Clean Harbors Announces First-Quarter 2023 Financial Results

NORWELL, Mass.–(BUSINESS WIRE)–Clean Harbors, Inc. (NYSE: CLH), the leading provider of environmental and industrial services throughout North America, today announced financial results for the first quarter ended March 31, 2023. 

“We opened 2023 with a strong first-quarter performance led by our Environmental Services segment,” said Mike Battles and Eric Gerstenberg, Co-Chief Executive Officers. “We delivered 12% top-line growth that translated to a 19% increase in Adjusted EBITDA. As a result, our Adjusted EBITDA margin grew by 110 basis points from the same period in 2022. The quarter’s profitable growth in the Environmental Services segment more than offset a decrease in the profitability of our Safety-Kleen Sustainability Solutions segment. In addition, we posted the best first-quarter safety results in our history, registering a Total Recordable Incident Rate (TRIR) of 0.61. Our team members did a phenomenal job embracing the ‘Safety Starts with Me’ mindset on the job every day.”

First-Quarter Results

Revenues increased 12% to $1.31 billion from $1.17 billion in the same period of 2022. Income from operations grew 39% to $121.0 million from $87.1 million in the first quarter of 2022.

Net income was $72.4 million, or $1.33 per diluted share. This compared with net income of $45.3 million, or $0.83 per diluted share, for the same period in 2022. Adjusted for certain items in both periods, adjusted net income was $74.1 million, or $1.36 per diluted share, for the first quarter of 2023, compared with adjusted net income of $45.4 million, or $0.83 per diluted share, for the same period of 2022. (See reconciliation tables below).

Adjusted EBITDA (see description below) increased 19% to $215.1 million from $180.3 million in the same period of 2022.

Q1 2023 Segment Review

“Environmental Services (ES) revenues increased 13% year-over-year, and segment Adjusted EBITDA rose 24%. This resulted in a 21.3% margin and represents a 190-basis-point improvement over last year’s first quarter,” said Gerstenberg. “Favorable market dynamics continue to drive record levels of demand across nearly every business line in our ES segment. Industrial Services revenue grew 9% as we continue to cross sell our services by leveraging our customer relationships. Revenue from Safety-Kleen Environmental Services grew an impressive 18%, while Field Services revenue was up 12% driven by pricing and branch growth initiatives. Our Technical Services business posted revenue growth of 13% despite utilization at our incinerators in the quarter being lower than expected at 80% due to several unplanned outages and landfill volumes being down 8% due to severe flooding at our California site. Pricing has stayed strong, with average incineration price up 15%, as we continued our focus on higher-value waste streams and remaining price competitive while offsetting rising costs. Landfill pricing per ton was up 17% reflecting strength in the base business, along with a healthy mix of waste projects.”

“Safety-Kleen Sustainability Solutions (SKSS) revenues grew 7% in the first quarter, while Adjusted EBITDA decreased 20% from a year ago,” said Battles. “Revenues were up based on the re-refinery acquisition completed in mid-2022, higher base oil volumes and sales of ancillary services. However, our re-refinery spread was compressed in the quarter as the normal seasonal demand pickup has been slow to develop this year. As a result of that environment, base oil pricing has been under pressure compared with a year ago, when we experienced three first-quarter 2022 price increases. On the front end of the spread, waste oil collections in the quarter were strong at 59 million gallons, up 11% from a year ago. We rapidly lowered our pay-for-oil (PFO) pricing in the quarter in response to the market and expect that strategy to positively impact us in the coming months.”

Business Outlook and Financial Guidance

“Based on our positive market outlook, we remain excited about Clean Harbors prospects for 2023,” said Gerstenberg. “We see tangible momentum and strong demand across all of our key ES businesses. In particular, within Industrial Services, we completed the acquisition of Thompson Industrial on March 31. We’re moving quickly to integrate that business, and we expect it to add approximately $80 million of revenue and $9 million of Adjusted EBITDA during the final three quarters of 2023. In our disposal network, our backlog of waste grew again in the first quarter to a record level. Our project pipeline in ES is as strong as ever. With reshoring and government programs in full swing, we continue to expect a record year in our ES segment.”

