Good day, ladies and gentlemen and welcome to the Clean Harbors Second Quarter 2024 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to turn the floor over to your host, Michael McDonald, General Counsel for Clean Harbors. Sir, the floor is yours.

Thank you, Latanya and good morning everyone. With me on today’s call are our Co-Chief Executive Officers, Eric Gerstenberg and Mike Battles; our EVP and Chief Financial Officer, Eric Dugas; and SVP of Investor Relations, Jim Buckley. Slides for today’s call are posted on our Investor Relations website and we invite you to follow along. Matters we are discussing today that are not historical facts are considered forward-looking statements within the Private Securities Litigation Reform Act of 1995. Participants are cautioned not to place undue reliance on these statements, which reflect management’s opinions only as of today, July 31, 2024. Information on potential factors and risks that could affect our results is included in our SEC filings. The company undertakes no obligation to revise or publicly release the results of any revision to the statements made today other than through filings made concerning this reporting period. Today’s discussion includes references to non-GAAP measures. Clean Harbors believes that such information provides an additional measurement and consistent historical comparison of its performance. Reconciliations of these measures to the most directly comparable GAAP measures are available in today’s news release, on our website, and in the appendix of today’s presentation. Let me turn the call over to Eric Gerstenberg to start. Eric?

Thanks, Michael. Good morning, everyone and thank you for joining us. Because safety is the foundation of our core values at Clean Harbors, I will start by highlighting our total recordable incident rate, which on a year-to-date basis is 0.70, consistent with where we were a year ago at this time. The recent impact on some of our employees by Hurricane Beryl in the Gulf as well as both the Alberta and California wildfires is a reminder of how critical it is to be prepared for any kind of crisis situation. Thankfully, all of our employees in these regions are safe. Turning to our Q2 performance on Slide 3, we delivered exceptional results that surpassed our guidance, driven by record volumes of containerized waste and sustained pricing momentum. Revenue and adjusted EBITDA were the highest in our history with adjusted EBITDA margin improving 50 basis points year-over-year. Environmental Services continues to outperform. ES results are attributable in part to a robust demand for our facilities network and several service businesses, especially Field Services. This business benefited from its first full quarter of HEPACO, which we acquired in March. Our SKSS segment posted a substantial sequential increase from Q1 fueled by the start of the summer driving season and improved lubricant pricing. Corporate costs were higher in the quarter due to incremental headcount from acquisitions, greater incentive compensation, and several discrete expenses related to legal and environmental liability matters. Turning to Slide 4. Environmental Services enjoyed another fantastic quarter by turning increased revenue into even larger profit growth. HEPACO accounted for more than half of the segment’s 12% revenue increase, with the remainder coming from organic gains attributed to volume and pricing. This top line growth drove an 18% increase in segment adjusted EBITDA, translating to 140 basis points of margin expansion. Adjusted EBITDA of Environmental Services has now increased year-over-year for 11 consecutive quarters. Our Technical Services business was a key contributor to the segment’s performance with a revenue increase of 14%. We again collected record levels of drum volumes through the network, which is reflected in continued increases in deferred revenue on our balance sheet. Even with completing a major turnaround at our Deer Park facility early in the quarter, our incinerators achieved utilization of 88%. Average incineration pricing rose 3% in the quarter, and we continue to expect our incinerators will deliver utilization in the mid- to high 80% range for the full year. We also remain on track to open our new state-of-the-art incinerator in Kimball, Nebraska in Q4. The team has done an outstanding job keeping that construction on schedule and the plant is coming together nicely. Landfills also had a strong performance in Q2, with both volume and average price up as we saw healthy drum volumes and base business supported by project work. We continue to expect landfills to deliver a very good 2024 and with a broad mix of waste streams and project opportunities. Field Services generated the largest increase in the quarter of 64%. While this was primarily driven by HEPACO, our legacy business posted low teens percentage growth. The acquisition has been a great fit with our existing field service operations. During the quarter, we responded to several larger emergency response events where both teams worked side by side. These large events in total accounted for roughly $24 million of revenue in Q2. We expect field services to continue to perform well as we fully integrate and internalize HEPACO’s national call center operations and collaborate on major emergency response events. In Q2, Safety-Kleen Environmental Services extended its multiyear momentum with revenue growth of 11% as its core offerings, particularly containerized waste, remain in high demand. Industrial Services revenue declined 10% due to reduced turnaround activity compared to last year. We anticipate a strong turnaround schedule this fall, and we expect to see a return to IS revenue growth in Q3. Overall, just another great quarter for our ES segment. With that, let me turn things over to Mike. Mike?

