Clean Harbors Sees 12 Percent Revenue Increase in Q3, Revises 2024 Outlook

Clean Harbors, Inc. (Clean Harbors) (NYSE: CLH) has released its third quarter financial results, showing a 12% increase in revenue growth and 25% increase in income from operations compared to last year.

For the quarter, revenue grew 12% to $1.53 billion, up from $1.37 billion from 2023’s Q3 results. Clean Harbors’ income from operations came in at $192.3 million, a 25% increase of 2023’s third quarter income from operations of $154.4 million.

Adjusted EBITDA increased 18% to $301.8 million, up from $255.0 million in the same time frame last year.

“We delivered profitable growth in both our operating segments while improving our consolidated Adjusted EBITDA margin by 100 basis points from the same period a year ago,” said Mike Battles, Co-Chief Executive Officer.

“Underlying demand remained healthy across our Environmental Services (ES) segment. Despite higher Adjusted EBITDA, our Safety-Kleen Sustainability Solutions (SKSS) segment results reflected softer-than-expected demand and pricing of base oil and lubricants throughout the quarter with a more meaningful decline in September. We continue to prioritize safety with industry-leading results, achieving a Total Recordable Incident Rate (TRIR) of 0.69 year-to-date through September.”

The Environmental Services segment of Clean Harbors recorded a revenue increase of 13% and a 15% rise in Adjusted EBITDA in Q3, resulting in a 40-basis-point improvement in segment margins.

“The third quarter marks our tenth consecutive quarter of year-over-year margin improvement in the ES segment,” said Eric Gerstenberg, Co-Chief Executive Officer.

Gerstenberg noted that Environmental Services growth was particularly strong by Field Services, which saw an increase of 68%, boosted by the HEPACO acquisition from earlier this year and organic growth in legacy businesses.

“Technical Services revenue grew 8% on higher network volumes and pricing. Incineration utilization was 89% for the quarter, up from 86% in the same period a year ago. Average incineration pricing increased 6%. Safety-Kleen Environmental Services posted another consistent performance with 8% revenue growth in the ES segment,” said Gerstenberg.

The SKSS segment of the company grew by 6% in revenue thanks to the contribution of Clean Harbor’s acquisition of Noble Oil earlier this year, with Adjusted EBITDA seeing a 32% increase.

Looking at the rest of 2024 and ahead to 2025, Gerstenberg sees healthy demand across North America and the outlook for Clean Harbor’s Environmental Services segment remains positive.

“Favorable market dynamics, including reshoring, infrastructure spending, PFAS, and other regulatory changes should continue to fuel growth opportunities for Clean Harbors,” said Gerstenberg.

“The commercial launch of our new incinerator in Kimball, Nebraska is scheduled for November, providing an essential outlet for additional hazardous waste volumes as it ramps up over the next 12-18 months.”

Gerstenberg highlighted the benefits of the addition of HEPACO’s emergency response capabilities, which should bring growth to the company’s field services. He also expects the company’s Technical Services and SK Environmental businesses to grow steadily and for Clean Harbors to take actions in Industrial Services to combat the weakness in fall turnarounds to return that business to revenue growth in 2025.

With that said, Battles mentioned that the company remains committed within the SKSS segment of the company despite pricing challenges and weak demand for base oil.

“We are taking decisive actions to reduce production and collection costs while also pursuing growth initiatives in Group III, blended sales, and our partnership with Castrol. These programs have the potential to reduce the carbon footprints of businesses significantly, and we believe they will gain traction as more customers look to Safety-Kleen as their sustainability partner in the coming years,” Battles concluded.

“Overall, despite some market obstacles related to base oil and refining customers, we expect to end 2024 with strong momentum across our network of disposal facilities and service offerings giving us a positive trajectory into 2025.”

Following its Q3 reporting, Clean Harbors has revised its full year forecast, now expecting Adjusted EBITDA to be in the range of $1.10 billion to $1.12 billion, an increase of 10% year over year. Additionally, Clean Harbors now expects adjusted free cash flow to be in the range of $280 million to $320 million, accounting for investments in the Kimball incinerator and the company’s Baltimore, Md. expansion. The adjusted free cash flow revision comes as the company’s new Adjusted EBITDA guidance and increased short-term working capital levels.

Q2 2024 Highlights:

Revenue: $1.53 billion

Income from Operations: $192.3 million

Adjusted EBITDA: $301.8 million

Net Income: $115.2 million