Clean Harbors, Inc. Stock

Greetings, and welcome to the Clean Harbors Second Quarter 2026 Financial Results Conference Call. [Operator Instructions]

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tim Rodenberger, General Counsel for Clean Harbors. Mr. Rodenberger, 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.

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, July 29, 2026. 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 of 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 IR website in the appendix of today's presentation.

Let me turn the call over to Eric Gerstenberg to start. Eric?

Thanks, Tim. Good morning, everyone, and thank you for joining us. Turning to a summary of Q2 results on Slide 3. I'll start, as we always do, with safety, which remains at the core of our success. In Q2, our team continued to focus on protecting themselves and their colleagues, resulting in a year-to-date total recordable incident rate of 0.46. This performance keeps us on track to reach our 2026 goal while continuing to outperform industry benchmarks and peer results.

Safety remains a meaningful competitive differentiator for us. We exceeded our guidance for the quarter on the strength of both of our operating segments. Strong performances in Environmental Services and Safety-Kleen Sustainability Solutions contributed to record revenue, adjusted EBITDA and adjusted EBITDA margin. While SKSS clearly exceeded Q2 expectations, what gives us conviction in our outlook is that Environmental Services continues to deliver strong utilization rates, expanding margins and a growing pipeline of long-term opportunities.

Within ES, demand for our disposal assets and vast collection network remains strong, reflecting the scarcity of disposal capacity across the industry. Within our Services business, growth was driven by another strong performance from SK Environmental Services and increased revenue in Field Services. The SKSS segment outperformed due to a variety of factors, including the environment created by global lubricant shortages.

Turning to our segment performance, beginning with ES on Slide 4. Q2 revenue in this segment increased by more than $100 million. Technical Services revenue grew by 18% on strong demand for disposal and recycling services. We won both base business and sizable projects, including a large PFAS related filtration project that directly resulted from previous emergency response work. That project accounted for more than $30 million of Q2 revenue.

Safety-Kleen Environmental Services revenue increased 11% driven by pricing and growth in its core offerings, including containerized waste collection and vacuum services. Incineration utilization in Q2 was 91% versus 86% a year ago, with the new Kimball incinerator included in both periods. Landfill volumes were also up, rising 7% this quarter. Field Services revenue grew 3% despite a difficult comp with Q2 2025. Our Industrial Services revenue was comparable to Q2 a year ago as growth in specialty and other services offset the impact of North American refineries continuing to operate with very limited downtime and turnaround activity.

Adjusted EBITDA was up 8% in the quarter, with ES segment margin up 10 basis points to 27.9%. We continue to demonstrate the earnings power of this segment, delivering our 17th consecutive quarter of year-over-year improvement in adjusted EBITDA margin and our 19th straight quarter of EBITDA growth. Overall, it was another outstanding quarter for ES as we continue to capitalize on favorable market trends that are showing no signs of slowing. We continue to successfully execute on our growth strategies as we head into the back half of the year.

Turning to Slide 5. We announced today that we recently won a significant long-term disposal contract with a manufacturing customer that is expanding its U.S. operations. This 10-year agreement, which centers on incineration waste and complex wastewater volumes carries an estimated value of $600 million with options to expand and scope and extend duration. The contract will commence in the fourth quarter and will likely generate about $10 million in revenue this year. Based on the customers' plans to open and ramp up multiple U.S. sites, it is expected to reach full capacity in 2030.

This contract provides a decade-long growth run rate tied to the expansion of U.S. manufacturing. We believe it validates our substantial capabilities and versatility to safely process large volumes of variable waste streams at our multiple locations. We are proud that this customer selected Clean Harbors as a long-term partner to grow its U.S. operations. We know that the scale and redundancy of our recycling and disposal network in our service locations are key factors in winning this contract.

There are 2 trends we are seeing in the market today. First, the expansion of U.S. manufacturing related to reshoring. And second, customers are seeking to utilize a common service provider for all of their regulated waste and recycling needs. Given the unique capabilities of our assets, we expect to pursue opportunities for new contracts both large and small, while expanding our relationships with customers that are growing their North American presence.

Turning to Slide 6. Data centers is a market that we have been eyeing for some time and I know that some of you have been asking about, we are in the process of introducing an integrated data center solution as many of our services align with customer needs. Our solution consists of 8 separate lines of business that will address multiple phases of the data center market. Our initial focus is on the construction phase, where our industrial services, mechanical flushing, chemical passivation and water filtration services are in high demand. Our specialty services group has had some early successes in meeting with hyperscalers and data center owners. We've already won work on 10 sites to date, and are bidding on a dozen more. We see an opportunity to cross sell and grow, particularly as that market continues to evolve.

In addition to shifting to a variety of data center cooling approaches that impact customer needs, the market is expecting to move from the current heavy construction phase to more of a maintenance phase. We see that as an attractive opportunity to introduce additional lines of business into our integrated offering, including fluid recovery and recycling, debris and waste removal, ER events and lubricant delivery.

Our long-term plans for this market opportunity remain relatively modest as we are targeting growth to $200 million in annual revenue by the end of 2028. In order to hit that mark, we will be investing an additional $50 million in CapEx over the next 3 years to increase the specialty equipment, tankage and vehicles we will need to service customers. The data center market is expected to grow at a CAGR of approximately 20% annually through 2030. With the services we provide, particularly within our Specialty Industrial Services group, we estimate our TAM by 2030 could be as large as $8 billion and $10 billion.

With that, let me turn things over to Mike to discuss our planned acquisition of ES&H, SKSS and our capital allocation strategy. Mike?

Thanks, Eric, and good morning, everyone. Turning to our latest acquisition on Slide 7. We announced today that we have entered into a definitive agreement to acquire ES&H, our regional leader in field services and emergency response services in the Gulf region for $305 million. The all-cash transaction is expected to close in the second half of 2026, subject to regulatory approval and other customary closing conditions. We expect to drive attractive shareholder returns from this transaction as ES&H has built an outstanding reputation with its customers over a 30-year history. They are a recognized leader in environmental ER throughout the Gulf Coast.

The addition of ES&H is expected to accelerate the growth and increase the coverage of our Field Services business. The company is known in the region as a great resource for on-water responses, and like Clean Harbors, the company carries the Coast Guard's highest Oil Spill Response Organization classification. Their talented employees, geographic footprint and equipment fleet will be a welcome addition to the company.

ES&H is headquartered in Louisiana with a total of 13 service branches across that state in Texas. The majority of those are coastal locations that support its maritime service. In addition to its primary offerings, the company also sells a brand new service called Forefront that includes emergency response readiness plan development, training and management of customers across multiple industries. ES&H's revenue are expected to be approximately $90 million annually, which should generate adjusted EBITDA of approximately $30 million. We expect the acquisition to generate cost synergies of approximately $5 million after the first full year of operations, which equates to a post-synergy acquisition multiple of 8.7x.

Moving on to SKSS on Slide 8. As Eric highlighted, this segment delivered spectacular results this quarter. The greater than 40% increase in its top line and remarkable 143% increase in adjusted EBITDA reflects the elevated market pricing during the quarter due to the scarcity of base and blended products. The business also continues to manage our oil collection services effectively, collecting [ needing ] volumes while delivering higher year-over-year charge for oil revenue.

Strong demand for our re-refining products was a result of major global supply disruptions in the Middle East and Asia, which created domestic market scarcity and drove multiple price increases in the market during Q2. In the quarter, we also saw the benefit of ongoing strategic initiatives, including producing Group III gallons and selling more blended volumes. We increased our blended direct gallons sold in Q2, which accounted for 11% of total volumes sold.

Our closed loop offering, where we collect customers' waste oil and deliver lubricants [indiscernible] is gaining more traction in this market. As mentioned, our collection team also did a great job actively managing the front end of our re-refining spread in terms of both collection volumes and costs. We gathered 61 million gallons of waste oil while continuing to increase revenue generated from our CFO program compared with a year ago.

Overall, we were pleased to see the SKSS segment rebound so strongly after recent challenging years. We expect the supply constrained conditions to extend into Q3. And importantly, we believe that our strategic investment initiatives, like Group III, more blended and the [indiscernible] will position us when base oil and blended prices return to prewar loans.

Turning to capital allocation on Slide 9. We continue to look for the best opportunities, whether internal or external, to generate the highest and most durable returns on our shareholders' capital. The ES&H acquisition we expect to close in the remaining months fall into that category. Additionally, we recently closed a $30 million acquisition of the New England-based field services and waste oil collection business called [indiscernible] delivered $4 million to $6 million of annual adjusted EBITDA. They are well known here in the Northeast and will help support the gallons we need for our New Hampshire re-refinery as well as provide more spill response capabilities. We are excited about other attractive acquisition [indiscernible] that we are engaged with or expect to come to market later this year.

Internally, we continue to invest strategically to accelerate our growth and increase profitability, including our previously announced vacuum truck fleet expansion, SDA unit in Chicago and other strategic opportunities, such as the data center investment that Eric outlined. We have the balance sheet and low leverage to execute both facets of our growth strategy. We also continue to support share repurchases as an attractive way to return value to our shareholders.

As we move into the back half of 2026, we will look to extend the momentum we generated in the first half. We have an industry leading team that executed well from both an operational and sales perspective. Demand trends are favorable as well. We believe ongoing reshoring is creating opportunities for us to add new customers and waste streams. Our PFAS pipeline continues to grow with no signs of slowing in the U.S. or Canada, including both private and government customers. For SKSS, the business continued to be well managed at both ends of our spread while operating in a robust pricing and demand environment. Overall, we expect to deliver record top line, bottom line margins and free cash flow this year, which will support our capital allocation strategy.

And lastly, we wanted to take a moment to acknowledge our founder, Alan McKim. Alan built this company from the ground up over 46 years and created opportunities for thousands of employees. The culture, value and customer focus that defines Clean Harbors today are direct reflection of his leadership. We recently renamed our campus headquarters in his honor, a fitting tribute to the tremendous impact he's had in our company, our people and our industry.

With that, let me turn the call over to Eric Dugas, our CFO, to discuss our financials.

Thank you, Mike, and good morning, everyone. Turning to our Q2 results on Slide 11. Our quarterly results came in well ahead of the expectations we outlined in May, driven by outperformance and strong execution from both segments. Total Q2 revenue increased 12% to $1.74 billion, reflecting a continuation of many of the trends we saw exiting Q1 and discussed on our previous earnings call.

Q2 adjusted EBITDA increased 22% to $409 million. Our consolidated Q2 adjusted EBITDA margin was 23.6%, representing the highest quarterly margin in our company's history and a 190 basis point improvement from the prior year period.

Market conditions in SKSS were clearly a factor. But our margin story in the quarter goes well beyond that as we leverage volume growth in our network, gained market share and added waste streams in several verticals, continue to drive strategies to offset inflation and higher fuel costs, controlled labor costs while continuing to minimize third-party costs, and improved utilization rates of our vehicle and equipment fleets.

SG&A expense as a percentage of revenue in Q2 increased year-over-year to 12.4%, primarily due to higher incentive compensation, insurance and claim-related costs and some strategic investments in the current period to support future expansion efforts. For the full year, we continue to expect SG&A expense as a percentage of revenue to be in the mid- to high 12% range.

Depreciation and amortization in Q2 was $122 million, up slightly from a year ago. For 2026, we now expect depreciation and amortization in the range of $475 million to $485 million. Second quarter income from operations was $269 million, up 28% from the prior year. Net income in Q2 increased 34% as we delivered EPS of $3.22 per share.

Turning to the balance sheet on Slide 12. We ended the quarter with cash and short-term marketable securities of $517 million. These cash balances will help fund the M&A activity we discussed today as well as the other capital allocation priorities that Mike outlined. We closed the quarter with a net debt-to-EBITDA ratio of approximately 2x, while our debt carried a blended interest rate at quarter end of 5.2%.

Turning to cash flows on Slide 13. Cash provided from operations in Q2 was $239 million, up 15% from a year ago. CapEx net of disposals was $124 million, up nearly $40 million from the prior year. We advanced our strategic growth investments in Q2, including the SDA unit and our vacuum truck fleet expansion. Those accounted for more than half of that year-over-year increase with the remainder coming from investments in our base business. Adjusted free cash flow, which excludes spend from these strategic projects was $136 million in the quarter, up slightly from the prior year.

For 2026, excluding expected $85 million of spend on the SDA unit, $25 million related to our fleet investment and $10 million related to our data center strategy that Eric highlighted, we now expect net CapEx to be in the range of $370 million to $430 million, with a midpoint of $400 million. This represents a $20 million increase versus the guidance we provided in May due to incremental capital investments related to some attractive growth opportunities in select markets as well as new customer wins and PFAS associated work. These opportunities and related CapEx investments are intended to accelerate growth in both the near and long term.

During Q2, we bought back approximately 84,000 shares of stock at an average price of $298 a share. At June 30, we had just under $550 million remaining under our share repurchase authorization.

Turning to our guidance on Slide 14. Based on first half performance, planned investments and current market conditions, we are now guiding to a 2026 adjusted EBITDA range of $1.35 billion to $1.41 billion, with a midpoint of $1.38 billion, and representing a $110 million increase from our prior guidance. We expect meaningful increases in both of our operating segments and are confident in our revised outlook. At the midpoint, this updated 2026 guidance now implies adjusted EBITDA growth of $210 million or approximately 18% versus 2025.

Looking at our annual guidance from a quarterly perspective, we expect third quarter adjusted EBITDA to grow 24% to 28% year-over-year on a consolidated basis.

Looking at how our annual guidance translates into our reported segments. At the midpoint of our guidance range, we now expect our 2026 adjusted EBITDA in Environmental Services to grow 6% to 9% for the year. We entered the back half with strong demand across all of our businesses. This range does include approximately $5 million in contributions from the Terra Nova acquisition. This guidance assumes no contribution from ES&H. Once we conclude the regulatory process and close on that transaction, we will update our guidance accordingly.

This 2026 guidance midpoint now assumes that our SKSS segment delivers approximately $275 million of adjusted EBITDA, double the amount we delivered in 2025 and significantly higher than the $165 million we provided in May when we expected the sharp spike base oil prices to be more temporary. There remains substantial uncertainty around the duration of current market conditions and how long they will impact petroleum-derived products such as base oil. While there is potential for more upside given the state of the market, we believe $275 million is an appropriate assumption at the current time.

Within corporate, at the midpoint of our guidance, we now expect negative adjusted EBITDA to increase by approximately 8% to 10% compared to 2025. This growth from our prior guidance is driven by higher incentive compensation, insurance claim costs, acquisition impacts and strategic investments we're making. Looking at it as a percentage of revenue, we still expect Corporate segment results to remain flat in the prior year.

For 2026, we now expect adjusted free cash flow in the range of $520 million to $580 million with a midpoint of $550 million. This represents a $30 million increase versus our prior guidance, reflecting the higher adjusted EBITDA we now anticipate this year and considering acquisition impacts in the revised CapEx assumptions.

In closing, I share Eric and Mike's enthusiasm about our growth prospects for 2026 and beyond. Resiliency, broadening capabilities and profitable growth have long been hallmarks of Clean Harbors, all of which have been demonstrated over the past several years. Even when external market conditions were not entirely favorable, we have continued to grow by executing well, taking market share and expanding many of our service offerings.

This year, we are starting to see some of those macro conditions turn in our favor, which is why our growth rates have been increasing. We remain a critical vendor and partner for our customers. And for many of them, we serve as their sustainability solution. We are bullish about our profitable growth for both of our operating segments in the back half of this year and we remain focused on executing against our longer-term vision and goals.

With that, operator, please open the call for questions.

[Operator Instructions] Our first question comes from the line of Tyler Brown with Raymond James.

First off, just congrats to Alan, wishing him all the best. But Eric D., so there's quite a few moving pieces in the quarter. I think the guide is up maybe $110 million. It looks like most of that is from SK, but can we talk a little bit more about the ES guide. So again, there kind of seems to be a few things, and maybe you can parse it out. But on the good side, it looks like you have Terra Nova. It sounds like some stronger ER work in Q3, and you got the new contract, it's positive. But then maybe Industrial Services is slightly lower, would that be right? But can you just give us any help on kind of what's going on inside of the ES guide specifically?

Sure, Tyler. I think you hit on a couple of the big moving pieces there in total. We did raise the guide for the full year, about $30 million, $10 million of that is Terra Nova. The remaining pieces there, certainly, the good momentum we're seeing exiting June and into the second quarter has been strong, both on the volume and continued pricing side. The new contract that we talked about will kick in, in the fourth quarter. We've got some upside from that. But there's other opportunities that we're seeing as well that's providing the good momentum in Environmental Services.

When I look at Industrial Services, I think similar to kind of the comments we had last quarter when we look at the back half for Industrial Services right now, kind of flattish to last year. If we see any type of escalation in kind of turnaround activities, that would be upside to our current guide. And on the Field Services side, that business has really performed well for the last year or 2, we're winning some big jobs, and we do have some nice things that we're working on currently to support the back half. So I think a lot of good momentum leading into the second half of the year in Environmental Services, and we should see some kind of sequential margin improvement here in Q3 and Q4 as well.

Okay. Perfect. And then just if we can kind of touch on Industrial Services a bit more. I kind of get it, the refineries are kind of running all out given crack spreads. But Eric G., there have been some higher profile, call it, accidents in the past few months. And I'm just curious how you're thinking about Industrial Services over the next couple of years. It just kind of feels to me that all this deferred maintenance is starting to really stack up. And maybe eventually some of these plants are just simply going to have to be turned around. Maybe something similar to what we saw post COVID. But I'm just curious, just any thoughts about Industrial Services over the next few years.

Yes, Tyler, thanks for the question. When we look at year-to-date and what's happening with the refinery demand, we all know that they're all running very hard to make products flat out. We've positioned ourselves very well with all those refineries that when they have downtime, for example, the couple of incidents that you spoke of, that we're going to be really well positioned to be able to help them. Our relationships with those refinery customers have continued to grow tighter. We're providing more services for them overall. So we're pretty bullish that when the turnaround happen for whatever reason, we're going to be strategically well positioned.

So while the overall year-to-date looks that our turnaround count is down probably about 1/3 year-over-year, we're well positioned to capture on that. Additionally, the team has done an excellent job of making up for the refinery downtime in other specialty businesses. And our growth in our specialty lines of business within Industrial Services is up about 14% to 16% year-over-year. So we feel pretty good about that trend and we focused on putting more branches around our customers to grow our specialty business in the technology that we're deploying there, which is really just nice efforts by the team.

Our base business also, when you think of our base business within Industrial Services, and the amount of personnel over 2,500 that we have working day in, day out of customer sites. That business is up about 2% to 4% from a revenue standpoint as well in the industrial world, so we feel good about that.

And then lastly, I touched on -- continue to touch on what we talked about in our script is that we're bullish on the opportunity in data centers and how we can grow with data centers to offset -- more than offset any of the decline and what continues to happen in the refinery and the chemical world. So we're deploying capital. We're standing up additional branches. Those are services that we do well, and we're tailoring them to the data center world. And we're quite -- again, feel quite good that our growth prospects overall between specialty and data centers are strong.

We've also been doing a lot in the IS world to make sure that we're capturing everything that we can capture through AI initiatives. And specialty industrial services platform that help us run that business and make sure we're charging accordingly for our services to expand our margins. So while overall, the refinery demand for turnaround is down, it's become a smaller percentage of our overall business. We're bullish on other areas that we're implementing hard throughout the organization to grow IS and grow the margins with that business.

The good thing, Tyler, is, I agree with all the things that Eric just mentioned for long-term growth prospects. I'm really excited about it. The good news is we hope -- in the guide that we just spoke of, we don't put a lot of -- that's on the comp. If that happened, that's upside. I think that we're actually pretty thoughtful and balanced in our view as we entered the back half of 2026.

Our next question comes from the line of Noah Kaye with Oppenheimer.

A lot of growth initiatives to talk about this quarter. So I'll just ask about two of them. First, data center. So this is really interesting. Liquid cooling is growing probably 35% to 40% CAGR over the next 5 years. There are some really stringent requirements for liquid cooling management around pH turbidity in particular requirements. And we've seen some of the equipment vendors and EPCs add flushing and filtration services.

Can you talk a little bit about your competitive differentiation and right to win when you're dealing with like highly sensitive materials? And can you help us understand what capabilities you're building up with that $50 million in CapEx?

