Greetings, and welcome to the Clean Harbors 3rd Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael McDonald, General Counsel for Clean Harbors. Thank you, sir. You may begin.

Thank you, Christine, 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 our 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 meaning of 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 october 29 2025 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 Harvest believes that such information provides an additional measurement and consistent historical comparison of performance. Reconciliations of these measures to the most directly comparable GAAP measures are available in today's news release, on our IR website, and in the appendix of today's presentation. Let me turn the call over to Eric Gerstenberg to stop.

Thanks, Michael. Good morning, everyone, and thank you for joining us. As always, we are at a TRIR of 0.49. The only way you achieve this level of excellence is with constant operational focus from the whole team to protect themselves and each other. Safety performance delivers measurable benefits across multiple dimensions, from enhanced operational efficiency and productivity to stronger employee retention and company reputation. For any team members listening, congratulations on these great safety results, and let's finish strong in Q4. Turning to a summary of results on factory 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. Our ES segment grew on strength. The technical safety, clean, sustainable solution segment performed in line with expectations, mainly due to our charge for oil program and product. Driving margin growth continued to be a focus for us as we were pleased to see our consolidated adjusted EBITDA margin increase 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 savings. We drove pricing gains and improved productivity while lowering costs, driving better margin from a year ago, primarily due to higher insurance expenses and healthcare expectations, due primarily to employee healthcare costs. We're optimistic with the continued growth in momentum in our waste collection and disposal. We believe that the productivity and margin enhancement initiatives undertaken throughout 2025 and across our businesses put us in a position to benefit as some macroeconomic conditions improve. Turning to our segments, beginning with ES on slide four, segment adjusted EBITDA margin grew year-over-year for the 14th consecutive quarter, with revenue up 3% and adjusted EBITDA up 7%. Our waste volumes, PFAS work, remediation projects, and pricing grew of our revenue increase, as that more than offset the slowdown in industrial and field services. Looking at revenue by the segment, we've led this quarter with 12% dualization, with 89% teams have done an excellent by current economic conditions. That sales effort includes our SK branches, who have consistently driven significant containerized waste volumes into our network. In Q3, safety, clean, environmental services rose 8% through a combination of pricing gains and growth in our core service offerings. The number of parts wash services was 249,000 in the quarter, with a larger average service ticket per stock. The consistency of that business has been a key element to our profitable growth over the past five years. Field services revenue declined 11% from a year ago, more than we anticipated in our guidance. This shortfall reflects the absence of median to large response projects, While we responded to more than 5,900 ER events, demonstrating consistent baseline demand, the revenue impact came from having no substantial projects. Within industrial services, we continue to see customers in both the chemical spending on turnarounds as they remain under significant cost pressure. As a result, revenue was down 4% from a year ago. In light of these market conditions, we focused on cost management, including workforce and equipment utilization. While we are hopeful that maintenance deferral for the past few years improves, we do not expect any meaningful recovery and revenue opportunities for chemical and refinery customers before the spring. Based on our service, we're rolling our wallet share with PFAS and Center in partnership with the EPA as well as the DOD. This study, which we completed in late 2024 in our Utah facility, has its own achievement for the company's recent and rigorous emissions we already know. temperature incinerators destroy these forever but can do so at a gain traction in the offerings ranging from lab analytics to water filtration to site remediation to 20 to 25 percent from a year ago pipeline in our momentum in the marketplace we expect pfos related sales to further accelerate in the years ahead with that let me turn things over to mike to discuss skss and capital allocation thank you eric and good morning everyone