Thanks, Eric and good morning. Turning to Slide 5, SKSS rebounded from a challenging Q1 by achieving more than $51 million in adjusted EBITDA, up nearly $22 million sequentially. Our plants ran smoothly in the quarter, resulting in a 3% increase in base oil and lubricant volumes sold from a year ago, which, along with the acquisition of Noble Oil, drove an 8% increase in revenue. Although the quarter opened with several announced posted base oil price increases, the market never fully incorporated those changes. Overall demand led to a weaker spot market for non-contracted volumes and resulted in a small year-over-year decline in segment profitability. With the addition of Noble, our waste oil collections achieved a record level at 57 million gallons in Q2, up 5% from a year ago. Average collection cost was at a small pay per oil level in the quarter. When you exclude Noble, our legacy collections averaged a slight charge for oil. We’re continuing to procure the feedstock we need for our nine new refineries at the best available price. Part of our strategy to minimize the volatility in SKSS is to intensify our focus on value-added products. Q2 blended volumes were up from the prior year, representing 19% of total gallons sold. Our Group III initiative is also part of the stabilization strategy. We dedicated one of our re-refineries to full-time Group III production and it ran well in Q2. We are encouraged about our ability to produce more Group III. We will be running a pilot at another re-refinery to expand this program in the quarters ahead. Last quarter, we discussed our multiyear partnership with Castrol and its more circular program. Castrol officially launched the program in late May at a key transportation industry trade show. They have been employing considerable marketing efforts since the program was announced with two dozen media placements in key publications. While we can’t share specifics about their sales progress, we can confirm that they have been building a pipeline of interest across many large fleet operators. Our multiyear agreement with Castrol as a sustainability partner is a strong validation of our high-quality rerefined base oil. Purchases of the base oil by cash flow have been strong, and we’re excited about the long-term potential of this partnership. While we don’t expect immediate significant gains from this program due to its long sales cycle, we remain optimistic about its future impact. Turning to capital allocation on Slide 6, given our strong cash flow expectations in the second half, our current cash balance and low leverage, we are in an excellent position today to execute the capital allocation strategy we outlined as part of Vision 2027. Halfway through 2024, we have demonstrated the key elements of our plan. Continuing to grow the core business through investments like the Kimball incinerator and our expansion plan in Baltimore and making smart acquisitions where we can extract considerable value such as HEPACO and Noble. Looking ahead, we will continue to pursue similar opportunities, both internal and external, that enable us to capture economies of scale, improve margins, increase cash flow conversion, and ultimately generate the best return for our shareholders. We continue to see a healthy pipeline of potential M&A as well as additional opportunities to invest internally. Coming off a strong Q2, we entered the back half of the year with good momentum. Within ES, our bullish outlook is supported by our record backlog, a growing project pipeline, and demand for our broad suite of services. We are also excited about the prospects of our legacy field service business combined with HEPACO to further bolster our ER capabilities while providing numerous synergy opportunities. Within SKSS, we expect to see stable performance in the quarters ahead despite the current market and demand environment for base oil. We will continue to capitalize on initiatives like Group III, blended sales, and our Castrol partnership. Overall, our outlook for the balance of 2024 remains favorable. We expect to deliver outstanding financial performance this year and remain on track to achieve our Vision 2027 goals. With that, let me turn over to our CFO, Eric Dugas.

