Clean Harbors - Earnings Call - Q4 2024

Executive Summary

• Q4 revenue grew 7% to $1.43B, with diluted EPS of $1.55; Adjusted EBITDA was $257.2M and margin 18.0% as ES strength offset SKSS headwinds.
• ES delivered 9% revenue growth, 11% Adjusted EBITDA growth, and 50 bps margin expansion; incineration utilization reached 94% (vs. 85% LY), average pricing +4%.
• SKSS remained challenged by base oil/lubricants pricing; management moved to charge‑for‑oil (CFO) in mid‑November and idled the California re‑refinery to lower costs.
• 2025 guidance: Adjusted EBITDA $1.15–$1.21B (midpoint +6% YoY), Adjusted FCF $430–$490M, and Q1 ES Adjusted EBITDA +4–6% YoY; consolidated Q1 EBITDA flat.
• Catalyst path: Kimball incinerator commercial launch and ramp (12% capacity increase), robust PFAS pipeline, continued field services growth with HEPACO synergies.

What Went Well and What Went Wrong

What Went Well

• ES segment delivered record performance: revenue +9%, Adjusted EBITDA +11%, margin +50 bps; “11th consecutive quarter of year‑over‑year margin growth”.
• Network execution: incineration utilization 94% and average pricing +4%; strong field services (+47% revenue, HEPACO integration) and technical services (+8% revenue).
• Operational milestones: Commercial launch of Kimball (on schedule), TRIR 0.65 for 2024, integrations of HEPACO and Noble, and PFAS “Total Solution” expansion; “We believe we have the ideal strategies in place to deliver a great financial performance in 2025.”.

What Went Wrong

• SKSS headwinds: base oil/lubricant pricing deterioration; Q4 SKSS revenue -5% YoY and profitability down vs. LY; CFO shift reflects weaker conditions.
• Q4 consolidated Adjusted EBITDA margin down YoY to 18.0% (19.0% LY) with ~$4M Kimball start‑up costs included; Q4 income from operations declined to $137.0M (vs. $147.3M LY).
• Industrial Services softness persisted into Q4 given weaker refinery turnaround scope; management expects recovery in 2025.

Transcript

Operator (participant)

Greetings, and welcome to the Clean Harbors fourth quarter and full year 2024 financial results conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael McDonald, General Counsel for Clean Harbors. Thank you, sir. You may begin.

Michael McDonald (General Counsel)

Thank you, Christine, and good morning, everyone. With me on today's call are our Co-Chief Executive Officers, Eric Gerstenberg and Mike Battles, our EVP and Chief Financial Officer, Eric Dugas, and SVP of Investor Relations, Jim Buckley. Slides for today's call are posted on our Investor Relations website, and we invite you to follow along. Matters, as we are discussing today, that are not historical facts are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Participants are cautioned not to place undue reliance on these statements, which reflect management's opinions only as of today, February 19th, 2025. Information on potential factors and risks that could affect our results is included in our SEC filings.

The company undertakes no obligation to revise or publicly release the results of any revision to the statements made today other than through filings made concerning this reporting period. Today's discussion includes references to non-GAAP measures. Clean Harbors believes that such information provides an additional measurement and consistent historical comparison of its performance. Reconciliations of these measures to the most directly comparable GAAP measures are available in today's news release on our website and in the appendix of today's presentation. Let me turn the call over to Eric Gerstenberg to start. Eric?

Eric Gerstenberg (Co-CEO)

Thanks, Michael. Good morning, everyone, and thank you for joining us. We continue to execute on our strategic priorities in Q4, delivering strong consolidated results and beating Street expectations. The quarter was highlighted by sustained momentum in our environmental services segment and concluded 2024 as another strong year with consolidated EBITDA growth of 10%. Before we get into the results, let me spotlight our team's outstanding safety performance.

We remain laser-focused on safety and continuous improvement in the quarter, which contributed to a total recordable incident rate that enabled us to surpass our 2024 goal. While we're proud of this achievement, we recognize that safety is an ongoing journey. Turning to our financial performance on Slide 3, our results were in line with our expectations as our ES segment capped a record year with solid fourth quarter.

Steady demand for our ES services allowed us to conclude 2024 with strong waste collection volumes, particularly containerized waste, and a healthy flow of project work, resulting in full-year revenue growth of 11% and adjusted EBITDA margins exceeding 25%. SKSS, as expected, faced a challenging commodity pricing environment with market conditions for base oil and lubricants further deteriorating toward year-end. As announced in November, our team took very aggressive actions in our used oil collection pricing to offset the lubricant pricing deterioration. Reflecting the strength of the year overall, we delivered record revenue, adjusted EBITDA, and adjusted free cash flow in 2024.

Operationally, we also achieved a number of milestones, including the completion and commercial launch of our Kimball Nebraska incinerator, the acquisition and integration of HEPACO and Noble Oil, growth in our workforce, and improved retention as we lowered turnover by 250 basis points, the launch of our Total PFAS Solution, initial expansion of our Baltimore hub, our partnership with Castrol for its more circular offering, and more than 20,000 emergency response events.

Turning to our segment's reviews, beginning with ES on Slide 4, adjusted EBITDA increased 11% with a 9% increase in revenue, translating to a 50 basis point margin improvement. HEPACO accounted for half of the segment's $103 million revenue increase, with the remainder from organic growth driven by a combination of volume and price.

