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spk09: Good morning and welcome to the US Ecology First Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Eric Jarrett, Chief Financial Officer. Please go ahead.
spk06: Good morning and thank you for joining us today. Joining me on the call this morning are Chairman, President and Chief Executive Officer Jeff Feeler, Executive Vice President and Chief Operating Officer Simon Bell, and Executive Vice President of Sales and Marketing, Steve Welling. 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 discussed 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 ongoing COVID-19 pandemic, the macroeconomic impact of specific end markets in which we operate, and our expectations for financial results for 2021. 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-in presentation today, we refer to adjusted EBITDA, adjusted earnings per diluted share, cash earnings per diluted share, and adjusted free cash flow. These metrics are not determined in accordance with generally accepted accounting principles and therefore are 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 in Exhibit A of our earnings release. We believe these non-gap metrics are useful in evaluating our reported results. With that, I'd like to turn the call over to Jeff.
spk08: Thank you, Eric, and good morning to everyone joining the call today. Before I dive into some prepared remarks on the quarter, I'd like to personally thank all of my colleagues within U.S. Ecology for their dedication to health, safety, and operational excellence, despite the disruptions from the ongoing global pandemic, weather events, and other constraints. For those that are following our webcast presentation, please direct your attention to slide five. The positive momentum we saw in our business in the second half of 2020 has continued into the first quarter of 2021. with improving trends and overall business conditions across a substantial portion of our business. Overall, our first quarter results were slightly ahead of our expectations. These solid results were achieved on the efforts of our broad-based team that navigated the continued pandemic challenges and new challenges such as the extreme weather events impacting our Texas-based operations and customers and supply chain disruptions that are proving to be headwinds for many of our industrial-based customers, delaying them from returning to pre-COVID levels. Total company revenue was $228.6 million for the first quarter of 2021 and was down just 5% year over year when compared to a strong pre-pandemic first quarter last year. Our field services segment was a bright spot with organic revenue growth of 4%. Our emergency response business was strong on the backs of continued COVID-19 decontamination work. We completed just under 2,700 projects and generated approximately $12.5 million of revenue during the quarter. This was a 13% sequential improvement over the fourth quarter last year and was the strongest quarter since the pandemic began. In our waste solutions segment, base business revenue, while down just 3% year over year, is beginning to benefit from the improved economic conditions. Looking sequentially at our base business, it was down 1% compared to the fourth quarter of 2020, much less than the sequential decline of 5% we experienced in the same period last year. Dissecting our base business by month, March 2021 was the strongest month of the quarter, recording both sequential and year-over-year growth. We anticipate base business will build on the results in March and record year-over-year growth in the second quarter, putting us on track to achieve our 5% to 7% growth target for the full year of 2021. Event business revenue was down 9% in the first quarter compared to the prior year and was up 2% sequentially from the fourth quarter of 2020. We continue to see positive developments in our pipeline with increased bidding activities with market reopenings and expectations for more normalized business conditions as we approach the summer construction season. Our energy waste business has now reported its third quarter of sequential EBITDA improvement with increased treatment and disposal volumes on improved rig count and related business activity. This allowed us to return to a positive EBITDA contribution during the quarter, generating approximately $1.3 million of EBITDA. Though revenues were down 64% in the first quarter compared to last year, they were up 29% from the fourth quarter of 2020. And we are encouraged by the trends we are seeing. While we are nowhere near pre-pandemic levels, the positive developments are our welcome sight and are better than we had expected to see last year. Overall, we reported total company adjusted EBITDA of $33.2 million, down 23% from the prior year, which was ahead of our internal plan. We continue to generate strong free cash flow of $13.7 million during the quarter. Before I turn the call over to Eric, I want to provide an update on some of our latest sustainability initiatives, which we are working on in 2021. On the governance front, in February, we had announced the appointment of Mack Hogan to our board. Mack brings extensive experience in leadership, strategy, M&A, governance, and ESG programs. This addition, along with others