Thank you, Mike, and good morning, everyone. Turning to the income statement on Slide 8, we delivered strong results this quarter, achieving record levels of revenue and adjusted EBITDA, along with continued margin expansion. Throughout the first half of 2024, our ES segment has showcased its ability to grow profitably by leveraging our extensive disposal and recycling network, coupled with our service businesses. We’re also encouraged to see SKSS have a nice bounce back in Q2 after an uneven start to the year. On the top line, as Eric highlighted, we delivered a good mix of organic and acquisition-related growth as we grew total revenues by more than $150 million year-over-year. Adjusted EBITDA of $328 million came in above our expectations and was up over $40 million from a year ago. Our adjusted EBITDA margin in the quarter was 21.1%, up 50 basis points year-on-year, driven by strength in the ES segment. Gross margin in the quarter was an impressive 33.3%, a 110 basis point increase from a year ago. This improvement speaks to the demand for our services and incremental volumes resulting in productivity gains and realized operational efficiencies across the network. SG&A expense as a percentage of revenue was 12.7% in Q2, higher than the prior year period. The primary drivers were increased costs from the acquired businesses, non-recurring expenses related to legal and environmental liabilities, and incentive compensation given the strong financial results we are seeing. For the full year 2024, we now anticipate our SG&A expense as a percentage of revenue to be between the mid to high 12% range, slightly ahead of last year, but decreasing longer term. Consistent with our expectations, depreciation and amortization in Q2 came in at just over $100 million. This is up from a year ago, primarily due to acquisitions. For 2024, we now expect depreciation and amortization in the range of $395 million to $405 million. Income from operations in Q2 was $215.5 million, up 14% from the prior year. Due to net income was $133.3 million, resulting in earnings per share of $2.46. All figures were up 15% from the prior year. Turning to Slide 9 and the balance sheet, cash and short-term marketable securities at quarter end were $493 million, up about $50 million from the end of Q1. Our increased receivables balance at Q2 is largely driven by acquisitions, and we expect to collect that cash in the coming months. We ended the quarter with just under $2.8 billion in debt, which reflects the $500 million incremental term loan that we issued to finance the HEPACO and Noble transactions in Q1 of this year. Our balance sheet remains in terrific shape. Our net debt-to-EBITDA ratio was 2.3x at quarter end with no significant debt amounts coming due until 2027. Our overall interest rate at quarter end was 5.7%. Turning to cash flows on Slide 10, cash provided from operations in Q2 was $216 million, up from the prior year. CapEx, net of disposals, was $132 million, which is down from Q1 but up more than $10 million from the prior year due to investments in our network, including $20 million in Q2 spend on the new Kimball incinerator, where our total life-to-date spend now sits at $175 million. For the quarter, adjusted free cash flow was $84 million, which was slightly below prior year. For 2024, we expect our net CapEx to be in the range of $400 million to $430 million. This range includes $65 million related to Kimball and $20 million for the purchase and expansion of the Baltimore facility this year. During Q2, we bought back 23,000 shares of stock at an average price of $214 a share. As of June 30, we had approximately $545 million remaining under our authorized repurchase program. Moving to Slide 11, based on our Q2 results and market conditions, we are raising our 2024 adjusted EBITDA guidance to a range of $1.125 billion to $1.165 billion, with a midpoint of $1.145 billion and representing a 13% increase from 2023 at this midpoint. This guidance assumes a $35 million contribution from HEPACO this year and approximately $5 million in Noble oil. Looking at our annual guidance from a quarterly perspective, we are expecting Q3 adjusted EBITDA growth of 20% to 24% versus the prior year. We now expect our higher full year 2024 adjusted EBITDA guidance to translate to our segments as follows: in Environmental Services, we expect adjusted EBITDA in 2024 at the midpoint of our guidance to increase 13% to 16% from 2023. With a very strong first half performance already complete, we are anticipating a similar performance in the second half. We expect to generate continued year-over-year volume growth in our core lines of business while also continuing to capture synergies and benefit from the addition of HEPACO. For SKSS, based on the current base oil and lubricant market conditions, we expect full year 2024 adjusted EBITDA at the midpoint of our guidance to increase 3% to 5% in 2023. In our corporate segment, at the midpoint of our guidance, we expect negative adjusted EBITDA results to improve by 14% to 15% compared to 2023. The increase here relates to costs from our acquisitions, including some one-time severance and integration expenses. Higher incentive compensation given our strong results this year and the expenses related to discrete legal and environmental liabilities, which were incurred in Q2. As it relates to the acquisition-related increases, some of these are synergy opportunities that we will realize in future periods. On a percentage of revenue basis, we expect the corporate segment results to be essentially flat with the prior year. For 2024, we currently expect adjusted free cash flow to be in the range of $350 million to $390 million, with a midpoint of $379 million. As I pointed out previously, if you take that midpoint and add back the Kimball and Baltimore spend, you’ll arrive at adjusted free cash flow of $455 million, which translates to approximately 40% of our adjusted EBITDA midpoint expectation. In closing, Q2 was a continuation of the favorable business trends we experienced in Q1. We see positive signs and believe this momentum will carry through the remainder of the year, and I share Eric and Mike’s enthusiasm about our growth prospects for 2024 and beyond. For the ES segment, we are excited about our backlog of waste and project opportunities, completing the full integration of HEPACO and bringing Kimball online. For SKSS, we believe the business has stabilized in terms of collection, production, and volumes, and we’re excited about the initiatives we have underway. Overall, a great year in store for us in 2024, both for the company and our shareholders. And with that, Latanya, please open the call for questions.

Thank you. Our first question comes from Tyler Brown with Raymond James. Please proceed.

Hey, good morning.

Good morning, Tyler.

Hey, big picture question. So obviously, this quarter was great, very solid growth along with record backlogs. But as we watch the industrial production, the story in the industrial economy doesn’t seem altogether that great. So I was hoping you guys could kind of bridge that gap. Is it just that there’s a lot of tightness in the hazardous waste markets maybe back in ‘21, ‘22? And you’re still feeling some of the reverberations of that? Has there been a steady stream of deferred cleanup work? Are you guys just winning market share? Just what do you think is driving the solid momentum? Is there really any reason to believe that momentum can continue into ‘25?

