“We delivered strong top-line growth and adjusted EBITDA (essentially net income with interest, taxes, depreciation and amortization) in the first quarter, in line with our expectations, and we are on track to achieve our guidance for the full year,” says Alan S. McKim, chairman, president and CEO. “Our results reflect the operating leverage in our business model. Adjusted EBITDA grew at more than twice the rate of revenues, driven by higher waste volumes, cost reductions and improved pricing, particularly in our lube oil business.”
Revenues for the first quarter of 2017 increased 8 percent to $688.9 million, compared with $636.1 million in the same period a year ago. Income from operations was $5.4 million in the first quarter of 2017, compared with a loss from operations of $4.1 million in the same period in 2016.
First-quarter 2017 net loss was $21.4 million, or $0.37 per share, which included the effects of not recognizing income tax benefits associated with pre-tax losses generated by certain of the company’s Canadian subsidiaries totaling $10.5 million. The company reported an adjusted net loss for the first quarter of 2017 of $10.9 million, or $0.19 per share. Net loss for the first quarter of 2016 was $20.9 million, or $0.36 per share, which included the non-cash effects of not recognizing certain Canadian income tax benefits totaling $7.9 million. The company reported an adjusted net loss for the first quarter of 2016 of $13.0 million, or $0.22 per share. Net loss and adjusted net loss results for the first quarters of 2017 and 2016 included pre-tax integration and severance costs of $2.4 million and $9.4 million, respectively.
Adjusted EBITDA in the first quarter of 2017 rose 19 percent to $80.1 million from $67.3 million in the same period of 2016. Adjusted EBITDA margin improved by 100 basis points to 11.6 percent from 10.6 percent in the first quarter of 2016.
“Our Safety-Kleen segment generated a 19% gain in revenues and a 31% increase in Adjusted EBITDA in the first quarter,” McKim says. “These results reflected strong growth in our Safety-Kleen branches, higher base oil and lubricant pricing, the acquisitions made in 2016 and the launch of our OilPlus closed loop offering.
Technical Services revenues also rose as we benefited from the opening of our new incinerator in El Dorado, Arkansas. With the new capacity we brought online, incinerator utilization was 79 percent in the quarter but would have been just over 90 percent without the new capacity, compared to 87% a year ago. First-quarter landfill volumes declined 25 percent as the project environment remained slow to rebound. In Industrial and Field Services, double-digit growth in Field Services was offset by lower revenue in Industrial Services, reflecting the sale of our Catalyst Services business and ongoing softness in Western Canada. Oil, Gas and Lodging Services remained under pressure but the rate of decline slowed as the North American energy market showed pockets of strength.
“As we move into our seasonally stronger periods of the year, we expect momentum to accelerate across several key markets, particularly those related to our Technical Services and Safety-Kleen segments,” McKim says. “After a sluggish first quarter, both U.S. Industrial Production and GDP are expected to pick up as the year advances, which should drive additional waste volumes into our network. This conclusion is supported by a noticeable uptick in customer activity and sales opportunities. With crude oil prices having stabilized in recent months, customers in multiple industries have been more confident in their spending decisions. In addition, the energy market itself has strengthened, with increases in rig counts and overall activity. Base oil and lubricant prices have risen steadily – a positive development as we move toward the summer driving season.
“With our new El Dorado incinerator now successfully launched and fully operational, we are ready to capitalize on an improving economic outlook and opportunities for increased waste volumes, particularly as the Chemical sector begins to rebound from its slowdown this past year. Within Safety-Kleen, we are confident that our closed-loop offering will grow incrementally throughout 2017, as we broaden the bulk lubricants delivery of our Performance Plus brands to additional metropolitan areas. Our Safety-Kleen branches continue to expand, aided by the acquisitions we made in 2016. Finally, our focus on profitable growth and margin expansion in 2017 will be supported by our comprehensive and ongoing cost-reduction efforts,” McKim concludes.
Based on its first-quarter financial performance and current market conditions, Clean Harbors continues to expect full-year 2017 Adjusted EBITDA in the range of $435 million to $475 million. A reconciliation of the Company’s annual Adjusted EBITDA guidance to net income guidance is included below. On a GAAP basis, the Company’s guidance is based on 2017 net income in the range of $4 million to $35 million. Adjusted net income for 2017, which includes the recognition of the non-cash tax benefits in Canada and valuation allowances, is in the range of $24 million to $48 million. A reconciliation of the company’s Adjusted EBITDA guidance and adjusted net income to net income guidance is included below.