- Achieves Q1 Revenue Growth of 12% to $1.31 Billion on Strength
of ES Segment
- Generates Q1 Net Income of $72.4 Million, or EPS of $1.33, with
Adjusted EPS of $1.36
- Delivers Q1 Adjusted EBITDA Growth of 19% to $215.1
Million
- Raises Full-Year 2023 Adjusted EBITDA Guidance to Reflect
Acquisition of Thompson Industrial Services
Clean Harbors, Inc. (“Clean Harbors”) (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):
For the Three Months
Ended
March 31, 2023
March 31, 2022
Net income
$
72,401
$
45,314
Accretion of environmental liabilities
3,407
3,156
Stock-based compensation
6,018
5,712
Depreciation and amortization
84,758
84,298
Other income, net
(116
)
(704
)
Loss on early extinguishment of debt
2,362
—
Interest expense, net of interest
income
20,632
25,017
Provision for income taxes
25,676
17,466
Adjusted EBITDA
$
215,138
$
180,259
Adjusted EBITDA Margin
16.5
%
15.4
%
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):
For the Three Months
Ended
March 31, 2023
March 31, 2022
Adjusted net income
Net income
$
72,401
$
45,314
Loss on early extinguishment of debt
2,362
—
Tax-related valuation allowances and
other*
(653
)
114
Adjusted net income
$
74,110
$
45,428
Adjusted earnings per share
Earnings per share
$
1.33
$
0.83
Loss on early extinguishment of debt
0.04
—
Tax-related valuation allowances and
other*
(0.01
)
—
Adjusted earnings per share
$
1.36
$
0.83
* Other amounts include ($0.7) million or
($0.01) per share of tax impacts from the loss on early
extinguishment of debt for the three months ended March 31,
2023.
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):
For the Three Months
Ended
March 31, 2023
March 31, 2022
Adjusted free cash flow
Net cash from (used in) operating
activities
$
28,008
$
(38,629
)
Additions to property, plant and
equipment
(81,686
)
(70,308
)
Proceeds from sale and disposal of fixed
assets
1,855
1,320
Adjusted free cash flow
$
(51,823
)
$
(107,617
)
Adjusted EBITDA Guidance Reconciliation
An itemized reconciliation between projected GAAP net income and
projected Adjusted EBITDA is as follows (in millions):
For the Year Ending
December 31,
2023
Projected GAAP net income
$364
to
$400
Adjustments:
Accretion of environmental liabilities
14
to
13
Stock-based compensation
26
to
29
Depreciation and amortization
360
to
350
Loss on early extinguishment of debt
2
to
2
Interest expense, net
120
to
115
Provision for income taxes
134
to
151
Projected Adjusted EBITDA
$1,020
to
$1,060
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):
For the Year Ending
December 31,
2023
Projected net cash from operating
activities
$705
to
$765
Additions to property, plant and
equipment
(410)
to
(430)
Proceeds from sale and disposal of fixed
assets
10
to
10
Projected adjusted free cash flow
$305
to
$345
Conference Call Information
Clean Harbors will conduct a conference call for investors today
at 9:00 a.m. (ET) to discuss the information contained in this
press release. During the call, management will discuss Clean
Harbors’ financial results, business outlook and growth strategy.
Investors who wish to listen to the webcast and view the
accompanying slides should visit the Investor Relations section of
the Company’s website at www.cleanharbors.com. The live call also
can be accessed by dialing 866.682.6100 or 862.298.0702 prior to
the start time. If you are unable to listen to the live conference
call, the webcast will be archived on the Company’s website.
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.