Yes, Tyler, this is Eric. I’ll begin here. So I think you made a lot of great points right there, and they’re all in line with how our business has been doing. There continues to be tightness across the whole hazardous waste industry, tightness in incineration. Our team has just done an awesome job executing on many different strategies, though, that we’ve had to grow all of our lines of business with our customers, getting more penetrated into those customers. So when you think about our drum growth as an example, we’ve seen drum growth and growing our market share in the environmental business, the Technical Service Area, and the Safety-Kleen Environmental. We’ve also seen strong project growth across the board. We continue to see all of our facilities really handle a tremendous amount of volumes through them from incineration, wastewater treatment, to landfill, to our TSDFs. They’ve all done a great job handling this volume. So all in all, yes, all of those factors that you just mentioned have played into how we’ve done as a company and really growing our volumes and leveraging our facilities network that is really unparalleled. So great job to the team.

Yes. And Eric – so I know that the segments have moved around a bit over the years, but isn’t 27.5% of record margin in ES? And I get that Q2 is typically your seasonally strongest margin quarter, but if you look at margins, they’re up over 300 basis points on a 3-year stack. I know that 30% is an aspirational goal in ES, but maybe how aspirational really is it at this point? Is it something that could be achievable by ‘27 particularly as Kimball ramps up?

Yes, we certainly think it’s achievable, Tyler. It’s – when you look at that growth, it is, to your point, a record Q2 for margin, even with Industrial Services having fewer turnarounds year-over-year. The team did a great job leveraging the network and leveraging our fixed costs and managing efficiencies throughout the network. So a lot of great work that we put into getting to where we are today. And yes, we do believe that we will continue to be able to have margin expansion in the Environmental business and shoot for that 30% goal by the 2027 area.

The thing I’d add on that, Tyler, is that has been happening for the past few years. I mean if you look back to 2018 and ‘19, it’s up over 500 basis points from that. So I think that trend kind of continues for all the reasons that Eric has just articulated.

Yes, absolutely. And then just a little bit more color on the $24 million of large-scale ER. What exactly was that? And does that revenue linger into the second half?

Yes, I would say there were a couple of large events that we had, one in the Midwest and one in the Pacific Northwest. We had a couple of other sizable events as well that all went into that $24 million that we point out. Some of that’s going to continue to carry over into Q3. But for the most part, they’re starting to wind down.

We just wanted to call them out, Tyler, because they were so large. It did – Field Service had a great quarter and in an emergency response business, that’s core. So it’s not surprising. They just were some very large ones that really drove the beat in Q2.

And just to add to it, as we pointed out in our script, our teams between the HEPACO acquisition and our field service teams, I think they did a really solid job of responding to the needs of those ERs, supporting them together, taking care of them quickly and managing and minimizing the effect on the environment. So great job to the team there.

Perfect. And just my last one to squeeze it in here. Obviously, cash flow is solid, likely to get better into ‘25. Balance sheet is in good shape. Mike, you talked a little bit about the M&A pipeline, but can you give us a little bit more color there? There’s a lot of interest in nontraditional solid waste assets out there. Just in a little more color on the pipeline, either smaller tuck-ins or possibly even something larger? Can you just talk about the prospects maybe this year and into next? Thanks, guys.

Sure, Tyler. So I’d say that as you’ve noticed, the multiples are going up. I mean, the multiples for environmental-type service businesses, I’d say, have been drifting up. Even though we think they’d be drifting down given interest rates, but I think that given recent transactions in the marketplace, you can see in public company transactions. You can see the multiples that are being paid by others. And so we’re going to have to pay up. We think there’s value there. But as I’ve always said, Tyler, we want to be disciplined in our assessment. Want to make sure that these assets make strategic sense and financial sense. And we walked away from some things that although may have fit strategically don’t fit financially. So we’re going to continue to be very disciplined. I’d say the pipeline is pretty strong on both is, both on the Environmental Services business and on the oil business, and it’s all about returns here. This is nothing new here, Tyler, but the pipeline is strong. We’re very active. I would say, as Eric said, I think HEPACO is going to turn out and Noble, they’re trying to be great acquisitions. We already see the benefits of them already after 3 or 4 months. So I think that there’s kind of more to come here. And you look at the cash flow generation and the leverage we have on the balance sheet, we’re kind of in a great space to do it because I think that the leverage is actually going to continue to tick down in Q3 without M&A and get below two by the end of the year, given kind of the forecasted guide we’ve given today.

Alright. Thank you very much.

Thanks, Tyler.

Thanks, Tyler.

The next question comes from Jerry Revich with Goldman Sachs. Please proceed.

Hi, this is Adam on for Jerry today. Good morning. I think incinerator pricing was 3% in the quarter. Just wondering how that breaks down between core price and mix? And then can you talk to us about the pipeline for your hazardous waste landfill and incinerator business? How do you expect product mix to trend in the back half of the year versus last year? Thanks.

