Clean Harbors, Inc.

Greetings, and welcome to the Clean Harbors Second Quarter 2025 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael McDonald, General Counsel for Clean Harbors. Mr. McDonald, please go ahead.

Thank you, Christine, and good morning, everyone. With me on today's call are our co-chief executive officers, Eric Gerstenberg and Mike Paddles, our EVP and chief financial officer, Eric Dugas, and our 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 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, July 30th, 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. Dean Harber's believes that such information provides an additional measurement and consistent historical comparison of its performance. Reconciliation of these measures, the most directly comparable GAP measures, are available in today's news release, on our IR website, and in the appendix of today's presentation. Let me turn the call over to Eric Gerstenberg to start. Eric? Thanks, Michael. Good morning, everyone, and thank you for joining us. As always, let me start with our safety results. we achieved our lowest ever quarterly TRIR of 0.40 in Q2, setting a new company benchmark for safety performance. Year-to-date, our TRIR stands at 0.45, reflecting our ongoing commitment to operational excellence and a culture of continuous improvement. This approach delivers significant benefits, including measurable advantages to costs and fewer lost workdays. There are also intangibles, like a stronger reputation with our customers, the ability to attract the best people, and most importantly, making sure everyone knows they're protected and valued at work. Turning to our financial performance on slide three, our results in Q2 highlighted the sustained, profitable growth of environmental services and the stabilization of safety, clean, sustainable solutions as both segments came in ahead of our expectations. Consolidated adjusted EBITDA margin increased by 60 basis points to 21.7%, driven by strong demand of our disposal and recycling assets and lower SG&A costs. Mike will cover SKSS shortly, but it's clear our waste oil collection strategies in that segment are delivering results. Corporate segment costs were lower year over year due to cost-cutting actions in non-recurring items that were included in Q2 of 2024, partly offset by higher insurance, severance costs, and technology investments. Overall, our results reflect continued business momentum from late Q1. Turning to our segment reviews, beginning with ES on slide four. Segment-adjusted EBITDA margin grew year-over-year for the 13th consecutive quarter. The primary drivers were increased revenue, waste projects, and pricing programs more than offset the fewer large emergency response events in Q2 this year. Looking at revenues by segment components, Safety Clean Environmental led the growth at 9% driven by pricing gains and growth in core service offerings. The number of parts wash services was down slightly from a year ago due to actions we were taking on the waste collection side. as well as the more advanced parts wash models we are introducing that generate higher revenue per stop. In addition, the safe SK branches continue to drive substantial volumes of containerized waste into our permitted facilities. In technical services, higher incineration and landfill volumes supported by pricing programs drove a 4% revenue increase. Incineration price rose 7% on a mix-adjusted basis. Incineration utilization was 89% versus 88% a year ago. For comparison purposes, this quarter's utilization number excludes the new Kiln and Kimball as we ramp up. With the inclusion of Kimball, our utilization rate would still be strong at 86%. We are successfully completing our shakedown process of the new unit, which processed more than 10,000 tons in the quarter. We are also seeing more network efficiency in terms of waste and transportation as Kimball processes greater volumes and waste types. Even with the tariff uncertainty hitting some of our customers in early April, incineration demand remained high throughout Q2 and continues to show no signs of slowdown with reshoring and manufacturing expansion top of mind for many of our key customers across multiple verticals. At the same time, we still see the potential for captive closures as we continue to have good discussions with several operators who are looking to cut costs by partnering with a vendor that has the capacity and network redundancy to safely handle and dispose of their incineration waste streams. Field services revenue was down from a year ago due to fewer large events. However, the team performed very well in Q2, generating strong margins on its base business. Within industrial services, Revenue was up slightly year over year, reflecting a larger number of turnarounds that carried a lower average spend. Due to these market conditions, we have been enhancing workforce and equipment utilization while taking out costs. We are seeing the benefits of those efforts as margins improved from a year ago, despite what has been a challenging environment for customer spending. We remain cautiously I wanted to touch on PFAS, given investor interest in this topic. The threat of litigation is creating a sense of urgency at the local, state, and federal levels to address contamination, either in water supplies or at site locations. Based on our discussions with the federal EPA and supported by their public statements, this administration remains committed to addressing the public health threat from PFAS. In addition, many states are attempting to mitigate the threat of forever chemicals as more than 350 PFAS-related legislative bills have been introduced across 39 states. PFAS remediation is rapidly becoming a national priority, and we are the only company positioned to offer an end-to-end solution that includes permanent, scalable destruction. With new EPA guidance pending and state-level action accelerating, we are prepared to lead in what many expect to be a multibillion-dollar opportunity. We believe that our record-permitted high-temperature incinerators with rigorous pollution controls remain the most viable and commercially scalable option for customers. The data from our last PFAS incineration site, which was performed in conjunction with the EPA, demonstrated that our incinerator achieved six nines of destruction of the key PFAS compounds and with emissions eight to ten times lower. very compelling data for any customers or government entities that may have been unsure about the safety or effectiveness of PFAS incineration. At the same time, our PFAS total solution offering continues to gain traction in the marketplace. With that, let me turn things over to Mike to discuss SKSS and capital allocation. Mike?

