Executive Summary / Key Takeaways

• Clean Harbors (NYSE:CLH) stands as North America's premier environmental and industrial services provider, leveraging its extensive network of specialized hazardous waste facilities and differentiated technology to drive consistent profitable growth.
• The company's core investment thesis is strengthened by its leadership in critical, non-deferrable services, particularly in hazardous waste management and the rapidly expanding PFAS remediation market, which is projected to generate $100 million to $120 million in revenue in 2025, a 20-25% increase year-over-year.
• Strategic organic investments, such as the new Kimball incinerator and the planned Solvent De-Asphalting (SDA) Unit, are set to enhance capacity, improve margins, and unlock new revenue streams, with the SDA Unit alone expected to contribute $30 million to $40 million in annual EBITDA upon completion in 2028.
• Despite macroeconomic headwinds impacting some industrial and field services, Clean Harbors demonstrated resilience in Q3 2025, achieving a consolidated adjusted EBITDA margin of 20.7% and strong cash flow generation, while maintaining a conservative capital structure with net debt-to-EBITDA below 2x.
• The company's outlook for 2025 anticipates adjusted EBITDA between $1.155 billion and $1.175 billion and adjusted free cash flow of approximately $475 million, driven by robust demand for waste disposal, strategic pricing, and operational efficiencies, positioning it for continued long-term growth.

Industry Leadership and Strategic Foundation

Clean Harbors, Inc. (NYSE:CLH) has established itself as North America's leading provider of environmental and industrial services, offering a comprehensive suite of solutions designed to help customers achieve their sustainability goals. The company operates the largest network of hazardous waste incinerators, landfills, and treatment, storage, and disposal facilities (TSDFs) across the continent, serving over 350,000 customers, including a majority of Fortune 500 companies. This extensive infrastructure underpins its overarching strategy: to deliver eco-friendly services that protect and restore the environment while driving profitable growth through operational excellence and disciplined capital allocation.

The company's journey began in 1980, evolving through strategic acquisitions and organic growth. A pivotal moment was the 2012 acquisition of Safety-Kleen, Inc., which significantly expanded its service offerings. More recently, 2024 marked a period of accelerated expansion with the acquisition of HEPACO, bolstering its Field Services, and Noble Oil Services, Inc., enhancing its Safety-Kleen Sustainability Solutions (SKSS) segment. These strategic moves, coupled with the late 2024 commercial launch of the new Kimball, Nebraska incinerator, underscore Clean Harbors' commitment to strengthening its market position and leveraging its integrated network. Broad industry trends such as reshoring of manufacturing, increased infrastructure spending, and the escalating focus on environmental remediation, particularly for emerging contaminants like PFAS, provide significant tailwinds for Clean Harbors' specialized services.

Technological Differentiation and Innovation: The Moat

Clean Harbors' competitive advantage is deeply rooted in its differentiated technology and specialized capabilities, particularly its RCRA-permitted high-temperature incinerators. These facilities represent a critical technological moat, offering unparalleled effectiveness in destroying complex and hazardous waste streams.

The company's incinerators have demonstrated exceptional performance in the destruction of per- and polyfluoroalkyl substances (PFAS), often referred to as "forever chemicals." A study conducted in partnership with the EPA and DoD at its Utah facility in late 2024 confirmed that these incinerators achieve "6-9s of destruction" of key PFAS compounds. Furthermore, the study showed "emissions 8 to 10x lower than the most restrictive state for federal standards," proving the technology's safety and efficacy at a cost-effective commercial scale. This quantifiable performance metric is crucial for customers and regulators seeking definitive solutions for PFAS contamination.

Beyond incineration, Clean Harbors is actively investing in new technologies and expanding its service offerings:

• Total PFAS Solution: This comprehensive offering includes lab analytics, water filtration, site remediation, and disposal, providing an end-to-end solution for customers grappling with PFAS contamination. This integrated approach enhances customer value and reinforces Clean Harbors' leadership in this critical area.
• Kimball Incinerator: The new Kimball incinerator, which began commercial operations in December 2024, is a testament to continuous design improvements, mirroring the successful Arkansas incinerator opened in 2017. It increases Clean Harbors' overall North American incineration capacity by 12% and is projected to process over 28,000 incremental tons in 2025. This expansion is expected to contribute $8 million to $12 million in incremental EBITDA in 2025, ramping up to $25 million to $45 million over the next three to four years.
• Solvent De-Asphalting (SDA) Unit: A significant planned organic investment is the construction of a state-of-the-art SDA Unit, anticipated for commercial launch in 2028. This unit will upgrade Vacuum Tower Asphalt Extender (VTAE), a byproduct from its re-refineries, into high-value 600N base oil, a premium product used in heavy-duty industrial applications. With an expected total spend of $210 million to $220 million, the SDA Unit is projected to generate annual EBITDA of $30 million to $40 million, offering a 6- to 7-year payback on the investment.
• Group III Oil Production: The company is expanding its Group III oil production, aiming to add several million gallons in 2025. These gallons command a premium over traditional Group II volumes, contributing to higher-margin sales within the SKSS segment.
• Hub Concept: Clean Harbors is replicating its successful "hub concept," exemplified by the Baltimore expansion and a new $15 million site in Phoenix. These hubs combine multiple business units, fostering cross-selling, shared assets, and leveraged costs, thereby driving operational efficiencies and enhancing customer service.