Turning to SKSS on slide 6, this segment delivered results in the third quarter that were in line with our expectations. Despite pricing headwinds in the base oil market all year, we effectively managed our re-refining spread and drove value from other initiatives. During the quarter, we dramatically lowered our waste oil collection costs versus a year ago as we advanced our CFO program. It is clear that our used oil customers understand that we are collecting a waste from them and providing value and reliable services. The team continued to manage costs while still collecting the volumes we need to run our plants. In Q3, we gathered 64 million gallons of waste oil, which is consistent with the second quarter. On the top line, our revenue decreased as expected. In terms of profitability, our adjusted dividend was essentially unchanged. The result was a 100 basis point margin improvement largely stemming from the CFO increase, cost reduction initiatives, and efficiency gains. We also increased our direct lubricant sales, which are among our highest margin gallons, to 9% of our total volumes, which also contributed to that margin improvement. During the quarter, we continued our partnership with BP Castrol to support their more circular offering for corporate fleets. Additionally, we are growing our Group 3 production, as those gallons carry a premium to our several million gallons of Group 3 this year. Turn to slide 7. Today, we announced plans to construct a state-of-the-art processing plant that we refer to internally as the FDA unit. By using an industry-proven salt and combining it with our existing plant, we can unlock incremental value from an everyday product, VTAE, generated today in our re-refiners. This new plant will upgrade VTAE into a high-volume 600N base oil. 600N neutral is a high-purity base oil that is typically used in heavy-duty industrial applications. High-performance characteristics. SDA unit is expected to be $210 to $220 million, with commercial launch anticipated in 2028. We spent approximately $12 million on this project year-to-date, with a total of approximately $30 million expected in 2025. As a result of the project, we expect to generate annual EBITDA in the range of $30 to $40 million, a six- or seven-year payback on the investment once completed. Such a return will rival and represent an additional growth opportunity for SKSS. Staying active in seeking opportunities to generate strong returns for shareholders. We also remain well-positioned to execute our strategy with record cash flows in Q3, low leverage, and a terrific balance sheet. On the M&A front, we're evaluating both non-transactions and larger acquisitions that would provide leverageable assets with high synergy potential that support our market position in a particular business or geography. We believe that in our space, it's best to be patient and prudent in pursuing the right transactions. We've also been evaluating a series of internal investments, including today's announcement of the FDA unit. Including that facility, we currently see a path to potentially investing over $500 million in internal projects over the next several years, ranging from greater processing capabilities within our network, additional hub locations, fleet expansions, and additional incineration capacity. We also view share repurchases as an attractive capital allocation opportunity to generate strong shareholder returns, as demonstrated by our $50 million in repurchases in Q3. Looking ahead, while we believe that the challenges we face in Q3 are temporary and market-driven, with year-over-year growth illustrating our resiliency, we expect our incinerator to run strong through year-end and wage projects to continue to feed our entire disposal and recycling network. Uncertainty and other macro factors in North America and the economy have ripple effects through some of our customers over the past two quarters, but we believe the overall economic outlook remains promising. Based on conversations with customers, we anticipate incentives to reshore and the benefits of the recent U.S. tax bill will drive meaningful lift in American manufacturing and continue to support remediation and waste projects. We expect that spending constraints related to industrial services and field services in our key verticals, including chemicals and refinerings, will loosen in the coming quarters as economic conditions improve. Overall, our project pipeline remains substantial, with growing PFAS opportunities expected to contribute meaningfully to future activity. We also remain excited about the steady ramp-up in production and mix in our new Kimball incinerator as it works toward full capacity. For SKSS, we believe we've stabilized this business with our efforts around CFO, partnerships, and Group 3 production, and are looking forward to the new SDA unit. We expect to achieve our profitability targets for this business in 2025.

With that, let me turn it over to our CFO. came in below our expectations, primarily a short-plus elevated health care cost, the underlying strength from our wide range of service offerings

