Executive Summary / Key Takeaways

• Clean Harbors is North America's leading provider of environmental and industrial services, operating an extensive network of hazardous waste disposal and recycling facilities, including the largest number of incinerators, landfills, and TSDFs.
• The company's core Environmental Services segment demonstrates resilience and growth, driven by strong demand for disposal assets, effective pricing strategies, and strategic acquisitions like HEPACO, despite some recent softness in Industrial Services.
• CLH possesses key technological differentiators, including high-temperature RCRA-permitted incineration and advanced oil re-refining processes, which provide operational efficiencies and competitive advantages in highly regulated markets, particularly for complex waste streams like PFAS.
• Recent Q1 2025 results showed revenue and Adjusted EBITDA growth, finishing ahead of expectations, supported by momentum in ES and outperformance in SKSS driven by successful used oil collection pricing changes.
• Management reiterated its 2025 guidance, projecting 6% Adjusted EBITDA growth and a nearly 30% increase in Adjusted Free Cash Flow, underpinned by the ramp-up of the new Kimball incinerator, structural market tailwinds like reshoring and PFAS regulation, and disciplined capital allocation including strategic investments and opportunistic share repurchases.

Setting the Stage: Essential Services in a Complex World

Clean Harbors stands as North America's preeminent provider of environmental and industrial services, a critical role in an increasingly regulated and sustainability-focused economy. The company's mission centers on offering environmentally responsible solutions, helping customers manage hazardous and non-hazardous waste, maintain industrial infrastructure, and respond to environmental emergencies. This is underpinned by an unparalleled network of disposal and recycling assets, including the largest collection of hazardous waste incinerators, landfills, and treatment, storage, and disposal facilities (TSDFs) across the continent.

The company's journey, beginning in 1980, has been marked by strategic expansion, notably the transformative 2012 acquisition of Safety-Kleen, which integrated extensive collection and recycling capabilities. More recently, 2024 proved to be a pivotal year for inorganic growth with the acquisitions of HEPACO, significantly bolstering field and emergency response services, and Noble Oil Services, expanding the Safety-Kleen Sustainability Solutions (SKSS) segment's oil collection and re-refining footprint. These acquisitions, along with other smaller deals, have expanded the company's scale and service offerings, enhancing its ability to provide end-to-end solutions.

In the competitive landscape, Clean Harbors operates alongside larger, more diversified waste management companies like Waste Management (WM) and Republic Services (RSG), as well as specialized players such as Stericycle (SRCL) in regulated waste and Heritage-Crystal Clean (HCCI) in industrial and environmental services, including oil recycling. While WM and RSG benefit from immense scale and cost advantages in broader waste streams, CLH carves out its leadership position through specialization in hazardous waste and complex industrial services. Its extensive network of permitted hazardous waste facilities provides a significant barrier to entry and a competitive moat that smaller or less specialized competitors cannot easily replicate. CLH's strategic focus on providing bundled offerings, integrating collection, transportation, and disposal across its network, differentiates it from competitors who may lack the full suite of assets.

Technological Edge and Operational Network

A cornerstone of Clean Harbors' competitive advantage lies in its technological capabilities and integrated operational network. The company operates high-temperature RCRA-permitted incinerators, a critical technology for the safe destruction of hazardous waste, particularly complex and persistent substances like PFAS. This technology offers tangible benefits, including achieving high destruction efficiency, crucial for meeting stringent environmental standards. The company's ongoing EPA and DOD-supported incineration study, with results expected in Q2 2025, aims to scientifically demonstrate the effectiveness of its incinerators for PFAS elimination, targeting "six nines of destruction." This research reinforces the value proposition of incineration as a sound method for managing such waste.

In the SKSS segment, Clean Harbors is North America's largest re-refiner and recycler of used oil. Its re-refining process produces high-quality base and blended lubricating oils. The company is advancing its Group III program, targeting production of 2 to 3 million additional gallons in 2025 compared to 2024. This initiative, along with partnerships like the one with BP (BP) Castrol for its "more circular" offering, leverages CLH's re-refining technology to create value-added, low-carbon footprint products, appealing to corporate fleets focused on sustainability.

The integrated network of facilities – including incinerators, landfills, TSDFs, wastewater treatment plants, and service branches – allows CLH to manage a diverse range of waste streams efficiently. Investments in expanding this network, such as the new Kimball incinerator and the planned Phoenix hub, enhance capacity and optimize logistics, enabling more efficient processing and movement of waste. This operational leverage, supported by technological capabilities, contributes to the company's ability to command pricing and improve margins, forming a key part of its competitive moat.

Recent Performance and Segment Dynamics

Clean Harbors began 2025 with a solid performance, with Q1 results finishing ahead of management's expectations. Total direct revenues increased 4% year-over-year to $1.43 billion, while Adjusted EBITDA grew 2.1% to $234.9 million.

The Environmental Services segment continued to demonstrate resilience, with direct revenues increasing 3.1% to $1.21 billion and Adjusted EBITDA rising 3.8% to $274.6 million in Q1 2025. This growth was primarily driven by contributions from the HEPACO acquisition, pricing gains, and higher incineration utilization at legacy facilities (88% in Q1 2025 vs. 79% in Q1 2024). Technical Services revenue saw a 5% increase, benefiting from higher incineration volumes and pricing, which rose over 5% on a mix-adjusted basis. Safety-Kleen core service offerings also contributed positively, growing 5% due to improved pricing. However, the Industrial Services business faced headwinds, with revenue declining 10% due to lower turnaround activity and deferred maintenance spending by refinery customers. Management noted that while weather in January impacted the quarter, a strong March helped recover some lost ground.