made in 2020, demonstrate our ongoing focus on board refreshment and our commitment to board diversity. not only with regard to gender and race, but also experience and expertise as well. These ongoing steps we are taking to improve diversity both within our board and our employee base have strengthened us as a company. On the environmental front, we have substantially completed gathering our vehicle fleet and emissions data and its impact on greenhouse gas emissions. Our vehicle fleet represents the most significant impact to the environment given that our landfills have minimal greenhouse gas emissions, particularly when compared to solid waste landfills of our peers. With our baseline data in hand, we are working with our capital planning group and advisors to develop emission reduction targets below our baseline levels despite expanding our fleet to support our growing field services business. We are also advancing sustainable waste solution services we offer to our customers, including investing in beneficial reuse technologies like aerosol recycling, container recycling, and distillation recovery systems, which we believe are responsive to demands in the marketplace and are not only good for the environment but also good for business. Finally, on the social front, We know that it's essential in a sophisticated and competitive market sector like ours to have leading human capital practices. The starting point for us, therefore, is to look as widely, inclusively, and creatively as possible to identify, attract, and retain, promote, and protect our top talents. Anything we do that needlessly limits our talent pool or diminishes the effectiveness of our team members and their career prospects can adversely affect our employment value proposition as well as our overall culture. This means that our diversity, equity, and inclusion are a core to our value creation and sustainability efforts, and this is evident in the strength of our programs. To give a couple examples, we offer a wide variety of industry-leading programs to meet our employees' individual needs wherever possible. We have created regular and robust feedback loops so that we can gain insights from all of our people, including our freshest eyes. And we continue to evolve our training, mentoring, promotion, and retention programs to increase diversity, respect, and inclusive ways of working throughout our company. We are proud of the special culture we have created that is built on inclusion, respect, protecting the environment, and continuous improvement in everything we do. With that, I'll turn it over to Eric.
spk06: Thank you, Jeff. Starting with consolidated results on slide 8, revenue for the first quarter of 2021 was $228.6 million. Revenue for the waste solution segment was $104.1 million for the first quarter of 2021, down 5% compared to $109.4 million in the first quarter of 2020. The decrease was due to a 17% decline in transportation revenue and a 3% decrease in treatment and disposal revenue. The decline in our treatment and disposal revenue was driven by a 3% decline in base business and a 9% decrease in event business in the first quarter of 2021 compared to the first quarter last year. The field services segment delivered revenue of $118.2 million in the first quarter, up 4% compared to $114 million in the first quarter of 2020. This increase was driven by increases in our emergency response, small quantity generation, and total waste management service lines. Total gross margin contracted approximately 280 basis points to 23% in the first quarter of 2021 compared to the same period last year. This was primarily a result of lower waste volumes in both our waste solutions and our energy waste segments. Selling general and administrative spending, or SG&A, was $51.4 million in the first quarter of 2021 and included $1.2 million of business development and integration expenses. This compared to $52.4 million in the first quarter of 2020, which included $2.9 million in business development and integration expenses. Adjusted loss per diluted share was $0.07 in the first quarter of 2021 compared to adjusted earnings per diluted share of $0.12 in the same quarter last year. Adding back the impact of intangible asset amortization, cash earnings per diluted share was $0.14 in the first quarter of 2021 compared to $0.33 per share in the first quarter of 2020. Adjusted EBITDA was $33.2 million in the first quarter, down 23% from the first quarter of 2020. Turning to slide nine, we exited the quarter with a solid balance sheet and strong liquidity. Despite the lower operating results compared to the prior year, we were able to generate strong adjusted free cash flow of $13.7 million in the first quarter of 2021. We had cash of $82.4 million and over $140 million of available capacity on our revolving line of credit at the end of the first quarter. Net borrowings were $702.9 million at March 31st, 2021, which was an improvement over our net borrowings at December 31st, 2020. Our bank covenant leverage ratio was 4.5 times at March 31st, 2021, well under the 5.5 times covenant level for the quarter. We expect the first quarter of 2021 to be the high point in terms of leverage and that we will be below four times at the end of 2021. With that, I'll turn the call back to Jeff.
