Clean Harbors, Inc 2026 Q3 Earnings Call

Eric? Thanks, Tim. Good morning, everyone, and thank you for joining us.

Before we discuss our financial performance, we wanted to touch on today's other news as we announced a planned executive transition. On January 1, I will become the sole CEO at the company. Mike will be retiring from his co-CEO role and board seat at year-end. This next step in our leadership team is endorsed by both Mike and I, along with our entire board. I am honored to lead this company, where I have built my career and worked for 37 years. For as long as I have been here, Clean Harbors has been setting the standard for the hazardous waste industry in North America. I would like to thank the board for trusting me to carry on this tradition. Our company is second to none. We employ the best team in the business.

We take great care of our customers by providing reliable waste and industrial service capabilities based on cutting-edge systems, scarce permitted facilities, more than 900 service locations, extensive equipment, and a comprehensive transportation fleet. I expect us to remain on the growth path we have been on for the past decade. I look forward to continuing to reward our shareholders and our employees in the coming years. With that, let me turn things over to Mike.

Thanks, Eric, and good morning, everyone. As I stated in this morning's release, helping to lead Clean Harbors, a company that defines our industry, has been an absolute privilege for me and the highlight of my career. I take tremendous pride in seeing what Clean Harbors has accomplished and what the company has become during our tenure as executive leaders, and most recently as Co-CEO. At year-end, I will leave here knowing what we accomplished is incredibly special. What I appreciate most, though, are the people. I've had the opportunity to work alongside an incredible group of people across Clean Harbors, many of whom I've known and worked with for years. Those relationships and what we achieved together is what I'll remember most. I've been incredibly fortunate to work with such a talented leadership team, and I know the company is in great hands going forward.

I'm also grateful for the investors I've gotten to know and the board members I've served alongside. I have the utmost confidence that Clean Harbors' best days remain ahead. I couldn't be more bullish about growth prospects for 2027 and beyond. With that, let me turn it back over to Eric.

Thanks, Mike. Turning to a summary of our results on Slide 3. Beginning with safety. We delivered another quarter of industry-leading safety performance in Q3. Our year-to-date total recordable incident rate, or TRIR, is 0.49, which matches the best full-year rate in our company's history and is in line with our annual target. Thank you, team, for making safety a priority every day. Nothing is more important to us. Turning to financial results. We materially exceeded our third quarter guidance, with both segments contributing to record quarterly revenue and adjusted EBITDA. Our ES segment delivered its 18th consecutive quarter of year-over-year adjusted EBITDA margin expansion with a margin of 27.4% as we continue to demonstrate our ability to price effectively, properly allocate capital to acquisitions and internal projects, take cost out of the business, and drive productivity.

Within ES, our record results were driven by substantial growth in field services, particularly in emergency response work. We also saw continued strong demand for our disposal assets and extensive collection network, as well as more PFAS-related work. Safety-Kleen Environmental Services was again a consistent performer and revenue in industrial services was up slightly year over year. In our SKSS segment, the tight global supply of base oil and lubricants, along with effective spread management, contributed to results that far exceeded our expectations, including the highest quarterly adjusted EBITDA in the segment's history. Turning to segment performances, beginning with ES on slide 4. Q3 revenue in this segment increased $220 million from the prior year. Field services led that growth, with revenue up more than 70% compared to a year ago, when we had very few sizable emergency response events.

This year, we responded to a number of significant events, including one very large event that generated approximately $120 million in revenue in the quarter. Safety-Kleen Environmental Services continued to produce consistent, profitable growth, with revenue increasing 11% from a year ago, driven by growth in its core offerings, including containerized waste collection and vacuum services. Technical services grew 3% in the quarter as continued strength in PFAS-related work in other areas offset lower project revenues compared with the year-ago period. Incineration utilization was 87%, down slightly from 88% a year ago. Our overall waste collections were very strong in the quarter, as reflected by the 20% increase in our deferred revenue balance. We expect to deliver healthy utilization in Q4 and achieve a mid to high 80% utilization for the full year.

Our industrial services revenue rose modestly from a year ago due to growth in Canada and some initial data center engagements. That growth offset continued softness from North American refineries, which again operated with limited downtime and turnaround activity. Adjusted EBITDA and ES was up 19% in the quarter, with the segment margin up 60 basis points to 27.4%. We delivered this margin improvement despite some early-stage headwinds from the acquisitions we completed this year, which we estimated reduced segment margin by approximately 20 basis points in the quarter. Overall, it was another exceptional quarter for the segment, reflecting the broad-based demand trends we have seen throughout 2026. Last quarter, I highlighted two trends shaping our ES segment, reshoring and customer consolidation of service providers. Both continue to hold true.

The 10-year, $600 million reshoring contract we announced last quarter has commenced here in Q4, and we're excited to see that relationship expand in the coming years. Beyond that award, the growth of U.S. manufacturing related to reshoring is visible in the U.S. ISM that we've seen in the first nine months of this year. On that second trend, we continue to hear from customers of all sizes who want a single service provider for all their regulated waste, recycling needs, and related services. With our unique capabilities and highly versatile asset base, we believe we are best-positioned waste provider to serve that market need. With that, let me turn things over to Mike to discuss SKSS and our capital allocation strategy.

Mike? Turning to SKSS on slide 5, this segment delivered extraordinary Q3 results.