CLH Q2 2025: SKSS Charge-for-Oil Boosts $140M EBITDA Outlook
- Robust Pipeline & Diversification: The team highlighted a very strong, year-over-year increasing sales pipeline across multiple segments (field services, industrial services, and emergency response) that is driving high volumes into processing plants, incinerators, and waste facilities, suggesting resilience even in a challenging macro environment [Speaker 2, Q&A].
- Improving SKSS Profitability: The transition to a charge-for-oil model has led to sequential improvements in margins and a positive EBITDA outlook in SKSS, despite a lower volume mix, with guidance for full-year SKSS EBITDA of $140 million supported by a shift from lower-cost inventory [Speaker 2 & Speaker 3, Q&A].
- Incremental Tax Benefits & Disciplined Capital Deployment: The recent tax law changes are expected to yield $10–15 million in incremental cash tax savings in 2025, complementing disciplined capital allocation, including M&A opportunities and organic investments, which strengthens the company’s long-term growth prospects [Speaker 4, Q&A].
- Compressed Turnaround Margins: Although turnaround volume is up 15% year over year, the average revenue per turnaround has declined by about 10–15%, which could pressure overall margins if lower-spend turnarounds persist.
- Reliance on FIFO Pricing Adjustments in SKSS: The SKSS segment’s guidance is supported by having sold through higher-cost inventory under FIFO assumptions. If future inventory is priced lower, margins may suffer despite current optimism.
- Execution Risks in New Asset Integration: New investments, such as the Kimball ramp-up and incinerator start-up, are currently dragging margins due to full cost allocations without full capacity. Delays or underperformance in these initiatives could negatively impact profitability.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Full Year Adjusted EBITDA | FY 2025 | $1.15B to $1.21B, midpoint $1.18B | $1,160,000,000 to $1,200,000,000, midpoint $1,180,000,000 | no change |
Environmental Services | FY 2025 | 5% to 8% | 6% to 8% | raised |
SKSS Segment | FY 2025 | $140,000,000 | $140,000,000 | no change |
Adjusted Free Cash Flow | FY 2025 | $430M to $490M, midpoint $460M | $430,000,000 to $490,000,000, midpoint $460,000,000 | no change |
SG&A Expense | FY 2025 | mid-12% range | low to mid 12% range | no change |
Depreciation & Amortization | FY 2025 | $440M to $450M | $440,000,000 to $450,000,000 | no change |
Net CapEx | FY 2025 | $345M to $375M | $345,000,000 to $375,000,000 | no change |
Net Debt to EBITDA Ratio | Q2 2025 | no prior guidance | Approximately 2x | no prior guidance |
Interest Rate | Q2 2025 | no prior guidance | 5.3% | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Robust Sales Pipeline & Diversification | Previously discussed in Q1 2025, Q4 2024 and Q3 2024 with emphasis on healthy project pipelines, PFAS opportunities and diversification across segments | Q2 2025 highlights an all‐time high pipeline across disposal and recycling assets with strong demand in all regions and continued diversification | Consistent and positive. The narrative has remained bullish with expanded diversification and even stronger pipeline metrics in Q2 2025. |
Environmental Services & PFAS Growth | Earlier periods (Q1 2025, Q4 2024, Q3 2024) emphasized steady revenue growth, margin improvements and active PFAS project pipelines alongside regulatory developments | Q2 2025 details robust ES revenue and margin growth, supported by a 13‐quarter EBITDA trend and detailed PFAS study results with growing project pipeline | Steady and reinforcing growth. The focus remains on ES and PFAS with evolving regulatory momentum, further solidifying the long‑term growth outlook. |
Incinerator Ramp-Up & Capacity Expansion | Q1 2025, Q4 2024 and Q3 2024 discussed the ramp-up of the Kimball facility, increased tonnage targets and positive early performance despite start‑up issues | Q2 2025 highlights successful scale‑up of the Kimball facility, progress on PFAS incineration study and incremental margin improvements as production increases | Positive progress. There is a clear trend toward more effective ramp‑up and capacity expansion, even while managing margin pressures during early operations. |
SKSS Profitability, Margin Dynamics & Pricing Strategies | In previous periods (Q3 2024, Q4 2024 and Q1 2025) the segment struggled with soft demand, inventory issues and pricing pressure prompting the shift to a CFO model, though improvements were noted as integration progressed | Q2 2025 shows better-than-expected SKSS performance with improved margins, successful implementation of the CFO pricing strategy and positive EBITDA performance | Recovering and stabilizing. Earlier challenges have been mitigated with aggressive pricing adjustments, leading to a more favorable margin dynamic in the current period. |
Capital Allocation, M&A Opportunities & Tax Benefits | Prior calls (Q3 2024, Q4 2024 and Q1 2025) described strong cash balances, selective M&A activity, active share buybacks and, in some periods, tax benefit discussions | Q2 2025 emphasizes a disciplined capital approach with strong cash flow, low leverage, and mentions of tax savings alongside selective acquisition strategies | Consistent strength. The company continues to allocate capital prudently, while recent periods highlight additional tax benefits and a sustained robust M&A pipeline. |