spk08: Thank you, Eric. We are encouraged by the positive trends we are seeing. with quarter over quarter improvement across most, if not all, our business lines. With this and the improving industrial trends combined with our ongoing success in our NRC integration activities, we have reaffirmed our 2021 business outlook. This includes a forecast of growth for revenue, adjusted EBITDA, and adjusted earnings per diluted share in 2021. Diving into our integration activities in more detail, We continue to make terrific progress and we are seeing our revenue synergies really gain momentum here in the second year. We continue to see a path to meet our three-year target of $20 million of EBITDA synergies by the end of 2021, one year ahead of our original target. Slide 10 has a detailed breakdown of our 2021 guidance that was released in February of this year and that we are reaffirming today. I am so proud of the entire US Ecology team and their ability to step up, innovate, and drive value during these times. As the industrial economies recover, we have the right assets and services in the right places to capitalize and thrive. We continue to be a trusted partner to our customers, and together we are building a sustainable future for all. And with that, we'll open up the call for questions.
spk09: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Michael Hoffman with Stifel. Please go ahead.
spk10: Hi, Jeff, Eric. Thanks for taking my questions. Hope you're having a good Friday. I appreciate that you opened the year a little bit ahead of plan. You're reaffirming the guidance, and I don't think companies are supposed to be trying to chase their guidance up prematurely. How would you reflect on the trend inside the guidance, though? Does this have more momentum to the upside than not, given what you're seeing?
spk08: Yeah, Michael, it's a good question. I mean, we're one quarter into it, another month behind us after today with April on here. And what I would say is, you know, the year is looking, you know, the way we intended it to look, maybe it's a little bit better. I mean, there's a lot of green shoots that are out there. And, you know, our first quarter results, you know, they were strong results given the fact pattern, but, you know, you also put into context some of the continued start and stop activities that we've seen with the ongoing pandemic, but we also had some major weather events that disrupted everything. So all in, you know, I'm really proud of what we delivered in the first quarter. And I think it does set us up for a strong, you know, 2021. You know, but there's still nine months to go. And, you know, we're going to continue to execute our strategy and our plan. And we have conviction in our guidance range that we released just, you know, back in February and reaffirmed yesterday.
spk10: And when we think about cadence, is there anything particular about what happened as exited 1Q and what you know since April's essentially done? about how to think about the cadence? Is this sort of, you know, originally when we all had these conversations in February, it was kind of a steady, almost ratable march through the year. Does it pick up a little bit of speed in 2Q, or does it still stay pretty ratable as far as the top line?
spk08: Yeah, you know, thinking about the cadence of the top line, you know, normal seasonality will play in and will drive it. So, yeah, we're expecting Q2 to be sequentially better than Q1 and Q3, you know, sequentially better than Q2. And they're talking about cadence from March to April. I would say we're seeing similar patterns. And we, you know, when you get into... you know, the first quarter and look at it by month. March was the strongest month that we had. So all of that is pointing the right direction. There's nothing that's given us a lot of pause there, in there. And, you know, I would say that we're on track to, you know, deliver that range and, you know, execute on our plan.
spk10: Okay. And then you mentioned, and it's not the first time I've heard this, that some of the supply disruptions are slowing the recovery of some of the customer base that doesn't look like that's going to get any relief in this calendar year. And is that all accounted for in the guidance as well, that you weren't looking for a big lift on reopening per se, more of an overall improvement in the industrial economy broadly?
spk08: Yeah. So all of that's factored in, Michael, and what we're seeing. And I think that that, you know, when you think about the choppiness we refer to, you know, in Q1, we saw it with a lot of closures and kind of the high rates of infection that we saw in the pandemic. We've seen that alleviate. But, you know, on the supply chain information, it is impacting our customers. If you go and, you know, read the detailed commentary on what industrial customers are saying through ISM and things like that, they claim, you know, They can't meet their demand because of, one, supply chain disruption, but also labor shortages. And those are some of the things our customers are challenged with to regain and get back to I'll call pre-COVID levels and growth thereupon. And so those are things that are all factored in, but we're seeing it at our customer base, and, you know, it creates ongoing choppiness.
spk10: And then the last two for me, you know, Texas got the snap beat out of it from a weather issue, power shutdown. You're not hiding behind any weather commentary, but I'm just curious if you hadn't had a loss of power for a week or more, what the difference in the numbers might have been.
