US Ecology, Inc.

And ladies and gentlemen, please stand by. Good day and welcome to the first quarter 2020 U.S. Ecology, Inc. Earnings Conference Call. Today's conference is being recorded. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star, then 2. I would now like to turn the conference over to Eric Jarrett. Please go ahead, sir.

Good morning, and thank you for joining us today. Joining me on the call this morning is Chairman and Chief Executive Officer Jeff Beeler. Before we begin, please note that certain statements contained in this conference call that do not describe historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Since forward-looking statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. Factors that could cause results to differ materially from those expressed include but are not limited to those disclosed in the company's filings with the Securities and Exchange Commission. These risks and uncertainties also include but are not limited to statements regarding the continued impact of the COVID-19 pandemic on our business, the microeconomic impact of specific end markets in which we operate, and our expectation for results for 2020. Management cannot control or predict many factors that determine future results. Listeners should not place undue reliance on forward-looking statements, which reflect management's views only on the date such statements are made. We undertake no obligation to revise or update any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events, or otherwise. For those joining by webcast, you can follow along with today's presentation. For those listening by phone, you can access today's presentation on our website at www.usecology.com. Throughout yesterday's earnings release and our call and presentation today, we refer to adjusted EBITDA, adjusted earnings for diluted share, cash earnings for diluted share, and adjusted free cash flow. These metrics are not determined in accordance with generally accepted accounting principles and are therefore susceptible to varying calculations. A definition, calculation, and reconciliation to the financial statements of adjusted earnings per diluted share, cash earnings per diluted share, adjusted EBITDA, and adjusted free cash flow can be found on slides 22 through 28 of today's presentation. We believe these non-GAAP metrics are useful in evaluating our reported results. We would also like to point out that our first quarter results include contribution from the NRC Group Holdings Acquisition that closed on November 1, 2019. Throughout this presentation, we often refer to NRC group holdings as NRC. We have also provided data on standalone U.S. ecology, which is referred to as legacy U.S. ecology. Similarly, for standalone NRC data, we refer to that group as legacy NRC. This disaggregation is an attempt to provide increased transparency and understanding of the underlying business. With that, I'd like to turn the call over to Jeff.