For investors, these technological differentiators and innovations translate directly into a robust competitive moat. The specialized nature of hazardous waste management, particularly for complex substances like PFAS, commands higher pricing and more stable demand. The continuous investment in capacity and upgrading capabilities, as seen with Kimball and the SDA Unit, ensures long-term growth, improved margins, and a reinforced market leadership position, making Clean Harbors a critical partner for industries facing stringent environmental regulations.

Competitive Landscape and Strategic Positioning

Clean Harbors operates within a competitive environmental and industrial services landscape, facing both direct and indirect rivals. Its strategic positioning is defined by its specialization in hazardous waste management and its extensive, integrated network, which differentiates it from broader waste management companies.

Direct competitors include Waste Management, Inc. (WM), Republic Services, Inc. (RSG), and Stericycle, Inc. (SRCL). While WM and RSG possess greater scale and broader market reach in generalized waste management and recycling, Clean Harbors excels in the highly specialized and regulated hazardous waste sector. Its expertise in handling high-risk materials, such as explosives and lab chemicals, and its robust regulatory licenses provide a significant advantage, fostering customer loyalty and enabling consistent pricing power. Clean Harbors' focus on high-compliance niches allows it to effectively counter the scale of larger rivals, potentially leading to superior market share in specialized segments.

In contrast to Stericycle, which specializes in regulated medical waste, Clean Harbors' broader industrial focus and integrated field services offer a more adaptable market positioning and a wider range of hazardous material handling capabilities. This allows Clean Harbors to differentiate itself through operational execution, service speed, and comprehensive waste lifecycle management. The company's diverse end markets also provide a competitive edge, enabling it to offset slowdowns in specific sectors by growing in others.

Despite its strengths, Clean Harbors faces vulnerabilities related to its cost structure and scale compared to the sheer size of WM and RSG, which can leverage greater economies of scale in non-hazardous segments. However, the company actively mitigates this through disciplined pricing, rigorous cost control, and internalizing labor, as evidenced by a $10.4 million reduction in third-party labor costs in Environmental Services in Q3 2025. Barriers to entry in the industry, such as stringent regulations, high capital requirements, and the need for specialized expertise, further protect Clean Harbors' market position by limiting new entrants.

The company's strategic responses to competitive forces include growing its "wallet share" with industrial customers by leveraging its extensive service platform and emphasizing its comprehensive offerings. This approach, combined with continuous technological innovation and a focus on high-margin services, allows Clean Harbors to maintain its leadership in specialized environmental solutions.

Financial Performance and Liquidity

Clean Harbors delivered a resilient financial performance in Q3 2025, demonstrating its ability to generate profitable growth despite a challenging macroeconomic backdrop. Total revenues for the quarter reached $1.55 billion, marking a 1.3% increase year-over-year, while for the nine months ended September 30, 2025, total revenues grew 1.6% to $4.53 billion.

The Environmental Services (ES) segment was a primary driver of this growth, with direct revenues increasing 2.6% to $1.33 billion in Q3 2025 and 3% to $3.89 billion for the nine-month period. This was fueled by strong demand for waste disposal services within Technical Services, which saw a 12% increase in revenue in Q3 2025, and Safety-Kleen core services, which grew 8%. The ES segment's adjusted EBITDA margin expanded by 120 basis points year-over-year to 26.8% in Q3 2025, marking its 14th consecutive quarter of year-over-year margin improvement. This was supported by a $10.4 million reduction in third-party labor costs and a $3 million decrease in equipment and supply costs.

Conversely, the Safety-Kleen Sustainability Solutions (SKSS) segment faced headwinds, with direct revenues decreasing 6.1% to $218 million in Q3 2025 and 6% to $638.5 million for the nine-month period, primarily due to lower pricing of base and blended oil products. However, aggressive management actions, including a shift to a "charge for oil" (CFO) program and strategic headcount reductions, enabled SKSS to maintain its adjusted EBITDA at $40.9 million in Q3 2025, resulting in a 100 basis point margin improvement to 18.8%.

Consolidated adjusted EBITDA for Q3 2025 increased 6.1% to $320.2 million, with the consolidated adjusted EBITDA margin expanding by 100 basis points to 20.7%. Net income for Q3 2025 rose 3.1% to $118.8 million, translating to diluted earnings per share of $2.21. For the nine months ended September 30, 2025, net income was $304.4 million, a decrease of 4.4%.

Clean Harbors' liquidity and capital resources remain robust. The company ended Q3 2025 with $850.4 million in cash and short-term marketable securities.