Yes, Jerry. So for the second quarter, as we’ve talked about before, we had a really large shutdown at our Deer Park incinerator. That unit is one of the largest consumers of our direct burn bulk waste streams. So that certainly had an effect in the mix of that overall incineration pricing. Year-to-date, we’re on 5% to 6%. It’s a little bit down from last year, but as things change a little bit. But overall, just again, continued strong performance. We’ll continue to outpace inflation on the incineration pricing side, and we have ways to continue to work on that. On the landfill and incineration pipeline area, they’re strong, as we showed from our second quarter performance and year-to-date both in projects and base business and drum volumes into our landfill, all those pipelines are up into those units. And a great job, too, on some of the really large projects that we’ve been able to leverage into those sites. On the incineration side, when we just met recently on our quarterly operating review, not just in incineration, but across the business, all the pipelines were really growing when we look at how we segment our business, look at lines of business, the different business units, real solid pipeline growth quarter-over-quarter and year-over-year in second quarter, so they’re solid. And you can also see from our deferred revenue, our deferred revenue ticked up to $108 million. So up, we’re really excited to really leverage that Kimball incinerator that we’re bringing online in Q4. So, some solid momentum there.

And then was wondering if you could just talk about how you see the recent Chevron ruling affecting the PFAS opportunity, if at all, when more broadly, hazardous waste regulations set by the EPA?

Yes. Our interpretation, Adam, of Chevron is that it is not going to have really any effect on the regulatory environment for us and particularly PFAS. The regulations that are in play today when you think about record waste codes around how waste is managed to the right disposal options, those aren’t going to be changed. They’ve been in place for a long time. They’re a very rigid foundation of record regulations; we don’t think Chevron at all affects that. And on the PFAS side, there’s so much data and so much analytical over the years of how PFAS has really affected the environment, it's hard to ever think that a Chevron ruling is going to affect how those regulations are going to continue to play out for the industry.

Great. Thanks so much.

The next question comes from David Manthey with Baird. Please proceed.

Hi, good morning, guys.

Hi, David.

Yes. First question on Kimball. So it adds, I think, approximately 18% to incineration capacity. And assuming you can take higher-value waste streams, it could be even more than that as it relates to the dollars. But I’m trying to circle in here on the Tech Services sub-segment revenue contribution from Kimball. I think in the past, back in many years ago, you gave us a breakdown of Tech Services between incineration, skilled labor and transportation, landfills, wastewater TSDFs, all kinds of things. When we think about that incremental capacity, does it just impact that incineration piece, which is maybe a third of Tech Services sub-segment? Or do you assume that it’s going to require some of those other services? So I’m just – you’ve given us the EBITDA run rate you think you can get to? I’m just trying to get a finer point on revenues, if you could.

Sure, Dave. I’ll begin, and I’m sure these guys will also add in. When you think about Kimball bringing it online, the 18%, we’ve talked about 70,000 tons of capacity that will add. And next year, we’re really looking to exceed 30,000 tons through that unit. When you look at the revenue at a higher level, and the collection from our customers, we don’t just collect incineration waste. When we’re out there collecting waste from our customers, there’s a broad range which we’re able to leverage our network of incineration and landfill and wastewater treatment and recycling. So we’re servicing customers based on all of their waste stream needs. Obviously, the network has been backed up on incineration. We’re excited to get that capacity online. But to your question about revenue, it’s a compilation of all those different waste streams that will benefit the Technical Services network.

The only thing I’d add to that is that so when you think about the new incinerator, it’s 12%, not 18%. So it is a lot more capacity, but not the 18%. I’d also say when you look at Tech Service and you look at our financials, as Eric said, it’s not just incineration. We have 32 TSDFs, we have wastewater treatment facility, we have solid recycling facilities; it really is over 100 permanent facilities across North America. And so, all those facilities handle waste, different types of waste streams. And so it’s really hard to kind of – we talk about incineration because it’s the biggest part of it, I get that, and landfills are a big part of it. But it’s a very big business. Yes is a very – technical service is a very large business. And so I think that it’s really important to think about it broadly. And so – and it’s really hard for us to kind of pin down like how much came from the facility versus transport and disposal. The answer is that those businesses drove and you see it in the tech services results in Q2. Tech Services were up 14% year-over-year, which is a lot of that is – I think that’s probably two-thirds volume and one-third price. And I think that’s really a testament to what Eric has said around all of the volumes we’re getting in, not just in incineration, which we follow in the quarter, which is great, but all over the entire net.