Q4 marked the 11th consecutive quarter of year-over-year improvement in the ES segment adjusted EBITDA margin, which has increased by more than 500 basis points when compared with Q4 of 2021. Looking at segment components, field services revenue grew 47%, driven primarily by HEPACO and organic growth. In technical services, higher network volumes and pricing drove an 8% revenue increase. Average pricing in the incinerators rose 4% while achieving 94% incineration utilization in the quarter.

Demand was robust, and our plants ran very efficiently. We are beginning to realize the benefits from investments and process improvements we have made in our network in the recent years. Safety-Kleen Environmental Services completed another year of steady revenue growth within the segment, generating 6% in Q4. We performed 246,000 parts wash services in the quarter, up from a year ago. Other core branch offerings also performed well, particularly containerized waste services.

Our industrial services team did a great job driving price improvements and managing their cost structure during the slower fall turnaround season. Turning to Slide 5, after completing final inspections and incurring some startup-related costs, our new incinerator in Kimball, Nebraska, launched commercial operations in December. We are proud to have successfully completed this multi-year project ahead of our original timeline. Our engineering team did an outstanding job hitting every milestone of this complex project. Kimball's design mirrors the Arkansas incinerator we opened in 2017. The initial shakedown phase for Kimball is underway, and we expect the incinerator to ramp up gradually as we optimize its operations over the next 12-18 months. The opening of the incinerator comes at an opportune time for our customers.

Kimball's ability to handle more complex waste streams aligns well with the demand environment, which is highlighted by reshoring, infrastructure spending, efforts to regulate PFAS, and the current administration's pro-growth agenda. Kimball increases our overall North American capacity by 12%, presenting solutions for captive incineration customers. We have a proven playbook that we continue to share with our captive customers to evaluate their strategic options, including closure.

Before turning the call over to Mike, I want to touch on PFAS, which is a topic we often get asked about. We shared on our Q3 call that we were planning to conduct our next round of testing to meet the EPA's more stringent emission standards for PFAS incineration. That testing took place in November at our Utah facility with both the EPA and DOD on site during testing.

These tests involved considerable data collection to scientifically prove that PFAS elimination in our incinerators occurs up to six nines of destruction with no emissions concerns. We expect the results of the testing to be available in Q2, and we are confident that the data will continue to support our previous testing results, clearly demonstrating that PFAS can be safely eliminated using our high-temperature record-permitted incinerators. We appreciate the government's active participation in our latest study.

The consensus is building around the need to address these forever chemicals and eliminate their threat to human health. Many industry analysts believe that PFAS remediation and destruction carries the potential of creating a multi-billion-dollar marketplace, and we are seeing an ever-increasing pipeline to support that belief. We expect PFAS to remain a priority for the current administration and state regulators. We look forward to keeping you updated on the results of our study once they are finalized. With that, let me turn things over to Mike. Mike.

Mike Battles (Co-CEO)

Thank you, Eric, and good morning, everyone. Turning to our SKSS segment results on slide six, revenue and EBITDA decreased year-over-year in Q4, reflecting soft demand and lower pricing during what is already a seasonally weak quarter. These results reflect the ongoing challenges in the base oil and lubricants market. In response to that market softness, we took action on several fronts.

In mid-November, we shifted to a charge-for-oil position. We also idled our California re-refinery in Q4 to address our inventory buildup and support our CFO initiative. We believe these actions, along with comprehensive cost-cutting initiatives, will support this business in 2025. In the quarter, we gathered 63 million gallons of waste oil, higher than the prior year, reflecting the addition of Noble Oil. During the November shift in our collection approach, Q4 collection costs were at a CFO average versus a PFO average in Q3.

We expect to continue to increase our price to collect used motor oil in 2025. Our goal is always to balance the feedstock levels our refineries need with collecting oil at the best possible price. In addition to aggressively moving to CFO and reducing oil collection costs in light of base oil pricing, our strategies to minimize volatility in this business include selling more blended gallons, producing Group III, and capitalizing on our partnerships that leverage our low-carbon footprint products like we have with BP Castrol.

Our blended volumes in the quarter came in, as expected, at 20% of total volume sold. Our Group III program has moved forward, and we expect to increase Group III production this year. Our Castrol partnership generated its first major fleet customer for their more circular offering toward year-end. Their sales and marketing rollout continues, and we're excited to see the potential of this partnership get realized with more large fleets. Turning to capital allocation on slide seven, we ended the year with a healthy cash balance and low leverage that will enable us to execute the overall Clean Harbors growth strategy.

We continue to look for opportunities, whether those are internal or external, to generate the best returns on our shareholders' capital. Internally, we continue to see opportunity to invest within multiple parts of the company. Eric detailed our success with launching Kimball, which is a $200+ million project that will pay an attractive return for decades. We have smaller lucrative opportunities as well. In 2024, we allocated approximately $20 million of capital to the expansion of our Baltimore location.

In 2025, we intend to replicate that success through another similar growth project by expanding our presence in Phoenix in response to rapid market growth in the southwest region, particularly in the semiconductor market. We are purchasing and upgrading a site that will have a comprehensive hazardous waste collection and service capabilities at an estimated cost of $15 million. We remain very active in the M&A front, evaluating potential acquisition candidates that will support our growth plans while enabling us to capture synergies and drive additional volumes into our network. The pipeline is as active as ever.

We intend to execute our share buyback plan to at least maintain a flat share count and be opportunistic with large purchases when conditions are ideal, just as we have for the past decade. In conclusion, we entered the first quarter of 2025 in great shape. We expect another year of consistent profitable growth led by our ES segment. We are bullish about our prospects this year as demand for our services remains strong, with multiple tailwinds supporting us from reshoring to infrastructure investments to PFAS to potential captive closures.