Yes, great question, Noah. So I first start out by saying that our industrial team has been doing flushing of systems, I'll call it at a broad scope for a long time. And we've had the people, the technology, the engineering staff to be able to support those types of jobs within chemical plants and refineries for a long time.

And so what we're really doing is adapting those services, same thing, same technology into data centers and adding in the chemical passivation that we're doing. So connecting a system, flushing the data center after they built it, removing all the residuals and put protective coatings on to be able to make sure that those cooling systems meet the demand.

So really investing in that flushing and passivation that we've done all along and building out our scale, building out more of a structured sales team around it that are aligned closely to those hyperscalers and general contractors. So we're pretty well prepared to leverage people and technology that we've already have within the business and operating in other large-scale plants and apply that to data centers. And it's working for us. There's high demand. We've got a good brand. We've got good people in our HPC and Clean Harbor's industrial. And so we're pretty excited about our path ahead here.

The good news is, Noah, is we've been doing this for a long time, and we have an industry-leading safety record, an industry-leading compliance record. We have the national footprint and we add in, as Eric talked about in the prepared remarks, is not -- it's going to be growing, but it's modest growth. It's modest growth over the next few years with obviously, the upside of much higher upside.

Yes. Helpful. And then on the large manufacturing contract customer. Congratulations on landing that. Maybe you mentioned there in manufacturing. Maybe you can help us understand a little bit more, give us a little more color about what that's exposed to and what investments you need to make to support that contract ramping through 2030.

Yes. We would hate to go into the specific vertical. I'm sure that will come out at some time. However, it's predominantly leveraging our back-end disposal market, incineration as well as complex wastewater treatment. We've had a nice technology that's been deployed within the organization back to the early '90s called clean extraction system that utilizes supercritical carbon dioxide to remove organics and recycle the wastewater, which was a very compelling technology for this customer to complement incineration. So we're looking at their waste streams and how do we not only just provide incineration in capacity, but also recycling services and a total waste management concept with them, which all went to play for us in helping to assure that contract.

When you look at the contract, it's going to ramp up over the next 4 to 5 years, about $15 million to $20 million of revenue per year and then get to an $80 million to $100 million run rate. When you think about what we have to add, we're taking some of our great insight people and putting them right on the customer sites. We're also adding additional trucking and driver capacity, all things that we can build on from our national fleet to be able to service this customer and provide them the redundancy and the recycling and the incineration services that we need.

So perfect example similar to some other major customers we talked about in the past, but we're getting embedded providing the services they need, leveraging our unique capabilities and disposable assets for them.

What I think about it, Noah, is the reshoring theory, it proves the reshoring theory, it's evident of that as we get into that.

Yes. And applause because you guys are not waiting a ground for the IS refinery turnaround. There are some real growth initiatives here to take that business higher. So nice job, guys. I'll turn it over.

Our next question comes from the line of James Schumm with TD Cowen.

Congrats on the great quarter. Let's just talk about SKSS for a minute, if we could. Just kind of curious if you can help with the expectation for 3Q and 4Q with the $275 million EBITDA guide for the year. What does that imply for the quarters? Is it -- are you assuming sort of flattish at the $93 million level for the third quarter and then $55 million in the fourth quarter? Or what should we expect there?

Jim, it's Eric. I'll start. And I think similar to last quarter, I'd like to kind of share some of the assumptions we have behind that. But I think pretty similar to what you just mentioned, when we move into Q3, assuming kind of pricing remains at an elevated point kind of similar to where we are today, and then begins to kind of trail back down kind of in Q4. So we see -- what I would tell you is kind of we see Q3 here maybe a little bit better than Q2, just have some differences around some turnaround timing that we had early in Q2, and then Q3 kind of trending down for the balance to arrive at that $275 million. And we'll continue to update assumptions next quarter, but that's how we see the business today.

Okay, Eric. And then just is there any refinery maintenance that we should be aware of in the third or fourth quarter that's significant or noteworthy?

Nothing more than already planned [indiscernible] and downtime.

Okay. And then lastly for me. You guys mentioned market share gains. And I was wondering if you could elaborate on that. Was that in a specific segment or anything like what gives you confidence that you're gaining share? If you could just talk about that a little bit?

Yes, sure. So when we look at the second quarter this year and even as we've come out of the gates of this year, year-over-year, we've seen our volumes increasing in multiple different areas. When you look at waste volumes in particular, containerized waste volumes. Our [indiscernible] business has been growing in both our Clean Harbors business and our Safety-Kleen Environmental business. And we came out of a record June.

When we look at some of the trends that we're seeing and how we're growing those volumes, we're certainly getting tighter with customers. We're expanding and taking over more traditional white space that other vendors may have had. And the way we're doing that is really continuing to get embedded with those customers through our insight programs and what we refer to as our total waste management program where our people are embedded and our tools and our systems to help them manage their waste needs. So by offering that type of service and that type of waste management, we're managing waste streams into our network. We're providing additional types of services and we're also providing traditional waste streams that we didn't typically manage, but managing those into third-party vendors.

So really providing a full service with the customer. So all those things combined is really what we see that in larger RFPs that there's more of that Clean Harbors, we have the footprint to be able to offer. And we think that's translating into market share gains with existing and future customers, and that's translating into our numbers.

Yes. The only thing I would add to that is that if you -- a lot of our competitors are right, it's hard to get a sense of what those are. But if we look at our pipeline, we look at our results, it's growing much faster than any market data I can see. And so we give confidence to that because the numbers would tell you that.

Our next question comes from the line of Adam Bubes with Goldman Sachs.

The Safety-Kleen Environmental Services business continues really robust growth performance, I think, 11% in the quarter. Can you just help us understand what's driving that? How would you break that out between pricing and volume? And is that -- is the volume side reflective of market share gains or favorable underlying demand? Just help us understand that performance.

Adam, Eric here. So you're absolutely right. We're thrilled with the performance of that business continues to put forth. When I think about that 11% growth, typically, we see kind of price to volume ratio there about 50-50, maybe a little bit closer to 60-40 on the price side here as some of the fuel recovery charges kind of kick in to make that higher. But I think that's a business that we see evidence of taking market share in that business as well, going back to the last question that we had. And we can see it in the volumes as Mike alluded to, and it's also an area of business where we've done a really nice job of retaining our people. The drivers in that business are really the key to growth there. They get to know their customers, they get to know their regions and ZIP codes that they service, and we're seeing more and more kind of customers come to Clean Harbors in that business as well as well as growing with the customers there. But to answer your question directly, probably in this quarter, 60% pricing, 40% volume, but still very strong.

Just to build on that a little bit more. When you think about the lines of business that we offer under the Safety-Kleen environmental footprint, and they break it down a little, an area that's been showing real high growth rates within it is our back services. Close behind that is our containerized waste services. And and even our parts washer revenue and our margins there, they're all contributing every one of the lines of business within that business unit have been growing pretty well, and we're making investments when we talk about the vac expansion and that $25 million over the next 2 years that we're spending in capital, that's all around supporting that business growth.

Yes. And what's interesting, Adam, is that 11% is obviously kind of eye-popping, and Eric and Eric gave a good job of explaining it. I mean that business has grown at this high single-digit rate for many years. It really is a great business model that deserves a high multiple and it deserves high valuation because this is -- it's higher, low double digits, it's obviously better. But if you look back, go look back to the trends for the past 5, 6, 7, 8 years, even before COVID, I mean it was -- it's a high single-digit grower. It's been for many, many years, something we're really glad on.

Great. Appreciate the color there. And then on the SKSS side, thanks for the detail on the cadence and sort of the back half. But what are the assumptions embedded in guidance on base oil pricing and your rerefining spreads relative to 2Q levels?

I'll take this. I would say that we follow kind of industry guidance that we get. And as Q3 is strong, as Eric Dugas mentioned, it does -- we do have base oil pricing coming down in Q4, and that's leading to the lower guide. And we're just using -- who knows, but that's what we're using as an industry guidance to kind of give us some direction as to how we're thinking about base oil price. And we just use that as our model.

And Adam, just one other thing to add. When you think about the current market conditions year-to-date in the SKSS business, one thing that we're really seeing develop here is not only significant demand for Group III. So we're continuing to ramp up our efforts to make as much Group III product as we can.

But we're also seeing really heavy traction in our closed loop offering that Mike talked about in his script. And what that means, obviously, is that not only are we collecting used motor oil, but they're buying our quality blended oil products from us in a customer-to-customer basis, and we've seen a tremendous uptick and pretty excited about where that can now go on the current market conditions. And the team has done a great job of deploying that closed loop, and we've had other players that work with us on that. So we're excited that those 2 are along with the SDA and others are contributors to really getting to that cadence that we all want around stabilization of the EBITDA across the SKSS business.

Our next question comes from the line of Jerry Revich with Wells Fargo.

I wanted to I wanted to ask on the manufacturing side. We've gone from an environment over the prior 20 to 30 years of offshoring and now we get the benefit of reshoring from a Clean Harbor standpoint. Can you just talk about which pockets of manufacturing reshoring are really additive to your opportunity set? We're seeing obviously power and gas compression and semis and electronics. Can you just talk about what moves the needle for Clean Harbors as you look at the U.S. manufacturing plans. What are you folks excited about from an end market standpoint? And what's the magnitude of upside to Clean Harbors?

Yes. Clearly, at the top of the list are around semiconductor, you mentioned that one when you think about that Phoenix area, the Texas area. We've been building out our platforms there to service those customers and see real activity and large-scale plans to continue to onshore there.

Also in the pharma area, general manufacturing, we're seeing solid opportunities there that play themselves out in the coming years. That would be close to that as well. And in other smaller areas, too. When you think about programs like around aluminum manufacturing, that's another area we're seeing more start-ups again of making more aluminum as an example, more onshoring and other products like that.

What's interesting is that many different end markets in many different verticals generate hazardous waste. You'd be surprised about hazardous waste comes from all different facets of the U.S. economy. And so whether it be in health care or in retail, I mean we're seeing growth in those areas as well, areas that you think that you get a lot of growth on it, but we've seen good growth in those areas as well.

Great color. And then can we shift gears in SKSS, obviously, really strong returns business for you folks through the cycle. Anything you can do to reduce the cyclicality at a time like this? Is it an option to enter into long-term contracts, maybe we shave the peak and maybe improve the trough price realization? Is that an option for you? Are you folks thinking about that at all given your really strong competitive position for rerefined product?

Yes, Jerry, one of the -- two of the big things obviously that we've talked about. Number one, to reduce the cyclicality is number one around that Group III producing more of that. And number two, utilizing that, our other Group II plus to drive a direct blended program that leads to that closed-loop relationship with key customers. And we're seeing that with many key customers. We're also seeing that the large refiners really love our product, too, to complement their suite of products. And probably about 70%, 80% plus of our Group II plus base oil, our Group III is working with those large providers.

I would say, Jerry, that if you look at the -- the cyclicality is we sell a commodity product, and that product moves up and down with -- based on a variety of different factors. But if you open up the aperture and look at the last 5 years and kind of where the guide is kind of as of the day, you do a simple average, it's in the mid-2s. And so we feel like it's going to be hard for us to say like, okay, what's next year, what's the year after this, it's kind of based on what the price of base oil is. All the points that Eric just mentioned around more Group III, selling to new customers, working with large refiners, all that's very true. But ultimately, you got to look at longer-term horizons. We're obviously excited about the business this year. We've always been excited about the business. We've done a great job to see managing the spread. But you got to look at it over a long-term horizon because it's going to be cyclical.

Our next question comes from the line of Jim Ricchiuti with Needham.

A couple of those growth drivers you identified, just on the data center opportunity. Can you say what kind of revenues you're generating currently in this market and maybe help us with the growth rate you're anticipating this year?

Yes. To begin, when we look at our estimated revenue this year, we're going to be in that $15 million to $20 million range. And our growth plan is that by 2029, we'll be on an annual run rate of about $200 million plus. So our buildup plan is really around that business, what we've seen with it, with the expertise that we have is a nice margin business in that mid- to upper 20s area on that revenue. So we're -- we feel pretty good about that.

And customers, can you say how many customers? And I think you alluded to 8 lines of business, but it sounds like initially tied more toward construction?

Exactly. The lines of business really, when you kind of break down the 8 lines of business that we referenced, they're really across all 3 different business units predominantly to start up to -- start up and continue to build is around our IS business. ES business, really providing debris and waste removal and battery recycling and emergency responses, we would expect there, too. And then on the SKE side, when you think about lubricants and fluid recovery and recycle, that business unit can benefit from what's going on with data centers as well.

Got it. And into PFAS project in the quarter. I'm wondering if you can just give us any update on how the PFAS business is tracking this year just in terms of perhaps percentage of revenue the growth? And whether your expectations have changed at all over the near term for this part of the business? It sounds like it's still going to be a good long-term driver.

Yes. I would say that our expectations have accelerated a little this year. I'm sure our team will do is when we talked in the past, we were looking at a pipeline and a revenue growth of about 20% per year. And when you look at the level of business that we have this year, it's really grown to be a 30%-plus increase year-over-year. The large project that we referenced. As many of you know, we did a large emergency response for a customer. That translated into after the emergency response was done into a PFAS treatment and remediation project from that event, and that's really what we were -- the team was executing on in the second quarter.

So we also see continued momentum. We talked about last quarter where the DoD, the Department of War has officially lifted their moratorium around incineration. So our team has been out there pounding the pavement, meeting with 700-plus military installations, and some of those really need to make more progress sooner. And there's been a large push to do that. And the framework that we've laid out in the past about how to handle PFAS and its different shapes and forms has made traction. So we continue to be bullish and we think we're deploying the people and the assets and have the complete total solutions around PFAS. So we're feeling pretty good about it.

Yes, Jim, it was -- we had a great quarter on PFAS. And if you take out -- even if you take out the large event that Eric referenced, we're still believing that, that 30% plus growth rate is really getting to good traction for all the reasons Eric mentioned, I think that we're really seeing really the benefits of that, not just in the U.S. and in Canada. We're starting to see some of that growth in Canada as well.

Our next question comes from the line of Shlomo Rosenbaum with Stifel.

It was good to see that incineration utilization go up to 91%. But I thought maybe you could talk a little bit about where we are in pricing versus volume in the quarter and kind of how did it shake out for your incinerators kind of the mix shake out?

Sure. I'll take that, Shlomo. And incinerators, as you all know, are kind of grouped into that tech services line of business where we saw the 18% growth. If I had to parcel up that 18% in totality, I'd say it kind of breaks out in thirds, 1/3 of it is probably good project volumes that we saw throughout the quarter and inclusive of the job that Eric just mentioned related to PFAS. 1/3 -- the remaining 2/3 is probably equally split between pricing as well as increased volumes and mix. And so I could say 1/3, 1/3, 1/3 there.

But when you think about the categories in general, we're really excited about continuing to see significant volume increases really across all of our disposals, not just incinerators, but landfills as well and then the other technologies we have. So that gave us a lot of confidence and has led into the increasing guide across the [indiscernible] services space.

Okay. Great. Maybe I could pivot a little. Where are you on the charge for oil? And just in terms of -- on a sequential basis, I know you talked about it year-over-year. But with the rise in oil prices, are you seeing more competition now where people are willing to kind of just take it for free because they're able to start to refine it? What are you seeing over there?

So, that's really the great story in the quarter even though base oil pricing has been up quite a bit, kind of we've been able to continue to charge for oil kind of up year-over-year, which I think is just a real testament to the team and their ability to drive that. It's down a little bit sequentially, down a little bit as we guide into Q4. But I think what the amazing story is that although pricing is very, very high, which we all know, we're getting a really good -- continue to have good traction on the CFO program. And the reason why we worked very hard drive the business from a PFO to a CFO, we love to give that back. And I think we have all the resources, the assets and the people to hold the line there.

Okay. And when you're just talking about holding the line, can you give a little more detail? In other words, like could you just -- are you expecting even if we go back to prewar levels, you'd still be able to kind of maintain it within 10%, 20%? Just what -- how should we think about that?

Our goal is to stay as CFO and no matter kind of what happens in the price, never go back to PFO. That's the plan.

Okay. And then just one more pivot. Just with that acquisition of ES&H and just -- it sounds like it's more of like a maritime type of acquisition, and I was just wondering what makes you decide like at this point in time that, that's just a good place to expand into? And what are some of the capabilities that they bring in particular that you didn't have already? And is it really geographic expansion? Or is there something in particular that they do that's unusual?

Yes. It's not -- I wouldn't call it a maritime play at all. I think that the -- what we're looking at by acquiring that business is very, very similar to our traditional Field Service business. All along the coast, all along the waterways, we've always had boom and equipment and the resources and the capabilities. We've been in OSRO as well as we've talked about there.

So those capabilities are part of the heart of what Clean Harbors has done every single day. And so it is a nice concentration of branches that complement our network in that Louisiana and Texas area. So expanding our footprint, which we've talked about over the years is we've been looking to open 15 to 20 field service branches within the organization, within North America on an annual basis. So this really hits the mark of creating a better presence, a bigger presence for us around that Louisiana and Texas market, where we were a little bit light on our field services revenue. So it's a great fit there.

And then additionally, Mike had mentioned in his script, the capabilities of forefront. And that business, that's a sub business of the ES&H footprint. That is really working with large companies that need emergency response plans and drills, have [ retainers ] associated with them. We've done that as Clean Harbors over the years, but the scale that ES&H has built there. And the market, looking at that forefront capabilities and the people there is really that helping us launch that as well. So a great fit overall complementing our field services presence, our business that we've been growing there. HEPACO, as you know, from the past, very similar field service acquisition that had a lot of benefits to the organization. So we see ES&H very similar to that.

He really explained that this helps us in an area that we don't have a huge presence in, and that forefront technology, as [indiscernible] mentioned, we're going to be able to leverage that pretty well across a nationwide rollout.

Our next question comes from the line of Larry Solow with CJS Securities.

Great. I echo the best wishes to Alan. Quarter of a century run for CJS and Clean Harbors, so thank you to him and best wishes. I guess just on the large contract you announced. So it sounds like a new customer are significantly incremental higher revenue. It feels like it's just a convergence. So you mentioned people wanting -- companies wanting to use a common service provider. Your capabilities, obviously, probably are by far the best in the U.S. and then more onshore manufacturing coming on board. So it feels like maybe we'll, even as we go forward, see more of these type of larger contracted business. Is that fair to say?

Yes. We feel pretty positive about that, Larry. It's -- as you mentioned that, when you think back to our large acquisition of a customer growing with 3M, which dates back a number of years, very similar type growth where that customer and this new customer, and we're seeing trends of other customers really want to have a service provider that have a national footprint with redundancy with a real strong safety and transportation network and trans compliance network that can not only manage just things like incineration and wastewater, but also have processing capabilities and recycling capabilities of solvents and wastewater treatment and landfill.

We just have such a great large network to be able to leverage with large customers who need that redundancy and service capabilities nationally. So we feel that will, as more and more reshoring, onshoring happens, there seems to be that sense where we see the momentum out there in it. And we have great tools and great people to be able to grow with those large customers and provide them the surety that they need to properly manage and track their waste streams.

And just on the ES&H acquisition. So the margins on that, pretty good, this was like mid-30s. Is that driven just by mix? The water cleanup, I know general [ MDR ] is higher margin work. Is that the primary driver of those good margins? And it sounds like this forefront will probably have good margins as well, but maybe that's still a relatively modest business, too.

Yes, the forefront has good margins, but the legacy business, too, very similar to what we've been doing when you think about ERs and base business. They were -- look, they are a little bit heavily more weighted towards ER, which is high margin as an overall percentage. When you compare their margins of ER and base business to ours, it's pretty close. So we're -- again, just a great complement.

Our next question comes from the line of Tobey Sommer with Truist Securities.

Single question for me. Could you discuss the return profile on acquisitions that you've announced this year and maybe compare and contrast them with the internal investments that you've articulated so far in the call in data center, new branches, et cetera?

Sure, Tobey. I'll take that. It's Mike. When you think about the M&A that we've done so far this year, the ones we've announced, and you do the analysis around what the multiple is that we pay on a synergized basis, they're all under [ 10. ] And I think that's a pretty good answer. And it really shows the discipline that we've had. If you look back a year ago, we didn't have a lot of acquisitions. But it wasn't because we weren't trying and looking at things. We're very active in the marketplace. If we did not land on anything this year, we've been able to land on it, but with the same level of discipline and [indiscernible].

