Clean Harbors, Inc.

Greetings, and welcome to the Clean Harbors fourth quarter 2020 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.

Thank you, Christine, and good morning, everyone. With me on today's call are Chairman, President, and Chief Executive Officer Alan S. McKim, EVP and Chief Financial Officer Mike Battles, and SVP of Investor Relations Jim Buckley. Slides for today's call are posted on our website, and we invite you to follow along. Matters 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 24th, 2021. Information on potential factors and risks that could affect our actual results of operations 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 in today's call, other than through filings made concerning this reporting period. In addition, today's discussion will include references to non-GAAP measures. Clean Harvest believes that such information provides an additional measurement and consistent historical comparison of its performance. Reconciliations of non-gap measures to the most directly comparable gap measures are available in today's news release on our website and in the appendix of today's presentation. Now, I'd like to turn the call over to our CEO, Alan McKim. Alan?

Thanks, Michael. Good morning, everyone, and thank you for joining us. Starting on slide three, we concluded 2020 with a strong fourth quarter. our environmental service segment outperformed our expectations, driven by a combination of factors, including the level of high-value waste in our disposal network, greater than expected COVID decontamination work, and ongoing cost controls. Total fourth quarter revenues were in line with expectations as our safety clean business remained constrained by the effects of the pandemic. Adjusted EBITDA in Q4 increased to $136.1 million, which included 5.6 million in benefits from government programs, primarily from Canada. For the full year, adjusted EBITDA grew by 3% to 555.3 million, with annual margins growing to 17.7%. We generated record adjusted free cash flow of 265 million, a noteworthy accomplishment considering the economic disruption caused by the pandemic. Without question, the success we achieved in 2020 is a direct result of the dedication, flexibility, and perseverance of our exceptional team. 2020 was a challenging year on many levels. I'd like to publicly acknowledge all the employees across our organization, particularly those on the front lines for their outstanding work this past year. Thanks to you, we delivered essential products and services to our customers despite facing many obstacles as the pandemic disrupted how we normally conduct business, and we did so safely all year. Turning to our segment results, beginning with environmental services on slide four. Revenue, while down year over year due to market conditions, was up on a sequential basis. Typically, Q4 is a seasonally weaker quarter for us, But the $18 million increase from Q3 is evidence that many of our markets are on the road to recovery. We also saw strong disposal and recycling volumes to close out the year. Adjusted EBITDA grew by 13% from a year ago, with margins up nearly 400 basis points. This was driven by a combination of business mix, cost savings, and $3.9 million in benefits from government assistance programs in Q4. Revenue from our COVID-19 decon work totaled $31 million in Q4. For the full year, our team completed nearly 14,000 responses and was an essential resourcing in protecting our customers, people, and facilities. In Q4, we benefited from a record level of drums collected, as well as some high-value, complex waste streams we received into our network. This resulted in an average price per pound increase of 16% from the year earlier period when we saw more bulk streams. Incineration utilization in the quarter was 84% due to a higher than expected number of maintenance days. Landfill volumes were down 37% in the quarter as the lack of remediation and waste projects opportunities intensified with the resurgence of the pandemic. However, our strong base landfill business largely offset that decline with a 42% increase and our average price per ton. Moving to slide five, safety clean revenue was down 15% from a year ago, but was flat sequentially as the ongoing recovery offset normal year-end seasonality. Vehicles miles driven had been on a nice upward trajectory throughout the summer, but plateaued a bit in Q4 with the COVID-19 surge resulting in some new local restrictions in areas such as California, and all across Canada. Most of our core services in the SK branch business were down year over year as a result, but flat from Q3. SafetyClean's adjusted EBITDA declined 21%, mostly due to the lower revenue and business mix. This decline was partly offset by our cost reductions initiatives, as well as the government assistance programs that provided $1.4 million of benefits in Q4. Waste oil collections were 49 million gallons in Q4, with a healthy average charge for oil, given the lack of available outlets for generators. On the SK oil side, we saw a typical seasonal softening of the demand for base oil and lube products. However, due to lower production levels in the traditional refinery space, available base oil and lubricant supplies shrank in the quarter, resulting in a rising price environment that should benefit us here in 2021. Percentages of blended products and direct volumes can end as expected and consistent with prior year. Turning to slide six, looking back at 2020 from a capital allocation standpoint, our strategy due to the pandemic was focused on capital preservation, which served us well. CapEx in Q4 was slightly higher than the prior year, but our full year spend was down from 2019. Moving forward, we expect to focus on internal growth capital on our plants and other assets that we believe generate the best returns. From an M&A standpoint, our opportunity pipeline is healthy as businesses emerge from the pandemic, and we gain a clear line of sight on our end markets. We prudently increased our level of share repurchases in Q4 and had an active repurchase program for the year. And Mike will provide the detail on our buyback shortly. Looking ahead, we're beginning 2021 in excellent shape, both operationally and financially. The markets we serve are on an upward trajectory. For our lines of business that have been held back by the pandemic, such as waste projects and remediation, we expect a measurable recovery this year. In 2021, we expect to pursue growth opportunities to our core suite of service offerings and by capitalizing on market conditions. And Mike is going to talk about our new sustainability report in a moment. But let me say that we expect to take full advantage of the growing market acceptance of our sustainable offerings in 2021 and beyond. We provide a broad array of green solutions that go well beyond our role as the largest collector and recycler of waste oil. Within environmental services, we entered the year with higher deferred revenue, and given the availability of waste in the marketplace, expect strong incineration performance in 2021. We anticipate our offerings within industrial services and tech services to grow from last year. We expect field services to generate 25 to 35 million of COVID-related revenues in 2021. Within Safety Clean, we remain below normal demand levels as we kick off 2021. However, later this year, we anticipate a steady recovery in the SK branch business. For Safety Clean Oil, our refineries are producing well, and as I mentioned, pricing for both base oil and blended products is favorable to start the year. We will continue to actively manage our charge for oil rates, while focusing on growing collection volumes to supply our re-refinery network and take advantage of market conditions for recycled fuel oil. In summary, while 2020 did not go as we originally envisioned for our 40th anniversary due to the pandemic, we did achieve record adjusted EBITDA and adjusted free cash flow thanks to our amazing team. As I look at 2021, the underlying dynamics in both our operating segments remain positive and we expect a strong sales growth year with healthy free cash flow as a result. I anticipate another great year for the company in 2021. So with that, let me turn it over to Mike Battles. Mike?