Thank you, Eric, and good morning, everyone. I hope you and your families are staying safe during these difficult times. Before I have Eric review the first quarter results, I'd like to address the coronavirus pandemic and how U.S. Ecology is responding to it. For those that are following the webcast presentation, please direct your attention to slide five. We are in unprecedented times with the COVID-19 pandemic affecting all humanity, and U.S. Ecology is no exception. Our hearts go out to all those impacted. You are in our thoughts and prayers. I want to offer a special thank you to all essential service providers that are keeping us safe in this time of need, and this includes U.S. Ecology's 3,500 team members that have not missed a beat despite the rapidly changing, unparalleled, and stressful conditions. In these unprecedented times, focusing on our core foundation and upholding our values has never been more important. In fact, our mission has always been to provide safe and compliant solutions to protect human health and the environment, which is exactly what is needed today. Moving on to slide six, safety is our number one priority and is a core part of our DNA at U.S. Ecology. This applies to our team members, our customers, and the communities in which we live and operate. At the start of this crisis, we immediately mobilized a COVID-19 crisis management task force to swiftly take action to address matters of importance. Throughout this process, we deployed safety protocols throughout our organization based off our extensive experience with Ebola, SARS, and H1N1. We mobilized 30% of our workforce to work from home and extended special COVID-19 time off benefits to our team members. We have been in constant communication throughout the organization, providing critical information to our team members that could use that personally and professionally to protect themselves and others. We mobilized and secured valued PPE using our established sourcing networks and expanded our sourcing message during this crisis to ensure our teams and customers were properly protected at all times. With our services deemed essential by Homeland Security, we implemented our business continuity plans to ensure we remained operational while we deployed field teams to perform decontamination cleaning projects where needed. All of this was done while running the day-to-day business. As you can see our results on slide seven, operationally we saw little impact from COVID-19 during our first quarter, other than our energy services business. Total company revenue grew to $240.7 million. Adjusted EBITDA was $43.2 million, and we saw a 32% growth in our adjusted free cash flow to $15.9 million. Looking at slide eight, our legacy U.S. ecology business had an outstanding quarter. Our environmental services segment grew 19%, with base business growth of 5% and event business growth of 102%. Our field and industrial services business was up 14%, driven by solid execution of our strategy to grow our small quantity generation business, led by our success of our retail program and the implementation of our national lab prep program. Factoring in margin expansion in both segments, adjusted EBITDA grew 31% over Q1 2019 to $31 million. As shown on slide 9, NRC contributed $86.6 million in revenue during the first quarter. Domestic environmental services performed well in most markets and experienced an uptick in COVID-19 decontamination services in March. Our standby retainer-based business was not impacted by the COVID-19 pandemic during the first quarter and saw its solid performance beating our own expectations. Weakness in the upstream energy services worsened during the quarter with the direct impact of the COVID-19 pandemic compounded by the production war that drove oil prices to historic lows. These truly black swan events resulted in us taking a $300 million non-cash goodwill impairment charge. Despite this charge, we have a strong belief in the value of the underlying assets, markets we serve, and believe the growth opportunities will be there just over a longer time horizon. Overall, NRC delivered $12.2 million of adjusted EBITDA during the quarter. Despite these strong results, the evolving health crisis and its impact on the global economy is creating uncertainty in many of our markets and will negatively impact our second quarter. As a result, at the end of March, we announced proactive and prudent measures to adjust our operating plan to reduce cost and capital spending in order to safeguard the financial strength of the company as outlined on slide 10. Our capital preservation initiatives included a reduction of approximately 30% to our planned 2020 capital expenditures expected to save up to $30 million of cash. Additionally, the suspension of our quarterly cash dividend will preserve approximately $18 million for the balance of the year. Cost controls, including the deferment of non-critical activities, elimination of discretionary spending, reductions in travel, hiring, and variable compensation, will save an additional $15 to $20 million. Furthermore, we are taking advantage of the deferral of withholding taxes expected to generate approximately $8 million of additional cash savings in 2020. And we drew $60 million off our line of credit, adding additional cash to the balance sheet while leaving $76 million of additional capacity. These actions are anticipated to generate more than $70 million of cash savings, providing its flexibility to preserve our talented workforce and by limiting furloughs and staff reductions while positioning us to take advantage of those opportunities when the market rebounds. These actions also supplement our strong operational cash flow generation, providing further financial flexibility as we navigate these unprecedented times. As covered on slide 11, due to the uncertainty surrounding the magnitude and duration of the COVID-19 pandemic, in late March we did withdraw guidance for the full year 2020. Looking further into 2020, we expect that our environmental services business will weather the current market conditions due to the collection of irreplaceable, permitted facilities and resilient business model. Further, many of the field service offerings are seeing continued growth and opportunities during this time. Execution on our retail program and strengthen our emergency response business that has benefited from increased COVID-19 decontamination work should help offset some of the industrial softness. Our energy waste disposal services business, which is operating in extremely challenging conditions, will be negatively impacted for the balance of 2020. We are hopeful that when states begin to reopen, our customers will restart their businesses. We are already seeing positive signs of increased activities, especially in those markets where either reopening has commenced or is planned to in the near term. We also expect that there will be a gradual phased-in approach starting in May, leading to strengthening overall industrial activity towards the end of the second quarter through the second half of the year. As a result, we believe at this time that the second quarter will be the low point of the year. Looking at the most recent data, we started seeing a reduction in waste volumes into our network starting at the end of March and accelerating into April. Our April base business volumes were down both sequentially from March and year over year by approximately 15% to 20%, which is in line with what we had expected. Our event business was up sequentially 6% from March 2020 however down slightly when compared to April 2019. We expect our base business to recover at the pace at which states and businesses reopen and expect our customers to reopen earlier than other services industries. So far we have seen little deferment in our event business with only a handful of projects that have been pushed from April and May into the summer where we already have a healthy pipeline. As for the pipeline, it is healthy, and even in this shutdown, we have seen bidding activity emerge. I would expect as of right now, most of the event business impact will be a shift into our third and fourth quarters. Overall, we believe with the actions we have taken, the company will be positioned to continue to generate positive year-over-year free cash flow, even at significantly lower than expected adjusted EBITDA levels. As to guidance, while we do not have enough clarity to refresh guidance, we expect to reestablish our 2020 guidance at the time of our second quarter earnings release. In summary, the flexibility of our business model, continued free cash flow generation, strong financial liquidity provided by cash on hand and available capacity on the company's lines of credit. and a committed workforce will enable us to navigate these challenging times and position the company to quickly capitalize on those opportunities for growth as business conditions begin to recover. With that, I'll turn it to Eric. Thank you, Jeff.