We continue to have a healthy waste backlog and a robust pipeline of remediation and waste projects. The commercial ramp-up of our Kimball incinerator is underway. The outlook for field services is positive given the early returns on HEPACO and the growing need of our skilled workforce and capabilities. We anticipate a recovery in industrial services this year after a challenging 2024 and fully expect our SK Environmental Services to continue to achieve record waste collection to support our network. In 2025, Clean Harbors celebrates its 45th anniversary. Our commitment to our core values has never been stronger.

We believe that we have the ideal growth strategies in place to deliver an outstanding financial performance in 2025, including record-adjusted EBITDA and cash flows. In addition, we anticipate continued margin improvement based on our pricing, cost mitigation plans, and productivity initiatives. With that, let me turn it over to our CFO, Eric Dugas.

Eric Dugas (EVP and CFO)

Thank you, Mike, and good morning, everyone. Turning to the income statement on Slide 9, our Q4 results exceeded the guidance provided on our last earnings call, led by profitable growth in ES with continued margin expansion in that segment. Demand across our core lines of business remained robust as we concluded the year. Overall, we grew total company revenues in the quarter by more than $90 million, or 7%, and by over $480 million, or 9%, for the year. The ES segment led the way with 15% adjusted EBITDA growth for the year, with the associated margin exceeding 25%. Fourth quarter adjusted EBITDA of $257 million was driven by great results in the ES segment, offset by a decline in SKSS and higher corporate costs.

This total reflects a $4 million adjustment related to startup costs at our Kimball incinerator that were incurred leading up to the launch of its commercial operations in December. Our adjusted EBITDA margin of 18% in Q4 was down year-over-year but up 30 basis points for the full year to 19%. This annual improvement speaks to the strength of our ES business, where margins improved 90 basis points for the year by leveraging our overall facilities network, in part from a record level of drum waste collected and the significant growth of field services. SG&A expense, as a percentage of revenue, was 12.7% in Q4, similar to the full-year percentage of 12.6%. These levels were in line with our expectations as the primary factors behind the dollar increase from prior periods were related to M&A activity, increased labor and benefit-related costs, and insurance.

For full year 2025, we anticipate our SG&A expense as a percentage of revenue to remain in the mid-12% range. Depreciation and amortization in Q4 came in as expected at $105 million and $401 million for the year, up from 2023 due to acquisitions. For 2025, we expect depreciation and amortization in the range of $440 million-$450 million. Income from operations in Q4 was $137 million and $670 million for the full year, representing a 9% increase from the full year of 2023. Q4 net income was down versus the same period a year ago while increasing for the full year as we delivered EPS of $7.42 in fiscal 2024. Turning to Slide 10 and the balance sheet, cash and short-term marketable securities at year-end were $790 million, up $195 million from the end of Q3 and approximately $240 million over the course of 2024.

We saw a meaningful decrease in our receivables balance of $127 million in Q4 as we focused on collections related to HEPACO billings that were slowed by a previous system changeover. On our Q3 earnings call, we had lowered our free cash flow estimate for the year in recognition of these challenges. However, cash collections in this area exceeded our expectations down the stretch, resulting in a strong Q4 free cash flow. I want to thank the team for their great effort in finishing the year strong. Our balance sheet continues to be a source of strength for us. Our net debt-to-EBITDA ratio at year-end was just under 2x, with no material debt amounts coming due until 2027. We continue to be opportunistic in addressing our interest rates as we did in October when we repriced our term loan to generate approximately $2 million in annual interest savings.

Our overall interest rate at year-end was 5.38%. Turning to cash flows on Slide 11, net cash from operating activities in Q4 was $304 million, up $25 million from prior year. CapEx, net of disposals, was $60 million, down considerably from prior year and in line with our expectations as we are wrapping up our Kimball spend. As Eric mentioned, the Kimball incinerator was commercially launched in December with total spend on the project of approximately $210 million, including the $75 million that was spent in 2024.

For the quarter, adjusted free cash flow was $248 million, finishing the year at $358 million. These results exceeded expectations based on the working capital improvements I spoke to a moment ago. For 2025, we expect our net CapEx, excluding the Phoenix growth project, to be in the range of $345 million-$375 million. During Q4, we bought back more than 101,000 shares of stock for a total of $25 million, bringing our year-to-date total to $55 million. Moving to guidance on Slide 12, based on our Q4 and 2024 results, along with current market conditions for both of our operating segments, we expect 2025 adjusted EBITDA in the range of $1.15 billion-$1.21 billion, with a midpoint of $1.18 billion.

Looking at our annual guidance from a quarterly perspective, we expect adjusted EBITDA for Q1 to grow 4%-6% year-over-year in our ES segment and be flat on a consolidated basis. For full year 2025, adjusted EBITDA guidance will translate to our reporting segment as follows. In Environmental Services, we expect adjusted EBITDA in 2025 at the midpoint of our guidance to increase 5%-8% from 2024. Overall, demand for our core ES services remains strong and will drive continued growth in 2025. With Kimball ramping up and offering additional capacity along with macro tailwinds, we expect to introduce more volumes into our facilities network, along with continued expansion in the SK branch and field services businesses and a return to growth in industrial services.

For SKSS, we expect full year 2025 adjusted EBITDA at the midpoint of our guidance to be $140 million. The environment remains challenging as we begin the new year, and we remain cautious in our oil pricing assumptions. Within corporate, at the midpoint of our guide, we now expect negative adjusted EBITDA to be up 3%-7% compared to 2024. The year-over-year increase primarily relates to rising expenses in areas such as wages and benefits, insurance, and growth in the business, partly offset by our cost savings initiatives.

