Executive Summary / Key Takeaways

• Resilient Growth Engine: Clean Harbors (CLH) demonstrates robust, recession-resistant growth, particularly in its Environmental Services (ES) segment, driven by specialized hazardous waste management, strategic capacity expansion, and consistent pricing power that outpaces inflation.
• Technological Moat & Emerging Opportunities: The company's proprietary high-temperature incineration technology, validated by rigorous PFAS testing, positions it as a leader in the burgeoning PFAS remediation market, offering a unique end-to-end solution with quantifiable destruction efficiency.
• Strategic Capital Deployment: CLH's strong balance sheet and free cash flow generation enable disciplined capital allocation towards high-return organic investments like the Kimball incinerator and new hub facilities, alongside opportunistic M&A and share repurchases.

• SKSS Stabilization & Operational Excellence: The Safety-Kleen Sustainability Solutions (SKSS) segment is stabilizing through aggressive "charge-for-oil" (CFO) strategies and operational efficiencies, aiming for renewed profitability growth despite commodity market volatility.
• Positive Outlook Amidst Macro Shifts: With a reiterated 2025 Adjusted EBITDA guidance midpoint of $1.18 billion (6% YoY growth), CLH is poised to benefit from macro tailwinds like reshoring and infrastructure spending, while actively mitigating risks from industrial services softness and base oil market fluctuations.

The Bedrock of Environmental Stewardship: Clean Harbors' Enduring Thesis

Clean Harbors, incorporated in 1980, has evolved into North America's preeminent provider of environmental and industrial services. The company's core mission revolves around offering environmentally responsible solutions, protecting and restoring the continent's natural environment. This foundational commitment has cemented its position as the operator of the largest network of hazardous waste incinerators, landfills, and treatment, storage, and disposal facilities (TSDFs) in North America, serving over 350,000 customers, including a significant portion of Fortune 500 companies.

The company's overarching strategy is built on leveraging its expansive asset base, deep expertise, and technological leadership to address complex waste streams and industrial service needs. This strategy is further enhanced by a relentless focus on operational excellence, as evidenced by its achievement of a record-low quarterly Total Recordable Incident Rate (TRIR) of 0.40 in Q2 2025, a testament to its commitment to safety and efficiency. This operational discipline translates directly into measurable cost advantages and a stronger reputation, reinforcing customer relationships.

Technological Edge: The Incineration Moat and PFAS Leadership

Clean Harbors' competitive advantage is deeply rooted in its differentiated technology, particularly its high-temperature incineration capabilities. These RCRA-permitted facilities are not merely disposal sites; they are sophisticated technological assets designed for the permanent destruction of hazardous and complex waste. The company's strategic investment in this area is exemplified by the Kimball, Nebraska incinerator, commercially launched in December 2024, which mirrors the highly successful Arkansas incinerator opened in 2017. This new facility alone increases Clean Harbors' overall North American incineration capacity by 12%.

The tangible benefits of this technology are most evident in the burgeoning market for PFAS remediation. Clean Harbors is uniquely positioned as the only company offering an end-to-end solution for these "forever chemicals," including permanent, scalable destruction. Rigorous testing conducted at its Utah facility in November 2024, with on-site participation from the EPA and DoD, demonstrated compelling results: its incinerators achieved "6-9s of destruction of the key PFAS compounds" and "emissions 8 to 10x lower than the most restrictive state for federal standards." This quantifiable performance is critical, as it provides scientific validation for the safety and effectiveness of high-temperature incineration, addressing potential customer and regulatory concerns. The company anticipates the full results of this testing to be published in Q2 2025.

Beyond incineration, Clean Harbors is innovating in its Safety-Kleen Sustainability Solutions (SKSS) segment. The Group III program, aimed at producing higher-quality base oils, is on track to add "several million gallons of Group III this year versus last year," supporting greater stability and profitability. The company is also exploring further processing of re-refining byproducts, believing there is "value to be harvested there." These technological advancements and strategic R&D initiatives contribute significantly to Clean Harbors' competitive moat, enabling higher-value service offerings, improved margins, and long-term growth in critical environmental markets.