and diversified cuts at EBITDA to $320 million

to drive profit commitment to margin expansion. The U3 adjusted EBITDA margin expanded to 20.7%, 120 basis point improvement in environmental services. Margin expansion reflects our strategic focus on pricing initiatives, cost reduction efforts, and productivity gains as we see evidence of margin improvement across each of our business units within the ES segment. Within environmental services, demand in our disposal network and collection businesses remain solid, driving revenue growth despite macro headwinds in some verticals like chemical. It delivered more than $40 million in EBITDA, its strongest quarter in a year, demonstrating operational resilience in a soft space oil market. SG&A expense to 12.2%, reflecting higher health care costs and compensation. We are maintaining our full-year SG&A guidance as a percentage of revenue in the low to mid-12% range. The allocation and amortization was approximately $115 million, reflecting our continued capital deployment, including Kimball operations, and increased landfill amortization related to greater disposal volumes. We've raised our full-year depreciation and amortization guidance to $445 to $455 million, primarily due to the strong landfill perforations in Q3 was $193 million in amortization, as I just mentioned, Earnings per share of $2.21. Slide 11. With continued focus, we ended Q3 with cash and short-term marketable securities of $850 million, providing substantial flexibility for our capital allocation strategy that Mike just outlined. Refinancing was executed at favorable terms as we replaced our 2027 senior notes at a more favorable 50 basis points. market confidence in our credit profile. With net debt to EBITDA below two times and a blended interest rate, we maintain a conservative capital structure. Q3 cash flow per prating cash flow of $302 million and a Q3 record adjusted free cash flow of $231 million, which was up $86 million year-on-year. The cash generated net of disposals of $83 million was down from the prior year, Reflecting, we began construction of our high-return re-refinery project, investing more than $10 million in EQ3 to launch this exciting initiative that we expect to deliver excellent shareholder value. We also continued advancing our strategic hub facility in Phoenix, doing our network capability in Phoenix hub project. We now expect our net capex to be in the range of $340 to $370 million. This range, as we expect asset sales to be closer to $15 million this year instead of the $10 million previously thought. We bought back more than 208,000 shares of stock for a total spend of $50 million in Q3. We currently have roughly $380 million remaining under our authorization. We continue to view our shares as attractively valued at current levels. adjusted EBITDA guidance to a range of 1.2 to 1.17 in the field services or industrial services will be offset. Long-term trends of PFAS, remediation and reshoring, create substantial upside potential with recent developments like our EPA incineration study further validating our strategic positioning. In 2025, our revised adjusted EBITDA guidance will translate to our report's midpoint, we now expect 2025 adjusted EBITDA to increase by more than 5% while recent economic turbulence has impacted some aspects of our business. We're optimistic about our future and ability to navigate the current landscape. KSS is stabilizing effectively. We continue to expect full year 2025 adjusted EBITDA at the midpoint of our guidance to be $140 million. The combination of our operating CFO strategies that Mike outlined have established a stable foundation for within corporate, at the midpoint of our guide, we expect negative adjusted EBITDA to now be up 3% to 5% compared by growth-related expenses, higher wages and benefits, and rising insurance costs. We continue implementing multiple cost savings initiatives to partially offset these to a midpoint of $475 million based on year-to-date performance in the U.S. tax earnings into substantial free cash flow returns. We presented near-term challenges. Our highest margin businesses continue to grow and demonstrate competitive strength. Our incinerators, their permanent locations, and supported our margin improvement. The slowdown in industrial services reflects deferred maintenance and projects that will return to market, positioning us well for recovery. Within field services, despite the absence of medium and large event work in the third quarter, it appears to have leveled off, and we expect this segment to deliver greater consistency moving forward. We look to finish the year strong and carry that momentum into 2026, and are excited about the many growth and margin-increasing initiatives undertaken this year, which place us in a solid position for profitable growth as macro conditions improve and we execute on longer-term goals. With that, Christine, please open the call for questions. Thank you. We will now be conducting

a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Tyler Brown with Raymond James. Please proceed with your question.

Hey, good morning, guys.

Good morning, Tyler.

Hey, so, you know, it feels like there's a lot of puts and takes out there. The industrial malaise, I guess, continues to march on a bit. But, Eric Dugas, just it looks like you brought the midpoint down, call it $15 million. But if you had to bucket the culprits, would you say it was really the field and industrial shortfall? And then how big was the health care issue? You brought it up a few times. Was that one time, or is that a go-forward step up in cost?

A lot of that is reflective results. Industrial services being the most predominant piece of that, you know, we estimate maybe $7 million. field services, you know, really just the lack of those medium and large projects that we've seen a good chunk of in earlier quarters, probably about $4 million. And then the health care and the environmental services segment is about $4 million and probably about $6 million. I think you're absolutely right in terms of a lot of puts and takes. We still see really strong momentum and good volumes in more of our waste disposal related businesses of tech services and SKE, and think those will perform quite strong kind of here into Q4 and then into 2026. I guess the last point on health care, Tyler, you know, it 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, you know, doing some things to make sure that we can offset some of the increases we're seeing there. But probably not entirely unusual, but certainly higher cost than we would have liked here in Q3. Hey, Tyler, this is Mike.

The one thing I'd add to what Eric said, we did have a fair amount of high, much higher than, let's say, averages for the past two or three years. Hard for me to say if that's the new normal. It doesn't feel that way, but as Eric said, we're trying to make sure we're changing some of our plans to make sure we cover off on that.

Okay, that's helpful. And then I appreciate that you guys aren't giving 26 guidance, but conceptually speaking, I mean, should we think about EBITDA on a more consolidated basis kind of flattening out year over year just into maybe the first part of 26? It sounds like maybe, Eric Gerstenberg, you're not looking for an industrial pickup really until the spring turnaround season, or are there enough internal levers to kind of drive EBITDA growth even in the first half without a whole lot of economic help?