For adjusted free cash flow, current expectation for 2025 is for a range of $430 million-$490 million or a midpoint of $460 million. As Mike mentioned, we are planning to invest $15 million in a growth project in Phoenix this year. We are going to exclude spend from this long-term growth project from adjusted free cash flow going forward. We believe this will create a more accurate picture of our free cash flow generation as a company. In summary, our growing ES segment delivered an exceptional performance in 2024, capped by a strong fourth quarter. The favorable market dynamics propelling this business position it for greater earnings potential, particularly as we anticipate a high-growth U.S. economy in the coming years. The ramp-up of our Kimball incinerator is underway, with our remaining network operating at a high capacity.

Moreover, the potential for increased volumes related to PFAS destruction are on the horizon as we move into 2025, presenting exciting growth opportunities. The integration of HEPACO has progressed nicely, and we're confident in another solid year for field services. Our SK branch operations continue to deliver profitable growth quarter-after-quarter, showcasing our operational excellence, and we're optimistic that industrial services will grow in 2025. Overall, we remain encouraged by the trajectory of our company and the market conditions to support and potentially accelerate that profitable growth this year. With that, Christine, please open up the call for questions.

Operator (participant)

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Thank you. Our first question comes from a line of Tyler Brown with Raymond James. Please proceed with your question.

Tyler Brown (Associate VP of Investments)

Hey, good morning.

Eric Gerstenberg (Co-CEO)

Hey, good morning, Tyler.

Tyler Brown (Associate VP of Investments)

Hey, sorry. I'm a little under the weather here. But there have been a number of articles about the California wildfires, maybe a sizable hazardous waste cleanup effort. I'm just curious if you guys are seeing any incremental opportunities. Is there anything kind of baked into the guidance there?

Eric Gerstenberg (Co-CEO)

Yeah, Tyler, this is Eric answering. We're participating actively in helping with the cleanup and the remediation. I'd say, though, that while the wildfires were underway, they did have some typical disruption to our branch collections. We were pleased, however, that none of our operating branches had any effect, and thankfully, our people did not have any effect on their homes by and large, and so after that conclusion of getting the fire under control, our teams have done an awesome job in helping with the environmental hazardous waste cleanup as that fire progresses today. How long that's going to go on is really unknown at this point, but we continue to support the efforts there.

Eric Dugas (EVP and CFO)

I think it's just in terms of the guidance to address your guidance question, Tyler, for Q1, maybe some modest benefits from the work that Eric talked about, but largely kind of a net-neutral event, I think, because of the slowdown in that region due to the fires as well. So that's how we kind of see Q1. But as Eric said, time will tell in terms of the scope of that work.

Tyler Brown (Associate VP of Investments)

Okay. And then if I come back on bird flu, I know I've asked about this before, but the culling numbers are really high, particularly in December and into January. I think you participated back in 2015, but are you guys mustering any resources in that effort as well, or could that be an opportunity to at least help?

Eric Gerstenberg (Co-CEO)

It could be, Tyler. At this point, we've actively participated in helping to provide assistance. There hasn't been anything that sizable at this point that we would speak of.

Eric Dugas (EVP and CFO)

Nothing material, Tyler.

Tyler Brown (Associate VP of Investments)

Okay. And then, Eric G, you mentioned this captive solution now that you've added 12% more capacity to the fleet. So I'm just curious, now that Kimball is online, are you getting any inbounds about possibly filling those burn slots with captive closures? Is there anything material to talk about there?

Eric Gerstenberg (Co-CEO)

Yeah, certainly, Tyler. We've talked about a number of times in the past. As you know, all those captive incinerators continue to be our customers, and we have some outstanding relationships there. And as things have evolved, we continue to work actively with some of those captives on helping to evaluate their next steps as things progress with Kimball coming online, but also as they really evaluate their cost structure and what could change in the regulations to affect their air emissions controls. All those types of things are in play in a challenging environment. And so, yeah, we work with them and continue to get closer with a few of them. That opportunity exists there.

Tyler Brown (Associate VP of Investments)

Okay. My last one, just real quick. That's helpful. On M&A, so there have been a number of deals in, let's call it, the specialty waste space, I think, by both financial and strategic buyers. It seems that multiples have maybe moved up. Just curious if you think you guys will get some M&A across the line this year. Are things a little rich? It sounds like the pipeline's good, but just any more color on that would be helpful. Thank you.

Mike Battles (Co-CEO)

Yeah, Tyler, this is Mike. We remain very active in the market. As you noted, there's a lot of deals out there. We've been very active in participation and looking at those deals, and we remain active. The pipeline is, as I said in my prepared remarks, as busy as ever, and we're trying to find the right deal that makes sense financially and strategically, and we're going to continue to be active in that marketplace. Prices have gone up, but we think there's real value there, and we'll be an active participant in 2025, no doubt.

Tyler Brown (Associate VP of Investments)

All right. Thank you, guys.

Eric Gerstenberg (Co-CEO)

Feel better. Thanks.

Operator (participant)

Our next question comes from a line of Noah Kaye with Oppenheimer. Please proceed with your question.

Noah Kaye (Managing Director and Senior Research Analyst)

Good morning, folks. Thanks for taking the questions. We'd just like to start by getting a sense of some of the moving parts for the 1Q guide. Specifically, I think what drives a bit softer ES segment growth versus the full-year average. I mean, some of the moving pieces I would think about would be you get a couple of months of rollover, HEPACO contribution. I don't think price was too strong in Q4 last year. Utilization wasn't too high. So is there anything kind of one-time or kind of a net headwind to ES to call out that we should be thinking about that maybe improves throughout the year?