When you think about the interim investments, those tend to be very good returns. And because there's more risk involved in some of these deals, it takes longer. We have a higher risk profile on these. But we think that the investments we're making in back trucks are in the FDA unit or in other things we're talking about, whether it be data centers have an incredible return over time because of the fact that it's self-help, it's self-help, it just takes longer.

Our next question comes from the line of David Manthey with Baird.

First, could you dissect the EBITDA guidance change here? So as I'm looking at it, it looks like 110 basis points or -- I'm sorry, $110 million at the midpoint for a delta. You picked up $110 million on SKSS going from $165 million to $275 million. My calculations on corporate is maybe a $15 million bad guy. And does that imply that ES in the new guidance is $15 million higher and $10 million of that organic. Does that all add up?

Yes, Dave, I think you're spot on there, kind of an increase of $15 million in the ES kind of offset by corporate as you implied. I mean I'd also point out that for the full year, we're up $30 million where we thought we would be kind of back in February when we first entered this year. And it has to do with a lot of the good momentum that we've highlighted. Yes. So lots of good growth in ES is what I kind of want to highlight there.

Okay. And then as it relates to ES profitability, you touched on a few of these items. But you saw 8% growth, margin up just 10 basis points. Could you talk about the puts and takes within the year-to-year growth that affected the segment margin?

I think the 2 biggest things there, Dave, on the margin growth in Q2 for ES is really tough comps on the field services side, we had a significant ER in Q2 of last year that had some particularly high margins. And then as Eric alluded to with some of the comments around Industrial Services, a little bit of a tough comp there in Q2 just given the nature and the mix of work that we're seeing in the current year.

I think as the year continues to roll out, again, the full year forecast, kind of 30 to 40 basis points of incremental margin year-on-year. So still kind of on track with our expectations, and quite frankly, still on the march to a longer-term Environmental Services segment margin profile of 30% plus.

Our next question comes from the line of Nandita Nayar with Bank of America.

Just two quick ones from my side. Just two quick ones here. So with regards to the incremental from Kimball this year, I believe we talked about an incremental of $10 million to $20 million of EBITDA. Could you just remind us what's kind of baked into the updated guide? And maybe how it's tracking so far this year?

Yes. Our Kimball ramp-up continues to go well, the number of the $10 million is hitting the mark. Our tonnage expectation this year, ramping up the plant is ahead of plan. So while we're excited to continue to meet the expectations we had on bringing the Kimball incinerator online and really helping the network and helping our customers.

Great. And I also just wanted to directionally just touch on the free cash flow outlook into '27, '28. And I'm not asking for exact guidance, Mike and Eric G., just would you say '26 is maybe likely the peak for your growth CapEx initiative? I noticed we did step it up by $10 million or so this year, and you did talk about the $50 million that's kind of spread across the coming 3 years. But just as you guys kind of progress towards your mid-40s free cash flow conversion target. I was hoping you could just give us some color on maybe the bridge that kind of gets us there? Do you kind of see these return initiatives growing faster than the CapEx spend? So maybe we could see an acceleration in maybe free cash flow growth over the coming years? Just any color there would be helpful.

Nandita, it's Eric Dugas. I'll take that and then I'm sure Mike and Eric can add any color I missed. But when we think about free cash flow and we think about free cash flow conversion, we're really targeting kind of that 40% on an adjusted basis. Obviously, on top of that, you alluded to some of the strategic incremental capital projects that are going on this year.

A good chunk, but I think we're going to continue to see some investments there kind of going forward. But all of those investments we make they go through a screening process, and they provide really good higher-than-normal returns. And that's why we choose to do them. And what you're seeing there this year is some incremental projects, really the acceleration of some of the things we talked about in the past as well as with new business opportunities [indiscernible] had some incremental CapEx there.

But I would think about it as from an adjusted perspective, roughly 40% this year is how it works out. We're going to continue to drive that number up. I hesitate to put a long-term goal on it at this point, but just know that when we put out some long-range plans here internally, it's growing that 40% basis. And continuing to do high-return internal capital adjustments that can help us in the near term and long term.

The beautiful thing about it is that the CapEx is growing because the opportunities are growing. The pipeline is strong. And as Eric said, June was the best month in the company's history. When you think about [ both ] volumes, [ coal ] volumes are also the best month in the company's history. So I really believe that the reason why we need to make these types of CapEx investments is because we see the long-term value creation over the next 2027 -- to your point, 2027, 2028, 2029, and we need to make the tech investments today to drive that type of long-term growth. And I'm excited about it. I mean, data centers is one more good example of ways we can capture kind of what we do well and leverage it.

This concludes our question-and-answer session. I would like to turn the floor back over to Mr. Gerstenberg for closing comments.

Thanks, Christine, and appreciate everyone joining us today. We hope everybody has a great summer, and we hope to see some of you at our investor events in the coming months. And most of all, please have a safe rest of your week and a safe summer.

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

Thank you again, everybody. I appreciate everybody's participation. We are going to start the next company panel with Clean Harbors. I want to welcome Mike Battles, Co-CEO; Eric Dugas, the CFO. I appreciate you taking the time to talk with us. And Mike, this is your second time up here on the stage this morning.

So I'm going to punishment.

You must like it up here.

I do not.

Similar to the other company panels, I'm going to start this off just basic questions. There's going to be some overarching questions and some company-specific questions, and we can kind of attack it that way from the industry perspective. And I thought I would just start out at high level.

Maybe you could talk about some of the high-level trends that should provide tailwinds to your business. So there's the PFAS, you're on the panel, the reshoring, onshoring, captives closing. Can you maybe take these one by one, talk about how investors should think about these trends impacting Clean Harbors' business over the next several years. And to the extent possible, if there's a way to quantify it?

Right. Well, first of all, thanks for having us. We appreciate an opportunity to talk for Stifel and for you to have us here on stage and tell the story of Clean Harbors, which I think is a great story, and we're hitting on a lot of cylinders right now. So I'm here -- I'm happy -- Eric and I are happy to be up here sharing that with you and with the investor base.

So when you think about the 2, 3 -- the 3 big items you just highlighted, PFAS, I spent this morning, a good hour this morning talking about PFAS. And that's kind of -- that's probably the most actionable right now of the 3. And as I said this morning, I think that the market is very strong for us. I think that it really has been growing at a very good clip. I think that continues over the next few years. I don't see anything -- obviously, clear regulation, we'll talk about that later. Clear regulation will be helpful, but I don't think that's stopping right now from our customers, whether they be the government, whether they be federal government, whether they be state governments or private companies.

So I think PFAS -- there's some questions on PFAS coming up, but I think PFAS is going to be a great grower for Clean Harbors over the next 5, 10 years easily.

When I think about reshoring, I mean, we definitely see PMI growing. The last 5 months has been a good run. People who may know this is the highest PMI in the month of May was the highest it's been in 4 years. And so we're on the back end of that. We're waste. So we'll see that kind of later. But we certainly see from a pipeline standpoint, from a volume standpoint, things are picking up. And it's not just in areas where we've been growing, which has been retail and other areas, but really in where the high-margin waste streams are in the industrial; in the chemical space, we've seen pretty decent growth. Again, still anecdotal versus the actual revenue generator, but still very good growth there.

When I think about captives, captives, there's 41 captives out there. They are -- that fit our profile. I think that we remain very close to these customers. We talk to them all the time. I mean that is a long selling cycle. And I think that there's -- it's coming. It's going to be here, but it's really hard to predict when.

Okay. And then just in terms of how these different trends could impact your business. I mean I know, Michael, is trying to pin you down to a $0.5 billion market business in the next few years. I'm just thinking out, I don't know why it can't be $1 billion business as you go along?

You said in your initiation report, $100 billion to $300 billion. Well, your words are guide here.

Have been in the industry. It's kind of hard to point this $10 billion from here.

I'm going to reference a very bright sell-side analyst who told us it was a $100 billion to $300 billion market -- addressable market. I'm not sure who did that, but I think it's solid as the rock.

All right. Well we're expecting to see some really strong growth from you now.

I hope so. I hope so.

What are you seeing on the reshoring and offshoring? So is that -- how material is that to your business?

I think it's very real. We -- when you think about growth in semiconductor or in pharma, you have to -- as you're building new facilities, you need to make sure that you have an outlet for that waste stream, whatever waste stream is being generated. And we're having conversations with those customers today about that type of growth. And so I'm of the view that reshoring is very much alive, very good grower and very real from what we see from a pipeline standpoint.

How much is the pipeline versus how much you're actually, hey, this is starting to hit us today.

I don't know.

I mean I think a lot of the reshoring is still on the come, Shlomo. But in our business, we have a lot of forward-looking information that we get from customers, and we can see their plans around higher production levels. And that's what's on the come. But I think we are seeing, and I know we're seeing in our revenues today, our volume growth in 2025 and 2026 was pretty solid, and that was against the baseline and maybe a macroeconomic environment that wasn't the strongest we have seen.

So with the better macro factors and currently in 2026, we're seeing greater volumes, and they're coming from some of the industries that Mike mentioned. And we're developing new locations and new hubs around those growing industries in specific regions of the country to realize that.

Yes, Eric makes a good point. We've been growing our tech service business, which is where most of the chemical company goes in mid- to high single digits in an environment where industrial production has been flat to down. And so I'm of the view that if we see any of this that you're talking about and if PMI is real and it's going to grow, I mean, the future is very bright. And so I feel like we've been able to do it in an environment that's been kind of mess. And so I'm of the view that, geez, I would hate -- I would love to see what would happen if industrial production does really start to pick up, which I think it is.

Okay. Great. I want to pivot a little bit towards incineration. And just what's going on in the market. We obviously had Neville in North America just here on the last panel, and they're talking about their Gum Springs incinerator coming on the third quarter, sometime in the fourth quarter of this year. And that brings extra capacity into the market. And they talked about a little bit of how they kind of prefilled some of that. But just in general, between what you're doing with your Kimball facility and what they're doing with the Gum Springs, how do you feel about the market's ability to absorb that capacity that's coming in without impacting pricing?

Yes. I think it's a great question, and it really comes down to kind of the laws of supply and demand dynamics. But I think the way the market is viewing it is for many of the reasons that Mike just alluded to, a lot of the tailwinds, just the natural tailwinds that we're seeing, whether those be reshoring, nearshoring, I heard a new term this week, home shoring, but I'll just call it greater domestic production, the PFAS opportunity that we spent a lot of time today speaking about and then captive incinerators, which I'm sure we can speak about as well.

I think the general consensus is that this incremental capacity will be absorbed. The last 2 facilities, the new incinerators that we opened, we've seen that the demand pick up and that capacity be absorbed and continue to really garner some nice pricing kind of on the incinerator front.

So it will be a little bit of a long-term add to the network, opening up a new incinerator as we've experienced twice in the last decade. It takes a year or 2 to kind of ramp it up and get the right waste streams through the plant. But again, we see a lot of tailwinds in the business, the latest being maybe some improved production conditions. And we think that will be absorbed just as it has in our case, the last 2 times that we've done this.

I mean incinerator pricing has never gone on sale. And maybe in some years, it has been slow growth, but it's never gone backwards. And so I don't see that happening. And as Eric just said, I think that you turn the plant on, and we've seen it in Eldo and in Kimball, Nebraska, it takes years to get fully operational. So it's going to take -- for that 100,000-ton capacity incinerator, it will take years for that to kind of get up to full capacity, which makes sense to me, which they have said that publicly themselves.

So do you have a backlog as well in terms of like, hey, we know this capacity is coming on, but we also know there's stuff that's coming in that you're able to point to hey, there's not a bunch of like For Rent signs that are going to go up...

Capacity for sale? Yes. I think that -- as Eric mentioned, that we heard from some large pharma companies, some large semiconductor companies, there's going to -- the waste is going to be there. I'm not -- I'm a little concerned about that.

Okay. Maybe shift a little bit more to the captives. It's hard to tell that team when are they going to close. There's obviously an issue of if you do close and you incur certain expenses to actually close, are there certain regulations that you see coming down the pike? Or what could be an impetus to spur some more of those closures? So we've been talking about that for a little while. 3M was the last big one, but what would it take to kind of push that forward a little bit more?

I mean, again, I think captive closures is something that over time will happen. It's probably not a question of if, it's a question of when. And certainly, there are some incremental things that are going on in the market around emissions and maybe some capital that certain captive incinerators will have to put in that may drive some of these captives to make that decision like 3M did a number of years ago to close and kind of move those volumes into the commercial space.

What I'd say, Shlomo, is that many of the operators of these captive incinerators, they're customers of ours today. We have relationships with these companies. We handle some of the waste streams that can't go through their captive or perhaps when they're down for a turnaround or maintenance, we take some of those waste streams.

So there's a long-term kind of history with those captive operating companies. We have a gentleman on our team that keeps close contact with those captive operators, meets with them regularly. And we're continually showing them how a move like what 3M did could benefit them, how we could save them money, how we could save them capital investment that's going to be required over time, how we could handle their waste in a very efficient and safe way. And we can give them surety that if and when they do close their captive they can move their volumes to us, and we'll be there for them in the long term.

One of the advantages of our network is we have redundancy, which is really valued by all of our customers. But when you think about a captive closure and some material amounts of volumes moving into a new place for that customer, it being Clean Harbors, they want to know that we're in it for the long term and that we can handle their waste, and that's what we do. So a huge opportunity, I think, for us, something that's going to kind of backfill the capacity that's opening up.

It really turns into a little bit of a return on headache for these companies. They want to focus on making things. They don't want to focus on these complex facilities. So again, I'll go back to my earlier comment. It's probably not a question of if, but when. And that's the difficult part here is being able to tell all of you exactly when this is going to happen. But we're confident it will in time.

Yes. The good news is that I know everyone wants to model as to, okay, what to put in 2027, what to put in 2028.

Which quarter?

Exactly. That's my point.

Right. Okay. We'll shift a little bit over here. Just there was a comment, I guess, on the first quarter call about the PFAS pipeline increasing 25% to 35%. How does the pipeline increasing impact revenue? So what do you -- how does that work in terms of converting over to revenue? That was pipeline. What does the qualified pipeline look like? Maybe you can explore that a little bit and as long as you're talking about how we should model, maybe you can give us...

Give us some modeling advise? I think the purpose of us sharing that with the investor base was not to say what does Q2 PFAS look like because it is a little lumpy, right? It's more to give assurance to the investor base that the growth is real and it's sustainable over the long horizon. We talked about 20% to 30% growth in our revenue growth for the year. And the quarter was much better. I just don't want to -- I don't want to start giving quarterly numbers on something that's a little lumpy and is a little event-driven.

And so you hate to kind of set yourself up for that type of failure. So -- and so the pipeline -- we talked a lot about it as a team to give out the pipeline number because like now people are going to ask what the pipeline is in Q2 and Q3? The answer was not to say the pipeline is X versus Y. It's more to give you assurance that, that growth is real and sustainable, and it's not just a one-off 2025 event based on some events that we end up winning, right?

So I'm of the view that the pipeline -- the qualified pipeline is also very strong, which I qualify as 60% more than likely of achieving. I think that's also growing at a same type of clip to answer your specific question. But I do think that the purpose of it wasn't to say, okay, what's the Q2 number because I think it's very dangerous to do that. I think it's overall, I think that it's a signal to the marketplace that it's real and sustainable. That's the purpose.

Perfect. And then is there a specific regulation that you're looking for in the next year or 2 that you think will kind of stimulate more activity in PFAS?

I mean I think that obviously, clear regulation would be helpful. I mean, as we talked about this morning, you have real good regulation on -- for like water treatment, that's kind of very clear. And maybe you have some general direction as to disposal outlets, right? So -- but otherwise, there's a lot of ambiguity out there.

Now states aren't waiting around for the federal government to do that. So some states like Maine and New Mexico and New York State are doing some things around it. So I think that's very real. But I do think that having better regulation in our framework, for example, which is the reason why we put it in the Q1 earnings release is to tell our investing public and our customers that we have a great framework that we've been working on for 10 years that does remediate PFAS based on levels of concentration. It's not just through incineration. There's solid waste in certain cases. There's deepwater, deep well injection in certain cases.

So I think it's a very real and very -- and we just had a conversation with the EPA about our framework. They really like the framework, and they're going to hopefully come up with some rules around that. We need better rules, we need funding and then the customers come from there.

Okay. And is there any visibility into the rule-making process right now or just kind of...

We're partnering as much as we can partner. I mean I think that we understand that customers -- because the problem, Shlomo, is that if you're going to spend -- if I'm a CEO, I'm going to spend a lot of money to clean up a problem that exists in one of my sites, I want to make sure that it's clean, that I don't have to do it twice or 3 times. Like you want to make sure that if I'm doing it, I'm going to spend the money and get it done. I want to know how clean is clean. And so with that, without clear regulation, I'd be very concerned that I'm going to dig all this stuff up and find out it didn't go deep enough. And now I'm really screwed, now doing it again, which seems like something I would not want to do.

Got it. And then what about some of the other emerging technologies in PFAS destruction. Are there other ones that you're using or other ones that you feel could be comparable as super critical water oxidation, electrochemical oxidation, photochemical reduction be processed, cold plasma, other ones that are out there.

Yes. Yes, I think all those are legitimate. I mean, I think that all the different technologies you made are all -- have a home. But I want to say that I want to make sure it's very clear to our customers and to the investor base is that you want to make sure that it's not just like pilot ready versus large-scale, provable, compliant and repeatable type of treatment and solution.

And I always worry that it may work well on a lab bench, but is it going to work out when it's 110 degrees outside or it's snowing outside because that's really what you have to make sure it works with. And we know through our testing with the Department of Water and the EPA that we do have a level of [99.9999%] destruction, which is essentially destroying it completely that's proven and compliant and give you assured destruction.

And so I think -- but to be fair, since I was up in this morning with someone who does super critical water oxidation, there's room for all of us. I think the pie is going to be enough that we're going to need -- PFAS, we call it as one thing, it's incredibly complex. And so they tell me we need all those technologies to work and work well to solve this problem. So I'm of the view that I think the pool is big enough so that we all have a good home here.

Got it. I'm going to ask you a question that actually is a flip of the question I asked you before about capacity in the market. But given all the demand that you're seeing, do you see in other project like Kimball coming on the back of the ramp of Kimball of expanding or another incinerator in order to -- these things take a long time to build and then to ramp, so you can't build -- there's no just-in-time. So how are you thinking about that? Are you already exploring other sites for potential expansion how are you thinking about that?

I mean, Shlomo, I'd start off answering that question by just saying what we were able to do in El Dorado, Arkansas and more recently in Kimball, Nebraska was to be able to build an incinerator at an existing site where we had existing permits that needed modification. We had existing infrastructure. We had water rights and things like that, that are very important to an incinerator.

In terms of kind of adding additional capacity, we'll see how these tailwinds play out in making that decision. I think the tailwinds to your earlier question, they're very strong. And over time, we will consider kind of additional capacity, which could be a third new incinerator, if you will, at another site that we have. I imagine it will be very, very similar to what we've done with the last 2.

But it's the type of decision that we're actively thinking about. But to put a shovel in the ground and start that project, I think we'd rather be a little late to the game, let that capacity and the demand absorb the capacity that's out there now and then make that decision in the future. It's about a 4, 4.5-year kind of timeline is what we experienced in Kimball to kind of first shovel in the ground to first waste stream going through. So it's something that totally -- we're totally able to do, I believe. And there's some other things we could probably do at existing sites to help get incremental capacity through in the meantime, if needed.

Are any of your other sites positioned so that it's similar to Kimball where you have the permits can be expanded. You feel good about that. Do you feel the relationship with the neighborhood is good in all that?

When we built the Kimball site, we explored the opportunity at another site basically on the same land as our incinerator out in Utah, and that would likely be able to expand the same way out there.

Okay. Maybe shifting a little bit to some of the M&A that you guys have done recently. Two acquisitions announced in the last 6 months or 5 months, actually, Depot Connect and Terra Nova. And maybe you could just explain to the investors what did you buy exactly? How does it fit with what you have? How are they growing, margin profile? And where do they fit within your company?

Yes. So we're both excited for both Depot Connect and Terra Nova, about $360 million of spend over the past 6 months, as you noted. And I think that they fit very well in our swim lanes. What we've learned probably the hard way is we want to make sure we're buying things that fit well with our swim lanes that are -- these are wastewater treatment, solidification pits, permanent facilities that draw -- that have a good list of customers and are good growers that we can integrate into our business very well.

