Clean Harbors Q3 Earnings Signal High Potential and Transformation

Clean Harbors, Inc. (NYSE: CLH) announced its third-quarter results for the 2022 financial year.

The presentation, led by current CEO Alan McKim, CFO Michael Battles, and COO Eric Gerstenberg was an optimistic display of the successes the company saw during the quarter and expectations for the next.

During the third quarter, Clean Harbors witnessed a 43 percent increase in revenue compared to the same quarter of last year. This was an increase of about $408.5 million, bringing the company’s revenue from $951.5 million in Q3 2021 to $1.36 billion in Q3 2022.

Looking into the sectors of the company, you’ll see a similarly strong quarter representative of the company's total growth successes.

“Revenue in our SKSS [Safety-Kleen Sustainability Solutions] segment was up 34 percent in Q3 on the strength of increasing pricing of both our base oil and our blended products versus a year ago,” McKim says.

These record-level revenue rates for this sector of the company are tied to both an increase in the pricing of base oil as well as an increased value of byproduct. 

The Environmental Services segment of Clean Harbors also experienced a tremendous revenue increase. The growth of 46 percent compared to Q3 2021 for this sector is attributed to  HydroChemPSC (HPC) acquisition and organic growth in the form of heightened demand for disposal. 

“We capitalized on a busy summer season in our industrial services group as we continue to enjoy steady contributions out of HPC” shares McKim.

Clean Harbors completed the second-largest acquisition in the company's history last October when it purchased HPC, and while this acquisition accounts for about half of the Environmental Services’ growth in revenue, McKim believes they have yet to unlock all of the potential this deal has to offer the company.

Representing the organic growth of the company's base business, McKim shares the following: “Landfill volumes rose by 38 percent reflecting our strong base business and more waste project opportunities.”

“We anticipate a strong finish to 2022 through a combination of base business and project work. All of our service businesses are entering the final quarter of the year on a positive trajectory” McKim optimistically states.

This strong performance was visible in other aspects of the quarter as well as McKim states there was a growth in Adjusted EBITDA of 67 percent as well as an improvement in Adjusted EBITDA margins of 310 basis points to 22.6 percent.

This 67 percent is an increase from $185.1 million in Q3 2021 to $308.6 million in the same period of 2022.

“Given our year-to-date performance, we are raising our annual Adjusted EBITDA guidance to more than $1 billion, which reflects the acceleration of demand for our environmentally focused services and products,” says McKim.

The updated Adjusted EBITDA will now fall within a range of $1.010 billion to $1.030 billion, for a midpoint of $1.020 billion. This updated stat is based on anticipated GAAP net income in the range of $387 million to $410 million.

Additionally, the company witnessed impressive results in income. For Q3 of 2022, net income was $135.8 million, which equates to about $2.50 per diluted share. This is compared to a net income of $65.4 million, or $1.20 per diluted share, for Q3 of 2021.

Clean Harbors saw income from operations nearly double. Income from operations went from $104.8 million in the third quarter of 2021 to $209.1 million in the same quarter of 2022.

Driven by ROIC, the current strategy for capital reallocation is to invest CapEx to drive organic growth, evaluate acquisition and divestiture opportunities, execute an authorized buyback plan, and assess current debt structure and leverage.

In other news, the company has also announced Alan McKim’s step down as CEO. Clean Harbors' current CFO, Michael Battles, and COO, Eric Gerstenberg, will be filling the position as Co-CEOs effective March 31, 2023.

In his concluding remakes, McKim Shares the following: “Looking ahead, we expect to conclude 2022 with a strong fourth quarter. We continue to believe our key markets are in great shape based on a number of favorable domestic trends.”

Q3 2022 Highlights

Revenue: $1.36 billion (Q3 2021: $951.5 million)

Net Income:  $135.8 million (Q3 2021: $65.4 million)

Adjusted EBITDA: $308.6 million (Q3 2021: $185 million