Eric Dugas (EVP and CFO)

Hey, no, it's Eric. I'll take this one. Just in looking at kind of our guide for Q1, as I said in my remarks, kind of the ES segment still kind of guiding to about a 5.5% growth rate here in Q1. You're right. Some big pieces just in there. Another quarter of HEPACO with some synergies, so that'll be nice. But we are seeing, again, the team has done a great job getting some pricing in here as the calendar turns, particularly in the SK branch business. Our volumes remain strong, so we're still seeing those things and guiding that way into Q1. There was a little bit of slowdown, obviously, from weather and the California fires that Eric alluded to a moment ago, but still seeing core growth in those core lines of business.

I'd say on the IS side of things, maybe a little bit of headwind in Q1 here from a large project that we had in IS last year in Q1. So that's driving the, like I said, 5.5% growth rate in ES. SKSS, obviously, pricing headwinds are offsetting that to arrive at kind of a flat guide for Q1. As I project out for the rest of 2025, I think the biggest item there leading to kind of the midpoint of our ES guide at 7% is the introduction of Kimball. That'll begin to ramp up through the year. We are being a little modest there at full-year growth, probably $10 million-ish, maybe in that range for the year, but that's the big one. And then I'd say the other item that we could see an upside to the guide would be just the level of responses. 2024 was a great year in terms of ERs, particularly in FS, and if we can continue to see the high level of ERs there, that would be upside.

Noah Kaye (Managing Director and Senior Research Analyst)

Very helpful detail. Just on the subject of Kimball, I guess the ramp-up of a new facility introduces some unique elements to utilization and price mix. So maybe help us understand kind of how you're thinking about the fleet average and whether or not you're going to sort of break out Kimball separately from kind of typical metrics you report around utilization and price mix.

Eric Gerstenberg (Co-CEO)

Yeah, Kimball. Yeah, Noah, Eric G here, just running through some of that. On Kimball, we expect to incinerate over 28,000 incremental tons throughout the course of this year. And as we started out of the gates here in January, we began with some really rough weather, which impeded our ability to get the tonnage throughput that we expected in January. That being said, the team has done an awesome job of helping to get over some startup issues, and we're really having a great stretch of how we're performing and burning currently and expect to meet our goal of tonnage throughput here in the first quarter.

So that's great. Overall, for the course of the year, as we've mentioned in the past, we expect incremental $8 million-$12 million of EBITDA contribution through that incinerator, 28,000 tons. And so excited with how we're progressing right now through the quarter. Over the next few years, we'll continue to ramp up and contribute $25 million-$35million-$45 million of EBITDA over the next three to four years.

Eric Dugas (EVP and CFO)

Noah, just as a point, if you look at it from a quarterly standpoint in Kimball, this is not perfect, but let's say it's not much of a contribution in Q1, then it goes, if you say the midpoint's $10, it's $2 million in Q2, $3 million in Q3, and $5 million in Q4, and then ramp up the year as depending on, obviously, depending on weather and plant production. There's a lot of variables in that number, but that's kind of directionally.

As we thought about the guide for the year and the breakout by quarter for Kimball. Also, I want to just reiterate. I've said it many times, that Kimball is part of a network, and there's another incinerator right on site. So sometimes it's hard to break that out specifically as to the profitability of each individual plant, but that's kind of how we've done it from a guide standpoint.

Noah Kaye (Managing Director and Senior Research Analyst)

Very good. Thank you. Maybe just one last one, and I'll stick on incineration. I guess, what are you all hearing on the update to the MACT standards? Maybe frame for us a little bit potential timing, where you think the regulations might go, and to what extent could this be a tailwind or an opportunity?

Eric Gerstenberg (Co-CEO)

Yeah, Noah, Eric here again. Certainly, it continues to evolve. We know that the EPA is actively engaged in doing a review of performance of current incinerators, both captive and commercial. That review will continue on for a while. Obviously, there's some change of administration that affects some of the timing of that. But we know that that's long overdue, and we do expect that that will have an impact on, particularly maybe on the captive area of evaluating some of those incineration units. With new standards are going to come capital investment, and we know confidently that our units perform exceptionally well.

We also know that some of the captive units are old and tired and will need some sort of upgrade. For that, we think that pertains to opportunity for us in future years. I think it really is going to play itself out over the next three-to-five years. Implementation, whatever upgrades, captives or commercials we'll need to do, there'll be an implementation schedule that'll take over the next three-to-five years.

Eric Dugas (EVP and CFO)

And Noah, the only thing I'd add to that is that these MACT standards are air quality standards. And the current administration has repeated many times, clean air, clean water. And so this is, I think nothing changes, nothing slows here, I think, with the change in administration because clearly what we're talking about here is air quality standards.

Noah Kaye (Managing Director and Senior Research Analyst)

Great stuff. Thanks very much, guys.

Eric Gerstenberg (Co-CEO)

Thank you, Noah.

Mike Battles (Co-CEO)

Thanks, Noah.

Operator (participant)

Our next question comes from a line of Larry Solow with CJS Securities. Please proceed with your question.

Larry Solow (Partner)

Great. Good morning, everybody.

Eric Gerstenberg (Co-CEO)

Good morning.