They fit into our technical services business and our field service business, 2 areas that have been really growing with really good margins. And so I'm investing in both the businesses and the people who are running those businesses. Our long-tenured Clean Harbors employees who really know what they're doing. And so I'm excited about the opportunity. In early days, the both acquisitions have done really positive. And -- but they really are -- they fit our swim lanes, and we're probably going to continue in that going forward. I think companies that fit our swim lanes that are highly permitted, that have high barriers to entry is where we want to go.

To dig deeper, what do they do, do?

Well, no, they -- sure, they do the same thing. They do lab pack cleanups. They do wastewater treatment. They do solidification pits. We're taking sludge and maybe dewatering the sludge and that waste, some of that water can go into POTW, some of that can go into an incinerator or into a landfill.

I mean they are very similar to what we do. And we spent a lot of time in the -- talking about incineration, which is certainly big important. We own 10 of them. It's awesome. It's great. But that type of work of wastewater treatment, of solidification pits, of the grind of cleaning up industrial wastewater, that's good margin business. That's a good growing business, and that's kind of what we bought.

Can you talk a little bit about what you're doing in the rail-car stuff on that. I thought that was a little bit interesting in cleanup.

Yes. We do tank cleanings all the time. So rail-car is just a natural step on that. We do thousands of tank cleanings every day. So rail-car is just one more step beyond that, which Depot Connect does a great job with.

Got it. Can you talk a little bit about the pent-up demand for the industrial services and for the turnaround? So how do you quantify it? What are your clients telling you? Obviously, the narrative seems to have shifted to, hey, we're -- turnarounds are not happening because no one is making any money, they want to put any money into it, to, hey, we're finally making money. We don't want to stop making money.

So what -- how much demand do you see there? And what kind of visibility do you really have to when the demand shifts to, hey, guys, I got to use you before something breaks and I'd have a bigger issue.

Yes, yes. It's a very interesting business. There's a little bit of a there where you have a period of time where, hey, we're in cost-cutting mode and we want to save money and we reduce our maintenance spend and our turnaround. And now the plants, kind of the situation we're in now is those refinery customers and chemical customers to some extent, are producing at high levels and they don't want to slow down and take that important time to do the maintenance and turnaround that's required.

And Shlomo, in terms of visibility, I would look at past cycles. And I've been drawing an analogy to something I think is really real that when you think about the COVID period and the patterns and behavior that we saw amongst these same customers back in COVID, you think about kind of March 2020, the world coming to a halt, these same customers stopping the level of maintenance they're doing, doing smaller or no turnarounds.

Then you kind of get to March of 2021 perhaps and the world turns back on. The same customers are now ramping up production and producing at high levels. And again, they don't want to stop and do that important maintenance and turnarounds. That's kind of analogous to where we are today. And then if I just go back in time again, kind of late '21 into '22, you saw these same customers begin to have disruptions and it was time to perform these important maintenance services and turnaround services.

And in our Industrial Services business, you saw a pickup into '22 and then into 2023. And when you speak to the members of the team that have been in this business a long time, they've seen patterns like this. So the visibility, I think we have into the future is that historical pattern that we've seen. You are beginning to see some disruptions out there and some incidents at some of these -- at some of these types of facilities.

I can't draw a direct link to kind of less maintenance and turnaround causing those, but it could be an early indicator. But I think past history and past cycles have told us that eventually, these are extremely large complex plants. Millions and millions of dollars are invested in them. They need to run and they need to do those important services that we help them provide eventually.

So based on past history and using the COVID coming out, would you start to think that this gets better in the second half of this year, the beginning of next year or...

We haven't planned any improvement in the back half of the year.

You have not?

In the guidance we gave a month ago, and you can.

We're hopeful that things will improve. And the reason I bring up past history is we've seen that. But in terms of our expectations for 2026 and the financial targets we've put out there, as we said publicly, we kind of have the back half kind of flattish to last year. No real uptick baked into the guide.

We'll see how that comes to fruition here in the back half. But you got to think eventually here, the tide is going to turn. And hopefully, latter half of '26, but certainly in '27, we would think that more maintenance is going to be required.

So not in guidance, but hopeful. That's the way to think about it.

And supported by past cycles.

That's right. And when -- just on the ground, when clients see things like what happened in California with that the core and thing. Does that push them more to do the maintenance? Or they're like, hey, that's a little bit of a different business than us? Or do they -- how do they think about that?

Every refinery has tanks like that. And I'm sure if I was sitting -- if I was running a large refinery, I would do inquiry about it.

Did you send out e-mails, Hey, did you see that?

I think they read the same newspapers I read.

Okay. Could you walk us through the business lines? And some are GDP growers, some are GDP plus growers. Which ones are which? And what drives the plus?

I guess I'll start in just pointing to kind of our largest business line within -- or I should say, business unit within our Environmental Services segment, our tech services business. When you think about that business, about $1.6 billion in revenues, we think about that as a GDP plus-plus grower. And when you think about the normal GDP or industrial production, the pluses are some of the pricing power that we see in that business. So that's where our incinerators are. That's where we have the greatest pricing power, kind of mid- to high single digits there historically.

You think about project work. So you think about sites that were contaminated and need some remediation work, that's in that business. And a lot of times, that type of contamination was done years ago. So it's outside the scope of kind of GDP or current industrial production. Obviously, regulation, PFAS, I think, is the perfect example. Regulation can drive incremental demand for us. So -- in tech services, that's kind of the plus, plus, plus. I'd say in our Safety-Kleen branch business, again, about $1 billion business, very similar to tech services, probably doesn't have the large remediation and project work in there.

But certainly, when you think about those customers, a lot of nondiscretionary routine, almost like a subscription-like business and again, some nice pricing power kind of above inflation that drives to -- I look at that business, I love that business kind of every time we close the books, 7% top line grower here for the last few years. So...

Can I stop you for a minute on that? What's the secret sauce?

Yes. I think the secret sauce is some of the things that I mentioned about nondiscretionary spend, relatively low kind of percentage of their overall wallet. But I'd also say the secret sauce for Clean Harbors is in that business, holding on to our people, getting them to be familiar. So when you think about the SK branch business, it's a driver in a box truck or something akin to that, going out, doing parts washer services, collecting containerized waste, maybe some special trucks get sent out to do back services as well.

But we've been able to hold on to our drivers. They get to know their routes, they get to know their customers. They can take the opportunity to cross-sell into the current customer base, but also we give them time and we've set up incentive programs to get them to do some prospecting during their day, stop by, introduce themselves to a potential customer, and that really has resulted in some incremental volumes coming through and taking some market share and helping to drive that top line. And the margins in that business are 30% plus, so really attractive. So that's a little bit of the secret sauce, I think.

Okay. So you did 2 of them. So maybe...

Field services, again, probably GDP plus there. I think the plus, again, a little bit like tech services, you have some large project work or large ER responses that come up from time to time. A little bit of a lumpy part of the business, those ER responses. But there's about 50% of the business that's routine work. And then the other 50% is ER response where we respond to over 20,000 events every single year. So over such a large base of events, they're pretty routine and pretty stagnant.

And then you think about Industrial Services, we spoke about that business a moment ago, more an industrial production type growth pattern there, a little bit of cyclical as we talked about, but still being able to price above inflation, which is a positive.

Okay. Great. Now just some numbers, we're going to finish off with the numbers question. What are the goals for really simple free cash flow conversion and improving in that area? Like what gets you to higher conversion rates as CapEx go down, interest expense go down, the tax rate? What are you thinking about over there in terms of conversion?

Yes. I mean I think the greatest driver of our free cash flow conversion over the last several years and will continue to be going forward is our margin expansion. So when you look at our core Environmental Services segment, which is about 85% to 90% of the business, we've grown margins over the last 5 years by about 450 basis points.

If you go back 9 years, we've grown margins in that business by about 860 basis points. So it's -- that incremental margin growth is driving kind of that greater cash flow conversion. There's working capital advancements that we're making as well. CapEx, we've had some nice growth projects. So that's not a thing, but it's really expanding those margins, getting our free cash flow conversion to where it is today at around 40% to 42% and looking to drive that up closer to 45% in long term, beyond.

Great. Thank you very much. I appreciate you being here.

Thanks, Shlomo.

Thank you.

Great. Well, good afternoon, everybody. I'm Jerry Revich once again, and I'm thrilled to have with us the senior management team from Clean Harbors. Immediately to my left, we have Eric Dugas, Chief Financial Officer; Carol Larsen, EVP, Sales Management; and Jim Buckley, SVP, Investor Relations.

As you might have noticed, I said those 2 names in reverse order based on who's sitting on the stage. Eric, Carol, Jim, thank you so much for joining us.

Thank you.

So we're going to run the conversation in a fireside chat format. As a starting point, Eric, looking at Clean Harbors over the past 5 years, the earnings growth has been really outstanding, 19% CAGR -- what went right over that time frame to enable that level of really strong profitable growth?

Yes. Kind of a great introductory question there, Jerry. I want to thank everybody for kind of joining us today and learning more about the company. But when you look over the last 5 years, really strong performance. And I'd say there's been a couple of catalysts to be able to deliver that type of growth at the earnings level.

I guess the first I would say is we are continuing each and every day to think about how we can drive more volumes into our network. And so when you think about Clean Harbors, you think about a company that handles for the most part, hazardous waste, everything short of nuclear. We have over 100 physical sites with hard to replicate permits where we handle that waste. And so one of the things we're constantly trying to do is increase volumes and bring more waste into the system. When we do that, we're able to really leverage the network and drive business performance and margins and earnings power that you've talked about.

So A couple of things, developing new lines of business. I think some regulatory changes that we've had on the retail side of things has really helped us grow that business line. When you think about our core verticals, Jerry, with chemical and manufacturing, those numbers from a macro perspective, and I'm sure we'll get into some more recent data, but those lines have been fairly flattish over the last couple of years, but we've still been able to grow through that -- through increased volumes, pricing strategies is something we spend a lot of time on and Carol was instrumental with that in the sales team. So driving good pricing power, continuing to integrate.

And the vertical integration, I think, is something that sets Clean Harbors apart from many of our competitors in that we can start with customers. We can be on site helping them test and handle their waste -- we can then transport that waste to our disposal sites and ultimately dispose of it. So really, I'd say it's volume growth, it's margin expansion through pricing. And then although 2025 was a little bit slower on the acquisition front, a long history of continuing to grow acquisitively as well as organically.

Can we unpack, Eric, the point on retail and the changes there that have been helpful to Clean Harbors?

Yes. When you think about retail, you oftentimes don't think about hazardous waste. And so there were some interesting regulatory changes started in California and really kind of have grown across the retail space, but took some -- put some regulations on the types of things that you -- fertilizers and things like that, that often are in the retail space that can't just go into the dumpster and be handled through kind of the traditional solid waste means. They actually have to be handled.

So when you think about retailers and the growing retail space and you think about some of those large retailers out there, those are significant customers of ours today. A lot of the returns, a lot of e-waste, things of that nature that we're handling. That's kind of new to the Clean Harbor space. But again, bring those incremental volumes into an already established leverageable network is really helping us grow in an area that, again, people probably don't think traditional hazardous waste.

Very interesting. What proportion of revenue is it? I'm assuming this is technical services based on the way you're describing it?

It's still, Jerry, a relatively small piece of the business, about 3% to 4%, I think, is our recent figure on the retail waste, but really growing. I think there's also some other areas. We're starting to get into health care waste a little bit, and that's a growing area we're seeing volumes grow. But I'm hoping that in addition to these growth areas, I think more recently, we've seen some better large-scale economic indicators around ISM and things and maybe some of the chemical space picking up as well here that should be very value accretive to Clean Harbors.

And then you folks have been able to achieve really strong price ahead of cost over this 5-year time period. Looking forward over the next 5 years, if we're in this room today, and we've got another 5 years of 90% earnings CAGR, what would have to go right to get there? Can you drive margins another step change higher from here?

Yes. I guess I'd answer that question first by a few years ago, we put out a Vision 2027 road map. And kind of in that road map, we had our margins in our Environmental Services segment reaching roughly 26% by fiscal '27. I'm happy to report that we reached that in 2025. And so we've hit that goal.

To continue to drive those margins, we're going to continue to do a lot of the things that we've done. I've mentioned volumes a couple of times and continuing to sell more services to fill out our platform in all over 100 disposal sites.

Jerry, you mentioned pricing. When I think about pricing and our pricing strategy and the trajectory we've been on, I think about many of the things that we've implemented over the last 5 or 6 years from a strategic perspective. So really looking at our entire customer base looking at the services we provide them across our 50 lines of business, looking at their current margins and quartiling those things and then really equipping our sales and operational folks with a strategy to kind of push pricing and get the value that we deserve for the important services that we deliver through pricing.

We balance pricing across our LOBs and make sure we're thinking about the total customer value long term and pricing accordingly. But volumes, pricing, vertical integration, continuing to bring as much transportation, labor into our business and use our own internal people rather than going external for some of those things.

And just speaking to the labor force for a moment, our ability to retain our folks here. Our retention rate with our employees is at a near all-time high here. And that's something really important to us to keep our own employees. It increases safety, it increases production and efficiencies and leads into that margin.

So current goals, we're trying to get that environmental services space to a 30% margin. Our current forecast has us at about 27% there. We'll finish this year, but hoping to move beyond that, hit that 30% target and then reset from there.

30% by '30?

Could be 30% by '30, Yes. Those are great ESPN flex as well, but that could be a monitor.

And in terms of the part of the business where you're seeing margin expansion, looking back really even over a longer time frame, you folks have done a great job getting Industrial Services margins higher. Is the next leg of margin upside for EAS primarily from Technical Services? Or can you continue to drive Industrial and Field Services margins higher?

I think it's going to come from kind of all 4 components of Environmental Services. So our Tech Services, our Safety-Kleen branch has been a great story. Field Services, where we've been able to raise margins probably in the mid-teens to kind of the low to mid-20% range. And then Industrial, I think we're beginning to see some cyclical signs of that business picking up. I think in the last few years, as that business has slowed down a little bit, we've done a lot of self-help items, labor management being one, cross-training employees being another across the industrial space.

And that's an area that I think as that business picks up and revenues come back, we should be able to see more margin. But going back to kind of tech services, Jerry, and the Safety-Kleen branch business, we're going to continue to, I think, see some great margin growth there. I think the demand remains strong. I think there's a lot of things that we're doing internally to drive margins.

And then I think with a lot of the tailwinds we have, and I'm sure we'll get into some of those, but between improved manufacturing numbers, PFAS opportunities and things of that nature, more volumes into that network is going to drive margins.

And it sounds like you're seeing in the business the benefits from higher manufacturing numbers based on that comment there?

Yes, I think we're beginning to. I mean I think...

Early days.

Early days. We saw the ISM figures come out last week, I think the week before, I think fourth or fifth month in a row where you saw kind of being in expansion mode. That certainly has not been the case over the last 4 or 5 years.

So the way we view it is we performed quite strong over the last 4 or 5 years in kind of in a space that's been a little bit of a gray area. And now you're starting to see some green shoots come up in our business and really excited about how we can perform and the earnings power that this business has in an environment with some expansion to it.

Very interesting. And then you also mentioned things are looking better in Industrial Services specifically. So last quarter, we're commensurating that when margins were low for refiners, they weren't spending any money. Now margins are too high for them to spend money and take downtime. Are they starting to take unplanned downtime? Or are they you doing more work?

Yes, Jerry, we have not -- in our forecast for 2026, we did not build in kind of an improving market in this area in the back half. I think we're beginning to see signs of perhaps some pickup later this year, maybe into next. One of the reasons I feel that way and some of the intel we're getting from the business is a little bit of what past history has shown.

And you kind of alluded a little bit to the Goldilocks syndrome that can exist in the industrial space where I think leading into 2026 here in the last few years, we've seen kind of that refinery space and chemical space, which are the largest verticals in our Industrial Services business, really be kind of in a cost-cutting mode and looking for areas to reduce spend. And in some cases, that means less maintenance and smaller turnarounds, maybe some more pit stop turnarounds rather than doing a full turnaround.

In past cycles, we've seen that type of behavior. And a lot of times, that leads into a period like I think we're seeing now where with crack spreads being where they are, refineries, in particular, kind of manufacturing and producing all out. And I'd say the latest cycle you saw that is kind of when the world turned back on. After COVID, we were in a period where these plants were running all out.

And then they get to a point where, hey, they can't skip the maintenance. They need to do the certain levels of maintenance and turnaround activity that is required for these multimillion-dollar plants. And you saw in the last cycle, kind of the 2022 time frame, you saw kind of the revenue -- Industrial services revenue expand.

And so we're looking at that potential and thinking that, that history will repeat itself there. And so when you compare the period we're in now to a period from 4 years ago, we're expecting and ultimately here, that business to turn around, those revenues to return. The timing, is it later this year, early next year? Time will tell on that.

But certainly, you don't want to run these plants to a point where you see production issues or disruptions or a safety event. You really got to get in there and clean out those units appropriately.

And have we seen that start to happen, onesies, twosies, any green shoots or no?

No, I think it's a little too early to tell. I think what those folks are focused on right now, they've kind of been in cost-cutting mode at this very moment, they are focused on production. And like I said, especially the refineries. But ultimately, they got to do the work, they got to do the maintenance work that's required.

I mean some of them are running to upset. You've seen there's been more refinery fires. There's even been some chemical plant fires over the last 6 months because they're just running their plants hard. And as Eric was saying, for a good reason now versus before, as you mentioned, it was as a cost cutting. And now they've got money and they're making money, and so they don't want to bring it down.

They're making too much money.

But then sometimes the plant says, I've got to come down.

And when they do, it's a much shorter cycle. So they're being very -- as Eric alluded to pit stop, that's what he's indicating is that over the last year, the duration of a turnaround is reduced by about 33%. And then even over 2 years, it's about 50%. So it's much more intentional, I would say. But the good news for us, too, is if you are there doing the turnaround, you either come to the table with all of the things that may happen as they go into the turnaround, but then also looking to minimize the number of vendors has been a big area of focus, too. So how do you do more of the work while you're on site.

And so it sounds like other parts of industrial services are getting better. The non-refining part it sounds like is improving.

Yes. And I want to just maybe add too. I mean, what we've been talking about here is our industrial services business. When you think about kind of industrial waste in totality, if these refineries or these chemical plants are now running at a higher level and not wanting to stop to do the turnaround, it means more waste is being produced, and we handle that waste kind of on our tech services side of the house.

So when we talk about green shoots, Jerry, and seeing some pickup in manufacturing and industrial activity, which is good for us, it's really good on the tech services side. When these plants do turn around and need to do their -- I should say, when they do turn around to do their turnaround, we'll see that on the industrial side.

So -- but the overall industrial landscape, again, I'll go back to kind of the ISM readings and things like that, starting to see some green shoots, and it would be nice to see a period of expansion kind of hold on here. That, among many other tailwinds for the business, I think, are a good thing for Clean Harbors.

Super. And Carol, right before this meeting, we had the Republic team in here, and they were complementary of your team's pricing algorithm and what you folks have been able to do. Can you just share with us the Clean Harbors approach to pricing that's been really a big part of the margin improvement journey?

Yes. I think Eric already alluded it to it. It's certainly pricing with discipline, pricing with intent, regularity, looking across the business and looking into each of the customers, the industry, the response, the competitiveness and what we can do as an organization to expand and cross-sell all lines of business. We want to look at it from both sides of the house and really partner with our customers, but certainly have the rigor around periodic annualized price increases with rigor.

So you get the customers used to a rhythm of annual price increases that's a key part of the operations.

It is an understanding of the value, right? So the value proposition in any pricing conversation is critical and key to understand the difference between us and somebody else and what we bring to the table. And that goes on throughout the year.

And then when demand drops down, it sounds like you folks did a nice job of pivoting last year. Can you talk about how you folks operated? And I'm referring to when the overall activity levels slowed around maybe 2Q, 3Q last year for the industry, it sounds like you folks managed it reasonably well based on your results and what I'm hearing from peers.

Yes. So you think about the various businesses and the demands of what we have and how many services we perform throughout the year. And so certainly, there's going to be ebbs and flows in how you continue to look at the available opportunities in the marketplace. And so we certainly leaned into that.

I think, Jerry, the ability for Clean Harbors to pivot when one vertical may be a little bit slower is one of the strengths of the company. When you think about our 50 LOBs and the more than 300,000 customers that we provide service to. I think what you're alluding to is as we saw kind of chemical volumes may be kind of flattish, we were able to turn on other things like health care, like retail.