spk08: Yeah, you know, we haven't even tried to attempt to quantify that, Michael. You know, from our operational perspectives, you know, some of our business lines were down, you know, 10 days to two weeks. Others reopened fairly rapidly, especially on our services arm, and we had a little bit of freeze damage from the weather. But, you know, the reality is February was definitely impacted pretty hard in that region. We did see a nice uptick in March in that area, which probably is a little bit of pickup on there. But when we look at the whole of the equation, yeah, it's probably a setback because some of that business will never regain because our customers were shut down. But for the most part, we still think that business conditions are robust enough down there that we'll be able to recover.
spk10: So closing the loop on that, you had a good quarter better than your plan and you had to deal with all of that. So if without it, it would have been that much incrementally better. Absolutely. Okay. Debt repayment. Are there any structural limits on any of the terms and the debt, make whole agreements, anything like that, that can allow you to keep walking these numbers down as you generate cash?
spk06: No, Michael, this is Eric. We're able to pay the facility down as quickly as we'd like. So there are no limitations on either, obviously on the revolver, but even on the term loan B. The only limitations we had were for the first year. There were some limitations on that, but it's now wide open and we can pay down as quickly as we want.
spk10: Perfect. I fibbed one last one. You opened the year saying we expect decontamination work to trend down. It was actually better in one queue than you thought. Is it trending down or is it holding up?
spk08: No, it's actually trending down. So we saw a surge in January and the first part of February, and it's been trending down since then. which is what we anticipated, and it really follows the caseloads that are out there. And, you know, from the good side of things, that from a humanity standpoint is we are seeing ourselves getting ahead of this pandemic, at least here domestically. And so if we see a rise in caseload, I would imagine that business line will benefit from it, and otherwise it will be replaced by hopefully a resurgence of industrial-based activities.
spk10: Okay. Thanks. Thanks, Michael.
spk09: The next question comes from Tyler Brown with Raymond James. Please go ahead.
spk04: Hey, good morning, guys. Hey, Tyler. Hey, so just to be clear, there's not really much additional DECON work in the guide for the rest of the year? No.
spk08: I mean, no.
spk04: There's not. Okay. Okay. That's helpful. And then, I mean, I know the reopening is difficult to discern for you all, but And you don't talk a lot about monthly trends, but you did kind of make some mentions about March. Is there any way you can kind of let us know what base did in March or is it not really just any color on exactly how much base was up in March?
spk08: Well, you know, from a year over year perspective, directionally, it was up about 10%. Now the reality is if you go back to March of last year, You know, we were starting to shut down in the second week halfway through. So, you know, probably March last year was a little bit lower when you looked at the monthly cycle on that. So I think that's elevated. You know, when you look at our base business for the full year, we're still confident that we're going to be able to deliver growth between 5% to 7% on that. And that's with us being down 3% in the first quarter. So everything's trending the way we expected it. It could be a little bit better than what we said on that side of things. But overall, when you, you know, you equal everything out, we're still very confident in what we have for guidance out there.
spk04: Okay. And so Q2 implicitly is like plus double digits. range on the bay side yeah well i would expect i would expect a very healthy uh rebound in q2 from a growth perspective okay and then just just again i don't know if you can put a finer point on q2 just to help us with our models but should i you say it should improve sequentially i mean are we talking something like five to ten million dollars of ebitda sequentially just to help us kind of get, because Q2 is just a really funny quarter.
spk06: Yeah, I think that's, this is Eric, Tyler, I think that's probably a reasonable range. You know, if you look at our second quarter last year, you know, we did EBITDA just under $39 million. And so I would expect us to be quite a bit better than that. And that range you laid out is probably reasonable.
spk04: Okay, okay, that's helpful. And then, so Jeff, you talked a little bit about investing in your people and about your kind of human capital and how you're really focused there, which is great. First off, I'm curious, how many drivers do you actually employ, roughly? Yeah, we're right around 250 to 300. Okay, and so how hard is that group to retain and recruit? in the current environment. I mean, you know, we obviously cover the truckers. I mean, there's a lot going on out there. I know it's a different business. It's more of a go-home-at-night business. But curious, are you seeing, like, real substantive pressures on hiring and retaining in that particular group?