Thank you, Eric, and good morning. Turning to our SKSS results on slide five, For the past several quarters, the team has done a terrific job shifting our customers to higher charge for oil, or CFO, which helped drive our better-than-anticipated results in this segment. Our revenue decreased year-over-year, as expected, reflecting lower market pricing and reduced volume sold. The $38 million we delivered in Q2 exceeded our expectations and reflects meaningful progress the team has made across a range of initiatives. We continue to aggressively manage our re-refining spread while lowering our cost structure and improving the efficiency of our operations. The shift to a CFO position that began in November continued in Q2. In the quarter, we gathered 64 million gallons of waste oil, which is up 11% sequentially. We believe we are achieving a healthy balance between charging appropriately for the used oil collection services we provide against the value of waste oil in the market and the quantities we need to optimally run our plants. We made progress and kept several key initiatives in Q2, We modestly increased our direct blended sales in the quarter. These sales provide greater stability to our business as pricing tends to be less volatile and they represent our highest margin gallons. During the quarter, we also advanced our partnership with BP Castrol as we support their more circular offering for corporate fleets. This lower carbon footprint solution is attracting more interest in the market with several fleets signed up and more evaluating the offering. We continue to grow our Group 3 gallons and are on track to add several million gallons of Group 3 this year versus last year, which should support greater stability in this segment. Turning to slide six, we continue to evaluate opportunities to execute on various elements of our capital allocation strategy with the goal of generating the best long-term returns. In Q2, strong cash flows resulted in higher cash balances and our leverage improved. As a result, our strong balance sheet only got stronger putting us in the ideal position to grow both internally and externally. On the M&A front, we remain active in valuating both on-transactions and larger transactions that would provide us with more permanent facilities, leverageable assets with high synergy potential, or ones that support our market position. Given our expansive network of assets, we believe that the right acquisition affords us the ability to unlock considerable long-term value, but we remain selective as always. Internally, we are evaluating additional organic investments to drive shareholder returns. With Kimball now on the path to success, we're looking at ways to increase incineration throughput at other locations in the years ahead. In Q2, we purchased our new Phoenix site where we will replicate the hub concept we're executing in Baltimore. We have other reasons to apply the same playbook going forward, as well as adding more processing or recycling capabilities like e-waste to other locations. We're also addressing the potential for further processing of our re-refining byproducts, as we believe there's value to be harvested there. With $700 million in cash, low leverage, a strong free cash flow, and free cash flow expected in the second half of 2025, we're in an ideal position to accelerate our growth and scale through both organic investments and strategic M&A. The pipeline is strong, and we fully expect to deploy significant capital in the quarters ahead in ways that enhance growth and long-term margins. As we're entering the back half of 2025 with strong momentum and a high level of confidence in our ability to deliver outstanding results, with the ongoing reshoring trend and substantial planned industrial investments in the U.S., our optimism is supported by a promising economic outlook. Reshoring is no longer a headline. It is becoming a funded reality. Our customers are breaking ground, expanding production, and creating more demand for our services. Although near-term trade trends trade headwinds persist. We expect that the tangible benefits of the recent tax bill and incentive to invest in America manufacturing will drive greater customer activity. We see no indication that a healthy customer demand for our services will slow down anytime soon. We have multiple customers with plans to move ahead with remediation projects in the coming quarters, all of which would further support our recycling disposal assets, including Kimball. In SKSS, We remain focused on driving increased returns throughout its value chain through disciplined collection pricing, optimized re-refining operations, and the expansion of programs like our blended direct sales and cash flow more circular partnership. Our favorable outlook is underpinned by a powerful combination of macro and company-specific catalysts. We remain focused on executing our pricing strategies, cost mitigation efforts, and operational efficiencies to drive further margin improvement. We anticipate leveraging the strength of both our operating segments to achieve record top-line and bottom-line results in 2025. With that, let me turn it over to our CFO, Eric Dukas.