Yeah, Tyler, I'll certainly not expect industrial turnarounds until the election businesses. And our service community, we're still a percent EBITDA growth. I mean, we really still can do that based on volume and price.

Okay, that's extremely helpful. And then I do just want to come back to capital allocation. Mike and Eric, just obviously you guys announced a very sizable organic growth project. I'm sure someone will go over all of that. there was another decent buyback in the quarter, but just realistically, what should we be expecting on the M&A front? I mean, how does that pipeline look? Are you looking at bigger deals? Are you looking at smaller deals? Do you think you can get something across the line this year,

or is that something maybe more into 26? You know, Tyler, the answer to that question is yes. So we are looking at larger deals. We're looking at smaller deals. You know, I think that we Obviously, we'll talk about the FDA unit. Happy to go into that and maybe other projects we're thinking about. But in the interim, you know, we want to remain prudent. We want to remain disciplined. Like we have for the company's history, frankly. But certainly in the past couple of years, we certainly tried to be very thoughtful about it and make sure we're getting a good return on our shareholder investment. And I think there's plenty of things out there, both large sizes, publicly available, and smaller things that are out there. So, you know, we've remained very active. In the interim, we did buy back some shares. I don't think that's a change in trends. That's more like we saw opportunities there to take advantage of some market dislocation, and we took advantage of that, and we bought back, you know, over $115 million worth this year. And so I think that's a good return on our shareholders' investment. So we'll continue down that path. I don't think that's a change in strategy, but we see ourselves as a growth company. We see ourselves as M&A company, and we'll continue to do things like that.

Okay, perfect. Thanks, guys.

One follow-up, too, Tyler, When you think about, you know, the 5% that Eric mentioned, obviously budget processes is in that area code. And it's probably, you know, most of that's going to be in ES

with a little bit in SK and a little bad guy in corporate.

Our next question comes from the line of Noah Kay with Oppenheimer. Please proceed with your question.

Thanks. Let's continue along the capital allocation theme. Made some really nice progress this year on free cash flow conversion. and free cash flow generation, as you talked about, Eric, you know, with Kimball rolling off and the underlying growth. Mike, when you talked about potentially up to $500 million of organic investments, and obviously this SDA investment might be part of that, can you give us some guardrails around where you want, you know, to convert free cash flow out to EBITDA within the business broadly over the next couple of years? Is there a baseline we should think about? And I know it's a little bit past dependent on what kind of M&A you do, but just kind of try to give us a baseline level that we should be underwriting here.

A lot of initiatives on that front. You know, as we look out into the future, I think we're going to continue to target kind of that 40% free cash flow generation, 40% of EBITDA. I think there will be pluses and minuses to that along the way. The minuses would be the secretive that we mentioned that will be adjusted out of that and into the 40%. But normal baseline guardrails, I'd say 40% conversion, and each year trying to grow up from that.

I think the team under Eric's leadership has done a great job with cash collection. The organization has done a great job with cash collections, managing our spend, and you really see it in the margin improvement. And that's really been helpful trying to get to that 40% and hopefully beat that over there.

Okay, thanks. And just so we're clear, you do intend to formally adjust this SDA investment out of free cash flow because that was not the case with Kimball, right? So is that kind of the practice going forward that these extraordinary organic investments would be excluded?

Yes, you got to know.

And then I guess to double-click on this specific investment, I think just help us understand some of the key assumptions you made in underwriting this. You talked about the six- to seven-year payback. Obviously, we've seen the value of base oils fluctuate a lot over the company's history. What is it dependent on to hit those target returns from a commodity value, if at all?

It's really a great investment for us. It's a bolt-on technology, and it's upgrading a product, moving it up the value chain, technology, and taking over 30 million gallons of what we already generate and sell and creating it at a duty application. application at when we sell that product, so we're excited about that. Overall, the line upgrade of that 30 million gallons into a new arena, bringing that up the value chain. Proven technology with a hydro-treater back down the back end, and so we're excited about that incremental 30 to 40 million dollars of EBITDA once we start up in 2028. And Noah, one thing I'd add to that is that, you know,

As Eric said, we're using the byproduct of the re-refining processes, VTAE, as Eric mentioned, and using that in this process to make a higher-value product. But there's also that 30 million gallons won't fill the new product. We'll have an opportunity to grow from there. We're not assuming we get any other VTAE from any other third parties, which that would be upside to the model. The reason why I bring that up, just as an example, is that I think that as we built this model up, We came up with the $30 million, $30 to $40 million that we spoke of in the live call. I think there's plenty of upside to that model. I think that we, I thought Eric and I, when we went through the analysis with the team, you know, we're very reasonable in our assumptions as far as how we build it, how we think about the price of VTE, how we think about the price of 600N, how we think about the cost of building the plant, how we think about the timeline of building. I mean, we thought through that. We've had many, many meetings on this, you know, with the team and with the board. to ensure that we're doing this in a thoughtful way. So we continue to do what we've done with every large project, on time, on budget, hit the numbers we say we're going to hit.