Larry Solow (Partner)

Good morning. On the Environmental Services, I know you don't guide to margin. You spoke about margin to management averaging, looks like a little over 100 basis points for the last four years. Sounds like a bunch of moving parts in 2025, a little bit of a, I guess, a tailwind still from HEPACO, pricing maybe a little bit of a benefit, and then there's obviously the ramp of Kimball, maybe a little bit of a negative impact, so how should we think? Sort of what are you incorporating? Is that a little bit of a slowdown in margin expansion this year? You did mention overall margin expansion, so just trying to dissect by segment.

Eric Dugas (EVP and CFO)

Sure. Sure, Larry. Eric Dugas here. I'll take that one. And certainly, I mean, I think margin expansion in our Environmental Services segment has just been a highlight the last few years. I mean, 90 basis points delivered in 2024, more than 100 basis points in 2023. So it's been a great story. Kind of implicit in our guide for 2025, we do continue to have margin expansion, but at a slightly lower level given the midpoint of our guide. I think the puts and takes that you mentioned a moment ago, Larry, you're on to the right things. I do think we have a couple of headwinds built into the guide relative to our growing Field Services business and really just not being able to perhaps forecast some of the same level of large responses that we saw this year and perhaps a little degradation in margin there.

And then also, obviously, we're very excited about Kimball, but as that plant ramps up, it won't be as contributory to margins just because of the ramp-up. So those are a couple of headwinds. If you kind of adjust for those, you're in that high kind of 60-90 basis points of improvement in the rest of the business. So again, great story. We're going to continue to do all the things around pricing, getting leverage from the network, cost-cutting, all those things to continue to drive margins in ES.

Larry Solow (Partner)

Gotcha. And just on Kimball, you mentioned startup costs. You're taking it a little bit slower this time around. I remember to go back in El Dorado, I guess I think it was 2017. There were a little bit more hiccups than expected, but it feels like lessons learned. I think this is a similar blueprint, but any color there would be great.

Eric Dugas (EVP and CFO)

Yeah, sure, Larry. As I mentioned in my script, the unit that we just completed and are starting up in Kimball is really a replica of what we built in El Dorado with design improvements. So that is contributing to a smoother startup here of this unit than what we experienced in the El Dorado unit, and the team is really doing a solid job of getting the unit online. It's performing well, as I mentioned earlier, as we go through February here, so really excited about hitting our goals that we've laid out for that unit.

Larry Solow (Partner)

Great. And just last one, if I could just follow up on Noah's question just on the PFAS. So obviously, it sounds like a significant and growing multi-year opportunity, and I know you've spoken about bookings growing sequentially double-digit, I think quarter-over-quarter for the last several years. Do you build in significant actual growth in revenue this year, or are we still kind of in somewhat of a holding pattern until we get more guidance from the EPA and whatnot?

Eric Dugas (EVP and CFO)

Yeah, Larry, I would say that we did not build in a significant revenue growth associated with PFAS year-over-year. We do continue to see an active pipeline, a growing pipeline. Our pipeline has been increasing about 20% quarter-over-quarter. And we have really an active market there. In fact, we just had a nice opportunity of really the first state in the country securing an AFFF collection. So we're seeing activity across the board, and the prospects that we have are solid, but we did not really include anything very material in our guide.

Eric Gerstenberg (Co-CEO)

Normal growth rate in the model from what we've seen the past two years. And we've made investments, as Eric said, in that business with Total PFAS Solution as well as sales investment.

Larry Solow (Partner)

Got it. Thanks, buddy. Thanks, guys. I appreciate it.

Eric Gerstenberg (Co-CEO)

Thanks, Larry.

Operator (participant)

Our next question comes from a line of David Manthey with Baird. Please proceed with your question.

David Manthey (Senior Research Analyst)

Hey, hi guys. Good morning. First question is on SKSS. With the addition of Noble and the mothballing of Newark, California in 2024, what is the current nameplate base oil re-refining input and output capacity of your system today?

Eric Dugas (EVP and CFO)

260. I think the number is about what it was last year because we kind of subtracted that one.

David Manthey (Senior Research Analyst)

In the fourth quarter of 2023, what would be the comparable number there?

Eric Dugas (EVP and CFO)

It's been between the acquisition of Noble and the offset of Newark. It's really about very comparable, Dave.

David Manthey (Senior Research Analyst)

Okay. All right. And based on the guidance that you provided here by segment, first off, is $80 million? Does that seem in the ballpark for corporate items in the first quarter?

Yeah, probably lower than that, Dave.

Yeah. Okay. All right. But regardless, when we look at the segments here, there's a pretty significant jump in EBITDA to get from the first quarter to get to some sort of run rate that gets you to the full-year EBITDA guidance in SKSS specifically. And I'm wondering if you could talk through the factors that are impacting the first quarter that either go away or get better in some way from 1Q to 2Q that gets you up to that sort of run rate so you can hit that 140 for the year.

Eric Dugas (EVP and CFO)

Sure, Dave. It's Eric. I'll answer the question here. When you look at Q1, obviously, in our guide, it's implied down from Q1 last year. Pricing certainly down. That's how we see it in Q1. But the other thing too is we still have some of that higher cost inventory rolling through the numbers here in Q1. Mike emphasized in his comments the great job that the team has done changing to a higher charge for oil here. We'll begin seeing a lot of those benefits kind of late in the quarter and then on to Q2 and Q3 when hopefully pricing improves a little bit, still lower than last year. But certainly, the run rate in SKSS in Q2 and Q3 improved because of the better inventory costs.