Environmental Services: A Pillar of Consistent Growth

The Environmental Services (ES) segment remains the bedrock of Clean Harbors' performance, consistently delivering robust results. In Q2 2025, ES direct revenues increased by 3.3% year-over-year to $1.35 billion, contributing to a 4.5% rise in Adjusted EBITDA to $376.19 million. This marked the 13th consecutive quarter of year-over-year Adjusted EBITDA margin growth, reaching 27.8% in Q2 2025, up 0.3% from the prior year. This consistent expansion is a direct outcome of increased volumes, disciplined pricing, and efficiency gains across its diverse service lines.

Technical Services, encompassing hazardous waste disposal and remediation, saw a 4% revenue increase in Q2 2025, driven by higher incineration and landfill volumes. Incineration pricing alone rose 7% on a mix-adjusted basis, with utilization at 89% (86% including the new Kimball unit). Safety-Kleen Environmental, a core part of ES, led growth at 9% due to pricing gains and expanded core service offerings. While Field Services revenue was down due to fewer large emergency response events compared to a strong prior year, the team successfully generated strong margins from its base business. Industrial Services, despite a challenging environment for customer spending, saw a slight revenue increase and improved margins through enhanced workforce and equipment utilization.

The strategic acquisition of HEPACO in March 2024 significantly expanded the Field Services business, contributing to a 32% growth in Q1 2025. The company's investment in new hub facilities, such as the recently purchased Phoenix site, aims to replicate the success of the Baltimore hub concept. These hubs combine multiple business units, fostering cross-selling, shared resources, and logistical efficiencies, thereby enhancing profitability and employee development.

Safety-Kleen Sustainability Solutions: Navigating Volatility Towards Stability

The Safety-Kleen Sustainability Solutions (SKSS) segment, while facing inherent commodity market volatility, is undergoing a strategic transformation aimed at stabilization and renewed profitability. In Q2 2025, SKSS direct revenues decreased by 18.7% year-over-year to $197.73 million, leading to a 25.6% decline in Adjusted EBITDA to $38.31 million. This was primarily due to lower market pricing and reduced volumes of base and blended oil products.

However, management highlights that Q2 results "exceeded expectations," driven by aggressive waste oil collection strategies. The shift to a "charge-for-oil" (CFO) position, initiated in November 2024, has been a critical success factor, leading to a doubling of the average price per gallon for used oil collection from year-end 2024 to March 2025. In Q2 2025, the company gathered 64 million gallons of waste oil, an 11% sequential increase, demonstrating a healthy balance between collection pricing and plant feedstock needs. The strategic decision to idle the California re-refinery in Q4 2024, a higher-cost operation, further supports the CFO initiative and helps manage inventory levels. The segment is also focusing on increasing direct blended sales, which offer greater stability and higher margins, and advancing its partnership with BP Castrol (BP) for a "more circular offering" that is gaining traction with corporate fleets. These initiatives, coupled with lower-cost inventory now flowing through the system, are expected to drive profitability growth in SKSS in both Q3 and Q4 2025.

Competitive Landscape and Strategic Positioning

Clean Harbors operates in a competitive yet highly specialized environmental and industrial services market. Its primary publicly traded competitors include Waste Management , Republic Services , and Stericycle .

Compared to Waste Management (WM), Clean Harbors distinguishes itself through its deep specialization in hazardous waste treatment, industrial maintenance, and unique sustainability solutions like explosives management. While WM boasts a larger overall operational scale and broader general waste management focus, potentially leading to lower operating costs in some shared areas, CLH's expertise in high-risk sectors provides a unique value proposition. CLH's operational execution in specialized field services, such as emergency response, offers a differentiated capability that WM's broader approach may not match. This specialization allows CLH to command pricing power and secure market share in niche, high-barrier-to-entry segments.

Against Republic Services (RSG), CLH's strength lies in its comprehensive hazardous waste management and industrial cleaning services. RSG's strategy emphasizes general waste and recycling, giving it a broader municipal market presence. However, CLH's offerings in areas like wastewater treatment and resource recovery, coupled with its Safety-Kleen segment's tailored industrial cleaning products, provide a more customized and efficient solution for industrial clients. While RSG may have advantages in operational scale and efficiency in general waste, CLH's specialized capabilities allow it to compete effectively by delivering superior performance in complex, high-value scenarios.