Our field services organization, if you think about that business and the acquisition that we did with HEPACO a few years ago, really kind of nearly doubling the size of field service -- this business, field services is a business where about half of those revenues are kind of routine tank cleanings and regular services and about 50% is responding, emergency response to certain events that happen.

You can have an event that's a few hundred thousand dollars. You can have an event that's tens of millions. But our ability to continue to grow that business, our ability to open new branches, our ability to build continued relationships with many of the customers that we handle from a tech services or Safety-Kleen branch side and get into their emergency response plans so they can -- we can respond when something bad happens.

We can fill in the gaps with that business and there's been some large events that we've responded to over the last year that has kind of helped fill in the gap. So at Clean Harbors, we -- a few years ago, if I was up here, we would talk about kind of an 8-cylinder engine. And our goal is to make sure at least 6 or 7 of those are operating at all times, and that really carries the wind in our sales.

Now a larger business, $6 billion in revenue, 25,000 people, we talk about it as a 12 piston or 12-cylinder engine. And we believe that kind of 10 or 11 of those are operating right now, and we can pivot from Piston to Piston as need be. And that's why we've been able to deliver great growth over the last 5 years even in difficult times and continue to see great margin expansion. And that's really what we want to focus on is continuing to grow revenue top line and get more dollars to the bottom line through the margin.

Super. Eric, you touched on the Safety-Kleen branch business. And so Jim and I had a conversation about that about a quarter ago. Can you just talk about how you folks have been able to drive margins higher by driving higher route density?

And it sounds like you folks feel like there's room to drive that higher. Can we just talk about, one, where the margins are now, how far they've come and what's driven just for a truck-based business to have the type of margins that we're about to talk about in a minute, it's just really impressive. So would love to unpack that.

Yes, sure. So I'll start maybe just by stepping back in a few sentences about the business, Jerry. And I'd like to start there because I think it is a part of our business that's a little bit underappreciated sometimes when you think about what we've been able to do in that business. And I'd start off by saying that the last 3, 4, 5 years, we've seen this business grow at a consistent kind of 7% plus top line growth rate. How are we doing that?

Think about all the small and medium-sized businesses out there that produce some level of hazardous waste. They got to get rid of that. And so our Safety-Kleen branch business has become very much a subscription-based model, where we're going out on a regular basis to these businesses, and we are collecting their containerized waste often in 55-gallon drums. We are providing them with parts washer services. We are doing bath services. And it's really kind of a one-stop shop where we can do a lot of things.

It's nondiscretionary spend in a lot of cases, and it's a relatively small piece of the overall spend, but it's very, very important services. Complementary to that, we've done a great job on the Safety-Kleen branch side of holding on to our drivers. The drivers are kind of the heartbeat of the business. They're in box trucks and things alike, and they're going out and making 5 or 6 or 7 stops a day. Through the last 5 or 6 years, holding on to those people. Those people will be more efficient. They're more efficient with how they do their jobs. They get to know the customers and they're able to cross-sell.

And we've also introduced incentive programs that provide these drivers with an opportunity during their day to do some sales prospecting to stop, to introduce themselves, to maybe pick up another drum of waste. And when you can get that 1 incremental drum or 2 incremental drums or an additional service on that same route with the same driver and the same truck, all that revenue is going to drop straight to the bottom line, except for maybe a little of that incentive cookie that we're going to give the driver.

So those types of things, holding on to our people, expanding that platform, that's what's driven that Safety-Kleen branch business to 7% almost every quarter, every year growth rate. And then when you think about the volume pulling in there and each additional drum, we're looking at margins in that business. Overall, Environmental Services, I mentioned earlier, 26%. These margins are in the 30% plus neighborhood and more volume into that leverageable network, feeding the beast, we believe that we can continue to grow this business.

I think in some cases -- in many cases, we're taking market share as well as we continue to build this business in certain geographies and kind of leverage some of our footprint in the TS space and bring SK trucks into that area as well.

So just really a great business, very accretive from a cash flow perspective as well and really good kind of pricing power with these customers, as long as we're providing great service and they know their drivers and they know we're going to show up, we can consistently price them at inflation or above.

And the Safety-Kleen branches are really feed so much of the network. Only about 30% of the drums they collect are for incineration. So it's going to landfills, it's going to salt and recycling, it's going to wastewater. And as we do these smart acquisitions like the Terra Nova one we recently did that add solidification permits and water discharge permits and you lay that into our network, the returns are terrific.

And it's why that growing monster from the Safety-Kleen branch that just keeps feeding everything is so important to us. But when we get in meetings with you folks, it's typically, let's talk about incinerators, let's talk about spread business like with this and everyone kind of overlooks the beauty of the Safety-Kleen branch business.

Well, and because it's tough to imagine the truck-based business instead of making 10% margins, making over 30% margins. It was 10% margins 5 years ago, wasn't that, somewhere in that range? How long have you been operating at this level of performance?

I mean on the Safety-Kleen branch side, we've always had -- they haven't been 10% margins. They were healthier than that. But certainly, each and every year, we're expanding margins kind of in that 50, 60 basis point area across Safety-Kleen branch and just a really highly accretive business, again, through volume growth, taking market share, continuing to deliver great service and then pricing accordingly.

So what's the moat? Because if you're making 30% margins and you've got 2.5 capital turns. Obviously, you're gaining share. So clearly, the moat is there. Help us understand that a little bit more.

Yes. When you talk about moat and the business has a very strong moat. The incinerators, as Jim just mentioned, a lot of times you talk about the incinerators, there's a moat there. But when you think about, again, we are picking up hazardous waste even on the Safety-Kleen branch side. That Safety-Kleen branch side, you have to have special permits to be able to handle that waste. And that's where the moat is to be able to collect that hazardous waste bring it to one of our TSDFs. These are kind of stops along the way to ultimate disposal where we can store hazardous waste, we can repackage. We do some treating there. We try to pull some things out that we can recycle.

But having those permits, which are very difficult to obtain, greenfielding permits like that is very difficult. That kind of creates the moat that is utilized kind of across that waste collection business. And so again, incinerators is probably the biggest moat, but the collection being able to store and treat hazardous waste along the way before it gets to its end disposal is almost just as valuable.

And just for my reference, where would margins have been 5 years ago? Were 25% instead of 30%? Or was it...

You think about this margin 5 years ago, probably in the mid- to high 20%. And then over the last 5 years, kind of increasing margins in this space, 600, 700 points in the Safety-Kleen branch. But I'd like to take a kind of a step back and again, look at the Environmental Services segment in totality, so Tech Services, Safety-Kleen branch that we've just spent the last few minutes speaking about Field Services and Industrial Services.

If you look at that as a combined Environmental Services segment and you go back in time, Jerry, I'll go way back and you look at 9 years ago, we've expanded margins, again, last year, landing at about 26%. We've expanded margins over the last 9 years by 850 basis points. We've expanded margins in that business over the last 5, about 460 basis points. And so just a really good story by continuing to gain traction with volumes, price strategically and really vertically integrate all aspects of those businesses.

Now before we talk about the incineration business, the M&A part of the Clean Harbor story has been really additive. You folks have generally bought assets 11x EBITDA, post synergies, 8x EBITDA and increased densification. What's the pipeline look like from here? How much runway do you have to do continued runway? And then the lack of activity in '25, just talk about was that issue of not enough companies coming to market or other moving pieces?

Yes, great question. I'd start off with the pipeline for acquisitions kind of in our core space, we believe, is -- remains quite strong. Even recently, we're seeing a lot of opportunities come our way, viewing a lot of books kind of on a weekly basis. We've gotten 2 acquisitions kind of over the goal line in 2026. They fit nicely kind of into our tech services and field services space.

So I think there's still quite a runway, both with tuck-ins of the size of the recent acquisitions and larger. I think there's plenty of things kind of in our core space. If I look back to 2025, Jerry, still, I think the pipeline is quite busy. Last year, we were very active, looked at a lot of things. They were just -- some of the things we looked at got to a point where when we look at acquisitions, they need to fit strategically, operationally, culturally and financially.

And I think some of the opportunities last year from a financial standpoint, been a little higher than we would like and probably couldn't check that box. But we pivoted. We introduced some organic projects. We -- from a capital allocation perspective, we allocated more to share repurchases, so returned value to shareholders that way. But framing back to the acquisitions, I think you look back at the 45-year history of the company, acquisitive growth has been a real engine for us, and I think it will continue to be in the future. And I think there's plenty of things that we can do kind of in our core swim lane.

And in terms of -- in 2025, just the timing of assets coming to market that you didn't like? Or were you close on deals? Can you give us some color?

We are definitely close on deals. As I said, I think for one reason or another, kind of got down the end, and we're outbid by the winners. I think one of the things -- one of the core tenets of Clean Harbors is we're going to be really responsible with our capital. We're going to look at returns. We're going to be strict at certain levels and stay within those levels that we believe are appropriate based on the assets we're getting.

And I think I'm pretty proud of the team and [indiscernible] strength to kind of get to a point and say, okay, we're not going to go above this. And that's what we saw in 2025. But static about the 2 that we've done this year again. And I think, again, if you look at Terra Nova, a great acquisition kind of based in the Carolinas, brings more volume into our network. And like I said, I think there's more opportunities to kind of bring things into that core space going forward.

And to shift gears to talk about incinerators. So Kimball, you folks have laid out progress that's tracking pretty close to plan. As you folks have brought that online, to what extent has that driven additional conversations for you folks with other customers that might be reaching the decision of invest or outsource on their incinerators? Is there a potential that we're sitting here a year from now, we're talking about Kimball 2.0?

Yes. I think what you're probably alluding to, Jerry, is just another tailwind we think that we see in the business in terms of captive incineration. And there's companies out there that have captive incinerators. These are incinerators where they can burn their waste, and there's been a movement to close some of these. And I think you're referring to the possibility that more of these will close and send their waste streams to Clean Harbors.

A few years ago, 3M was a company that did that with their captive incinerator, and we were the beneficiary of those waste streams. I'd say that's still a tailwind for us. It's still an opportunity as we move forward. We still have discussions and many of the captive operators are customers of ours today. They send us their waste streams that they can't handle in their captives or when they're in turnaround. And so I think the possibility is real here. I know it's real that over time, I think you'll continue to have these examples of those waste streams moving into the commercial space.

As I said, we keep active contact. We have a gentleman that's in charge of keeping that relationship going. We talk about in discussions with those captives about how we can save them operating costs. We can save them capital expenditures. We can handle some of the more complex waste streams that are coming out of some of those factories and manufacturing sites.

So I think it's definitely a tailwind. The timing is what's a little bit of a question mark. But between captives, between kind of re-shoring, near-shoring, between kind of improved economic environment overall, PFAS, which we really haven't talked about, but that opportunity also kind of picking up steam and growing at rates that are exceeding our expectations coming into the year.

All those things will cause us to consider in the future, hey, another new incinerator or increasing throughput through some of our current kilns. So really an exciting time, lots of tailwinds. And I'd say that when the time is right, we will strongly entertain kind of another facility.

And any scenario where you folks could step in and take over a captive incinerator? Or are these just too old assets that are too inefficient for the most part?

Yes, it gets tricky. I think the 2 biggest concerns are the technology and there's some upgrade. But also a lot of these captives are -- they're on site. They're in the middle of a production area, if you will. And certainly, if we kind of took one over, we'd want to commercialize it. So it turns into a permit modification and also -- but just the ability to get in and out of these sites with customer waste makes it a little tricky.

And can we double-click on PFAS tracking ahead of expectations? Please say more.

Yes. I'd love to turn it over to Carol as Head of Sales, but I will say kind of the expectations around PFAS are kind of growing by the day internally, and we're really excited about it.

Yes. So I would say with our total PFAS solution, so we have an end-to-end solution. That, coupled with our recent publication of disposal recommendations has garnered a lot of interest and response from customers out there from both an inquiry, though, as well as action. And so when you think about in today's environment, emergency response, there are emergency responses that we are a part of.

UPS recently being one of them, the plane that goes down. We are on site and AFFF is released to put out the flame. And therefore, we are in a PFAS situation, where people will immediately need to respond to that. So there are those types of opportunities. But also as we think about water filtration and remediation, where we're seeing a lot of progress and movement right now.

There's just a plethora of momentum. And if you listen to the experts, a TAM of potentially $100 billion to $300 billion, which is a large market. It's just really a matter of mobilizing folks to act today and to just continue to have those conversations. So I would say the pipeline is extraordinarily strong, and we are really excited about our unique position to have an end-to-end solution.

PFAS is being driven by regulation, litigation and even public relations. It's hard to go more than a few days without reading about forever chemicals in the news.

And what's the revenue contribution this year, expectations for next year?

So we came into the year thinking that building upon the $120 million that we had in PFAS revenue in 2025, we thought 20% growth rate would be appropriate. As we sit here kind of through Q1 and halfway through Q2, I think we're seeing more opportunity than we had anticipated. And I would expect the growth rate around PFAS to be greater than that.

I think to Jim's point, you're just seeing a lot of people and a lot of companies when there's a PFAS hit, they want to deal with it right away. So I think we're excited near term with some of the opportunities that are coming our way, but also long term, just a huge opportunity for Clean Harbors. And we're in the catbird seat when you think about that total PFAS solution and everything we have in place today.

And the $120 million, what's the mix of that within incinerators versus collection versus emergency response, what roughly?

Yes. I'd say roughly 1/3 of that is probably filtration, maybe a little bit more, 1/3 of that is kind of ER response and maybe the rest of it is as releases happen. I think early days on incineration, I think many of us believe and we believe that, that will be the best long-term solution, certainly for high concentrations of PFAS.

So I think that incineration outlet will be something that grows over time. It's great that incineration has been recognized as one of the most effective ways to get rid of PFAS.

Super. Thank you. Please join me in thanking Eric, Carol and Jim for coming out. Appreciate your time today. Thank you.

Thank you.

Thank you.

Thank you.

Well, good afternoon, everyone, and welcome back to Day 4 of Oppenheimer's 21st Annual Industrial Growth Conference. I'm Noah Kaye, Managing Director in Oppenheimer's Sustainable Growth and Resource Optimization Practice, which was recently rebranded to Industrial Innovation. We are very glad to welcome back to the conference, the management team of Clean Harbors, CFO, Eric Dugas; SVP of IR and Communications, Jim Buckley.

Gentlemen, welcome. Thanks so much for being here.

Thanks for having us, Noah. Excited to be here.

I would love to maybe just start with yesterday's results and the market reaction. The company raised guidance across segments above the street. It is pretty unusual for the company to raise guidance in the first quarter. And certainly, there was some anticipation of stronger results given what's happened with the energy markets. But I guess the question to start with is, what, if anything, do you feel is underappreciated by the market? And where there might still be some upside in the outlook that you provided?

Great. So I'll start, Noah, and I'm sure Jim will share some thoughts as well. But I appreciate the question about kind of what wasn't appreciated yesterday. And certainly, the market reaction was a bit disappointing, but I don't think it takes away from the positivity we felt about quarter 1 and our optimism for the rest of 2026 here as well as our optimism around many of the long-term tailwinds that are still intact and that we still believe in for the business.

But we were really excited yesterday morning to come out with kind of a Q1 beat. Virtually all of our business units performed well in Q1. We're still seeing a difficult market conditions across our Industrial Services business. But outside that, when you look at our other core businesses in Environmental Services, we felt a very strong quarter, overcome some -- overcame some weather weaknesses early in the quarter that was kind of in our expectations in our guide back in February.

But really saw some good momentum in March and continue to see good momentum in April here, which gives us confidence about the rest of the year. When you look at our core Technical Services business, we're continuing to see good volumes in our waste streams. We're continuing to collect a wider variety of waste streams and utilizing our entire waste network to handle those waste streams. So beyond the chemical sector and things like that, we're still seeing fair volumes in manufacturing. We've made great headways with some retail waste, which has really been a great story as we built that business out over the last couple of years. And we continue to see some really good pricing momentum in that business as we continue to keep volumes high and utilize all of our assets.

Our project work was great in Q1, and we see that pipeline continuing to grow with remediation work as well as PFAS. PFAS continues to be a huge opportunity for us kind of both in the near term and long term, and I'm sure we'll get into that. So just a really strong quarter in tech services. Field service continues to perform well. Some of the things we emphasize, we're continuing to build out that field services organization with new branches, some really nice investments on the sales side and the equipment side that are really putting us in a strong position to be able to respond to our customers when bad things happen and require an emergency response.

So oftentimes, we win that work because we have the right equipment. We have the people in the right place, and we're able to respond quickly, and we continue to benefit from some large jobs at the current time. But also, we see going forward, these things, they're going to continue to happen, and we'll be in a good position to respond. And then lastly, on the Safety-Kleen branch business, again, really good pricing power. This business is very consistent, very subscription-like, and we continue to deliver great service to our customers, and that gives us the ability to continue to price accordingly.

So really strong quarter. Again, the momentum and the strength we see the rest of the way in our guidance for the rest of 2026, we did guide Environmental Services up about $15 million. And so we're now expecting kind of year-on-year growth rate in Environmental Services to be about 6.5%. And we think there's a lot of upside that we couldn't quite put in our guidance, but things that we're hearing about increased chemical manufacturing and things like that, perhaps in starting now. So we'll see those waste streams probably in the back half of the year. But if things like that happen in response to some of the things we're seeing in Iran and the consequences of that, that's all upside to kind of our guide.

And I think we'll continue to see great project work and great PFAS momentum, probably to the extent of growing a little bit better than that 20% marker that we put out there on PFAS work. So feeling very, very good on that.

If I switch gears, SKSS, obviously, the conflict in Iran, that's having the biggest impact on our SKSS business, largely from a base oil pricing perspective. So we're seeing what's been a very depressed market with lower base oil pricing in the last few years. That obviously reversed and has become more positive as the supply of base oil has tightened and customers -- our customers and many of our more significant major oil customers are coming to us looking for base oil supplies, both Group II base oils as well as Group III base oils.

And at that higher price that we see certainly playing out at least through Q2 and Q3, we raised the guidance on that part of our business by $30 million. And so ultimately, a $40 million increase across the consolidated business. We're now forecasting the business for the full year to deliver total consolidated EBITDA growth of about 9%. And again, I think there's a lot of things that could break our way that would make that number even better. So again, I would just reemphasize, and I hope people took this away from the quarter irrespective of the stock reaction, but the business is performing well.

We like to think of the business as kind of a 12-piston engine. Many of those pistons kind of functioning extremely well right now, the potential for the few that are a bit slower to turn and even those that are firing to really increase our current expectations. So we're excited about the balance of 2026. We're excited about some of the internal growth projects we have from a capital perspective. Also excited about the DCI acquisition that we kind of got across the goal line here in late March and really an acquisition pipeline that's pretty full and active right now. And definitely kind of the way we feel today as compared to maybe 12 months ago, much higher chance that we continue to kind of get some of these acquisitions over the goal line here like we have historically.

Great. Well, that covered a lot of ground. Jim, did you want to add anything? Because I think Eric...

Eric said it all, but it's hard for us to -- on the market side of it, I mean, the stock, obviously, we're very disappointed with the response, given kind of our view, we came in, we guided, ultimately what's pretty conservative at a 5% growth in February. And here we are, as Eric said, we're at 9% growth. And when we gave that guidance in February, we had said we're not assuming a big reshoring impact.

We're not assuming PFAS grows faster than 20%. We're not assuming any captives growth. We're not assuming any recovery in base oil. We're not assuming there's a lot of turnarounds, and we're not assuming a lot of large ERs. There was a lot of upside potential in that 5%. We move it up after 60 days to 9%, and the market is unhappy with that. And that's a little bit of a head scratcher, I think, for us because even at the 9%, we feel that there's still a lot of upside. So I think others use their different valuation approaches and things. So it's hard for us to necessarily comment on the stock other than we say, we think it's a great value at yesterday's price or even the day before yesterday's price, it's certainly a better value today because we couldn't be more bullish on our prospects for this year.

I'll take that comment and file it away for a capital allocation question at the end. But I wanted to ask about your comments around the acceleration of PFAS pipeline, right, which is now growing 25% to 35%, I think you said quarter-over-quarter. So maybe just give us some granularity on where you're seeing that inflection showing up within PFAS? And what's happened since kind of the DOW and EPA issued favorable disposal guidance?