Got it. That’s helpful. Thank you very much. And then second, just trying to scale the ER work that you referenced here this quarter, $24 million, it’s not the highest you’ve seen, but it’s nothing either. I’m just trying to understand if that’s because of the addition of HEPACO and that’s kind of a normal rate you’d expect to see going forward? And related, is that something that you’ll continue to report going forward given that’s such a large portion of HEPACO business?

Hey, Dave, so this is Mike. I guess we thought it was important because there were a fair amount of really large items. And as you know, you followed us for very many years when we’ve had these large events, we’ve called them out. And I don’t think there – I don’t think they’re going to last for quarters and quarters; I think the multi-year probably done kind of early Q3. And so these are just – we just thought that it was important given the really strong growth in field service business in the quarter. Just so that as you think from a comparison to next year, frankly, we’re going to say, look, there are some large events that we were the beneficiary of at pretty good markets just as we think about that. So it’s just – again, we have some cutoffs. There are some very large events. I’m not sure – you tell me if there’s going to be large events in the back half of the year. It’s tough for us to tell. I do know we’ve gone quarters without it. So well as we see fit, given the size and scale of events, we’ll call it out. But it was really more of a – from a comparison standpoint, given the great results and the beat we had in the quarter to kind of we thought it was appropriate to call out these material items.

And Dave, just one other point, it was not – these events weren’t also just due to HEPACO. It was really the network. It was really a mix across all of our field service business.

I appreciate it. Thanks, guys.

Thank you.

Thanks, guys.

The next question comes from James Ricchiuti with Needham & Company. Please proceed.

Hi, thanks. Good morning. And maybe just a follow-up to what you were just discussing. I think you had been targeting a lot about $30 million of EBITDA from HEPACO and that’s now $35 million. Can you talk about what’s driving the higher expectations for that business? You only acquired it in March. So it seems to be tracking ahead of expectations. And I wonder if you could talk a little bit about that?

Sure, James. Eric Dugas here. I’ll start with that one. And you’re absolutely correct. We did our expectations from HEPACO for the full year did increase $5 million, partially due to some of the larger ER jobs that we have been talking about for the last few minutes. But also I think the integration of HEPACO is probably a little ahead of schedule from what we projected three months back. The team has done a great job of integrating the HEPACO field services office into the legacy Clean Harbors network, sharing resources, sharing labor. And one of the bright spots to the acquisition we talked about was the emergency response line that HEPACO had. Our ability to integrate our field services folks into that business. So, what we have done here at Clean Harbors is really put a full court press on hiring some additional heads. We have been successful with that in field services and it’s allowed us to internalize more of that work and drive more EBITDA into this year. So, as we said a few times now, really excited about that acquisition. And like I said, a little bit ahead of schedule probably in terms of synergies and a little bit better on the business front as well. And those are all the reasons we increased that number.

Yes. The only other thing I would add, since Eric Dugas brought it up, is that our voluntary turnover actually has gone down quite a bit, and that allowed us to kind of keep people longer and realize really good growth. It’s over down 200 basis points year-over-year and an amazing over 600 basis points since over 2 years ago. So, the team has done a really good job of retaining and training good employees, and that’s really helped us in a variety of fronts, not just on field service, but across the organization, and it gives us good safety and better margins.

Got it. And you guys talked a little bit about Group III and plans for expanding that. I wonder if you could maybe elaborate on what you are seeing and how you are expecting that business to perhaps scale over the next 1 to 2 years.

Yes. Jim, we had – we ran a refinery now full time on Group III, actually ran well in the quarter. We have been using that Group III into our blended gallons. I think it’s been a success. And when I think about the pilot we are running now for another plant to get that running, it’s just a different type of oil re-refining process. So, we got to test that out. But there is good growth in this business. We think there is over 20 million, 25 million gallons of incremental Group III out there, and we could dedicate two or three plants to run and use, and that will be a good cost save and give the ability to drive more planned gallons into our network at a higher price point.

And last question just on PFAS. I wonder the conversations you are having with customers in this area, how are things potentially changing versus earlier in the year? Just give us a sense of how you are seeing that business evolve for you.

Yes, James, Eric here. So, when we talked about PFAS, as you know from the past, we have really looked at providing total solutions from performing analytical to remedial events to incineration landfill capabilities and really managing projects from drinking water to industrial water. And to be honest with you, we have really seen growth in all of those areas. Our water treatment that we have seen for PFAS has increased industrial and drinking. Our project business of remediation of contaminated soils has been increasing as well as some of our analytical that we have started on the front end. So, we are really seeing it from all areas. The other key area is AFFF change-ups. So, there have been some discussions and we have seen it in certain projects where we’ve had to go in and remove AFFF. And one other last complement to that is when today, you have an emergency response or somebody has an event at their facility and their foam dumps. That foam is no longer being really discharged on site. It really has to be removed from the site. And so we are seeing those types of activities as well.