The Safety-Kleen Sustainability Solutions segment saw direct revenues increase 9.1% to $222.7 million in Q1 2025, primarily driven by contributions from the Noble acquisition and growth in charge for oil (CFO) revenue for used oil collection. Despite the revenue growth, SKSS Adjusted EBITDA decreased 4.9% to $28.3 million, and the margin declined to 12.7% from 14.6% in the prior year, mainly due to lower base oil pricing relative to costs. Management highlighted the team's success in doubling the average price per gallon charged for used oil collection since year-end 2024 and the strategic decision to idle the California re-refinery to manage inventory and support the CFO initiative.

Overall Q1 profitability was impacted by higher depreciation and amortization expenses ($112 million vs. $95.1 million in Q1 2024), largely attributable to the recent acquisitions and the new Kimball incinerator. Interest expense also increased due to higher debt levels.

Financial Health and Capital Allocation

Clean Harbors maintains a healthy balance sheet, ending Q1 2025 with $595.3 million in cash and marketable securities. The company's net debt-to-EBITDA ratio stood at approximately 2.1x, and it was in compliance with all debt covenants. A recent credit rating upgrade by Moody's further underscores its improving financial strength.

Cash flow from operations in Q1 2025 was $1.6 million, down from $18.5 million in the prior year, primarily due to increased working capital and higher interest payments, reflecting typical first-quarter seasonality. Adjusted free cash flow was an outflow of $115.7 million, consistent with the prior year's Q1 outflow.

Capital allocation remains focused on driving shareholder returns through internal investments, strategic M&A, and share repurchases. Capital expenditures in Q1 2025 were $118.7 million. The company plans 2025 net CapEx between $360 million and $390 million, including a $15 million investment in a new Phoenix hub. This disciplined approach to capital deployment is expected to be funded by operating cash flows. The company also continues to return capital to shareholders, repurchasing $55 million of stock in Q1 2025 and viewing its shares as undervalued, with $444.1 million remaining under its authorization.

Outlook and Growth Catalysts

Clean Harbors reiterated its full-year 2025 guidance, projecting Adjusted EBITDA in the range of $1.15 billion to $1.21 billion, with a midpoint of $1.18 billion, representing 6% growth over 2024. Adjusted free cash flow is expected to be between $430 million and $490 million, a nearly 30% increase from 2024, excluding the Phoenix growth investment.

Management's outlook is supported by several key catalysts and assumptions:

• Kimball Incinerator Ramp-up: The new facility is expected to process over 28,000 tons in 2025 and contribute incrementally to earnings as it ramps towards full utilization in 2026.
• Strong Demand & Pricing: Demand for disposal and recycling assets remains robust. Management expects incineration pricing to continue growing at a mid-single-digit rate.
• Structural Tailwinds: Reshoring of manufacturing, government infrastructure spending, and increasing regulation around PFAS are expected to drive sustained demand for environmental services. The PFAS market, in particular, is viewed as a significant long-term opportunity.
• SKSS Stabilization: The SKSS segment is expected to stabilize in 2eral initiatives like Group III and the Castrol partnership.
• Field Service Growth: The integration of HEPACO and organic growth initiatives are expected to drive continued expansion in field services.
• Industrial Services Recovery: While potentially muted, a recovery in industrial services is anticipated in the second half of 2025 as refinery maintenance activities resume.

Risks and Challenges

Despite the positive outlook, investors should consider potential risks. Economic sensitivity, particularly impacting the Industrial Services segment, could lead to further delays in customer spending. The SKSS segment remains exposed to volatility in base oil prices and changes in used oil collection market dynamics, which could pressure profitability. Regulatory changes, while often creating opportunities, could also impose significant compliance costs or alter waste management practices in ways that negatively impact specific business lines. Environmental liabilities, largely assumed through acquisitions, represent long-term obligations that could require greater or earlier payments than anticipated if regulations change or remediation estimates prove insufficient. Inflationary pressures, particularly on labor and transportation costs, could erode margins if pricing strategies are unable to fully offset them.

Conclusion

Clean Harbors is strategically positioned as a leader in essential environmental and industrial services, leveraging its extensive network, specialized technology, and recent acquisitions to capitalize on favorable market dynamics. While the SKSS segment faces ongoing commodity price volatility and the Industrial Services business navigates a period of customer spending caution, the core Environmental Services segment demonstrates consistent strength driven by robust demand for disposal assets and effective operational execution. The ramp-up of the Kimball incinerator, coupled with structural tailwinds from reshoring, infrastructure investment, and increasing PFAS regulation, provides a clear path for continued profitable growth. Management's reiterated 2025 guidance reflects confidence in the company's ability to execute against these opportunities, supported by a healthy balance sheet and disciplined capital allocation. For investors, Clean Harbors represents an opportunity to invest in a market leader benefiting from long-term secular trends, albeit with exposure to cyclical and commodity-related fluctuations in specific business lines. The successful integration of acquisitions, continued operational efficiency gains, and the realization of growth from new capacity and emerging markets like PFAS will be key factors to watch in the coming quarters.