Yes. I mean I'll start and Eric can jump in. There's always so much we can talk about with PFAS. The question that I'm sure some folks tuning in would want to know is have we seen any movement on the Department of Water side now that they've given their guidance. The answer to that is not yet. That calendar has to come together. That funding has to come together. We are getting some assignments. We're in discussions with some of the base commanders and they'll move it up the chain.

So -- but that's going to play out over to the 700 locations. That's going to play out over a decade plus. But certainly, we'd like to see some movement on that. And I think as one goes, then others will follow. So we're seeing work there. Definitely, the EPA guidance that came out didn't have the granularity of parts per million or parts billion. They were just clarifying what technologies they would endorse. So that helps us, but not quite as much as it will when they get some more detail into that framework, if you will.

But sort of the -- I think what we talked about is internally is this is just a real validation of consideration, which we believe for years is the great scalable, cost-effective solution to PFAS in many forms and to have the endorsement of both on the private side, if you will, from the EPA and then on the public side through the [indiscernible] department is terrific. And I think from a pipeline perspective, it just has so many tentacles where you're seeing it in contaminated water at sites. You're seeing it in emergency situations where the AFFF foam is going off and now it's out into the environment or out on to that property and have to be remedied.

And we're seeing it at airports, at firehouses. And it's just -- it almost seems endless at times of how much contamination that these chemicals have caused in drinking water, industrial water and location. So our pipeline has grown quite a bit. It's a little bit of everyone sort of maybe looking at others to see who jumps first in terms of some of the big cleanups or contamination. I think if you see a 3 [indiscernible] or someone start to clean up their sites and some of the industrial locations themselves where this stuff was produced, that may open up a channel for folks like us.

And then similarly, as you see public bodies of water getting addressed, you'll probably see some momentum there. And on the drinking water side, that's an area that we're starting to grow in. We've got a lot of visibility around our installation in Pearl Harbor. So we think that market is going to continue to grow for us as well because from many angles, people consuming this stuff is something that from a health perspective, we obviously want to stop immediately.

No, no. The only thing I would add to that is, I think a lot of investors are looking for us to really try to put more of a concrete time line and value on the growth of this business and where we can bring it. And what I would say on that is certainly kind of the growth rates that we've talked about, you alluded to a moment ago, now 25% to 35%.

I certainly think that is achievable this year. I think what gets me most excited about this opportunity, and I can't put an exact number on it as to when. But when I look at how we're building the pipeline, when I look at the team that we have in place and the tools that we have in place, the assignments that we're giving to people to go out and touch base with these different areas and different military bases where we know there's things, the relationships that we're developing with those.

I mean, Jim alluded to kind of Pearl Harbor. That's where we are doing some work and then have essentially broadened the scope there and nearly doubled the work that we're doing under that relationship. So those types of things laying that groundwork. And I do think, obviously, kind of the military is where we see a lot of these opportunities, but private companies as well that we already have relationship with. We've gone out. We've talked to them about the opportunities and our capabilities.

It's those things that are going to kind of give us that first step in the door to show them all of our capabilities, all in one spot and really grow this business, 25%, 30%, 35% kind of annually here for a good period of time. And I think PFAS remediation and PFAS cleanup is something that folks in these chairs are going to be talking about a decade from now as well. So really excited about the opportunity, really excited about the growth rate. It is coming. Exactly how much, at what period of time, that is the question, but it's something we're devoting capital to a lot of energy to and I think we're the right provider for many, many people and many, many communities that are going to have to deal with this issue.

Yes. Thank you for kind of getting into the characterization of the pipeline itself because obviously, a lot of this work is going to be longer cycle in nature for a myriad of reasons, funding availability, figuring out who does what and where the time frame and who pays for it. But you're the CFO, and so you have to kind of look at this sort of pipeline and how probability weighted or evaluate that. Can you kind of help us understand how you think about the sort of the shape of the funnel and how you look at kind of probability weighting as stuff comes from kind of early-stage talks down to, okay, this is going to move in the next couple of quarters or the next couple of months?

Yes. That's a great question. And I can give you a couple of examples, obviously, on an earning basis, but a couple of of opportunities where you can kind of see, okay, this is near term. But I would say in our field services business, there's certainly been some opportunities that have come our way that we've executed on where you can tell based on the description and the pipeline and conversations that our sales folks are having that, okay, this is something that, that customer, there's an issue here, there's a contamination here.

They want to get out in front of it and remediate this problem before there's a larger kind of publicity problem or legal issue. And so those types of opportunities are coming our way from the private sector. And those you can kind of put a much shorter tail on. You can tell that the customer wants to to deal with the situation sooner rather than later, and those have turned into real opportunities. You also see opportunities more in the public space, whether that be a municipal airport or the military or a fire department or something like that where they've got PFAS, you can tell us an opportunity.

They may need some funding, they may have some funding. There's also aspects of some of these projects that come in that you can see may be dealt with in tiers. So maybe this is more of a near term in the next 90 days. This is more 6 months. This is probably a year, 2 years into the future. And so you can see that cadence building based upon the nature and the customer. It really -- I'm really pleased where I hear of an existing customer of ours that we have a relationship with that you see an opportunity in the pipeline or something that they want to do.

Typically, that type of thing kind of comes to us a little bit sooner than some of these much larger projects that are often in there. So it's not a perfect science in terms of timing that things out. But I like the opportunities that are filling the pipe with, obviously, the public sector where the funding exists, but also those things that we're doing for customers that are current customers of us maybe in a different part of the business.

Very helpful. I guess the last part of it that people often ask us is how will the margin profile of the PFAS work kind of compare say, versus the ES segment broadly because there's a lot of different lines here, right? There's disposal, there's water filtration, toils, contamination, remediation, landfilling, things like that. So just help us understand how this should trend relative to broader ES?

Yes. Yes. I certainly think kind of on average over a broader project, we're certainly looking at being margin-accretive projects. So when you think about our Environmental Services segment, and we're kind of forecasting this year to be about 27% margins. If you think about the the broad types of projects that are coming, it will be accretive to that number. Each project is unique. It will be determined whether it's more kind of labor equipment or if there is a lot of disposal attached to it.

And obviously, the jobs with a lot of disposal certainly will garner higher margins. But overall, it's just -- we've talked about for a few years now kind of having a longer-term goal of getting those Environmental Services segment margins to 30% and above. We've made great headway over the last 5, 6 years, raising those margins by 500, 600 basis points to where they are today at 27%. These types of services are going to be just another way that we get those margins into the 30% range.

If we go through the sort of subsegments within ES, and you commented on this at the start, but I want to pick up on that thread. And if we start with Tech Services, just help us unpack the utilization and mix trends in incineration for 1Q and the visibility you have to higher utilization moving throughout the year.

Sure. So yesterday, when we announced Q1, we're now giving an incineration utilization number that includes our new incinerator that we opened late in 2024, December 2024 in Kimball, Nebraska. The utilization for the quarter was about 80%. Admittedly, probably a little bit lower than we had hoped, but kind of in line with our expectations that we gave in February and probably negatively impacted through some difficult weather that we had predominantly in February that affected one of our sites.

And then just kind of some normal calendarization of some down days and turnaround time that we incurred. Typically, Q1 is -- we spend a little more time kind of a turnaround at some of our sites, just given the relative slowness in the seasonality of the business. Our line of sight and what we talked about yesterday is when we close out the year, that utilization for the full year will be pretty consistent with past years kind of in the mid- to high 80% range. So as we move beyond Q1, get into Q2 and Q3, you're going to see high 80%, even maybe close to 90% for kind of Q2 and -- 2 and 3.

And that's pretty consistent with our past history. Obviously, we'll have more volumes this year as we continue to ramp up Kimball and really excited with the progress we've made so far in Kimball kind of right on track. And I think when you look at 2026 versus 2025, there's probably more of that high haz waste stream type of waste that will be going through that new unit this year. So good line of sight to filling the plant, excited about the progress we made in Kimball.

And certainly, when you think about mix, going back to some of what we talked about earlier, if, in fact, we start to see some more of those chemical and manufacturing vertical produced waste streams that are higher price points, a little bit nastier material, you'll see the utilization and the utilization kind of stay in that same level, but the mix will get better and profitability improves.

Yes. Yes. I want to ask about the captives element of this, which has been an ongoing story, really with the partnership with 3M, for example, which led them to close their captive incinerator and give you the business, very important signal to the market, we thought. So can you talk about the current prospects for captives to close and how we should think about the upcoming MAC regulations playing a role here?

Yes. I can start and Eric to jump in. We love talk about captives and the Street does, too, but it's sort of a turning of the Queen Mary because it's just a huge decision for the captive operator to make because they can only make it once. And so 3M did there at a time that the industry was pretty backed up and then the industry became very backed up. Now since then, we've opened up Kimball and one of our competitors is working on opening up some more capacity there.

So Eric and I like to say logic would tell you that now there's some capacity available. It's not going to be there for a long time with all the reshoring coming to America. And so we have those discussions with the captives. And we think everyone wants to pin us down on what quarter or when -- how many this year type thing. But it's something that we would expect that some of those captives will come off.

We were talking pretty closely with a couple of them last year and then liberation day kind of threw all the chest pieces up in the air and they had to deal with supply chains and other things. it's a lot of change management to go through closing your captive and rerouting all your waste to a third party. And for us, like with 3M, we put our systems in and put them on our kind of waste profiling system. And so it's a lot involved.

But from a financial perspective, we are showing them as we did with 3M that we could save them a lot of money. A lot of them are trying to promote cost savings plans, and we can be a big part of that. It's just the timing of that. It's just hard to predict. But we're probably dancing with 3 or 4 or 5 of them right now out of the 41 captives that are operating in the U.S.

And I mean, you're providing your utilization figures, right, 80% for 1Q going to close to 90%. Fair to assume that the captives generally don't run as high utilization rates because they're not taking in a whole mix of third-party waste for the most part, right? They have to be oversized to meet their backflow demand, which they don't probably meet most of the time, right? I think there's some data to support this, but what is sort of that delta? And I ask because. I think these regulations are going to make it more expensive to run more inefficiently.

I think you're spot on, No. We have a gentleman that does the best he can to kind of estimate and determine some of those run rates, utilization rates of some of these captives. Some of them could be as low as 30% or 40% based upon some of the intel that he's gathered. So you're exactly right. And Jim noted a minute ago, kind of hey, logic would tell you that these things shut down or at least that's like what we say. If I was running these plants or I was running a company that had one of these plants, and it's not my core business, and it's running at 30%.

And now I got to go put x million dollars into some capital investments to upgrade it to the current regulations. I'm beginning to think, hey, is it about time to find a more professional outfit, if you will, to take care of my waste streams. And over time, that's how we see this thing playing out in some instances. And a lot of those characteristics I walked through, not all of them are consistent with the 3M case study, but there was some of each of those things I just mentioned kind of built into their decision to move to Clean Harbors.

And each captain though has its own story and what the pitch would be to them. And for them, they're not a commercial operator. So operating at 50% or 40%, they can do that. We obviously couldn't afford to do that. They also put a lot of things in there that if we were to handle those waste streams, we might be able to send some of that to our landfills or to an alternative or even recycling. But because they have that outlet, they just throw everything in and burn it. but that's where that kind of cost savings can really come into play if we were to take those waste streams over for them.

Makes sense. I guess within Tech Services, landfill volumes trends were very strong in 1Q. And so what is the pipeline and the guide really imply for growth moving throughout the year? Because you've had strong volume trends in landfill now for a couple of quarters.

Yes, we have. And a lot of that landfill volume is coming from some of these waste projects and remediation work that's coming our way. And so kind of in the guide, I wouldn't say we have blowout -- continued kind of blowout quarters from landfill, but it is an area that we seem to have some good momentum. The pipeline of our project services group is fairly strong, probably increasing and increased over where it was 6 months ago and 12 months ago. So that's part of the confidence we have in increasing our guide by $15 million here yesterday. And some of that is coming from continued strong project work, much of which kind of feeds our landfills. And as you know, Noah, the landfills, those generate good margins as well.

And just for those that don't maybe know us as well, from the landfill side, 50% of those volumes in a given year are usually from projects and 50% is kind of from base business. And we have, as you mentioned, a couple of years of good runs last year. Overall landfill volumes grew 24%. And I would say assumed in the guide this year is that continues to grow, but it's hard to put up those kind of numbers every single year because there is some project dependence there.

Yes. Very helpful. I guess turning to Field Services, outperformed, right, just full stop in 1Q. And I know you have a tough comp here in 2Q. When we pull back though, it just seems like you're taking share in field services and not just through consolidation, but organically. So maybe talk a little bit about what's been the driver of the share gains. And going forward, with the branch expansion and some of the other investments you're making, can you hang on to or expand that share.

Yes. So great questions. And we would agree with you. I think we're definitely taking share there. I think we're doing it in a couple of different ways. Certainly kind of getting a larger business and expanding branches, so getting larger through the HEPACO acquisition that we did now a couple of years ago, I think 2 years later, feel even better about that acquisition than we did when we made it, just the -- our ability to continue to grow that platform and really fit hand in glove in our current field services organization.

So to have a field services organization, almost $1 billion of revenue continue to build out sites. We really are -- if you kind of look at a map of our field services organization now, we really are everywhere. And so we can respond anywhere that we need to. I think the other thing we're doing a great job on, and it's an ability to take share, but also internalize a lot of our labor.

So our dependency on third-party labor subcontractors is much less than perhaps it was a few years ago because we've made some investments in our employees, our retention rate is much better. And through all those things, they're doing the work more efficiently, but it also allows our branches to remain staffed up so that when an ER happens, we are right there ready to go.

I also think we made some nice investments in some specialized equipment related to kind of marine responses and things like that. So we're much more competitive kind of in that realm. And I think some really nice leadership coming over again from the HEPACO and some internal hires has really allowed us to put a strategy forward and grow the business and take some market share.

And I guess on IS, it's understandable, right, that refiners are going to run at high production levels in this environment, and that reduces turnaround work. We saw that post-COVID, right? But if we look at that sort of history of the refiners running strongly and deferring some of the turnaround work, what does that history imply for when you should see an uptick in activity?

Yes. I mean when you look at that most recent cycle with COVID, if you were to go back and look at our Industrial Services business, late '21 on to '22, '23, the business put on -- put up some pretty good numbers. That was right around the time we did an acquisition as well. So you got in there. But each and every month, we kind of closed out, it was better. It was better because during that period of time, early during COVID and right after people were delaying the maintenance that's required for these plants. And that's kind of what's happening now, Noah.

So when you think about, hey, when do these customers get back into their normal routine of not deferring maintenance and really getting in there and cleaning out these units, we're hopeful that once we get through this major ramp-up, maybe it's the back half of this year. We don't have that in our guide right now. We won't guide that way until we see that happening. But you kind of look at the length of time this is going on now, and it's beginning to be very analogous to the situation you referenced and I mentioned a moment ago.

And you've got to think here at some point here in 2026 or early 2027, you really start to see kind of those maintenance schedules and the scope of those maintenance projects increasing and benefiting that Industrial Services business. And for us, we've done a lot of self-help things I talked about on public calls and conferences before, but a lot of underlying self-help things that I think will put that business in even a better position when that demand comes back.

One question, given the time constraints on SKSS. We expected the uplift in the guide from higher base oil prices. But can you talk about some of the internal initiatives around charge for oil and Group III production and direct sales? We don't have to get into them all in great detail, but to what extent did any sort of improvement in progress there drive some of the upside for the year? Or is there more upside to come if you get an uptick in Group III or direct sales?

Yes. Certainly, I think there's more upside to come if base oil pricing stays high for longer than we've anticipated. Certainly, if we continue to get more interest from the majors who are looking for that consistent stream of base oil and maybe even some more Group III, that's certainly upside to the guide.

So those capabilities, the partnerships we've developed, the development of our Group III initiatives, those are all helping to the upside here, and we'll continue to do so. And then you mentioned kind of charge-for-oil initiatives. We've just gotten a lot smarter. We've gotten a lot better communities with our customers. We're managing that better in terms of making sure that we maintain the volumes to get into our plants. So all those things have improved over the last few years and all provide kind of upside here to the numbers, both this year as well as hopefully going forward with continuing to stabilizing this business and growing it to the extent we can as well.

All right. I want to ask you in the final minutes about capital allocation. You mentioned at the beginning, increasing confidence year-over-year around getting some M&A done. Maybe just comment on what's driving that, talk about the funnel. And then the pair of that is you talked about the value you see in the shares. You've still got a healthy amount of dry powder on the buyback. Just how we should be thinking about your activity there?

Sure. Sure. First, acquisitions funnel is super strong, lots of opportunities. I'd say lots of opportunities kind of in our core tech services, field services, kind of environmental segment space. So I feel, like I said, compared to 12 months ago, I think a high likelihood that we get kind of more acquisitions over the goal line this year. I also think valuations maybe tick down a little bit in some of these. And so that's helping.

On the remaining capital allocation on share repurchases, we always weigh our share repurchases against other value-driving opportunities like acquisitions, capital investments. Last year, we kind of really stepped on the share repurchase program, absent acquisitions and things. We'll continue to utilize that. In the first quarter, we bought back $25 million of shares. I think we'll continue to exercise that program as another outlet to deliver value to shareholders. But like all things, it's always balanced against kind of other opportunities and what are the most accretive.

All right. Well, there's a lot of, I think, progress and momentum across the different parts of the business. And so we look forward to seeing that play out over the course of this year and beyond. Gentlemen, thanks so much for the discussion today. As always, it's a pleasure to have you here. If anyone wants to follow up, they can certainly go through us or contact Jim and his team. We hope everyone has a great day at the conference, and a great rest of your week. Thank you.

Greetings, and welcome to the Clean Harbors First Quarter 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael McDonald, General Counsel for Clean Harbors. Mr. McDonald, you may begin.

Thank you, Christine, and good morning, everyone. With me on today's call are 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, May 6, 2026. 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 Investor Relations website and in the appendix of today's presentation.

Let me turn the call over to Eric Gerstenberg to stock. Eric?

Good morning, everyone, and thank you for joining us. Before we move into the results, I want to recognize our General Counsel, Michael McDonald, who will be retiring next month. Michael has been a trusted colleague and an integral part of the Clean Harbors team more than 25 years and his judgment and perspective have been invaluable. We thank him for his many contributions and wish him good health and happiness in the years ahead. Thank you, Michael.

Starting off with safety. Our team delivered an extraordinary safety results in Q1 by achieving the lowest quarterly total recordable incident rate in our history at just 0.39. While we invest in better equipment, technology and company-wide programs to improve safety, you only get the type of results we are achieving with buying at field level. We are continually setting a higher standard for our company and our industry. For any employees tuned in today, thank you for all that you do and keep yourself safe and your colleagues safe.

Turning to a summary of results on Slide 3. We kicked off 2026 with better-than-expected Q1 results, including higher profitability in both of our segments. Despite challenging weather conditions that impacted our collection and services business in February, we exceeded our EBITDA expectations and improved the company's adjusted EBITDA margin by 60 basis points from Q1 2025. Within the Environmental Services segment, we demonstrated our resiliency by delivering the segment's 16th consecutive quarter of year-over-year improvement in adjusted EBITDA margin and 18th straight quarter of EBITDA growth.

At the same time, Safety-Kleen Sustainability Solutions segment benefited from our continued focus around charge-for-oil services and from a late quarter surge in oil pricing that lifted its profitability. Turning to the segments, beginning with ES on Slide 4. Q1 revenue in this segment increased by more than $40 million due to growth in project services, including PFAS related opportunities, and a considerable amount of emergency response work.

We also continue to see healthy demand for our disposal and recycling services. Technical Services revenue rose 5%, and Safety-Kleen Environmental Services revenue grew 7% and driven by pricing and higher volumes within its core offerings. Incineration utilization, including the new Kimball incinerator, was 80% versus 81% a year ago, reflecting scheduled maintenance days and weather-related impacts in both periods.

Continuing the trend of the past several quarters, we generated a sizable increase in landfill volumes, which rose by 34% on strength of project work, including PFAS related plans. Field service revenue grew 7% in the quarter as we responded to a steady stream of customer emergency events across the U.S., including a large-scale event that generated approximately $10 million in revenue. We opened 18 field service branches during 2025 and plan to open 10 more in 2026. While these new locations will take some time to grow their revenue base, our investment speaks to the opportunities we see in field services as well as our ability to cross-sell across other businesses.

