Clean Harbors (NYSE:CLH) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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Summary
Clean Harbors reported stronger-than-expected Q1 2026 results, with both segments showing higher profitability despite challenging weather conditions.
The company achieved a historical low in safety incidents and improved its adjusted EBITDA margin by 60 basis points from Q1 2025.
Environmental services revenue increased due to growth in project services, particularly PFAS-related opportunities, and emergency response work.
The Safety-Kleen Sustainable Solutions segment saw a significant rise in profitability due to increased base oil prices and managed costs.
The company opened 18 field service branches in 2025 and plans to open 10 more in 2026, indicating a strategic focus on expanding its field services.
Management highlighted the potential of AI in improving productivity, compliance, safety, and customer service, with ongoing investments in technology.
Clean Harbors raised its 2026 adjusted EBITDA guidance to a range of $1.24 billion to $1.30 billion, reflecting confidence in both operating segments.
The company continues to pursue growth through strategic acquisitions and internal investments, alongside share repurchases as a way to return value to shareholders.
The PFAS management framework and recent regulatory endorsements are expected to drive significant growth in PFAS-related services.
The overall sentiment is positive, with management expressing confidence in continued growth and profitability, supported by favorable market conditions.
Full Transcript
OPERATOR
Greetings and welcome to the Clean Harbors first quarter 2026 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, you may begin.
Michael McDonald (General Counsel)
Thank you Christine and good morning everyone. With me on today’s call are our Co Chief Executive Officers Eric Erstenberg and Mike Battles, 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, May 6, 2026. Information on potential factors and risks that could affect our results is included in our SEC filings. The Company undertakes no obligation to revise publicly release or publicly 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. Clean Harbors believes that such information provides an additional measurement and consistent historical comparison of its performance. Reconciliations of these measures to the most directly comparable GAAP measures are available in today’s news release, on our Investor Relations website and in the appendix of today’s presentation.
Eric Erstenberg (Co-Chief Executive Officer)
Eric Erstenberg to start. Eric Good morning everyone and thank you for joining us. Before we move into the results, I want to recognize our General Counsel Michael McDonald who will be retiring next month. Michael has been a trusted colleague and an integral part of the Clean Harbors’ team for more than 25 years and his judgment and perspective have been invaluable. We thank him for his many contributions and wish him good health and happiness in the years ahead. Thank you Michael. Starting off with safety, our team delivered an extraordinary safety results in Q1 by achieving the lowest quarterly total recordable incident rate in our history at just 0.39. While we invest in better equipment, technology and company wide programs to improve safety, you only get the type of results we are achieving with buy in at the field level, we are continually setting a higher standard for our company and our industry. For any employees tuned in today, thank you for all that you do and keep yourself safe and your colleagues safe. Turning to a summary of results on slide 3, we kicked off 2026 with better than expected Q1 results including higher profitability in both of our segments despite challenging weather conditions that impacted our collection and services business. In February, we exceeded our EBITDA expectations and improved the company’s adjusted ebitda margin by 60 basis points from Q1 2025. Within the environmental services segment, we demonstrated our resiliency by delivering the segment’s 16th consecutive quarter of year over year improvement in adjusted EBITDA margin and 18th straight quarter of EBITDA growth. At the same time, Safety Clean Sustainable Solutions segment benefited from our continued focus around charge for oil services and from a late quarter surge base oil pricing that lifted its profitability. Turning to the segments beginning With ES on slide 4, Q1 revenue in this segment increased by more than 40 million due to growth in project services including PFAS related opportunities and a considerable amount of emergency response work. We also continue to see healthy demand for our disposal and recycling services. Technical services revenue rose 5% and safety clean environmental services revenue grew 7% driven by pricing and higher volumes within its core offerings. Incineration utilization including the new Kimball incinerator was 80% versus 81% a year ago, reflecting scheduled maintenance days and weather related impacts in both periods. Continuing the trend of the past several quarters, we generated a sizable increase in landfill volumes we which rose by 34% on strength of project work including PFAS related cleanups. Field Service revenue grew 7% in the quarter as we responded to a steady stream of customer emergency events across the US including a large scale event that generated approximately 10 million in revenue. We opened 18 field service branches during 2025 and plan to open 10 more in 2026. While these new locations will take some time to grow their revenue base, our investment speaks to the opportunities we see in field services as well as our ability to cross sell across other businesses. Adjusted EBITDA was up 6% in the quarter with ES segment margin up 50 basis points due to pricing, higher volumes, workforce productivity and cost control initiatives. Overall, our ES segment achieved positive Q1 results despite certain market conditions in the quarter including weather and regional softness. In our industrial services business, we exited the quarter with considerable momentum for ES in March. Revenues were approximately 10% higher than the same month a year ago. Turning to Slide five, we wanted to take a moment to highlight our PFAS management framework that we issued in early April. The purpose today is not to cover the individual details of the framework, but to reemphasize that we have an end to end cost effective solution for PFAS in all of its forms and concentrations over the past several years we’ve had many customers, government agencies and even community leaders approach us for advice on how to best address PFAs. For example, they call on us when they want us to clean up contaminated water, remove stockpiles of AFFF firefighting foam, need someone to respond to emergency situations like fires or spills or remediate a contaminated site. Customers have a lot of uncertainty around PFAS and we believe our framework featured on this slide is beneficial to help them make smart economic decisions at all stages of the process. Our recommendations are based on years of institutional knowledge and the latest scientific data, including the PFAS incineration study we completed in conjunction with the EPA and the Pentagon. Our concentration based framework provides the proper treatment and disposal pathway for a range of scenarios. This tiered approach provides the ideal way to address complex contaminants at reasonable cost. We are starting to see considerable regulatory movement around these forever chemicals. Both the Department of War in March and the US EPA in April have issued PFAS guidance that included incineration, hazardous waste, landfill and water filtration as recommended methods of treatment and disposal. The market is still developing, but having both the Pentagon and the EPA issued guidance that endorses high temperature permitted incineration and our other PFAS offerings is critical. Those endorsements of our proven capabilities add to the momentum we are already seeing in our PFAS sales pipeline as PFAS remediation accelerates nationwide. Integrated Framework provides a practical and scalable model for industry and government partners Today. We continue to believe that Clean Harvest remains the only company that can offer a cost effective end to end single source solution that is commercially scalable for any PFAS need. With that, let me turn things over to Mike to discuss skss, our efforts related to AI and our capital allocation strategy.