Industrial Services Demand & Turnaround Margin Pressure | Earlier periods (Q3 2024, Q4 2024 and Q1 2025) noted challenges with deferred maintenance, lower average turnaround spend and margin pressure in Industrial Services, though a record number of turnarounds were anticipated for 2025 | Q2 2025 indicates a moderate increase in turnaround activity with lower average spend creating some margin pressure, while management remains cautiously optimistic about improvement in H2 | Cautiously optimistic. Despite ongoing margin pressures from reduced turnaround spend, the overall tone remains hopeful for recovery in the later half of the year. |
Commodity Pricing Risks & Inventory Valuation Concerns | In Q3 2024 and Q4 2024 there were concerns over depressed base oil prices, significant inventory buildup and soft market pricing, while Q1 2025 saw discussion of CFO strategy improving inventory costs | Q2 2025 focuses on sequential improvements as lower cost inventory is sold through and the CFO strategy provides comfort to expand profitability | Improving outlook. The shift to CFO pricing and active inventory management has reduced earlier pricing risks and high-cost inventory issues, indicating a strengthening trend in commodity economics. |
Execution Risks in New Asset Integration | Q3 2024 explicitly mentioned billing integration delays with HEPACO and earlier periods (Q1 2025 and Q4 2024) noted challenges and positive progress in integrating new assets like Kimball | Q2 2025 does not explicitly mention integration risks, implying smoother execution and improved integration processes | Mitigated and streamlined. Initial execution challenges appear to be behind the company as integration risks have diminished in the current period. |
Regulatory & Capital Expenditure Risks | Q3 2024 discussions touched indirectly on PFAS regulatory frameworks and capital expenditures via Kimball and other projects; Q4 2024 and Q1 2025 elaborated on impending regulatory changes (MACT, PFAS) and significant CAPEX commitments | Q2 2025 underlines PFAS regulatory risks with awaiting EPA announcements along with detailed capital expenditure commitments for facilities like Kimball and Phoenix | Carefully managed. Regulatory and CAPEX risks remain key but are being actively managed; emphasis on PFAS regulation and disciplined CAPEX indicates an adaptive response to evolving requirements. |
Weather Sensitivity Impact | Q1 2025 and Q4 2024 reported significant weather-related disruptions with EBITDA impacts and operational challenges, whereas Q3 2024 did not mention weather issues | Q2 2025 does not mention weather sensitivity impacts, suggesting either seasonal improvement or reduced impact on operations [N/A] | Less prominent. Weather-related challenges were significant in earlier periods but are not highlighted in Q2 2025, indicating an easing of adverse weather impacts or better operational mitigation. |
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Macro Outlook
Q: How is overall market demand evolving?
A: Management noted that network volumes and the sales pipeline are at an all‐time high—with broad end market coverage and new branch openings supporting strong demand and share gains. -
Refinery Turnarounds
Q: Are refinery turnarounds key for guidance?
A: They clarified that their guidance isn’t dependent on a massive ramp in refinery turnarounds; despite a 15% increase in turnaround count, lower average spend keeps the focus on efficient, base industrial services. -
Bonus Depreciation
Q: What bonus depreciation benefits are expected?
A: The team expects roughly $10–15 million in incremental cash tax savings this year, bolstering available capital without changing their disciplined investment approach. -
SKSS Guidance
Q: What drives improved SKSS Q3 performance?
A: They explained that clearing higher-cost inventory under FIFO—shifting to a charge-for-oil model—sets the stage for a stronger Q3, aiming for a $140 million annual target. -
Tariff & Remediation
Q: Is tariff uncertainty affecting remediation projects?
A: Management noted that tariff issues have not stalled their remediation efforts; project spending remains clear and the pipeline continues growing. -
Kimball Scale-Up
Q: How is Kimball scaling EBITDA?
A: They are on track to process 28,000 tons through the unit this year, which should add roughly $10 million in EBITDA as production ramps up to full capacity. -
ES Margin Outlook
Q: What is the ES margin trend forecast?
A: With pricing gains, improved labor efficiencies, and easier comps in upcoming quarters, management is confident that Environmental Services margins will continue expanding toward a 30% EBITDA target. -
FIFO Impact
Q: Will FIFO adjustments boost SKSS profitability?
A: By selling off higher cost inventory under FIFO, the business expects a clearer, more profitable outlook for Q3 and Q4, lifting SKSS margins. -
Hub Strategy
Q: What benefits does the hub concept offer?
A: Consolidated hubs improve cross-selling, share assets and logistics, and reduce real estate costs—offering significant efficiency and cost leverage. -
M&A & Organic Growth
Q: How are acquisitions and organic investments prioritized?
A: They employ a disciplined approach, using a strong balance sheet for targeted acquisitions and internal projects—like Phoenix and Baltimore hubs—to boost ROIC and fuel long-term growth.
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