Mike Battles (Co-CEO)

Yeah. We're going to see better CFO pricing, kind of summer driving season, and kind of some of that, as Eric said, some of the higher price gallons kind of out of the network as we roll out through Q1.

David Manthey (Senior Research Analyst)

Okay. Thanks, and then finally, ex-HEPACO, if we're looking just at organic growth in field and emergency response, what was the growth there? And then to round that out, other than the softness you saw in 2024, why is it you expect growth in industrial services in 2025?

Eric Gerstenberg (Co-CEO)

It was Dave. Eric here answering. And when you think about industrial services, we talked about in Q3 of last year that the refinery world, in particular, ratcheted down their spend. The refinery turnaround number still held in place, but the extent and size of their turnarounds was really constrained, and that affected us. What we're seeing so far this year is that our number of turnarounds that we already have booked for 2025 is up substantially.

Hard to quantify total spend on that, but the count is a significant change. So what we're seeing is that some of the things that most likely that were pushed from 2024 have to get done in 2025. So the team has a pretty bullish outlook on what we have in the book so far and how that business will be better and perform well. There is certainly some specialty things that go along with those turnarounds that we expect to have happen as well. So a good early look at how 2024 is going to enhance and help a better position for industrial services in 2025.

Eric Dugas (EVP and CFO)

And Dave, you asked about field services ex HEPACO. I think organically for the year, it's up high single digits, 7%, 8%. On a consolidated basis, organically, environmental services closer to 5%. So that was definitely a driver. That 7% or 8%, a lot of it was from the larger projects we talked about. And we had a great year in project work, fair amount of work that year, and we're forecasting that continuing to 2025.

David Manthey (Senior Research Analyst)

I appreciate it. Thanks, guys.

Eric Dugas (EVP and CFO)

All right, Dave.

Operator (participant)

Our next question comes from a line of Brian Butler with Stifel. Please proceed with your question.

Brian Butler (Analyst)

Hey, good morning. Thanks for taking the questions.

Eric Gerstenberg (Co-CEO)

Good morning, Brian.

Brian Butler (Analyst)

Just on the SKSS, when you think about the oil that you're collecting, how much are you over-collecting versus what the capacity is now? I think, I mean, you just told us where that is, but how much are you over-collecting and what's the safety margin on what you'd like to collect? Put it that way.

Mike Battles (Co-CEO)

Brian, this is Mike. I'll start in one of the Erics' trivia time if they want. We're not over-collecting. We went aggressively, as we talked about in the call, we went aggressively on CFO pricing, and we're losing some gallons to do that, and that led to the closure of the California re-refinery, so I think that's what's happening. We've kind of drawn a line we should preferably have been really very adamant about driving CFO pricing, and to some extent, we've lost some gallons, and that's okay, and so we are certainly beyond the over-collecting world. We're a little under-collecting, and we may have to continue to be aggressive in that area around plants.

Eric Gerstenberg (Co-CEO)

Yeah, Brian, just to build on that, one of the key things as we pushed so hard in the past, we were taking some gallons from some of our partners, I'll call it, into our refineries that were also collectors in the used motor oil market. Those are the first ones to go. As we raise our prices there, we're not taking those gallons nearly to the extent that we purchase from those competitors or collectors that are out in the market as well. So the direct customers are the ones that we're really managing collectively as a team to drive that right CFO rate.

Eric Dugas (EVP and CFO)

We're holding the line on those pricing. We have no intent to change that.

Brian Butler (Analyst)

Okay. Great. And then on the captive incinerator opportunity, can you maybe just refresh everybody on the size of that potential market and what's the reality of some of those converting in the next couple of years? Obviously, you're working with all of them, but again, let's just try to size that and understand how big because it's not built into your 2025, but is it part of your Vision 2027 as well?

Eric Gerstenberg (Co-CEO)

Brian, just. I'll give you a recap. It's really not part of our Vision 2027. It's all opportunity. To size it, today there is 41 active captive incinerators out there. All those captive incinerators continue to be our customers. We handle waste streams and support their shutdowns when they occur. About 20 of those have a probability that something may change with them, whether it's due to the changes in air regulations or them evaluating their utilization and their cost structure or all of the above, and the change in products that they might be making that affect the waste streams that go in, all of those types of things are in play, and it seems clear that there is an active opportunity with a few of them over the next three to five years. None of that is built into our thought process.

Just like we did with 3M, we went through strategic reviews with them as partners to help evaluate what is the best path, but we do see opportunities with them and to help them lower their cost structure, and we anticipate that continuing to be a trend, especially in light of that we have such redundancy in our incineration units to be able to handle anything that they need us to handle in our footprint, so good, strong opportunities there, we think.

Brian Butler (Analyst)

Great. Thanks for taking the questions.

Eric Gerstenberg (Co-CEO)

Sure.

Eric Dugas (EVP and CFO)

Thanks, Brian.

Operator (participant)

Our next question comes to the line of Jerry Revich with Goldman Sachs. Please proceed with your question.

Hi, this is Adam on for Jerry today. Good morning. Over the last five years, you folks have had a really strong focus on pricing for appropriate returns in industrial and field services. Can you just update us on how customer retention metrics are tracking in those businesses? Have you seen any change over the last 12 months?

Eric Gerstenberg (Co-CEO)

Adam, yeah. Eric here to begin. I'm sure my partners will add in. As you mentioned, we've continued to price aggressively in the market with our field services and industrial to make sure that the returns that we're getting in those businesses are commensurate with the hazards associated with those services, and we've seen strong, solid results with the teams implementing that. We've obviously stayed ahead of inflation as well. When we look at the overall market basket of customers, I could count on one hand the number of those customers that we've decided proactively to walk away from that weren't willing to accept what we were doing and to work with us, and so small, small attrition of customers overall.