spk08: Yeah, we continue to see challenges in that group, and you nailed it. You know, it's a demographic that is not growing enough. And, you know, there's a lot of competing pressure, not only from our side of the world, but many other industries in there. So, yes, we're continuing to see challenges in there. Simon, maybe you can elaborate on some of the things that we're doing. Yeah.
spk01: This is Simon. It is a challenge, as Jeff says. What we're doing is we're certainly launching programs that kind of provide retention and We're launching programs to kind of pay for schooling and encourage our employees to get their CDLs, really creating committees to better understand what is important to the driving community and what we can do to support them. As you mentioned, we do have both long haul and short haul, but certainly we think we can differentiate ourselves in some of the short haul and and really just listening to their drivers' needs. And so, as Jeff said, that's something we're fiercely focused on, and we will be for a while, I suspect.
spk04: Yeah, so some of those jobs, like I said, are a little bit more LTL in nature, where I guess they're coming home, but there is a subset where you're actually laying those guys down at night. That long-haul piece, it's probably a little bit tougher to recruit.
spk01: Absolutely. I mean, you think about a retail program in particular, those guys will be on the road for several days, and they're definitely a more challenging group. Interesting.
spk04: Okay. And then back to the NRC synergies. So correct me if I'm wrong, because I'm going off the top of my head here. Eric, I think you, of the 20, I think is the number, you maybe got 10 last year. I think you were guiding to something like three to five. But then, Jeff, it sounded like there was more optimism there. So I'm just curious, are you basically tracking ahead of what you had originally thought on the synergies for this year, or are we kind of right in line? You're just hoping that by the end of the year, you'll be fully run-rated.
spk08: Yeah, so we're tracking a little bit ahead of what we thought for 2021, and it's really driven on the revenue side of things. And I talked about the momentum earlier. that's definitely continuing. And we're seeing a lot of opportunities emerge as we continue to really, you know, get more of a cohesive sales group across the organization and, you know, driving those results. And we're seeing opportunities there. So we do believe that by the end of the year, we'll have achieved that $20 million run rate. And, you know, there's potentially upside to that next year.
spk06: And as a reminder, Tyler, that The $20 million number was one that we put out at the time of the acquisition that we thought we'd be at that run rate by the end of 2022. So we feel like we're a year ahead of schedule.
spk04: Perfect. Okay. And then just my last one, maybe coming back to the energy business. So I think you talked a little bit about it, Jeff, or kind of talked about it on the periphery, but obviously oil prices have moved. I'm just curious if you're starting to see any green shoots out there in the oil patch. Are you starting to see any building confidence that maybe that business could be a positive delta to what you're expecting for this year?
spk08: Well, Tyler, there's definitely green shoots in there. I mean, we definitely were ahead of plan in what we had anticipated on that business. We've seen rig counts increase dramatically from the low point, but they've increased sequentially as well. And it's in both of the basins, both the Permian and Eagleford, that we're – that we play in. The reality though, and the sanity check is we're still, you know, at 50% levels of where we were pre-pandemic. So all the trends are good. The activity is increasing. We're seeing a lot of green shoots out there, but we still have a ways to go, you know, to get back to that pre-pandemic level.
spk04: Okay. And then just real quickly, can you remind me what the mix is? Is it roughly half and half Permian versus Eagleford, or is it skewed one way?
spk08: Yeah, from a revenue standpoint, it's about half and half on there. So where our strength right now is in the Eagleford because we have two assets that were, you know, put in place, you know, just before the pandemic set in and the Permian. Those are, you know, they're trending and they're trending positive, but, you know, they're still, you know,
spk04: not to where we want them to be. Okay. And is the CapEx on that business roughly set? As in you've kind of developed the footprint of the landfills, probably built out the first cells. Are you kind of good on the CapEx side so that when we do see volumes come back in, there's not a tremendous amount of capital needs?