When compared to Stericycle (SRCL), which focuses on regulated waste, particularly medical waste, Clean Harbors offers a broader and more diversified portfolio. CLH's industrial maintenance and comprehensive sustainability solutions provide a more integrated offering for industrial clients, potentially leading to greater efficiency in field services. While SRCL excels in compliance-focused regulated waste, CLH's diversification across environmental segments, including resource recovery and explosives management, allows it to capture a wider array of high-hazard opportunities.

Clean Harbors' competitive advantages, or "moats," are multifaceted. Its proprietary incineration technology and stringent regulatory licenses are significant barriers to entry, ensuring high efficiency in waste treatment and superior margins. The company's efficient network for waste transportation and collection further provides cost advantages, enhancing cash flow. This extensive footprint enables CLH to leverage relationships with national customers, providing a comprehensive service that competitors may struggle to replicate. Management notes that competitors in its space are "very disciplined," but CLH's ability to outpace inflation with its pricing initiatives and its national scale in used motor oil collection (being the largest collector) allows it to influence market dynamics, as seen with the industry's adoption of the CFO model.

However, CLH faces vulnerabilities, including potential dependencies on specialized suppliers and a narrower scale compared to the largest general waste players. These factors could impact financial performance during supply chain disruptions or if larger competitors aggressively enter specialized niches. The company actively mitigates these by focusing on internalizing labor, optimizing logistics, and leveraging its integrated network.

Outlook and Risks

Clean Harbors has reiterated its 2025 Adjusted EBITDA guidance at a midpoint of $1.18 billion, representing 6% year-over-year growth. This outlook is supported by strong momentum in the ES segment, which is expected to grow Adjusted EBITDA by 6% to 8%. The company anticipates good volumes into its facilities network, driven by an encouraging project pipeline. PFAS and reshoring trends are expected to provide significant upside potential in the second half of 2025 and beyond. The Kimball incinerator is on track to process over 28,000 tons in 2025, contributing an incremental $8 million to $12 million in EBITDA, with further ramp-up to $25 million to $45 million over the next three to four years.

For the SKSS segment, the full-year 2025 Adjusted EBITDA guidance remains at $140 million, with anticipated profitability growth in Q3 and Q4. This confidence stems from the successful shift to CFO and lower-cost inventory. Corporate costs are projected to be up 5% to 7% (negative EBITDA) due to growth-related expenses, wages, and technology investments. Adjusted free cash flow for 2025 is guided to be between $430 million and $490 million, a nearly 30% increase from 2024, excluding a $15 million investment in the Phoenix hub. Total capital expenditures for 2025 are expected to be in the range of $360 million to $390 million, including the Phoenix hub.

Despite this positive outlook, risks persist. Tariff uncertainty has impacted some customers, particularly in Industrial Services, though management believes the worst of refinery maintenance deferrals is behind them. The SKSS segment remains exposed to base oil and lubricant market volatility, requiring continuous aggressive management of collection pricing. While weather impacts in Q1 2025 caused some lost volumes, the company's enhanced logistics network aims to recover deferred work. Environmental liabilities, though managed, could require greater payments if regulations change unexpectedly. The integration of HEPACO's billing system caused temporary AR collection delays in 2024, but this issue is now resolved.

Conclusion

Clean Harbors stands as a compelling investment opportunity, firmly rooted in the essential and growing environmental services sector. Its narrative is one of strategic foresight, operational excellence, and technological leadership, particularly in hazardous waste management and emerging areas like PFAS remediation. The company's ability to consistently expand margins in its core Environmental Services segment, coupled with aggressive strategies to stabilize and grow its Safety-Kleen Sustainability Solutions business, underscores its resilience.

With a robust balance sheet enabling strategic capital deployment into high-return organic projects and opportunistic M&A, Clean Harbors is well-positioned to capitalize on powerful macro tailwinds such as reshoring and increased infrastructure spending. While commodity volatility and industrial services softness present ongoing challenges, the company's proven ability to adapt, innovate, and leverage its unique technological advantages and extensive network provides a strong foundation for continued profitable growth and long-term value creation for investors.