Clean Harbors outlines $210M SDA unit investment, raises 2025 free cash flow guidance to $475M amid PFAS momentum

Earnings Call Insights: Clean Harbors (CLH) Q3 2025

MANAGEMENT VIEW

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Eric Gerstenberg, Co-CEO, opened by highlighting record safety performance with a TRIR of 0.49 through September 30 and noted, “Our Q3 performance reflected year-on-year growth from an increase in overall waste volumes into our network. Pricing gains and increased productivity even in an environment where softer conditions resulting from macroeconomic factors have impacted some customers.” He emphasized strong growth in the ES segment, particularly in Technical Services and Safety-Kleen branches, while acknowledging shortfalls in field and industrial services and elevated healthcare costs.

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Gerstenberg stated, “Our consolidated adjusted EBITDA margin increased by 100 basis points from a year ago to 20.7%, demonstrating the effectiveness of our pricing, the leverage in our network of permitted facilities and cost-saving strategies.” He confirmed landfill volumes were up 40% year-over-year and incineration utilization was 92%.

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Michael Battles, Co-CEO, noted, “Despite pricing headwinds in the base oil market all year, we effectively managed our re-refining spread and drove value from other initiatives.” He announced the construction of the SDA Unit, an advanced processing plant expected to cost $210 million to $220 million, with commercial launch in 2028. Battles stated, “We expect to generate annual EBITDA in the range of $30 million to $40 million, a 6- or 7-year payback on the investment.”

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Battles also disclosed $50 million in share repurchases during Q3 and outlined a capital allocation plan including “potentially investing over $500 million in internal projects over the next several years.”

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Eric Dugas, CFO, said, “Total revenue increased to $1.55 billion in the quarter... Adjusted EBITDA increased 6% to $320 million...” He highlighted record free cash flows and strong balance sheet flexibility, with $850 million in cash and short-term marketable securities at quarter end.

OUTLOOK

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Dugas revised 2025 adjusted EBITDA guidance to a range of $1.155 billion to $1.175 billion, stating, “We are revising our 2025 adjusted EBITDA guidance to a range of $1.155 billion to $1.175 billion or a midpoint of $1.165 billion.”

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He said, “We are raising our full year adjusted free cash flow guidance to a midpoint of $475 million based on year-to-date performance and favorable provisions passed in the U.S. Tax Act this summer. This represents more than 30% growth from 2024.”

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Management expects PFAS to generate $100 million to $120 million of revenue in 2025, up 20% to 25% year-over-year, with further acceleration anticipated.

FINANCIAL RESULTS

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Dugas reported, “Total revenue increased to $1.55 billion in the quarter... Adjusted EBITDA increased 6% to $320 million... Our consolidated Q3 adjusted EBITDA margin expanded to 20.7%...”

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Net income grew modestly year-over-year with earnings per share of $2.21. Operating cash flow was $302 million and adjusted free cash flow reached a Q3 record of $231 million.

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CapEx net of disposals was $83 million, and share repurchases totaled $50 million in Q3, leaving $380 million under authorization.

Q&A

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Patrick Brown, Raymond James: Asked about the $15 million EBITDA guidance reduction and the breakdown of shortfalls. Dugas responded, “Industrial Services being the most predominant piece...maybe $7 million. Field Services...about $4 million. And then the healthcare...about $4 million and probably about $6 million overall to the entire company.”

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Brown continued, inquiring about capital allocation and M&A priorities. Battles said, “We are looking at larger deals. We're looking at smaller deals...we want to remain prudent. We want to remain disciplined...we see ourselves as a growth company. We see ourselves as M&A company, and we'll continue to do things like that.”

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Noah Kaye, Oppenheimer: Asked about free cash flow conversion targets. Dugas replied, “We’re going to continue to target kind of that 40% free cash flow generation, 40% of EBITDA.”

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James Schumm, TD Cowen: Sought clarification on the 600N base oil market and SKSS guidance. Battles explained the investment assumptions, stating, “We've consistently put together a large-scale construction projects that are on time and on budget that hit or exceed the EBITDA numbers that we have quoted. I believe this is no different.” Gerstenberg responded to SKSS guidance, “We're very confident in that $140 million mark.”

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David Manthey, Baird: Inquired about incinerator pricing and segment growth rates. Gerstenberg answered, “Incineration pricing...mid-single digits again...Technical services...double-digit growth...Field Services...about a 9% drop in revenue...Industrial Services...about a 3% or 4% decline.”

SENTIMENT ANALYSIS

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Analysts expressed concern about margin pressure, healthcare costs, and the sustainability of growth in certain segments, with a slightly cautious tone—especially regarding the outlook for Field and Industrial Services. Questions aimed to clarify guidance confidence and capital allocation discipline.

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Management maintained a generally confident tone in both prepared remarks and Q&A, frequently citing operational discipline, strong pipeline, and proactive cost management. Dugas emphasized, “We are maintaining our full year SG&A guidance as a percentage of revenue in the low to mid-12% range.”

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Compared to the previous quarter, management’s confidence was slightly more tempered amid macro headwinds, but optimism remained around core growth drivers and operational improvements.

QUARTER-OVER-QUARTER COMPARISON

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The Q3 guidance for adjusted EBITDA was revised downward from the $1.16-$1.2 billion range in Q2 to $1.155-$1.175 billion in Q3, reflecting macro headwinds and specific segment softness.

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Margin expansion continued in Environmental Services, while Field Services and Industrial Services faced incremental weakness versus earlier expectations.

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Management’s tone shifted from high confidence and momentum in Q2 to a more balanced outlook in Q3, acknowledging challenges while emphasizing resilience and growth opportunities.

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Analysts’ questions in Q3 focused more on risks and the sustainability of improvements, in contrast to the previous quarter’s focus on growth and pipeline strength.

RISKS AND CONCERNS

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Management highlighted slowness in Field Services and Industrial Services, as well as elevated employee healthcare costs, as key challenges.

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Dugas noted, “Healthcare...is a trend I think a lot of companies are combating. We have built in the increases into our Q4 guidance, and we're in the process of doing some things to make sure that we can offset some of the increases.”

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Management is not forecasting a rapid recovery in Industrial or Field Services, instead focusing on margin and productivity gains in waste-related businesses.

FINAL TAKEAWAY

Clean Harbors reported solid year-over-year growth in waste volumes and margins, driven by strong performance in Technical Services and the successful execution of pricing strategies. Management revised full-year adjusted EBITDA guidance slightly downward, citing weakness in Field and Industrial Services and higher healthcare costs, but lifted free cash flow guidance. The company announced a major $210 million internal investment in the SDA Unit, expected to provide substantial long-term returns, and continues to prioritize organic growth, M&A, and disciplined capital deployment. Growth in PFAS-related revenue and resilient waste and disposal businesses underpin management’s confidence heading into year-end and into 2026, even as certain market headwinds persist.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/clh/earnings/transcripts]

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