spk01: Yeah, Tyler, this is Simon. We are certainly planning and moving forward with our landfill construction this year. So we're going to make sure we have capacity for whatever the demand is. And we're also continuing with some refurbishment of equipment. And certainly we're planning for a recovery and we're spending our capital accordingly.
spk06: And to just clarify that a little, Tyler, the landfill Simon's referring to is the one in the Eagleford that's the first one that was built. And so it's Its current cell is almost full. It's been operating for, what, four years? Yeah. And so it's just the next cell at that facility.
spk04: Okay. Okay. Good deal. All right, guys. Thanks so much for the time. All right. Thanks, Tyler.
spk09: The next question comes from Jeff Silber with BMO Capital Markets. Please go ahead.
spk07: Thank you so much. Actually, I just wanted to follow up from one of Tyler's first questions. about hiring and wage inflation and retention. We talked about truck drivers. Are you seeing issues anywhere else throughout the company? I know we've got a lot of other companies complaining that it's tough to find good quality skilled workers out there.
spk08: Yeah, I think everybody's competing for the same talent. I mean, the reality is not only are we competing against other companies, but My personal opinion is I think that we're competing against some of the government subsidy programs that are out there and that hopefully will free up here this summer timeframe. But I think the combination of those two is creating a challenging condition to recruit, you know, frontline workers.
spk07: Okay. That's helpful. And you mentioned the government subsidies, so I wanted to ask about the infrastructure plan. I know – It's still early. I know there's just some proposals. Is there anything in there that you think might either help or hurt your business?
spk08: Yeah, Steve, why don't you address that?
spk05: Sure. Hi, Steve Welling here. What we've read so far is we look to potentially increase Superfund cleanup work. There's possibly a proposal to add back the Superfund tax on corporations, which will provide money for those types of cleanups. There's also... When you do infrastructure improvement, usually that means there's things that get torn down, cleaned up first before you improve. So like bridges, there could be lead paints and other waste streams that come from that. Also seeing that there's some information about improvement at schools and urban areas, which they want to remove all the lead piping. So it looks like it would be a benefit to us for sure. It's just we don't have much detail yet.
spk07: Yeah, sure, nobody does. But that's actually good to hear. And, you know, finally, I think you alluded to this a little bit earlier, but, you know, you mentioned some of the starts and stops in terms of reopening. Are there any specific areas to call out that are doing better than others?
spk08: Yeah, so where we're seeing is the West. has seen some positivity and really the Gulf. And they're the ones that are starting to have been reopened and are reopening more. Where we saw this start and stop is, you know, we have a lot of operations in the Michigan corridor and they've been a hotspot. And so, you know, that was a challenge in the first quarter, but they're getting things under control and we anticipate that that to improve here overall. And then internationally, Canada continues to struggle. They're not, they don't have the same vaccination rates that we do here. And, you know, I think Ontario just walked back down, or the province of Ontario. And so, you know, they've been struggling there, but the underlying business still seems to be gaining traction and positive momentum, even though they're going through some starts and stops.
spk07: Okay, that's really helpful. Thanks so much. Thanks, Jeff.
spk09: The next question comes from Tyson Bauer with KC Capital. Please go ahead.
spk02: Good morning, gentlemen. Good morning, Tyson. On the whole theme of pricing and inflation and the treatment costs, whether it be freight or wage or other, some of the companies in the coverage universe have benefited from the inflation effects. Others have suffered because of it. What does U.S. Ecology stand as far as are you able to pass those through, get a benefit in rising pricing environment, or are you trying to absorb some of those treatment costs, and that may put a little pressure on?
spk08: Steve, why don't you talk about the pricing and the strategy we've been doing this year, and I'll have Eric kind of chime in on where we're seeing some inflationary challenges.
spk05: Yeah, so in prior years, we've done more across-the-board type price increasing, and this year has been totally different. What we did is some selective price increase in certain markets on certain waste streams and then some specific geographies where the customer base wasn't as impacted as others. So we have taken price increases in the first quarter. Most went into effect between January 15th and February 15th. on base business only, event work we bid case by case. But we have been doing a number of things and we're also looking, you know, what do we potentially, what are the possibilities for maybe another increase in mid-year? But we have been able to pass a number of things along. In terms of the transportation, generally we have a separate charge like on fuel surcharge that does, when things go up or down there, we're covered. For the most part, a lot of our pricing on the waste disposal side, we have the ability to adjust. We do have some select service lines where we're in a longer-term contract, but that's not the majority of our business.