If I could sneak one more in, you know, I think you were clear now on sort of the delta versus expectations in industrial and field services. I guess just from a forecasting perspective, um i know usually is tends to gather steam into september and then october is is kind of the big month so you know with with that particular line of business was it just the case that um you know these deferrals really started to manifest late in the quarter um and and and can continue through through october here and that's what we're seeing and is there some way to think about you know normal seasonality in the future perhaps being different at all than, you know, what we've seen

in the past? Yeah, no, I'll begin. This is Eric. When you look at kind of the number of counts, when we get into work, the scope of the term is a little bit less than what we, they really wanted to get the units cleaned and back up. As we proceed into the fourth quarter, we took that into our guidance for the fourth quarter as we flow into October here, and that's solid. But we're performing all the turnaround, particularly in the chemical.

I think just to add to what Eric said, and one thing that we can see in our P&Ls in here around the business is the business is we're setting ourselves up really well for when things loosen up and come back. And when I look at even the industrial services, P&L, NOAA, I can see much better labor management. So I can see labor as a percentage of revenue in a better spot. I can see overtime coming down as a percentage of revenue. I can see us using less subcontractors and internalizing more work. So despite, you know, the financial results here in Q3 and what we believe into Q4, which is really impacted by the cost pressures, particularly in chemical and refinery, as we said, that those customers are seeing, we set ourselves up really well for when things change in the future because I do think those investments, particularly on the labor front and other areas, we should reap benefits of that, you know, but definitely in company.

Thank you very much.

Our next question comes from the line of Jim Shum with TD Cowan. Please proceed with your question.

Hey, good morning, guys. Hey, how's it going? So maybe just help me understand. I'm sure other people don't know the 600N base oil market very well. Can you just help us with, like, what is the market pricing right now? what is like peak to trough pricing for this market you know what's the total demand um you know just how should we think about this like what's what's the total demand this year what was it five years ago is demand expected to grow why you know what's the end market just help us you know understand this is a fairly big investment for you guys so just want to understand this market a little better?

Yeah, Jim, so we have an hour on the call. We're not going to take an hour trying to explain that 600 N base market, but I will tell you, I will tell you that it is used primarily in industrial applications, which tend to be a little more resilient than gear oils, heavy-duty diesel engines, hydraulic oils. It's not as sensitive to electrification as passenger car engine oils would have. We've had a lot of customers express interest in this high value, buying this high 600 N oil and we've kind of worked out, we've kind of given them samples of what we provided and they seem like there's a very good receptivity in the marketplace for this base oil. When you think about the market, you know, we'd be a very, very small player in a very large market. It tends to trend a little bit with group two base oil, which has been down over the past couple, three years, but it's at a much higher premium and it's been a consistent, you know, dollar premium to what we're thinking in the group two base oil. You know, and most of the country has to import 600N today, including from Korea and from other places. And so, you know, it's hard to kind of put a finger on what's it going to be three years from now. You know, we're assuming that the trend we see, we're assuming it decreases over the modeling period. You know, we're not expecting this plant to get turned on until 2028, so we do have some time there. But I do think that we've cut this way. We've cut this seven different ways. So let's assume that Basel, the Group 600N pricing is down. I think there's other levers out there, including taking additional BTAE from other companies. That comes up a little softer than we expect. There's other levers we can pull to help offset that to kind of get to where we need to get to. Again, they're on time and on budget that hit or exceed.

Mike, thanks for that. I just want to clarify. It sounded like you said, were you saying the consumption, you're expecting the consumption to decrease over the next couple of years of this oil?

No, no, no, no. It is more about, we have assumed pricing goes down a little bit in the modeling period, not the demand per se. And the point I think that maybe I misspoke is that when we produce this $600, $600 end market, I guess is what I'm trying to say.