Safe Harbor Statement
Any statements contained herein that are not historical facts
are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are generally identifiable by use of the words
“believes,” “expects,” “intends,” “anticipates,” “plans to,”
“seeks,” “should,” “estimates,” “projects,” “may,” “likely,” or
similar expressions. Such statements may include, but are not
limited to, statements about future financial and operating
results, and other statements that are not historical facts. Such
statements are based upon the beliefs and expectations of Clean
Harbors’ management as of this date only and are subject to certain
risks and uncertainties that could cause actual results to differ
materially, including, without limitation, those items identified
as “Risk Factors” in Clean Harbors’ most recently filed Form 10-K
and Form 10-Q. Forward-looking statements are neither historical
facts nor assurances of future performance. Therefore, readers are
cautioned not to place undue reliance on these forward-looking
statements. Clean Harbors undertakes no obligation to revise or
publicly release the results of any revision to these
forward-looking statements other than through its filings with the
Securities and Exchange Commission, which may be viewed in the
“Investors” section of Clean Harbors’ website at
www.cleanharbors.com.
CLEAN HARBORS, INC. AND
SUBSIDIARIES
UNAUDITED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
For the Three Months
Ended
March 31, 2023
March 31, 2022
Revenues
$
1,307,387
$
1,169,109
Cost of revenues: (exclusive of items
shown separately below)
931,514
843,389
Selling, general and administrative
expenses
166,753
151,173
Accretion of environmental liabilities
3,407
3,156
Depreciation and amortization
84,758
84,298
Income from operations
120,955
87,093
Other income, net
116
704
Loss on early extinguishment of debt
(2,362
)
—
Interest expense, net
(20,632
)
(25,017
)
Income before provision for income
taxes
98,077
62,780
Provision for income taxes
25,676
17,466
Net income
$
72,401
$
45,314
Earnings per share:
Basic
$
1.34
$
0.83
Diluted
$
1.33
$
0.83
Shares used to compute earnings per share
- Basic
54,076
54,408
Shares used to compute earnings per share
- Diluted
54,404
54,672
CLEAN HARBORS, INC. AND
SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, 2023
December 31, 2022
Current assets:
Cash and cash equivalents
$
304,307
$
492,603
Short-term marketable securities
71,818
62,033
Accounts receivable, net
963,659
964,603
Unbilled accounts receivable
137,507
107,010
Inventories and supplies
322,386
324,994
Prepaid expenses and other current
assets
103,370
82,518
Total current assets
1,903,047
2,033,761
Property, plant and equipment, net
2,027,513
1,980,302
Other assets:
Operating lease right-of-use assets
167,144
166,181
Goodwill
1,287,416
1,246,878
Permits and other intangibles, net
636,523
620,782
Other
62,365
81,803
Total other assets
2,153,448
2,115,644
Total assets
$
6,084,008
$
6,129,707
Current liabilities:
Current portion of long-term debt
$
10,000
$
10,000
Accounts payable
427,480
446,629
Deferred revenue
101,336
94,094
Accrued expenses and other current
liabilities
313,916
396,716
Current portion of closure, post-closure
and remedial liabilities
22,780
23,123
Current portion of operating lease
liabilities
51,325
49,532
Total current liabilities
926,837
1,020,094
Other liabilities:
Closure and post-closure liabilities, less
current portion
109,372
105,596
Remedial liabilities, less current
portion
103,800
106,372
Long-term debt, less current portion
2,409,654
2,414,828
Operating lease liabilities, less current
portion
118,074
119,259
Deferred tax liabilities
344,333
350,389
Other long-term liabilities
91,894
90,847
Total other liabilities
3,177,127
3,187,291
Total stockholders’ equity, net
1,980,044
1,922,322
Total liabilities and stockholders’
equity
$
6,084,008
$
6,129,707
CLEAN HARBORS, INC. AND
