortization increased 16% in the quarter, the highest Q1 adjusted EBITDA margin for the ES sector in the company's history, he said. Disposal and recycling volumes continued to increase, but revenue in the Safety-Kleen sector declined in Q1 due to year over year base oil and lubricant pricing. Oil market demand was weak at the beginning of the quarter but began to recover by the end, said co-CEO Mike Battles.
- Noble Oil acquisition: Safety-Kleen announced a deal to acquire North Carolina-based Noble Oil Recycling, on May 1, according to a news release. The financial terms of the transaction were not disclosed, but Battles said during the earnings call that the deal was meant to expand the company’s oil collection footprint in the Mid-Atlantic market and add more re-refining capacity. “We continue to evaluate other potential transactions and see a healthy pipeline of candidates,” he said.
- Environmental Services: ES revenue increased 10%, with two-thirds driven by organic growth from volumes and pricing. The other third came from the $400 million acquisition of field services firm HEPACO, which closed in March, and the $110 million acquisition of Thompson Industrial Services, which closed in Q1 2023.
- Castrol partnership: The Safety-Kleen division will partner with Castrol on a recycled lubricant product called MoreCircular, a “lower carbon footprint” offering. Safety-Kleen will collect the used oil from customers in the program, and the oil will be re-refined and integrated into Castrol lubricants. Battles said the multiyear agreement between the two companies will officially launch later this month. “As the EV transition plays out over the next several decades, we see our green base oil as an ideal bridge for this market. It offers an opportunity for companies, particularly those with large vehicle fleets, to immediately lower their carbon footprint,” he said.
- HEPACO integration: The HEPACO acquisition was Clean Harbors’ “headline” deal in Q1, which Gerstenberg said the company expects to provide numerous revenue synergies. “One thing that HEPACO has really brought to the table is their penetration in the rail vertical. They've had some great relationships with some of the largest railroads and have got a great team that responds to not only events, but ongoing services for the rail industry,” he said.
- PFAS opportunities: Gerstenberg said the company continues to see more business opportunities in light of recent PFAS regulations from the U.S. EPA. Clean Harbors aims to be a “total solutions provider” for services such as incineration, sampling, analysis and other remediation services. “We're doing about $50 million to $70 million of PFAS-related work through our network from all the different opportunities,” he said, adding that the PFAS pipeline is growing between 15% to 20% each quarter “as we go into 2025.”
- Capital expenditures: In 2024, Clean Harbors expects its capital expenditures to be in the range of $400 million to $430 million, slightly up from a previously-reported estimate. This range includes the new additions of HEPACO and Noble Oil, plus about $65 million to complete the construction of the Kimball, Nebraska, incinerator and about $20 million for the expansion of its Baltimore facility.
- Incinerators: Incinerator utilization was 79%, down from 80% due to weather-related outages and planned maintenance. Average price was up 6% year over year due to what the company calls “favorable mix and pricing initiatives.”