Okay. All right. Thanks for that. Maybe switching over to the SKSS guidance, my recollection was just that it was sort of the 140 was the number. you guys just referenced a midpoint what is uh just so everybody's clear like what is the range for skss this year so um and then you know what's the confidence level in hitting that 140 midpoint

jim uh eric here i'd say that as we sit here today we're very confident in that 140 mark. To range-bound that, I hesitate to do so. You might have to force me into a range. Maybe it's a few million on either side, but the way the business is performing right now, particularly around our initiatives of CFO and our ability to continue to drive CFO pricing due to market conditions, the catalyst of that is obviously the high-level service we continue to provide and the fact that we haven't lost customers. I mean, that really is the area that the team has done excellent on this year, and that gives us the confidence that we'll be able to meet that $140 million of EBITDA. So, hopefully that answers your question. Range-bound, we haven't really looked at it that way, but high confidence in that number right now. We feel the 140 is a new low watermark. We grow

from there. Okay.

Great. Thanks a lot, guys. Appreciate it.

Our next question comes from the line of David Manthe with Baird. Please proceed with your question. Good morning, everyone. My first

question is on incinerator pricing. I didn't see a number in the slide deck. Could you talk about what that was? And then somewhat related, I know you give the data specifically in the 10Q later today, but could you talk about specific growth rates for industrial services, field services, as SKE and tech services?

I'm sure the guys will. In terms of incineration pricing, you know, there's pockets, but over the entire population, you know, we're looking at mid-single digits, again, I think pretty consistent with prior quarters. In terms of, you know, the different business lines or business units underneath ES, you know, you'll find our tech services business, really great revenue growth there, some nice volumes, good pricing, but some of our waste remediation projects, those types of things really saw a really strong quarter. So you're looking at, you know, double-digit growth there. Safety Clean Branch continues to do really well. Again, some nice initiatives around our back services and pricing, mostly leading to about an 8% growth. And then we mentioned field services. You know, not overly concerned here. You'll see, I believe, about a 9% drop in revenue there, maybe a little bit higher, maybe 11% now that I'm thinking it through. But really, it's those projects that didn't come through, kind of medium, large-scale projects. We're not overly concerned about that right now. These things can be a little episodic. But when you look at that business over the longer term of the last few years, you're going to see some nice organic growth there. So not concerned with that. And then industrial services, as Eric mentioned earlier, you know, about I think a 3% or 4% decline kind of year-on-year there, largely related to the turnaround services.

That's great. Thank you. And I know we've talked a lot about capital allocation here this morning, but does the investment you're making in this SDA unit say anything about your M&A outlook? And I was also wondering that, you know, since you put out these Vision 2027 goals, we're a little bit past halftime here. I think Hydrochem was already in that 2022 starting point, and you've added Thompson and HEPICO, basically. But could you maybe talk about how things have played out since that update and kind of how you're thinking about the market in general?

Yeah, Dave, this is Mike, and I'm sure Eric and Eric have some thoughts on this as well. But, you know, the SDA unit has no reflection, no reflection on our M&A appetite. That's been an investment that we've talked about internally for a few years, frankly. And so this is more like, hey, we got the board approval. We're starting to spend money on it. We should talk about it and make sure that our investors understand it and we track against that. So that's really the driver of the discussion of the SDA unit. The other items that are out there, the $500 million, those are other things we're thinking about. As we think about where we go next with this, things like adding more hubs or making some investments in other incineration capacities, these are not new topics that we've talked about many times before. So it's more like just trying to say, look, that's another good use of capital that has great, that's a good use of capital. You know, we're going to have a billion dollars in cash by the end of the year. We're going to generate another, you know, high 400s of cash flows in 2020. Our debt investors are very strong. Eric and the team did a great job of pushing that debt out for a number of years, and it shows the appetite that the marketplace has for our high-quality debt because of the high-quality assets. So it doesn't change one little bit. When thinking about Vision 2027, that was always a vision, just what it was. It was a vision of where we'd want to take the company. But we want to be disciplined about capital, and we've been thoughtful about M&A, and we'll continue to be thoughtful, and there are opportunities out there that are big and small, and we'll continue to capitalize on that. So I'm of the view that nothing has really changed with that announcement, with the FDA announcement. I just want to make sure that you understand that this is more of kind of a timing issue that we've been talking about for a number of years that we wanted to share with the investing public

because it was getting to be a material number. Got it. Thank you.

Our next question comes from the line of Larry Solo with CJS Securities. Please proceed with your question.