Net cash from operating activities for the nine months ended September 30, 2025, increased by $37.8 million to $511.6 million, driven by improved working capital and lower environmental expenditures. Adjusted free cash flow for the same period was $248.1 million, a significant increase from $110.4 million in the prior year, reflecting strong cash generation.

The company's net debt-to-EBITDA ratio is below 2x, and its conservative capital structure is further enhanced by a recent refinancing in October 2025. This involved issuing $745 million in unsecured senior notes due 2033 and $1.26 billion in secured senior term loans due 2032, used to refinance existing debt and redeem $545 million in 2027 notes, extending maturities and lowering the effective interest rate on hedged term loans to 3.46%. Capital expenditures for the first nine months of 2025 were $303.2 million, including investments in the SDA Unit and Phoenix Hub. The company also actively returned capital to shareholders, repurchasing $50 million in common stock in Q3 2025, with $382.4 million remaining under its authorization.

Outlook, Guidance, and Assumptions

Clean Harbors' management maintains an optimistic outlook, projecting continued profitable growth driven by its strategic initiatives and favorable market dynamics. The company has revised its 2025 adjusted EBITDA guidance to a range of $1.155 billion to $1.175 billion, with a midpoint of $1.165 billion. This adjustment reflects the Q3 2025 results, with management anticipating that any Q4 carryover effects from softness in Field Services and Industrial Services will be offset by strong facilities performance, a robust project pipeline, and growing PFAS opportunities.

For the Environmental Services segment, adjusted EBITDA is expected to increase by more than 5% from 2024. This growth is underpinned by sustained high demand for waste collection and disposal, the ramping up of the Kimball incinerator, and the accelerating opportunities in PFAS remediation. The SKSS segment is projected to achieve a full-year 2025 adjusted EBITDA of $140 million, which management views as a "new low watermark" from which the business is expected to grow. Corporate negative adjusted EBITDA is anticipated to increase by 3% to 5% compared to 2024, primarily due to growth-related expenses, higher wages, and rising insurance costs.

The company is raising its full-year adjusted free cash flow guidance to a midpoint of $475 million, representing over 30% growth from 2024. This figure excludes significant long-term growth investments, such as approximately $30 million for the SDA Unit and $15 million for the Phoenix Hub in 2025, to provide a clearer picture of core cash generation. Total capital spending for 2025, net of disposals, is expected to be between $385 million and $415 million.

Key assumptions supporting this outlook include the continued strong demand for waste disposal services, the successful ramp-up of the Kimball incinerator, and the accelerating market for PFAS remediation, with PFAS-related sales expected to reach $100 million to $120 million in 2025. While a meaningful recovery in Industrial Services revenue is not expected before the spring turnaround season in 2026, management is cautiously optimistic that spending constraints will ease as macroeconomic conditions improve. The company is also targeting 5% EBITDA growth for 2026.

Risks and Challenges

Despite a compelling growth narrative, Clean Harbors faces several risks and challenges that warrant investor attention. Macroeconomic factors, including softer industrial conditions, have already impacted some customers, particularly in the chemical and refining sectors, leading to reduced spending on turnarounds and maintenance. The company continues to grapple with inflationary pressures across key cost categories such as labor, healthcare, transportation, maintenance, and energy, which can compress margins.

Operational and safety risks are inherent in the hazardous waste management industry, and any incidents could lead to significant liabilities and reputational damage. The company is also exposed to litigation, including ongoing Safety-Kleen product liability cases and Superfund proceedings, for which it held reserves of $19.4 million as of September 30, 2025. Unanticipated changes in environmental regulations could necessitate substantial capital expenditures, potentially impacting financial results and cash flow. Furthermore, the SKSS segment remains susceptible to commodity price volatility in the base oil market, although aggressive "charge for oil" strategies are mitigating this risk. Higher-than-anticipated employee healthcare costs also posed a challenge in Q3 2025, which management is actively addressing.

Conclusion

Clean Harbors stands as a resilient and strategically positioned leader in North America's environmental and industrial services sector. Its core investment thesis is firmly anchored in its unparalleled network of specialized hazardous waste facilities and its continuous innovation in critical areas like PFAS destruction and re-refining technologies. The company's ability to consistently expand its Environmental Services segment's margins, coupled with disciplined capital allocation towards high-return organic projects like the SDA Unit and strategic acquisitions, underscores its commitment to long-term value creation.

While macroeconomic headwinds and specific industry slowdowns present challenges, Clean Harbors' diversified customer base, robust project pipeline, and proactive cost management strategies have enabled it to maintain strong financial performance and generate substantial free cash flow. The company's strong balance sheet and recent debt refinancing further enhance its flexibility to pursue growth opportunities. With a clear technological roadmap, a focus on essential, non-deferrable services, and a demonstrated capacity to adapt to market dynamics, Clean Harbors is well-positioned to capitalize on the growing demand for environmental solutions, offering a compelling investment opportunity for discerning investors.