Mike Battles (Co-Chief Executive Officer)
Mike thanks Eric and good morning everyone. Turning to SKSS on slide 6, the year over year decrease in segment revenue was expected and reflects lower market pricing for basin blended products as compared to a year ago. This was partially offset by an increase in charge for oil revenue as well as rising base oil prices toward the end of the quarter. That base oil price increase and the work the team has done to manage our costs over the past year has led to a meaningful rise in profitability. Q1 adjusted EBITDA in SKSS grew 17% to $33 million with an impressive 320 basis point improvement in margins. We increased our CFO pricing sequentially from Q4 and more than double that rate in Q1 last year. We continue to provide high level services to customers and even with the higher CFO, we collected 53 million gallons of waste oil to keep our RE refinery running efficiently. At the same time, sales of base and blended gallons were consistent with the prior Q1. We incrementally grew both our direct lubricant gallons and Group 3 gallons sold versus Q1 a year ago. Those gallons carry a premium value and profitability compared to our other products. Overall, our SKSS segment delivered better than anticipated results turning to slide 7 this morning, we wanted to briefly touch on the topic of artificial intelligence, an area of immense potential for us. Technology has been part of Clean Harbor’s DNA and a competitive differentiator for decades. AI is the next practical layer of that. We have implemented AI type functionality for years and we continue to see real opportunity to improve productivity, compliance, safety and customer service over time. We use AI in many areas including waste classifications, invoice audit, ready to bill automation, document processing and field support tools. We are also evaluating opportunities in routing, scheduling and supply chain logistics. Our approach is disciplined governed data, human in the loop controls and clear operating use cases People and Technology Creating a safer, cleaner environment has been our corporate slogan for many years. AI will continue to be a key element of our technology journey and we expect our AI efforts to keep delivering meaningful financial returns for us in the years ahead. Turning to capital allocation on Slide 8, we continue to look for internal and external opportunities to generate the best return on our shareholders capital. In recent years. We have executed well against all elements of our capital allocation framework and we expect 2026 to be no different. We closed the DCI acquisition at the end of Q1 and we’re excited about other attractive candidates that could materialize in the very near future. We’re also investing wisely internally to accelerate our growth, including our previously announced back truck fleet expansion, SDA Unit, East Chicago and other smaller revenue generating opportunities that have recently developed. We ended the quarter with an ample cash balance and low leverage to execute both facets of our growth strategy. We also continue to view share repurchases as an attractive way to return value to our shareholders. Eric will detail our Q1 purchases, but we continue to see our shares as attractive at current market prices given the favorable long term outlook for our business. We exited Q1 with momentum in a number of fronts within our disposal and recycling network. We are seeing an improving US Economic backdrop to drive our base business, supported by growth opportunities stemming from reshoring pfas and project services with a large number of maintenance days and our incinerator now in the rearview. We expect to deliver mid to upper 80% utilization for the full year. SK Environmental should deliver another consistent year of profitable growth. Our field service business continues to strengthen its position as a trusted national provider for environmental emergency response. Our industrial services business continues to operate in a challenged market, but initiatives we are undertaking now should position us for growth and better margins as conditions improve for skss. We are capitalizing on elevated pricing and demand dynamics associated with global market disruptions and a continued focus on maximizing profitability while enhancing long term customer relationships. Overall, we expect another year of exceptional profitable growth, margin improvement and free cash flow generation. With that, let me turn it over to our CFO Eric duties.
Eric Dugas (Executive Vice President and Chief Financial Officer)
Thank you Mike and good morning everyone. Turning to slide 10, our quarterly results came in ahead of the expectations we outlined in February, driven primarily by SKSS outperformance and continued strong execution of the environmental services segment. Total Q1 revenue increased 2% to $1.46 billion, reflecting solid top line growth for the quarter following some weather related impacts in February that Eric mentioned, the ES segment delivered a record revenue month. In March, Q1 adjusted EBITDA increased 6% to $248 million. Our consolidated Q1 adjusted EBITDA margin was 17%, representing a 60 basis point improvement from the prior year period as both operating segments contributed higher margins. This margin expansion reflected a combination of our ongoing initiatives including disciplined pricing, leveraging volume growth, effective cost controls around labor and cost internalization, as well as network and transportation efficiencies. SG&A expense as a percentage of revenue in Q1 increased year over year to 14.2%, partially due to higher incentive compensation and insurance costs in the current period. For the full year, we still expect SG&A expense as a percentage of revenue to be in the high 12% range. Depreciation and amortization in Q1 was 116 million, up slightly from a year ago. For 2026, …
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