Mike Battles (Co-CEO)

No real change in customer churn based on price increases. That's the punchline. No real change.

Understood. And then in SKSS, understand that the CFO will take some time to flow through the financials, but are you fully caught up on your base oil market pricing? Are there any other front-end actions that can be taken, or are we fully caught up at this point?

Eric Dugas (EVP and CFO)

Yeah, Adam, this is Mike. I'll answer the question. Base oil pricing has come down through the year-end and even here early in January. We're a price taker in that marketplace, and it's really hard for us to predict kind of what's going to happen to base oil pricing. Now, as we think about our guidance, we don't assume that pricing comes back. We assume it stays kind of relatively flat.

A little uptick in summer driving season, a little downtick in the back half of the year, but really, we're assuming kind of where we are today is the best we can do, and if you're kind of referring to our pricing relative to used motor oil collection and if we're caught up there, that is something that we'll be dynamic and flexible on based upon the base oil pricing that Mike just alluded to. So if we continue to see deterioration in base oil, we'll counteract that through our used motor oil collection pricing. So that's the other variable there.

Great. Thanks so much.

Operator (participant)

As a reminder, if you would like to ask a question, press star one on your telephone keypad. Our next question comes from the line of Tobey Sommer with Truist. Please proceed with your question.

Good morning. This is Tyler Barys on for Tobey. Could you explain the impact of the Trump administration's tariff policy on your business? This is both potential incremental risk to refining margins or environmental services demand.

Eric Gerstenberg (Co-CEO)

Tyler, Eric Gerstenberg responding on that one. We do not think that there is going to be any material effect on regulations that really are the foundation of the business. They go back such a long time, and there isn't any anticipation that we would see or even think about rollbacks and regulations that would affect our business. In fact, as the Trump administration has changed, new EPA leader, he's been talking about how he wants to help solve air issues and grow by onshoring and helping with permits on manufacturing and really supporting the business and hopefully taking care of getting more regulations in place around PFAS. We don't see any step backward on any of the regulatory environment parameters that affect our business.

Got it. And maybe just a little more broadly, could you just talk about demand trends by customer vertical, whether it's refineries or global chemical companies?

Sure, Tyler. We still see very strong demand across the board. The refinery business, what's going on there, as we've mentioned in the past, has affected the later half of 2024 with turnarounds. As we mentioned earlier in the call here, we are seeing a stronger count of number of turnarounds that we expect with that refinery business, but that continues to be in flux a little. The rest of the markets that we're servicing, particularly around chemical, retail, manufacturing, we still see strong growth. Our collection volumes of containerized waste as we begin 2025 are ahead of single digits, ahead of last year.

So that's positive. Team's doing a great job of making sure that we're staying tight with our customers, servicing them well, making sure we're staying in contact with them. And we see that in the early stages here at drum collections. As Eric alluded to earlier, there are some normal effects in Q1 weather that affect certain areas, but overall, the verticals that we're servicing, and it's obviously a broad range of verticals, we're seeing some solid trends still.

Thank you.

Operator (participant)

Our next question comes from a line of Jim Ricchiuti with Needham. Please proceed with your question.

Hi, good morning. This is Chris Grenga on for Jim. You'd mentioned that you'd signed the first fleet customer for the oil at the end of the year. Is there a collection arrangement in conjunction with that? And could you talk a little bit about the funnel for similar types of fleet opportunities as you enter the new year? Thanks.

Mike Battles (Co-CEO)

Yeah, Chris, this is Mike. I'll answer that. So yeah, that's exactly what happens. So as far as the more circular offering, we collect used motor oil at CFO customer sites and sell them base oil at a little bit of a premium versus the market rate because it's a low-carbon footprint offering. And so that is how the more circular offering works. The commercial team has put a fair amount of sales and marketing effort behind it, and they've been investing a lot in different avenues to try to grow that. And we do think that there's plenty of opportunity to see a lot of lines in the water. The pipeline is very strong and the progress that they're making to sell the more circular offering. As I said in my prepared remarks, they did sign up one very large customer.

I think they have another one very close to being complete, and there's more in the pipeline. So stay tuned. We work very actively with them as far as we go to market together and sell our services and sell our great base oil. And so I think that they've been a good partnership so far. And as you know, Chris, the lead time on large fleet change is long. And so that's part of the challenge here. But I think the progress has been terrific.

Got it. Thank you. And you'd mentioned the expansion of Phoenix related to the semiconductor vertical. I'm just curious, are you evaluating other potential geographic nodes where there are semiconductor fabs underway?

Eric Gerstenberg (Co-CEO)

Yes, we certainly are, Chris. The expansion with our customer base out in the Phoenix area has been really strong so far. We fully anticipate that's going to continue. And then a couple of other select geographies, we have strong opportunities as well, growing relationships with customers there. So it's been an area that we see growth.

Great. Thank you very much.

Thank you.

Operator (participant)

Thank you. Mr. Gerstenberg, we have no further questions at this time. I'd like to turn the floor back over to you for closing comments.

Eric Gerstenberg (Co-CEO)

Thank you, Christine. I want to thank the Clean Harbors team for their great work in 2024. At 25,000 strong, their focus on safety, sustainability, and exceeding customer expectations led to another year of great results and positions us well for continued growth. We hope to see you all at our investor conferences in the coming weeks. Have a good rest of your week, and most of all, please stay safe.

Operator (participant)

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.