Clean Harbors, Inc. (CLH) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a generally positive outlook with strong financial performance and optimistic guidance. The company is experiencing growth in key segments, with significant expansion plans and a strategic acquisition. Despite some negative factors like negative free cash flow and lack of specific details on AI impact, the overall sentiment is positive, bolstered by strong segment growth, positive market trends, and active M&A pipeline. The Q&A session reinforces this positive sentiment with strong growth expectations in PFAS services and robust market vertical trends.
Key Financial Performance
Total Q1 revenue $1.46 billion, increased 2% year-over-year. Growth attributed to solid top-line growth despite weather-related impacts.
Q1 adjusted EBITDA $248 million, increased 6% year-over-year. Margin improved by 60 basis points to 17%, driven by disciplined pricing, volume growth, cost controls, and transportation efficiencies.
Environmental Services (ES) segment revenue Increased by more than $40 million year-over-year. Growth driven by project services, PFAS-related opportunities, emergency response work, and healthy demand for disposal and recycling services.
Technical Services revenue Increased by 5% year-over-year. Growth attributed to pricing and higher volumes within core offerings.
Safety-Kleen Environmental Services revenue Grew 7% year-over-year. Growth driven by pricing and higher volumes within core offerings.
Landfill volumes Increased by 34% year-over-year. Growth driven by strength in project work, including PFAS-related claims.
Field service revenue Grew 7% year-over-year. Growth attributed to emergency events, including a large-scale event generating approximately $10 million in revenue.
ES segment adjusted EBITDA Increased by 6% year-over-year. Margin improved by 50 basis points due to pricing, higher volumes, workforce productivity, and cost control initiatives.
SKSS segment revenue Decreased year-over-year due to lower market pricing for base and blended products. Partially offset by increased charge-for-oil revenue and rising base oil prices.
SKSS segment adjusted EBITDA Grew 17% year-over-year to $33 million. Margin improved by 320 basis points due to cost management and higher base oil prices.
Net income Increased 8% year-over-year. Earnings per share reached $1.19.
Cash and short-term marketable securities Approximately $670 million at the end of Q1, providing flexibility for capital allocation.
Net debt-to-EBITDA ratio Approximately 2x, with a blended interest rate of 5.2%.
CapEx (net of disposals) $97 million in Q1, down $20 million year-over-year. Includes $15 million for strategic growth projects.
Adjusted free cash flow Negative $76 million in Q1, typical due to seasonality.
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Operating Highlights
PFAS Management Framework: Clean Harbors introduced an end-to-end cost-effective solution for PFAS in all forms and concentrations. This framework is based on institutional knowledge and scientific data, including a study with the EPA and Pentagon. It provides scalable solutions for PFAS remediation, including incineration, hazardous waste landfill, and water filtration.
Field Service Expansion: Clean Harbors opened 18 field service branches in 2025 and plans to open 10 more in 2026, reflecting opportunities in field services and cross-selling potential.
Safety Performance: Achieved the lowest quarterly total recordable incident rate in company history at 0.39, attributed to investments in equipment, technology, and safety programs.
Adjusted EBITDA Growth: Q1 adjusted EBITDA increased by 6% to $248 million, with a 60 basis point improvement in margin due to pricing, volume growth, cost controls, and operational efficiencies.
SKSS Profitability: Safety-Kleen Sustainable Solutions (SKSS) segment achieved a 17% growth in adjusted EBITDA to $33 million, with a 320 basis point margin improvement driven by cost management and increased base oil prices.
AI Integration: Clean Harbors is leveraging AI for productivity, compliance, safety, and customer service improvements. Applications include waste classification, invoice audits, and supply chain logistics.
Capital Allocation Strategy: The company is investing in growth opportunities, including vacuum truck fleet expansion and SDA unit development, while also pursuing share repurchases and acquisitions.
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Risk or Challenges
Weather-related impacts: Challenging weather conditions in February affected the collection and services business, leading to operational disruptions and impacting revenue.
Industrial Services market softness: The Industrial Services business continues to operate in a challenged market, which could hinder growth and margin improvement.
Regulatory and compliance risks: The company faces regulatory uncertainties and compliance challenges, particularly around PFAS-related work and environmental regulations.
Supply chain and operational costs: Higher incentive compensation, insurance costs, and increased SG&A expenses could pressure margins and operational efficiency.
Economic uncertainties: Uncertainty around global market disruptions, including overseas conflicts affecting petroleum-derived products like base oil, could impact profitability.
New branch expansion risks: The opening of new field service branches requires time to grow their revenue base, posing risks of underperformance in the short term.
Incinerator maintenance and utilization: Scheduled maintenance days and weather-related impacts have affected incineration utilization rates, which could impact operational efficiency.
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Guidance & Outlook
Adjusted EBITDA Guidance for 2026: The company has raised its 2026 adjusted EBITDA guidance to a range of $1.24 billion to $1.30 billion, with a midpoint of $1.27 billion, reflecting an increase of $40 million from prior guidance. This implies approximately 9% growth compared to 2025.
Environmental Services Segment Outlook: The Environmental Services segment is expected to achieve adjusted EBITDA growth of 5% to 8% in 2026. The company anticipates increasing demand across disposal, recycling, remediation work, and SK branch offerings, supported by reshoring activity, robust project work, and expanded PFAS-related work.
Safety-Kleen Sustainable Solutions (SKSS) Segment Outlook: The SKSS segment is projected to deliver approximately $165 million in adjusted EBITDA for 2026, representing a 20% increase from 2025. This increase is attributed to higher base oil prices and improved profitability dynamics.
Capital Expenditures for 2026: Net capital expenditures for 2026 are expected to range between $350 million and $410 million, with a midpoint of $380 million. This includes investments in growth opportunities such as property enhancements and additional capabilities at certain sites.