SUBSIDIARIES
UNAUDITED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands)
For the Three Months
Ended
March 31, 2023
March 31, 2022
Cash flows from (used in) operating
activities:
Net income
$
72,401
$
45,314
Adjustments to reconcile net income to net
cash from (used in) operating activities:
Depreciation and amortization
84,758
84,298
Allowance for doubtful accounts
1,398
3,619
Amortization of deferred financing costs
and debt discount
1,354
1,561
Accretion of environmental liabilities
3,407
3,156
Changes in environmental liability
estimates
683
312
Deferred income taxes
(363
)
2,226
Other income, net
(116
)
(704
)
Stock-based compensation
6,018
5,712
Loss on early extinguishment of debt
2,362
—
Environmental expenditures
(8,348
)
(3,615
)
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable and unbilled accounts
receivable
(5,030
)
(138,690
)
Inventories and supplies
2,758
(13,610
)
Other current and non-current assets
(17,328
)
(32,924
)
Accounts payable
(21,801
)
43,001
Other current and long-term
liabilities
(94,145
)
(38,285
)
Net cash from (used in) operating
activities
28,008
(38,629
)
Cash flows used in investing
activities:
Additions to property, plant and
equipment
(81,686
)
(70,308
)
Proceeds from sale and disposal of fixed
assets
1,855
1,320
Acquisitions, net of cash acquired
(108,533
)
5,000
Additions to intangible assets including
costs to obtain or renew permits
(333
)
(321
)
Purchases of available-for-sale
securities
(39,037
)
(5,002
)
Proceeds from sale of available-for-sale
securities
29,800
10,450
Net cash used in investing activities
(197,934
)
(58,861
)
Cash flows used in financing
activities:
Change in uncashed checks
164
(2,295
)
Tax payments related to withholdings on
vested restricted stock
(3,351
)
(1,831
)
Repurchases of common stock
(3,000
)
(3,694
)
Deferred financing costs paid
(6,094
)
(291
)
Payments on finance leases
(3,689
)
(3,585
)
Principal payments on debt
(616,475
)
(4,384
)
Proceeds from issuance of debt
500,000
—
Borrowing from revolving credit
facility
114,000
—
Net cash used in financing activities
(18,445
)
(16,080
)
Effect of exchange rate change on cash
75
579
Decrease in cash and cash equivalents
(188,296
)
(112,991
)
Cash and cash equivalents, beginning of
period
492,603
452,575
Cash and cash equivalents, end of
period
$
304,307
$
339,584
Supplemental information:
Cash payments for interest and income
taxes:
Interest paid
$
34,878
$
33,697
Income taxes paid, net of refunds
37,141
3,121
Non-cash investing activities:
Property, plant and equipment accrued
27,533
11,397
Remedial liability assumed in acquisition
of property, plant and equipment
—
13,073
ROU assets obtained in exchange for
operating lease liabilities
10,203
7,342
ROU assets obtained in exchange for
finance lease liabilities
5,153
4,679
Supplemental Segment Data (in thousands)
For the Three Months
Ended
Revenue
March 31, 2023
March 31, 2022
Third-Party Revenues
Intersegment Revenues
(Expenses), net
Direct Revenues
Third-Party Revenues
Intersegment Revenues
(Expenses), net
Direct Revenues
Environmental Services
$
1,060,982
$
9,759
$
1,070,741
$
940,798
$
6,647
$
947,445
Safety-Kleen Sustainability Solutions
246,298
(9,759
)
236,539
228,239
(6,647
)
221,592
Corporate Items
107
—
107
72
—
72
Total
$
1,307,387
$
—
$
1,307,387
$
1,169,109
$
—
$
1,169,109
For the Three Months
Ended
Adjusted EBITDA
March 31, 2023
March 31, 2022
Environmental Services
$
228,345
$
183,602
Safety-Kleen Sustainability Solutions
41,463
51,877
Corporate Items
(54,670
)
(55,220
)
Total
$
215,138
$
180,259
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230503005122/en/
Eric J. Dugas EVP and Chief Financial Officer Clean Harbors,
Inc. 781.792.5100 InvestorRelations@cleanharbors.com
Jim Buckley SVP Investor Relations Clean Harbors, Inc.
781.792.5100 Buckley.James@cleanharbors.com
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