By the numbers
2024 revenue: $5.41B
Up 4.7% year over year
Q4 net income: $98.3M
Up from $82.5 million in Q4 2022
Q4 adjusted EBITDA: $254.9M
Up from $224.2 million in Q4 2022, with the margin improving 1.5 percentage points.
- Economic picture: The company met its updated adjusted free cash flow guidance for the year, reaching just under $322 million, executives said on the company’s earnings call Wednesday. Clean Harbors had to revise down its guidance in the third quarter after base oil prices continued to sag, weighing on the company’s revenue from its Safety-Kleen Sustainability Solutions segment. Nevertheless, full-year revenues grew 5% year over year in 2023, and the company increased its adjusted free cash flow 11% year over year despite increased spending on an expansion to its Kimball, Nebraska, facility. Co-CEO Eric Gerstenberg said the performance “underscores the role of our environmental services segments.”
- Shifting oil strategy: Despite spot base oil prices experiencing a temporary uptick in October, they declined again in the fourth quarter, continuing a revenue slump in the Safety-Kleen business. Full-year revenues for the segment declined about 9.8% from 2022 to 2023. To mitigate future impacts, Clean Harbors is planning to begin processing Group 3 base oils, which require specialized facilities, in the second quarter. Co-CEO Mike Battles said revenue from the business would be modest in 2024 but would continue to ramp. The company is also increasing its blended oil volumes, which Battles said would reduce volatility in the business.
- Environmental services: Clean Harbors’ environmental services business continues to drive the company’s fortunes, posting its ninth consecutive quarter of year-over-year growth, Gerstenberg said. The segment’s revenue was up more than 7% year over year in the fourth quarter. The segment saw strong volumes in 2023 and should have another year of “high single-digit” growth rate in 2024, CFO Eric Dugas said.
- Capital expenditures: Clean Harbors is expecting another busy year of improvements to existing assets. Battles announced a $20 million investment in land and upgrades at Clean Harbors’ Baltimore site. The project is scheduled to ramp up this year, and will add more recycling capabilities and create a production line for containerized manufacturing, he said. The company is also continuing to invest in improvements to its incinerators. Clean Harbors is planning to launch an eight-year process to upgrade wastewater treatment at its Houston incinerator. It’s also continuing ongoing winterization efforts at some locations, as well as some air pollution control upgrades. All told, the company spent $412.7 million on capex in 2023, and expects to spend $390 million to $420 million in 2024, Dugas said.
- Kimball incinerator: While Clean Harbors still expects its Kimball incinerator project to come online this year, change is afoot. The company is investing an additional $15 million in “enhancements” to the facility, constructing “more direct burn bays and additional specialized lines to handle certain high-hazardous materials,” co-CEO Mike Battles said on the earnings call. He expects those improvements to take advantage of growing need from the chemicals industry. Average incineration price was up 7% year over year in the fourth quarter as the company prioritized high-value waste streams and addressed its backlog. That backlog did land Clean Harbors into trouble recently — the U.S. EPA announced a fine against Clean Harbors last week for operations at the Kimball plant, some of which stemmed from a backlog of material. The EPA said Clean Harbors has addressed the violations.
- HEPACO acquisition: In February, Clean Harbors announced an all-cash deal to acquire field services firm HEPACO for $400 million. The companies expect the deal to close in the first half of 2024. HEPACO generated about $270 million in revenue in 2023, and Clean Harbors expects the acquisition to add $20 million in cost synergies once fully integrated into its environmental services segment. HEPACO operates in about 25 locations where Clean Harbors does not currently, according to Dugas, and Clean Harbors plans on leveraging HEPACO’s 24-hour call center to route more business to its own operations on the West Coast.
- Outlook: Ongoing trends like the reshoring of manufacturing will continue to drive demand for Clean Harbors’ services, the company reported. Additionally, Gerstenberg said the company’s PFAS remediation business grew 20% to 25% year over year, and he expects it will continue to grow as the company finds new customers in 2024. Executives expect 7% growth in adjusted EBITDA overall in 2024, targeting $1.05 billion to $1.11 billion on the year. The company is also projecting adjusted free cash flow will be between $340 million and $400 million in 2024. Clean Harbors’ projections don’t include contributions from HEPACO, which would further boost its revenue.