spk06: And, Tyson, just in terms of kind of the categories where we're feeling the most pressure in terms of cost, we've talked a lot about labor. That's probably one of the biggest right there with it. Insurance is one that everyone, frankly, whether you're in our industry or not, we're seeing pretty significant increases and have for the last couple of years. This year is no exception. Steve talked about transportation. We feel like we do have some opportunities there just based on the way our contracts work to recapture a lot of the increases there. So the reagents and commodities, that's another area I would say. As the company's grown and as we've diversified a bit, that's not as significant a portion as it used to be, U.S. Ecology, but it is still a meaningful cost that we're continuing to watch and monitor, and there is some pressure there as well.
spk02: Well, to piggyback the targeted price increases, you only do that when you have the ability to do so. What are you seeing as those growths? the greater leverage opportunities for you as far as certain business segments or waste streams that you can take advantage of?
spk05: Well, like I said, what we did already was in the Midwest, we looked at some select waste streams and particularly non-haves and solidification where there seemed to be opportunities and we adjusted that much more than 3% to 5%. And then West Coast, we were able to look at our customer base and do some things across the board in the West that maybe we're not able to do in the Gulf. Right now we're seeing the Gulf recover, which was not at all in the first quarter. We were struggling a bit in the beginning and then we had the freeze. So we may be looking to see if there's opportunities there in the future. But it's a case-by-case review and we're just trying to see how things evolve as the world gets going back to normal here.
spk02: Do you anticipate, even though they don't call it the Green Act, that we may see some materials or other things that have not previously been considered hazardous fall into that category going forward?
spk01: Yeah, this is Tyson. This is Simon. You know, those long-term, yes, I think there will be some, certainly you think of PFAS, but I'll say that's generally a fairly slow process in terms of changing the regulations. But certainly, you know, I would expect this administration to be more aggressive on that front, but I certainly can't point to specific things in the near term.
spk02: Okay. Last question. On the event pipeline, are we still looking at a lot more of the smaller jobs, maybe the 5, 10 million or less, as opposed to some of the larger discrete projects that are multi-year and faceted?
spk05: We still have a combination of both. We have... some multi-year projects that are continuing this year. We have a multi-year project that we had done work in prior years that was off a bit last year. It's kicking back in in the next three weeks. And then we have another new long-term project that'll be kicking off in the third quarter. So I don't think anything's really different in terms of that. It's a mix of all the above. Okay, thank you, gentlemen. Thanks, Tyson.
spk09: Again, if you have a question, please press star then one. The next question comes from Peter Rabover with Arcto Capital. Please go ahead.
spk03: Hey guys, thanks for taking my question and for being so thorough on the inflation talk. Just a couple of questions, one small one. How much was the Texas freeze or the storms, was that a beneficial or a negative impact for you guys in the quarter?
spk08: Yeah, Peter, we didn't quantify it, but it would have been negative in the quarter.
spk03: Okay. Just thinking through next year. And then maybe like a longer term question. I mean, what are you guys thinking in terms of capital structure? I know you suspended a dividend last year and we're in cash conservation mode and You know, I think you're back to being fairly free cash flow positive and growing. So just thinking, like, what's your ideal capital structure? What are your plans for, you know, capital allocation? You have some warrants out there. So just anything you guys can comment on, I'd appreciate it.
spk08: Yeah, so our capital deployment plan is really focused on organic capital investment, paying down debt, doing small tuck-in acquisitions if they come available. And then we'll be looking at returning any capital to shareholders likely in 2022.
spk03: Okay. Great. Thanks so much. I appreciate it. Those were my questions. All right. Thank you.
spk09: This concludes our question and answer session. I would like to turn the conference back over to Jeff Feeler for any closing remarks.
spk08: Well, I just want to thank you for your interest today and looking forward to updating you in future conferences here in the second quarter.
spk09: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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