Adjusted Free Cash Flow Guidance for 2026: The company has increased its adjusted free cash flow guidance to a range of $490 million to $550 million, with a midpoint of $520 million, reflecting higher anticipated adjusted EBITDA and revised capital expenditure assumptions.
Incineration Utilization for 2026: The company expects mid- to upper 80% utilization for its incinerators for the full year, following the completion of maintenance activities.
Field Services Expansion: The company plans to open 10 new field service branches in 2026, building on the 18 branches opened in 2025, to capitalize on growth opportunities in field services.
PFAS Remediation and Market Development: The company anticipates accelerated PFAS remediation nationwide, supported by regulatory endorsements from the EPA and Pentagon. Clean Harbors positions itself as the only company offering a cost-effective, end-to-end solution for PFAS needs.
Artificial Intelligence (AI) Integration: The company plans to continue leveraging AI to improve productivity, compliance, safety, and customer service, with expectations of meaningful financial returns in the coming years.
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Shareholder Return Plan
Share Repurchase Program: During Q1, we bought back approximately 87,000 shares of stock at a total cost of $25 million or an average price of approximately $287 per share. At March 31, we had approximately $575 million remaining under our share repurchase authorization, reflecting the expansion of that program by our Board in February.
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Key Q&A
Q:What is the growth profile across business lines for the second quarter, and how does it relate to the midpoint of the EBITDA guide?
A:The Environmental Services (ES) segment is expected to grow at 5-6% year-over-year, with SKSS growth exceeding 10% due to increased base oil pricing. Industrial Services is expected to remain flat year-over-year despite stronger performance in Q2 and Q3.
Q:How does the company generate cross-sell opportunities from field expansion and branch expansion?
A:The company leverages its Technical Services and Safety-Kleen Environmental customers to cross-sell Field Services, which include cleaning production tanks, vacuum services, and emergency response. They aim to complement their branch footprint by building out Field Service capabilities in the same locations.
Q:What is the impact of rising diesel costs on the company's profitability and margins?
A:The company offsets rising diesel costs through a recovery fee that adjusts monthly. This makes the impact of diesel prices immaterial on Environmental Services' profitability and margins, while it is more material for SKSS.
Q:What are the company's thoughts on artificial intelligence (AI) and its impact on operations?
A:The company has been using AI and robotic process automation since 2017 to improve safety, compliance, and profitability. AI contributes to margin improvements and operational efficiencies, though the financial impact is not precisely quantified.
Q:What is the demand outlook for Industrial Services, particularly in the refining end market?
A:The overall turnaround count is consistent with last year, but durations are shorter due to refiners maximizing fuel production. The company is cautiously optimistic and expects a clearer outlook in 90-120 days.
Q:What is the status of the company's M&A pipeline?
A:The company is pursuing multiple smaller, tuck-in acquisitions primarily in Environmental Services. Some deals are close to closing, and the pipeline remains active.
Q:What is the outlook for Industrial Services turnarounds in the energy market?
A:The company does not expect significant changes in pricing but anticipates more turnaround activity in Q3 and Q4. However, the guidance assumes flat year-over-year activity.
Q:Which market verticals are showing stronger-than-expected trends in Environmental Services?
A:Healthcare, retail, pharma, manufacturing, universities, and household hazardous waste are showing strong trends. The company is also seeing growth in project services and Technical Services.
Q:Has the Iran conflict or inflationary pressures affected customer behavior?
A:The company has not seen significant disruption due to the Iran conflict. U.S. manufacturing may grow in the short term due to supply chain concerns, but demand trends remain muted.
Q:What is the growth outlook for PFAS-related services?
A:The company expects PFAS-related services to grow by 25-35% in 2026, driven by increased customer activity in soil remediation, AFFF change-outs, and water treatment.
Q:What is the contribution of the Kimball facility to the company's financial performance?
A:The Kimball facility exceeded tonnage targets in 2025, contributing $10 million in EBITDA. It is expected to add another $10-15 million in 2026.
Q:How does the company plan to manage charge-for-oil actions in an up cycle for base oil prices?
A:The company intends to maintain the charge-for-oil model despite higher base oil prices, aiming to manage efficiently and avoid reverting to a pay-for-oil model.
Q:What is the company's perspective on EPA guidelines and their impact on PFAS services?
A:The company views the EPA guidelines as validation of its end-to-end PFAS solutions. It is working with over 700 military installations and sees positive momentum in regulatory and customer actions.
Q:Review of Unclear Management Responses
A:Management avoided providing specific numerical details on realized base oil prices in Q1 and their exit rate. Additionally, they did not quantify the financial impact of AI on operations or provide precise timing for M&A deal closures.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AFFF foam
AI area
AI capital
AI effort
AI element
AI layer
AI type
Chicago opportunity
Clean Harbor
Co Executive
DNA differentiator
Department Water
Field
General
Industrial Services
PFAS framework
PFAS incineration
Pentagon
approach
base oil
colleague
concentration
control
emergency response
focus
government
improvement margin
industry
landfill
maintenance day
margin basis
oil price
pricing volume
productivity
profitability segment
project service
result Slide
solution PFAS
treatment disposal
weather
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The earnings call presents a generally positive outlook with strong financial performance and optimistic guidance. The company is experiencing growth in key segments, with significant expansion plans and a strategic acquisition. Despite some negative factors like negative free cash flow and lack of specific details on AI impact, the overall sentiment is positive, bolstered by strong segment growth, positive market trends, and active M&A pipeline. The Q&A session reinforces this positive sentiment with strong growth expectations in PFAS services and robust market vertical trends.
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