Adjusted EBITDA was up 6% in the quarter. with ES segment margin up 50 basis points due to pricing, higher volumes, workforce productivity and cost control initiatives. Overall, our ES segment achieved positive Q1 results despite certain market conditions in the quarter, including weather and regional softness in our Industrial Services business.

We exited the quarter with considerable momentum for ES and March. Revenues were approximately 10% higher than the same month a year ago.

Turning to Slide 5. We wanted to take a moment to highlight our PFAS management framework that we issued in early April. The purpose today is not to cover the individual details of the framework, but to reemphasize that we have an end-to-end cost-effective solution for PFAS in all of its forms and concentrations. Over the past several years, we've had many customers, government agencies and even community leaders approach us for advice on how to best address PFAS. For example, they call on us when they want us to clean up contaminated water, remove stockpiles of ASSS firefighting foam, need someone to respond to emergency situations like or spills or remediate contaminated site.

Customers have a lot of uncertainty around PFAS, and we believe our framework featured on this slide is beneficial to help them make smart economic decisions at all stages of the process. Our recommendations are based on years of institutional knowledge and the latest scientific data, including the PFAS incineration study we completed in conjunction with the EPA and the Pentagon. Our concentration based framework provides the proper treatment and disposal pathway for a range of scenarios. This tiered approach provides the ideal way to address complex contaminants at reasonable costs.

We are starting to see considerable regulatory movement around these forever companies, both the Department of War in March and the U.S. EPA in April have issued PFAS guidance that included incineration, hazardous waste landfill and water filtration as recommended methods of treatment and disposal. The market is still developing. But having both the Pentagon and the EPA issued guidance that endorses high temperature for permitted incineration and our other PFAS offerings is critical. Those endorsements of our proven capabilities add to the momentum we are already seeing in our PFO sales pipeline.

As PFAS remediation accelerates nationwide, our integrated framework provides a practical and scalable model for industry and government partners. Today, we continue to believe that Clean Harbors remains the only company that can offer a cost-effective end-to-end single-source solution that is commercially scalable for any PFAS need.

With that, let me turn things over to Mike to discuss SKSS our reference related to AI and our capital allocation strategy. Mike?

Thanks, Eric, and good morning, everyone. Turning to SKSS on Slide 6. The year-over-year decrease in segment revenue was expected and reflects lower market pricing for base and blended products as compared to a year ago. This was partially offset by an increase in charge for oil revenue as well as rising base oil prices towards the end of the quarter.

That base oil price increase and the work the team has done to manage our costs over the past year has led to a meaningful rise in profitability. Q1 adjusted EBITDA in SKSS grew 17% to $33 million with an impressive 320 basis point improvement in margin. We increased our CFO pricing sequentially from Q4 and more than doubled our rate from Q1 last year. We continue to provide high-level services to customers and even with the higher CFO, we collected 53 million gallons of waste oil to keep our re-refinery running efficiently.

At the same time, sales of base and blended gallons were consistent with the prior Q1. We incrementally grew both our direct lubricant gallon and Group III gallons sold versus Q1 a year ago. Those gallons carry a premium value and profitability compared to our other products. Overall, our SKSS segment delivered better-than-anticipated results.

Turning to Slide 7. This morning, we want to briefly touch on the topic of artificial intelligence, an area of immense potential for us. Technology has been part of Clean Harbors' DNA and a competitive differentiator for decades. AI is the next practical layer of that. We have implemented AI type functionality for years, and we continue to see real opportunity to improve productivity, compliance, safety and customer service over time.

We use AI in many areas, including waste classifications, invoice audit, ready-to bill automation, document processing and field support tools. We are also evaluating opportunities in routing, scheduling and supply chain logistics. Our approach is disciplined, govern data, human in the loop controls and clear operating use cases. People and technology creating a safer, cleaner environment has been our corporate slogan for many years.

AI will continue to be a key element of our technology journey, and we expect our AI efforts to keep delivering meaningful financial returns for us in the years ahead.

Turning to capital allocation on Slide 8. We continue to look for internal and external opportunities to generate the best return on our shareholders' capital. In recent years, we have executed well against all elements of our capital allocation framework, and we expect 2026 to be no different. We closed the DCI acquisition at the end of Q1, and we're excited about other attractive candidates that could materialize in the very near future.

We're also investing wisely internally to accelerate our growth. including our previously announced back to fleet expansion, SDA unit in East Chicago and other smaller revenue-generating opportunities that have recently developed. We ended the quarter with an ample cash balance and low leverage to execute both facets of our growth strategy.

We also continue to view share repurchases as an attractive way to return value to our shareholders. Eric will detail our Q1 purchases, but we continue to see our shares as attractive at current market prices, given the favorable long-term outlook for our business. We exited Q1 with momentum in a number of fronts. Within our disposal and recycling network, we are seeing an improving U.S. economic backdrop to drive our base business supported by growth opportunities stemming from restoring, PFAS and project services.

With a large number of maintenance days in our incinerators now in the rearview, we expect to deliver mid- to upper 80% utilization for the full year. SK Environmental should deliver another consistent year of profitable growth. Our Field Service business continues to strengthen its position as a trusted national provider for environmental emergency response.

Our Industrial Services business continues to operate in a challenged market, but initiatives we are undertaking now should position us for growth and better margins as conditions improve. For SKSS, we are capitalizing on elevated pricing and demand dynamics associated with global market disruptions and a continued focus on maximizing profitability while enhancing long-term customer relationships. Overall, we expect another year of exceptional profitable growth, margin improvement and free cash flow generation.

With that, let me turn it over to our CFO, Eric Dugas.

Thank you, Mike, and good morning, everyone. Turning to Slide 10. Our quarterly results came in ahead of the expectations we outlined in February driven primarily by SKSS outperformance and continued strong execution from the Environmental Services segment.

Total Q1 revenue increased 2% to $1.46 billion, reflecting solid top line growth for the quarter. Following some weather-related impacts in February that Eric mentioned, the ES segment delivered a record revenue month in March.

Q1 adjusted EBITDA increased 6% to $248 million. Our consolidated Q1 adjusted EBITDA margin was 17%, and representing a 60 basis point improvement from the prior year period as both operating segments contributed higher margins. This margin expansion reflected a combination of our ongoing initiatives, including disciplined pricing, leveraging volume growth, effective cost controls around labor and cost internalization as well as network and transportation efficiencies.

SG&A expense as a percentage of revenue in Q1 increased year-over-year to 14.2%, partially due to higher incentive compensation and insurance costs in the current period. For the full year, we still expect SG&A expense as a percentage of revenue to be in the high 12% range. Depreciation and amortization in Q1 was $116 million. up slightly from a year ago. For 2026, we expect depreciation and amortization in the range of $460 million to $470 million.

First quarter income from operations was $119 million, up 7% from the prior year. Net income in Q1 increased 8% as we delivered earnings per share of $1.19. Turning to the balance sheet on Slide 11. We ended the quarter with cash and short-term marketable securities of approximately $670 million, providing ample flexibility to execute on the capital allocation priorities that Mike outlined.

We closed the quarter with a net debt-to-EBITDA ratio of approximately 2x, while our debt currently carries a blended interest rate of 5.2%. Our balance sheet remains in terrific shape as we move into the more cash-generative quarters of the year.

Turning to cash flows on Slide 12. Cash provided from operations in Q1 was $6 million. CapEx, net of disposals, was $97 million, down roughly $20 million from the prior year. Included in this quarter's CapEx figure is approximately $15 million of cash investments in strategic growth projects, including the SDA unit and our vacuum truck fleet expansion.

Adjusted free cash flow which excludes spend from these strategic projects, was a negative $76 million in the quarter and in line with our expectations. As a reminder to folks, due to seasonality, negative adjusted free cash flow is typical in Q1 for our company. For 2026, excluding our expected $85 million of spend on the SDA unit and $25 million related to our fleet investment, we now expect net CapEx to be in the range of $350 million to $410 million with a midpoint of $380 million. This represents a $10 million increase versus the guidance we provided in February due to some investments related to attractive growth opportunities in select markets and geographies.

We are exiting these opportunities by making additional property investments and adding capabilities at certain sites where we see immediate returns. As such, these investments require a modest increase to our 2026 capital plan.

During Q1, we bought back approximately 87,000 shares of stock at a total cost of $25 million for an average price of approximately $287 per share. At March 31, we had approximately $575 million remaining under our share repurchase authorization, reflecting the expansion of that program by our Board in February.

Turning to our guidance on Slide 13. Based on current market conditions and our Q1 results, we are now guiding to a 2026 adjusted EBITDA range of $1.24 billion to $1.30 billion with a midpoint of $1.27 billion or an increase of $40 million from our prior guidance. Given positive trends and market factors, which have developed late in Q1 and on into Q2, we now expect meaningful increases in both of our operating segments and are confident in our revised outlook. At the midpoint, this updated 2026 guidance now implies adjusted EBITDA growth of approximately 90% versus 2025.

Looking at our annual guidance from a quarterly perspective. We expect second quarter adjusted EBITDA to grow 5% to 9% year-over-year on a consolidated basis. Looking at how our annual guidance translates into our reporting segments. At the midpoint of our guidance range, we now expect our 2026 adjusted EBITDA in Environmental Services to grow 5% to 8% for the year.

We exited Q1 with increasing demand across disposal, recycling, mediation work and our SK branch offerings. Our facilities network is positioned to process record volumes this year with strong execution from our sales team in a market backdrop of reshoring activity, robust project work and expanded PFAS-related work. We also expect to see continued expansion in our Field Services business.

This 2026 guidance midpoint now assumes that our SKS segment delivers approximately $165 million of adjusted EBITDA, up approximately 20% from 2025 and higher than the $135 million we provided in February due to the increase in base oil prices. There is significant uncertainty around the duration of the overseas conflict and its impact on petroleum-derived products such as base oil. We believe $165 million is an appropriate assumption at the current time given the wide range of potential outcomes.

Within corporate, at the midpoint of our guidance, we expect negative adjusted EBITDA to increase by approximately 3% to 6% compared to 2025. This modest growth is primarily driven by higher wages and benefits, costs to support business growth, increased insurance costs and acquisition-related impacts. Looking at it as a percentage of revenue, we expect Corporate segment results to be flat to slightly down from the prior year.

For 2026, we now expect adjusted free cash flow in the range of $490 million to $550 million with a midpoint of $520 million. That represents a $10 million increase versus our prior guidance, reflecting the higher adjusted EBITDA we now anticipate this year and considering the revised CapEx assumptions. We're off to a strong start in 2026, and our Q1 performance has led us to raise our full year expectations for both operating segments.

We expect the positive demand environment we are seeing today to support strong, profitable growth through the balance of the year. We're encouraged by our growth trajectory and remain focused on executing against our long-term vision and goals as we move through the rest of 2026.

And with that, Christine, please open the call for questions.

[Operator Instructions] Our first question comes from the line of Noah Kaye with Oppenheimer.

Great start to the year. I'm just trying to think about the growth profile across business lines here in the second quarter and the guide. Clearly, I think you mentioned improving trends really accelerating trends across segments. In March, I think you said 10% year-over-year revenue growth within ES in March and base oil price is improving as well.

So I guess, if we just unpack kind of the midpoint of the EBITDA guide for 2Q, how do we kind of think about that, if possible from a segment perspective? Because it seems like your exit trends imply a pretty good amount of upside to that.

Yes. Noah, this is Eric. I'll start. When you think of our different business segments, Clearly, as Mike pointed out, there's still a lot of fluctuation in what's going to happen with base oil. But we're cautiously optimistic that, that segment is going to continue to overperform.

When we think about our Environmental Services segment, as we saw in Q1, our growth rates of our SKE business, our Technical Services business, our Field Service business, all are north of mid-single digits and higher. Industrial Services, we continue to be cautious about looking at how that business will perform, especially in light of how refineries these days and turnarounds are producing -- are trying to maximize the production of fuel and diesel and jet fuel. So that business, we expect to obviously have a stronger second quarter and third quarter, but probably pretty flat year-over-year.

And I think to address kind of the Q2 question you had, Noah, in terms of the segments, I agree with all of Eric's points. To put a little bit finer point on Q2. I think when you look at the Environmental Services segment, Q2 last year, strong, Q1 this year, kind of in that 5%, 6% range, very similar growth pattern as we move into Q2 here for Environmental Services. a little better than what we thought 3 months ago.

And so that's nice to see. On SKSS, obviously, the year-on-year growth in Q2, greater than that, probably in excess of 10% due to the increase in base oil pricing predominantly.

That's super helpful. I want to pick up on your comments around the field expansion, the branch expansion and the cross-selling opportunity there. Can you talk a little bit more about that? Like how do you generate cross-sell from the field expansion? How does it translate across the business? If you can give us some examples, that would be helpful.

Yes, absolutely. When you think about our Technical Services business going up and collecting waste and packaging and bringing it back, those same technical services customers have -- the larger ones have environmental needs to have us respond with Field Services to clean their production tanks, to perform vacuum services above and beyond those baseline disposal lines disposal and transportation lines of business.

When you think about our Safety-Kleen Environmental customers, we're seeing the same things where those smaller customers, smaller locations still have tanks and still have emergency response events, still have fleets that need our Field Services services. to respond to their fleet emergencies or minor spills that they have as they transport goods throughout the country. So our job is to make sure that as we grow out our footprint that when we have a technical service branch footprint or SKE branch that we're complementing that by building out all of our Field Service branch capabilities in those same locations and growing our cross-sell with all of our lines of business.

We have about 60 different lines of business that we service. And when you think of the number of technical -- the types of technical services customers, they consume about 20 to 25 lines of business, Safety-Kleen customer is about 5 to 6 of those business unit lines of business. Field Services complements both of those business units by responding to their needs. And that's why we're -- we continue to build out that field service footprint.

It also I would say is that as we talk about field service branches, we're strategically trying to make sure that we are always the first call for any emergency response, large or small. And our team has been doing an excellent job of positioning us with emergency response agreements with large and small customers that we can be there from our needs. And those efforts, the team has done a great job there, and they're really paying off. And that's to come back around and to answer your question, Noah, our field service business is really complementing those other business units.

Our next question comes from the line of Bryan Burgmeier from Citi.

Just on the '26 guide and the updated '26 guide. Just curious if there's any impact from kind of rising diesel costs. Maybe an impact to 1Q or 2Q as you kind of pass those costs along to customers or maybe that's kind of happening in real time. Just any thoughts on that would be helpful.

Yes, Bryan, this is Mike. I'll take a shot at that. We have a recovery fee that covers many different things, including the price of that diesel, that gets reset monthly. And so we tend to offset the cost of the diesel prices with that recovery fee. It's really been a long-standing process we've had for many, many years.

It's based on the underlying price of diesel, and I think it's been a well understood and well accepted by our customers. It moves every month. So I think that the rising price of diesel -- as it relates to Environmental Services, the rising price of diesel has kind of an immaterial effect on our profitability and our margins. It's almost a pass-through. On the SKSS side, obviously, it's very much more material.

Got it. Got it. That makes sense. And then I appreciate the kind of overview and your thoughts on AI. Just maybe from a high level, where do you see the greatest opportunity right now? Would you say it's maybe on top line, bottom line? Is it efficiency or safety, just some general thoughts on where the opportunities lie?

Sure. I'll start. When I think about artificial intelligence, it was interesting as we prepared for this call, we want to talk a little bit more about AI. We went back and looked, and we were actually talking about AI and robotic process automation back in 2017. So we've been actually having these types of technologies in our systems, in our processes.

As we say, we think we're a leading in technology and cleaning harbors and AI is the next iteration of that. And again, we've been talking about it for many, many years. So all the things I laid out in my prepared remarks, they're all part of the reason why the margins have gone up 16 straight quarters for 4 straight years. They're all that and many other things we do as an organization.

With that type of safety, compliance and profitability drivers, whether it be invoice audit automation, faster profiles and the list goes on and on. I mean we're making a more concerted effort here in 2026. A little more money, not a lot more money. But there's many, many different projects out there that are -- that help us from a safety and compliance standpoint as well as profitability. And it's hard to put a real number on that, like how much is that related to it. It isn't a huge spend, but we do see this is as a great opportunity.

Our next question comes from the line of Jerry Revich with Wells Fargo.

I wonder if you just talk about the cadence of demand that you're seeing in Industrial Services, especially on the refining end market given the improved spreads. I'm wondering what you're expecting over -- as we head into turnaround season and what's the potential upside in that line of business now that the customers are a lot more profitable than a year ago?

Yes, Jerry. The start of the year, we went out with our sales team and the touch points with over 12,000 customers that have both small and large type turnarounds planned for the year. And our overall turnaround count seems to be consistent with last year. However, with what's going on with the Iran conflict, we're also seeing that those refiners really want to run full out to make as much fuel and diesel as they can.

And preliminary trends that we're seeing exiting first quarter seems to be that those are more of pit-stop related refinery turnarounds, shorter in duration. So while the count seems good, they have been shorter in duration. We have had a few that have expanded in scope that we've seen. And we think that, that's primarily due to last year they were also constructing their spend.

But we're cautiously optimistic. We're staying close with our clients. We're making sure that we manage all their needs. Our specialty services is growing when we perform those turnaround services as well. So we'll continue, I think, 90 to 120 days from now, we'll have a better outlook of what we're seeing.

Okay. And then Mike, can we just circle back to your comments in the prepared remarks on the M&A pipeline? Can we, to the extent you're comfortable, just talk about the sizes of potential deals that you're looking at? Is it one large deal, is it multiple deals? And any color that you could share or willing to share on what are the key signposts from a timing standpoint that we should keep in mind?

Yes, Jerry. So when we think about M&A, but another year here at Clean Harbors. It's just like it was last year which weren't as successful. But we got the DCI acquisition over the goal line and that closed here in Q1. And there's many other opportunities out there, all in our primarily in Environmental Service that have permanent facilities that feed our network or have a large collection network.

So these are many out there. I think some are very close to closing. Some are -- but there's plenty in the mostly smaller deals, tuck-ins type of transactions. But I think those have been plentiful this year.

Our next question comes from the line of James Ricchiuti with Needham.

Just based on what you're seeing in the Industrial Services turnarounds in the energy market, which you just characterized as kind of like pit-stops in nature. Does that suggest something more meaningful in the back half, we see some change in the overall pricing environment for a while?

We don't see a change from the pricing environment, no, but could suggest that in the back end that it might be a little bit more heavily loaded on turnarounds in Q3 and some bleeding into Q4. Obviously, as mentioned earlier, they're running hard right now. But we're staying close with those customers, making sure that we're available for all their needs, and we'll be there to service them.

Yes, certainly hopeful that, that pattern comes to fruition, Jim. But just to be clear, kind of in the guidance that we haven't laid out right now, we don't have large turnaround activity coming back in the second half. again, hopeful that, that happens. But the way we have it laid out right now is pretty flattish year-on-year.

Got it. And just with respect to the activity, the more positive trends that you're seeing in ES in March. Can you give any color on -- and maybe more broadly in the quarter, which market verticals are you seeing changes versus your expectations, say, entering the year? I think you alluded to...

Yes, James, we're seeing very strong trends with multiple verticals. Chemical, a little bit too early to tell, but in other areas such as health care and retail, we are driving expansion of those businesses. Pharma has been showing a lot of strength. Manufacturing, we're seeing volumes being really strong. .

So a number of areas in our verticals that are pushing volume growth across the network in both Technical Services as well as SK Environmental, other things like universities and household hazardous waste days pretty confirmed good spending trends. The number of quotes overall that we're seeing across the business is continuing to grow substantially. Our pipeline is strong in various areas, including project services. So a number of verticals we're seeing expansion in.

Jim, the only thing I'd add to that is that you've been covering us for a long time. We've been doing this for a long time. And normally, we don't raise guidance after 90 days in the quarter, whether we -- unless there's an M&A or something like that. So the fact that we're raising guidance on both segments here just after just giving guidance 6, 7 weeks ago, should tell you about our view as we think about the rest of the year.

Yes, it does. And I appreciate that additional color, and congrats on the nice start.

Thank you.

Our next question comes from the line of Larry Solow with CJS Securities.

I was going to follow up on that question just because I know you mentioned the economic backdrop seems to be improving. And gave a little more color on that. Just a question I had was, has there been any hesitation from any customers through the kind of just the Iran conflict going on? Has that interrupted you guys at all? It doesn't feel like much.