Great. Thanks, and good morning, everybody. First question, just on the guidance again, and not to be a dead horse, but the myths in the quarter, you guys clearly outlined that, a little bit of industrial, a little bit of field services. But it sounds like you've bucketed that myths out in the quarter, and it's a few cards out for the year. But do we bounce back? were you assuming a little bit of a better Q3 than you are going forward already? I'm just kind of curious if, you know, turnarounds seem to be a little bit less even than expected. You know, so what gives you the confidence that we kind of get back to where you thought we were going to be in Q4? Not to kind of get into the nitpick of the details, but, you know, if you get where I'm going with that question.

Certainly, certainly, Larry. And as we, you know, digested kind of our Q3 results and then projected our thoughts on kind of Q4 and the guide there, you know, I think one thing that gives us, makes it, allows us to feel really good about Q4 is I mentioned a moment ago, and I think in response to Dave's question, kind of the growth that we're seeing in technical services, you know, that 12% revenue growth, more projects coming our way, continued good waste volumes. So we're continuing to see, because of our diverse customer base, although there's softness in certain verticals that we mentioned around chemical and refinery, we continue to increase volumes by collecting from other customers and bringing it into the network. So that part of the business, we see a lot of strength. I think the other thing that pleasantly that we saw in Q3 here that I mentioned a moment ago is our margin expansion, right? I mean, I think, as I mentioned in my remarks, the steadfast commitment to continuing to drive margins and generate free cash flows. That gives us comfort, quite frankly, as we move into Q4 and some of those more waste disposal type businesses. Certainly the services business, as Eric alluded to, industrial services, we're not forecasting any large pickups there. And field services, again, like industrial services, a lot of good margin accretion there that we're seeing, but that can be episodic. So both medium and large jobs will come back. It's just a question of when and where, quite frankly.

I guess I would say one more thing, Larry, to that end. I'd say that all our LOBs, all the businesses that make up environmental services, had good margin accretion year over year. And when you think about from where we were a year ago, where we were concerned about SKSS, where we stabilized that business, we were concerned about free cash flow conversion. We're going to have great free cash conversion this year for a decade to grow. When you think about EBITDA margins, our margin to 30% margins, I mean, yes, that continues on unabated. It's 14 straight quarters of year-over-year margin growth. So, I mean, I feel like we're kind of hitting all our strides.

Absolutely, and I appreciate it. And I'm kind of looking at how this myth, how you put this on a go-forward basis as opposed to just the myth. I just want to make sure that going forward, obviously it's only one quarter, but you threw out a – we appreciate a little bit of color for next year, that 5% number, which I'm sure could move around. And that's just kind of a base on we get all that. But I just wanted to make sure that it doesn't sound like you're building a rapid improvement industrial or field service. So I just was kind of trying to say, then, if you weren't building that in this quarter, then why would we have the MIS? But I get that. The extra color really does help. Just shifting gears real fast. Just on PFAS, it sounds like things continue to go well internally. to get a real acceleration, obviously 20-25% growth is great, but I think your Q is growing a lot faster than that. To translate that into actual sales, we'll need some governmental some kind of legislation or something, I guess, or maybe even the National Defense Authorization Act or something, and I guess we're just in a holding period on that. Obviously, government shutdown doesn't help, but any further, any color on that?

Yeah, Larry, this is Eric. So, you know, obviously getting the results of our tests that we did on our thermal units out and exposed and published by the EPA was a great milestone for us. The activity in the market has been extremely strong and became even stronger when that published results came out. The level of activity of what we've seen, how our pipeline has been growing. We've continuously talked about how our pipeline has been growing 15% to 20% quarter over quarter. It continues to do that. It feels like we even got more of a bump. So we're not really thinking that any major change in regulation has to happen to continue to drive that growth and even accelerate it. We're pretty bullish on, we feel pretty good about it. And as far as the Department of Defense lifting their monitorium, that will be just another accelerator for us, and we're up.

Great. I appreciate that. Thanks.

Our next question comes from the line of James Rusciuti with Needham & Company. Please proceed with your question.

Thanks. Good morning. So outside of chemical, the refinery markets, are you seeing any choppiness, Any other signs of weakness in some of the broad end markets that you guys service?

I'll begin. No, we haven't. We really do three. We're beginning Q4, very strong. The waste side of the business, it's been strong. Volumes, price, into the network and project. I feel pretty good about what we're seeing from manufacturing, from retail, from really, you know, We're very in business because of everybody's generating hasn't sent to our network, which we continue to see, and projects are left.