Got it. Thank you.

Thank you.

Thank you.

The next question comes from Tobey Sommer with Truist Securities. Please proceed.

Thanks. I will follow up on that last question. How do you see the potential for a new presidential administration to potentially change or diminish the PFAS opportunity through a different sort of blend as far as environmental rules and regulations?

Yes. So, we really don’t think that the change in administration would have any effect on what is happening with record regulations or PFAS regulations at all. We continue to – we think it is going to continue to be business as usual.

The company has been growing for 40 years Tobey – 45 years next year. And through Democrats, Republicans, Conservatives, Liberals, I mean the company – and we’re talking about hazardous waste here, right. So, it’s important that I don’t think that, that really changes the overall kind of view based on the administration.

Thanks. News reports out in recent months about potentially large ES M&A opportunities in the market, how would you describe your appetite for transformational deals?

We are open to those. We are open to those types. They got to meet kind of our strategic sense and meet our strategic hurdles in our financial. But we are certainly open to those. We talked about Vision 2027 of spending a lot of capital to grow that business, double the size of the business within 5 years. We are on that track. I think we are right on track kind of what we said back in the day, back in 2013. And I am excited about those opportunities big and small. It’s like sometimes the hard. The small deals are the hardest ones to do because they take so much work to kind of get done. And so we are open to those they just kind of make sense.

And then if I could ask you to elaborate a little bit on the incinerator capacity and utilization topic. As the new capacity ramps, historically, has there been an influence or a change in the pricing trend in the quarters where that capacity is entering the market?

No, there hasn’t, Tobey. We really do not anticipate any pricing change. In fact, we are going to continue to drive price improvement across the network. So, the capacity will ramp up, as we talked about earlier. We look to do about 30,000 tons next year and grow sequentially after that. We don’t – and the backlog, again, of drums and how our team has been doing and collecting drum volumes from all of our different customers will continue to fuel that EBITDA growth.

That’s a more bullish answer than some alternatives. Thank you very much.

Thanks, Tobey.

The next question comes from Brian Butler with Stifel. Please proceed.

Good morning. Thanks for taking my questions.

Hi Brian.

Hi Brian.

Thanks. First one, just on the SKSS business, when you – maybe a little bit more color on kind of how the spot price and the charge for oil is kind of trending into the back half and maybe what’s built into the 2024 guidance of that 3% to 5% kind of improvement?

Well, the good thing, Brian, is we have made it 45 minutes into this call. There you go, good for you. If you consider the second half of the year, it's only 12% of the business, but I'm happy to answer your questions about it. When thinking about our oil pricing for the back half of the year, we have taken a very conservative approach to our pricing trend. As we reach the midpoint of the guidance we provided this morning, we feel we're making good progress on Group III, capital, and blended volumes. I believe all of these factors will help us stabilize and continue to grow that business. Therefore, when you look at the growth rates we have for the year, as you see, 3% to 5% is pretty modest, but we do not have aggressive pricing in the back half of the year to achieve those numbers.

So, we would probably just build on it, Brian. The team continues to execute on our blended sales strategy year-to-date. Our blended sales and volume is up year-over-year. So, good job in how we are trying to stabilize that. And as Mike talked about earlier in the call, our Group III efforts are beginning to pay off. So, there are some nice things going on there.

Okay. Great. That was my one question for SKSS, and I will go to ES now. I want just maybe some high-level thoughts on as capacity is getting added to the incineration market with you, Veolia adding, maybe we could talk about how do you view the potential for captive incinerators maybe coming back and looking at commercial as an option as more capacity kind of manifest in the commercial side?

Yes, Brian, first, as we have mentioned in the past, all of the captive units out there, those companies are our customers. We continue to work as partners with them to help to manage their variety of waste streams. I think when you think about taking a captive to commercial and any sizable scale, it is really, really difficult. There are individual State and EPA regulations that you have to go through. So, it’s hard to imagine that any type of captive knowing that we know them all and we work with them all is going to really have any material type of change in the market conditions of what’s going on.

On a more likely scenario, Brian, would be that they would process given the process and the cost and the regulations and compliance, and that creates more opportunity for us and the network.

Yes. I guess that was the focus of the question was, what’s that potential of them closing as more capacity gets added?

We continue to believe that there are a few that are prime targets. Their utilization is down over the past few years. So, that – and also the products that they are making have changed. And that means that the waste streams that those captives have been consuming affect the utilization of those units. We also believe that while we know that the EPA is out there and it’s going to be looking to change MAC guidelines, again, which is – they are required to do by the statute. And so they are going down that path. We will evaluate that. So, those – if capital has to be invested by those companies to upgrade those units that are having lower utilization, all of those types of things are catalysts which could affect a captive coming offline.