“Within SKSS, we are expecting the market to stabilize following a difficult start to the year. We are actively managing our waste oil collection to drive our costs down considerably while still gathering the gallons necessary to supply our plants. Base oil and blended pricing is more challenging than we anticipated, including an unexpected price decline in April. We are going to continue to drive additional SKSS profitability to offset the spread compression through greater base oil production from a year ago, cost reduction initiatives, accelerating blended sales and cultivating interest in our environmentally friendly solutions. While we are lowering our expectations for the SKSS segment in 2023, we anticipate that this reduction will be more than offset by continued growth within the ES segment,” Battles concluded.

For the second quarter of 2023, Clean Harbors expects Adjusted EBITDA to decrease 7% to 9% from the prior year.

For full-year 2023, Clean Harbors expects:

• Adjusted EBITDA in the range of $1.02 billion to $1.06 billion or a midpoint of $1.04 billion, which reflects the addition of an expected $9 million contribution from the Thompson Industrial acquisition. This range is based on anticipated GAAP net income in the range of $364 million to $400 million; and
• Adjusted free cash flow in the range of $305 million to $345 million, or a midpoint of $325 million, which includes $90 million of spend related to the Kimball incinerator. This range is based on anticipated net cash from operating activities in the range of $705 million to $765 million.

Non-GAAP Results

Clean Harbors reports Adjusted EBITDA, which is a non-GAAP financial measure and should not be considered an alternative to net income or other measurements under generally accepted accounting principles (GAAP) but viewed only as a supplement to those measurements. Adjusted EBITDA is not calculated identically by all companies, and therefore the Company’s measurement of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. Clean Harbors believes that Adjusted EBITDA provides additional useful information to investors since the Company’s loan covenants are based upon levels of Adjusted EBITDA achieved and management routinely evaluates the performance of its businesses based upon levels of Adjusted EBITDA. The Company defines Adjusted EBITDA in accordance with its existing revolving credit agreement, as described in the following reconciliation showing the differences between reported net income and Adjusted EBITDA for the three months ended March 31, 2023 and 2022 (in thousands, except percentages):

This press release includes a discussion of net income and earnings per share adjusted for the loss on early extinguishment of debt and the impacts of tax-related valuation allowances and other items as identified in the reconciliations provided below. The Company believes that discussion of these additional non-GAAP measures provides investors with meaningful comparisons of current results to prior periods’ results by excluding items that the Company does not believe reflect its fundamental business performance. The following shows the difference between net income and adjusted net income, and the difference between earnings per share and adjusted earnings per share, for the three months ended March 31, 2023 and 2022 (in thousands, except per share amounts):

Adjusted Free Cash Flow Reconciliation

Clean Harbors reports adjusted free cash flow, which it considers to be a measurement of liquidity that provides useful information to investors about its ability to generate cash. The Company defines adjusted free cash flow as net cash from operating activities excluding cash impacts of items derived from non-operating activities, less additions to property, plant and equipment plus proceeds from sale and disposal of fixed assets. The Company excludes cash impacts of items derived from non-operating activities. Adjusted free cash flow should not be considered an alternative to net cash from operating activities or other measurements under GAAP. Adjusted free cash flow is not calculated identically by all companies, and therefore the Company’s measurement of adjusted free cash flow may not be comparable to similarly titled measures reported by other companies.

An itemized reconciliation between net cash from (used in) operating activities and adjusted free cash flow is as follows for the three months ended March 31, 2023 and 2022 (in thousands):

Adjusted EBITDA Guidance Reconciliation

An itemized reconciliation between projected GAAP net income and projected Adjusted EBITDA is as follows (in millions):

Adjusted Free Cash Flow Guidance Reconciliation

An itemized reconciliation between projected net cash from operating activities and projected adjusted free cash flow is as follows (in millions):

About Clean Harbors

Clean Harbors (NYSE: CLH) is North America’s leading provider of environmental and industrial services. The Company serves a diverse customer base, including a majority of Fortune 500 companies. Its customer base spans a number of industries, including chemical, energy and manufacturing, as well as numerous government agencies. These customers rely on Clean Harbors to deliver a broad range of services such as end-to-end hazardous waste management, emergency spill response, industrial cleaning and maintenance, and recycling services. Through its Safety-Kleen subsidiary, Clean Harbors also is North America’s largest re-refiner and recycler of used oil and a leading provider of parts washers and environmental services to commercial, industrial and automotive customers. Founded in 1980 and based in Massachusetts, Clean Harbors operates in the United States, Canada, Mexico, Puerto Rico and India. For more information, visit www.cleanharbors.com.