Maybe just turning to Kimball, and I know you touched on it a little bit, but how should we be thinking about how the scale-up of Kimball is going, maybe discussions you're having with customers? And, yeah, you've talked in the past about better network efficiencies that come as a result of this and potentially some lift to margins. And just talk to us about maybe how Kimball plays out in 2026.

Yeah, so when we came into the year, we're doing that with the Kimball expansion. It's been great. We expect that tonnage to continue to grow as we've laid out. Nothing continues to see. The network efficiencies are into our units. The transportation is showing up. So we're really bullish about how Kimball has helped the network in so many ways. As far as speaking with our customers, you know, the trend continues on how our network provides a really security in being able to have multiple units geographically with transportation efficiencies built on. And when we even think about what's going on with captives, we talk a lot about that. we're at the interest of strong positions.

Last question, just on M&A, and again, you touched on this, but is valuations, is that the main challenge with respect to the potential for larger opportunities that might be out there? Just wondering how we might think about the pipeline for larger deals.

When you think about larger deals, Jim, this is Mike, You know, certainly the whole industry includes some valuation appreciation, which is well-deserved, but for the larger deals provide the most amount of synergies there. When you look at a kind of post-synergy basis on multiple levels that are very reasonable and very value-accretive to our shareholders. So the answer to your question is that we're trying to stay in our swim lane. We look at deals all the time. Price is certainly part of the discussion, no doubt about it. We're trying to be thoughtful and make sure we get a good return. But I think on some of the deals we look at, synergy component is a big part of it.

I think we can provide a fair amount of synergy for the larger deals we're looking at.

Our next question comes from the line of Toby Sommer with Truist. Please proceed with your question.

Thanks. I'm going to ask another capital allocation question, but maybe from a broader perspective over the next two years plus. If you look back at your investor day two and a half years ago, you have about $3.4 billion you thought at the time. and incrementally you'd be able to deploy on acquisitions. Now we've got 500 million internal investments that you cited, and who knows, maybe there's even more. If you could compare and contrast sort of today's capital allocation profile between acquisitions, share repurchase, and internal investments versus what you thought two and a half years ago, what are the differences in that mix of spend?

Toby, this is Mike. I'll start, and Eric can certainly chime in. I think that there's been really no change in our deployment of capital when you think about internal investments or buybacks. I think those two, when you think about the four lenses, the fourth being debt repayments, I think that we have maintained a consistent posture on internal growth projects like the Kimball Incinerator, now like the SDA unit, or buybacks. A steady growth of buybacks this year, maybe a little higher than normal, But, you know, we buy back the flow plus depending on the market that's out there. We still have $350-plus million availability under our current authorization. When I think about M&A, I mean, M&A is lumpy. It takes two to tango, and we've got to make sure that we're getting a good return to our investments. We never said it was going to be a straight line to get. We always said that it was going to be, you know, this is kind of we wanted to mess into the street that this was our, Eric and mine's intent to go do M&A. But as such, there have been deals that we got to a point where we stopped or deals that didn't fit very well that we talked to the board about a couple, three times that didn't fit well that we decided not to go forward on. So these are all the process of being very cash-disciplined, trying to make sure we get a good return.

And I think that our long-term shareholders...

And if I could ask another question about health care expense, do you anticipate health care expense growth increasing or accelerating again next year? Some of the surveys out of the big healthcare consulting firms suggest that next year is going to be even tougher.

Yeah, Toby, it's Eric here. I think difficult to project, kind of read the same news you do. I think at a gross level, certainly I don't think one could say that healthcare costs in general won't increase. For our increase this year that Mike mentioned around, you know, the preponderance of high-cost claims, The frequency of those this year just seems to be higher than normal, and I don't necessarily see that impact continuing. It could, but I think the law of kind of long-term averages would get that back down to a normal level. So I think in short, yes, they'll continue to increase. I don't think they'll increase at the same level that we saw this year at the gross level. However, as I mentioned earlier, we are doing some things internally to try to mitigate the increase, and I think it will mitigate the increase in health care costs going forward.

Mr. Gerstenberg, we have no further questions at this time. I'd like to turn the floor back over to you for closing comments.

Thanks, Christine, and thanks, everyone, for joining us today. Our next investor event will be at the Baird Industrial Conference in Chicago in a few weeks, followed by a Stevens event that Jim will be presenting at in Nashville. Also, have a great day today. Keep it safe and enjoy the upcoming holiday season. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.