Okay. And then one last one on PFAS real quick, can you maybe give an update on the PFAS destruction from an incineration and the OTM 50 testing, has that progressed, and is there maybe an update there?

Yes. We are – it’s progressing well. We will be doing that OTM-50 testing this fall, working jointly with the EPA on achieving and proving out once again that repro high-temperature thermal destruction is really the preferred method. And so we are proceeding very well on that.

Great. Thank you for taking my questions.

Thank you.

Thanks Brian.

The next question comes from Noah Kaye with Oppenheimer. Please proceed.

Hey. Thanks for taking my questions. It’s an election-adjacent question, really about the fund flow under the IIJA, I think even just looking at Superfund, right, we have got 2.5 billion out of the 3.5 billion already obligated, but most of that has not been spent yet. I guess how are we actually seeing some of that spending impact your P&L this year? Is that more of a tailwind for ‘25, ‘26, anything you can do to help quantify that is helpful? And then do you think there is a possibility for kind of an increase in awarding activity as we get into the election season?

So, no, it’s very difficult for us to – this is Mike. It’s very difficult for us to kind of directly correlate, here is the investment that they are making in infrastructure spend or in the SIPs act and then how that affects kind of our financial statements and how it all rolls down. But I will tell you, from a project level standpoint, Q2 is one of the best quarters in the company’s history from the level of project work. So – and almost – it’s like I can’t draw – that came from the government spend x amount that drove this investment by this company and drove the contractor to try this stuff that came to us. But I will tell you that that seems to be a very strong pipeline of work. And that pipeline looks really good into 2025. So, can I give you like, well, here is how much has been spent? Here is how much it impacts us? No, I cannot. But what I can tell you is that we are seeing a very strong pipeline of work. Q2 was terrific, and there are no signs that we see from our pipeline work and from talking to the leadership team and the sales organization that would change that view. So, I love the view that all the spend that you are talking about continues on into 2025. We are cleaning up some nasty messes in super fund and in other areas, and it’s a great way to invest in America.

Thank you, Mike. You mentioned earlier, you are on track for Vision 2027. I will say, by the way, as far as M&A, transformational M&A goes or winning kind of M&A, if you pay the multiples that you are getting on this first year HEPACO that will be just fine with investors. But do you feel like you are on track for the M&A plus organic version of those targets in Vision 2027? The $600 million EBITDA, $200 million free cash flow incremental, with HEPACO and Noble, right, you are probably around 50 to 60, correct my math. So, there is a fair way to go. What is the view on whether you are tracking towards those targets?

Yes. No, it’s not a straight line. It never was, and the fact we showed it as a direct line was just because we had to take something. But the path, the success is never that easy. And so I would say that we spent almost $0.5 billion in the first half of the year, really closed it three months ago. And now you are asking kind of when are we going to do more. The answer is that we are going to integrate these strong businesses. We are going to continue to look for opportunities, and we are going to be smart about it and make sure that we are not wasting shareholder capital to do it. And so that doesn’t necessarily mean the M&A world. I mean we did – I think that the Baltimore project and the Kimball project will be unbelievable returns to our shareholders. And I think there are more of them like that out there that we, as a leadership team, are continuing to evaluate that are going to cost big bucks that are going to drive our way to get to the answer. So, it’s not necessarily like buy your way to it. What we won’t do is waste your capital to do it. We are going to have things that make sense to us that fit in our strategic portfolio as well as our financial portfolio. And we are going to get there, and I think we are on track.

I appreciate it. Thanks all.

Thanks, Noah.

Our next question comes from Jon Windham with UBS. Please proceed.

Hi. Thanks for taking all the questions and obviously, great result on the quarter. Maybe I wanted to step back a little bit from the quarter. I would be interested to hear your thoughts on your exposure to growth in the electricity system in the United States. One of the bigger trends going on right now is the resumption of electricity growth, which means more natural gas, more infrastructure investments in transmission. I am just wondering if you could talk about certain parts of our Environmental Services business that may have exposure to that. Appreciate it. Thanks.

Yes, Jon, this is Eric here. So, we – through our Field Service business, we really support some of the nation’s largest utilities from helping to maintain those units. And as they see growth with what’s going on, we will continue to support their growth. Our service with those utilities, we have gotten a number of different accolades about how we are doing with them. We work really in conjunction with them as partners. And so, as the utility infrastructure is growing, we are going to continue to grow with those clients. So, a good opportunity for us, particularly around Field Services.

Thanks.

Thank you.

There are no further questions at this time. I would like to turn the floor back over to Mr. Gerstenberg for closing comments.

Thank you and thanks for joining us today. We hope everyone listening enjoys the remainder of this summer. And we will be seeing some of you as we get back out on the road in the coming months. Please stay safe out there.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.