Obviously, we talked about the oil effects. But outside of that, has any customer behavior changed at all due to maybe inflationary pressures they're feeling. Obviously, your energy customers are kind of drinking from the fountain there from the holes, but just outside of those customers.

Larry, this is Mike. Thanks for the question. I guess I would say that we haven't seen a lot of disruption because of the conflict. As a matter of fact, one would think, logic would tell you that you're getting kind of more U.S. production, that should be, if anything, a short-term -- from a manufacturing standpoint, you want to be closer to your customers, you're worried about supply chain, I mean, those types of things that happen during COVID, frankly, that may be happening again.

Certainly, if you look at some of our larger customers and read their earnings releases and their transcripts, you come away with that impression that they are definitely -- whether or not the demand environment is changing, I don't know, but that's still kind of muted. But certainly, as the U.S. manufacturing should grow in the short term because of this conflict if you're betting on that.

Right. Okay. And then just a question more mid- to longer term on PFAS, and I appreciate all the color and the framework that Eric provided there. Just so the DOW, the EPA, obviously, they've given kind of guidance. It still feels like it's interim though, right? Because they're not really establishing actual requirements. They're just kind of laying out the options, right, for removal. So are we still waiting for like a more finalized guidelines or requirements for customers that might actually accelerate growth over the next couple of years?

Larry, I'll start. So certainly, we've talked about in the past the revenue that we did in 2025 was about $120 million plus, and our pipeline was continuing to increase by 20%. To start the year based on the activity and the announcements over the past couple of quarters, we're seeing an accelerated pipeline and our full reasoning behind putting out that recommended guidance was because we see customers responding to that.

When they have PFAS need, it's like changing out FFF fire suppression systems or fire departments need to change out their fire trucks or an airport is going to be remediated because they're going to put a new runway down. We're using that guidance and they're accepting it and they accept it because of who we are and what we know and how we utilize our network in order to perform those responses.

So I think that the point is that we're seeing that framework being enacted, customers acting more and more responsibly, regulatory agencies acting more and more responsibly. There definitely seems like there's more momentum going into this year than a year ago at this time. So we're -- even though there hasn't been any formal specific items like what we put out, we're acting by that. We see the market acting by that when they need to deal with their situations.

Our next question comes from the line of David Manthey with Baird.

First off, on the new guidance. So it looks like $30 million of the $40 million midpoint EBITDA increases because of SKSS. And as you said, I mean, you don't normally raise guidance in the first quarter. So should we expect the benefit from spreads in SKSS to flow ratably second quarter through fourth quarter?

Or are you thinking about this like, hey, we have visibility on the second quarter based on where spreads are now and we'll assess the potential third quarter and beyond spreads when we report in -- second quarter in July or whatever.

Sure, Dave, it's Eric. I'll take that one. I would say we have the better base oil pricing kind of spread between Q2 and Q3. Certainly, more insight into Q2 right now, given the uncertainty around how long oil stays high. So I would think about it kind of ratably through Q2, Q3. I think Q4 remains better just with a lot of the things that the business is doing as well. But in the current guidance, we kind of assume pricing may be coming back down a little more towards the normal as we get closer to year-end.

Okay. That's helpful. And then as it relates to Kimball, I know initially, you were doing a lot of starting and stopping and doing some test burns and things. As we sit here today, is Kimball sort of running on a normal schedule? Is it taking what you would consider normal waste streams at this point?

Yes, David. Kimball ramp-up has gone extremely well. We more than exceeded our tonnage targets in 2025 were out of the gate exceeding our expectations. And in 2026, the plant is running well. Team has done a great job and we're on track with everything that we've laid out in the past from financially.

When you think about 2025, our overall EBITDA contribution was about $10 million this year, add another $10 million to $15 million to that. But we're hitting our goals, our targets and the plant is running very well.

Our next question comes from the line of Adam Bubes with Goldman Sachs.

How are you thinking about potential to maybe hold on to some of the charge for oil actions in a base oil up cycle? And is there a way you would advise us thinking about SKSS EBITDA growth on a percent higher base oil prices or maybe incremental margins are a way to frame that?

Yes, Adam. We -- the team throughout 2025, we were responding to some very challenging conditions with what was happening with base oil, and did a great job of moving to a charge-for-oil basis. As we exit Q1, we're in that $0.60 range, and we look to continue to manage.

We have lost some gallons but we really want to continue to manage and charge-for-oil scenario. It's a waste that needs continued processing and refinement. And we want to make sure that we continue to operate that way. and operate efficiently even though the base oil market has been changing.

Adam, we worked really hard to change the industry from a pay for oil to a charge for oil, and it's a long, painful 18 months, and we're not that interested in giving it back. Obviously, we're going to need to be selective on that. We want to make sure we keep our talent flowing into the re-refineries, but I think we'll be loathed to do that.

And then can you just help us think about where your realized base oil price was in the quarter? And how does that compare to the exit rate?

I mean, base oil prices, I don't have exact numbers to share with you, but base oil prices certainly went up as we got toward the end of the quarter. The conflict started in late February, we gave guidance in mid to late February. The conflict started in late February. Prices started ramping up, and that was part of the beat here in Q1.

And frankly, the guide grade is Q2.

Our next question comes from the line of James Schumm with TD Cowen.

So maybe just a couple of clarification questions for me. So the SKSS guide up 30%, we're spreading that over 2 quarters, Q2, Q3. So that's like $5 million additional or incremental per month over those 6 months? Or did you realize some benefit in Q1 and you're assuming a little bit of benefit in Q4? Just maybe some help there.

I would describe it as this. We certainly realized some of the benefit in Q1. We talked about that kind of on the call. in Q2 and Q3, I would say, kind of an equal amount of incremental benefit and then kind of back down to normal in Q4. Q4 has a small kind of year-on-year increase in our current assumptions.

But as I alluded to a moment ago, there's -- and in my prepared remarks, a lot going on in the business, a lot changing, even early as today, some news -- we have some assumptions we're working on right now, and we're going to come back in 3 months' time and kind of update those. But I would think about it as the increase that's in the bank in Q1, spread pretty evenly between 2 and 3 for the rest of the $30 million and then kind of flattish to up a little bit in Q4.

Okay. And then on PFAS, it sounds like you just kind of mentioned some -- maybe some accelerating momentum there. Is 20% the right growth rate to continue to think about this? Or does the accelerated pipeline maybe we should be thinking about like a 25% growth rate? Or is that too premature?

Yes. We -- it's more in the 25% to 35% range, what we're seeing initially year-end during the year. So a strong pipeline. Number of samples that we're seeing to analyze for PFAS contamination that customers have been submitted have been up.

The pipeline in both soil remediation, AFFF change-outs as well as industrial and municipal water treatment, all of those areas we're seeing improvement trends as we begin here in 2026.

[Operator Instructions] Our next question comes from the line of Tobey Sommer with Truist.

I'd love to get your perspective on the EPA guidelines, any differences that you've noticed between those fresh and the DoD and what you expect to hear from customers or, in fact, are already hearing.

Yes. We were really excited, obviously, to get to see over the goal line, the approving of incineration by the Department of War. Our teams have been working with already 700 different military installations to make sure that we're here for their needs. So all positive trends there.

Just as you know, we spoke in the past that we had down and visited our incinerator down at Houston a while ago, and he recently commented about meeting with environmental and us on helping to solve the PFAS challenges out there. So we're excited by just seeing some of that limited momentum about disposal of technologies being pushed out there by particularly the Department of War.

Tobey, just revalidates what we already know that we have a great end-to-end solution, as Eric said in his prepared remarks, we have -- we can solve any of our customers PFAS problems, and we've proven that both internally with our own framework as well as externally with the Department of War or the EPA.

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

Thanks, Christine, and I appreciate everyone joining us today. We are participating in several investor events in the coming weeks, starting with the Oppenheimer Conference tomorrow. We are looking forward to seeing many of you at these events, and as always, have a great safe rest of your week. .

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.

Cool. All right. Let's go ahead and get started with the next presentation. Good morning for day 2 of the Raymond James Conference. For those who don't know me, I'm Tyler Brown, senior analyst here at Ray Jay. I cover a variety of things. You've maybe seen me in a presentation already, but I do the waste industry. We do heavy construction materials as well as some transports, which we have later on today. But this morning, I'm very excited to kick it off with Clean Harbors.

Presenting today, the company's Co-CEO, Eric Gerstenberg; the company's CFO, Mr. Eric Dugas. Jim Buckley is out in the audience. There's Jim. Does a great job on the IR effort. But I think at this point, you guys have been coming down for a few years. I think a lot of people kind of know a little bit about Clean Harbors. But the reality is Clean Harbors is a complicated business. You have a lot of different lines of business, you do a lot of different things. I know we don't have any slides, but it is a generalist conference. So Eric, why don't we just kind of get kicked off. And maybe just tell us a little bit about who you are and what you do. We'll kind of jump into Q&A. There's a lot of people. So if you guys have questions, please let me know. We can do that interactively. Eric?

Great. Thanks, Tyler, and thanks for everybody for joining us today and all the interest in our company. Our mission as a company is really based around sustainability. Our job is to make sure that we're creating a cleaner, safer environment through the proper disposal and recycling of hazardous waste. We have a great business model. We're really resilient business. We have 24,000 employees strong today. We manage over 340,000 customer locations. We have 900 branches located throughout all of North America. We co-locate in our branch offerings, 4 different -- 6 different business units under 2 reporting pillars.

So let me first touch on our safety -- our environmental business. Our environmental business has 4 different business unit branch types and our Safety-Kleen Sustainable Solutions has 2 different branch types. Under the Environmental Services side, we have a technical service branch business unit. What they do is they go out and package and collect large quantities of hazardous waste that route into our network.

We also have our Safety-Kleen Environmental business unit that collects smaller quantities of hazardous waste at our customer sites, servicing smaller customers, particularly around manufacturing and automotive. We also have a field service branch type that responds -- it's about $1 billion of our $6 billion of business that responds to emergency responses and supports the utility industry. All of the major utilities throughout North America are part of our business platform, customers that we serve. Last year, our Field Service business unit responded to over 21,000 emergency response events, both large and small.

And then finally, the fourth business unit within our Environmental Services is Industrial Services. In Industrial Services, we work for the largest chemical, refining, manufacturing plants throughout North America. We have embedded people. Our people work on site at our customers, providing services and collecting hazardous waste to route into our network. Of our 24,000 employees, we have 2,600 day in, day out that work actively providing these environmental services at our customer locations. So that's a high-level look at our Safety-Kleen Environmental.

On the Safety-Kleen Sustainable Solutions, we are the largest collector of used motor oil. We collect over 250 million gallons of used motor oil at these customers, 160,000 customers that we collect from that also need our environmental side. And we collect that used motor oil routed into a wonderful refinery network, and we make a great base oil product and blended oil products that we sell to some of the largest refineries and they use our blended oil products to brand under their brands. So it's a great sustainable model that complements our environmental services. So that's a high-level look at the beginning of our business model, Tyler.

Okay. So I'm a simple guy. You know this. So when I think about your business, it's kind of the collection, the transportation and disposal of hazardous waste. So maybe we'll kind of walk through that whole supply chain and start on the collection side. You talked about environmental services. You talked about field services. Just talk a little bit about what you do for customers, helping them manage the front end, which is collecting the molecules. And then we'll talk about how you get them to their final destination.

And I'm kind of curious, in terms of the competitive moat, is the collection side more competitive than maybe the back end? And maybe we can talk a little bit about that.

That's great. That's great. So let me go back to the point about our 900 service branch locations and those 6 different business units that we have. Those service branch locations, in many cases, we have co-located business units. And why do we do that? We do that because we offer over 60 different lines of business to our customers. Large customers such as Dow Chemical, they need 40 of our 60 lines of business. So our service branches, when they're going to Dow sites, realize that they have 40 different products that they can sell.

Our sales teams that are aligned to those business units are cross-selling all those lines of business at that customer and their job is to go out and work on their sites. That was alluding back to the 2,600 people I talked about, but also drive out our equipment, various tankers, box trucks that go out to these customer sites and collect that hazardous waste. So that service side is really what that branch offering is. That -- they are the spokes. We have a spoke hub final facilities network that we'll get into in a minute. But those branches work, and they have competitive dynamics depending on the geography where they are.

We're the largest collector of hazardous waste. So -- and there's a lot of fragmented pieces or collectors out there as well, but we certainly have the dominant share.

Right. Okay. So we have kind of collected the molecule. We're out there doing remediation, all sorts of different work. I think one of the things that is underappreciated in your business is your transportation network.

Yes.

You guys have an extensive portfolio of assets. All sorts of different types. So maybe talk a little bit about that because once we kind of go through the collection process, we've got to get it to that more technical service piece or final disposal. So talk a little bit about the moat and the competitive advantage you have in the middle part of that supply chain.

Great. Great. So nationally, we're the 14th largest private motor carrier out there, pretty impressive statistic. Above and beyond our fleet of trucks and vehicles, we also manage over 2,600 different railcars. So a really vast collection network of railcars, van trailers, tanker trucks, vacuum trucks, a lot of specialty equipment that provide these services.

In addition to that, we also have 6 of our own refurbishment build-out centers. So we really take and build our own equipment and refurbish our own equipment, which gives us a competitive advantage. Our -- we get a feedback from our drivers and our customers about different shapes and sizes and tailor our vehicles to meet our customer needs and our driver needs, very important. And so that network of fleet of vehicles transports all that hazardous waste into our back-end disposal network and technology. So impressive footprint of vehicles and capabilities servicing all these different types of waste streams we see.

Right. Okay. So the molecule has been generated, the molecule has been moved. Talk about the final in disposal. You guys have probably the widest array or a portfolio of disposal options. It's a huge competitive moat. So let's kind of just talk a little bit about that, what you do on the back end?

Yes. We have an unparalleled network of disposal and recycling facilities, really, really unique stuff. And let me start by talking about our hubs. That starts where we talk about the service branches as the spokes. They are traditionally collecting and routing material back to our hubs. Our hubs start as what we call TSDFs. We have about 33 of them. And those TSDFs, treatment storage disposal facilities, they're aggregators of hazardous waste. They bulk consolidate. We put things into tanks, we co-mingle, and through those TSDFs, we make it more efficient for long-haul transportation and rail and tanker trucks and van trailers to our really unparalleled network of disposal and recycling facilities.

So going top to bottom after our TSDFs, we have 10 incinerators throughout North America. And those incinerators manage approximately 70% of the commercial incineration waste out that is generated today. So pretty proud of that, a strong footprint. We just completed last year, bringing a new incinerator online that we built. It was a $230 million capital investment in Western Nebraska that complemented a site we already had there, very difficult permits to get. Really proud last year of how we brought that unit online and managed over 38,000 tons in a start-up mode bringing that unit online. So 10 incinerators.

We also have a collection of 7 landfills, hazardous waste landfills that we manage throughout the U.S. They're what's called Subtitle C landfills. What does that mean? That means that they're taking materials that get stabilized and have a double liner, not like your traditional Subtitle D trash landfill, more around and built around hazardous waste.

We also have 11 wastewater treatment facilities that take acid material and caustic material and neutralize it and treat it for discharge. And then we also have 8 solvent recycling facilities and then 9 refineries that are taking that 250 million gallons of used motor oil and recycling and making it -- making a wonderful base and blended oil product.

Yes. Perfect. So obviously, I think we can all say an extensive portfolio. But I want to touch on the incinerator. So you said, if I just kind of parse out and think about it specifically, 70% of the commercial market is maybe Clean Harbors, but there's more than just the commercial market.

There's an entire captive market where Dow or DuPont or whoever may own a captive incinerator that is only used to burn their own waste. But the number of those have been going down for decades. Can you talk a little bit about that opportunity longer term for you?

Sure. So captives, as Tyler just alluded to, is when one of our customers has built out their own incinerator for their waste streams that they manufacture or make as a byproduct of all the great products that they make. And if you think about 20, 25 years ago, there was approximately 90 different captives throughout North America. And today, there's about 40 different captives. All of those captives owned by our customers, we service those customers for other environmental needs. So we're pretty close to them.

So not only do we manage their environmental needs but we help them to evaluate their long-term strategy as the suite of products that they're making has changed, their incinerators that they've built haven't come up -- have not really kept up with that change. So the utilization, the amount of material that they put through their own units has declined. And our estimate today is that for those 40 incinerators, captive incinerators, their utilization on an annual basis is probably in that neighborhood of the 30% to 50%. So dramatically different than how we operate our utilization of our plants, which is in the mid-80s to 90%.

So they really have -- some of them have a cost evaluation to do. And that dovetails into an opportunity for us to work with them on really managing all of their needs, take that incinerator offline, eliminate the environmental aspects of it. Let us do our job, let you do make your sticky stuff for your chemicals, your products. We'll manage all your hazardous waste into our network. And that's part of why we continue to think about evaluating our capacity. So there's about 500,000 tons of captive waste being incinerated out there, and those customers generate opportunities for us.

We were really successful 4 years ago, 5 years ago, working with 3M. 3M had the largest captive incinerator in North America. We worked a great deal for them so they could go make sticky stuff and all the wonderful products they do, shut down the incinerator, we'll manage and take down the incinerator for you, and we'll manage all those waste streams that you have in your 80-plus sites into our network and give you guaranteed capacity. That's the type of opportunity that continues to present itself for us.

Yes. I appreciate the 3M example. That was very interesting. So a very idiosyncratic story that could be a benefit. That's a long sales cycle, so we'll see how it goes. But something else that's very idiosyncratic to you is PFAS. And I know, Eric, you actually testified in front of Congress. Can you talk a little bit about -- and I'm still, frankly, again, I'm a simple guy, confused as to where exactly we are in this whole PFAS cleanup story. And maybe you can give a little bit of detail and talk about the next few years and what you see there.

Sure. That's great. So PFAS is a chemical that's been manufactured a long time ago and helps to repel water and is called a forever chemical. And that forever chemical is penetrated into our groundwater into contaminated soil. And it's a very hazardous material and causes effects like cancer. And so we've gone down -- we're providing solutions to manage the environmental cleanup of PFAS contamination. So we have a total PFAS solutions. What does that mean? That means that we can go out and work with our customers to sample their contaminated soil, their water.

We can provide analysis, and we can provide the proper management disposal of that. So we have drinking water systems. We have industrial water treatment systems. We offer our Subtitle C landfill solutions. We offer our incinerator solutions. And why is that important? Because there's different thresholds of that PFAS contamination. The higher the contamination really suggests that, that material should be excavated and sent for incineration. Some of it's that's lower drinking water, industrial water, that has to be treated at a lower threshold, and we provide treatment systems to do just that.

When Tyler alludes to going in front of Congress and the Senate, I went in front of the Environmental Public Works Committee, also had the opportunity to meet with Lee Zeldin, who is the head of the EPA. One of the things on his top priorities is to make sure they institute more governance around PFAS regulations by actually creating their own thresholds of what requires what type of disposal technology and remediation and cleanup. And we, as a company, we actually -- when I was testifying in front of Senate and meeting with Lee Zeldin, laid out what we believe based on how we're managing our customers what we believe those thresholds should be enacted. And that's today how we're operating with our customers.

Depending on their contamination level, we're going to suggest a path to limit your environment -- long-term liabilities to clean up your sites and manage it into our network, and we have the capacity and the wherewithal and the technology to be able to do it for you today. And that's what we're pushing with Congress and the EPA to get enacted.

Yes. Perfect. So today, you're doing PFAS, PFOS cleanup work. So Eric Dugas, can we talk about financially, how big is that business? And I know everybody wants me to just put it in my model real simply. But the problem is that, that touches many different pieces of the ES segment. So maybe talk just a little bit about it from a magnitude perspective. And what you see maybe over the next few years?

Sure, sure. Maybe before I jump into that, maybe just to wrap up this last section because I think there's one piece we talked about the great collection assets we have, the great transportation assets we have. And then lastly, and most valuable probably the disposal assets. But when you think about the competitive moat, obviously, there's a competitive moat in each of those 3 areas. But I like to think about the competitive moat as that entire process.

When you think about Clean Harbors and you think about our customers and you think about the types of waste we're handling, if I'm a customer, I want to go to one company to be able to handle all 3 aspects: the handling and collection upfront, the transportation as well as the disposal. So from a customer perspective, to be able to come to a company, Clean Harbors that can provide them those services coast-to-coast across North America, can track that properly through our proprietary software and then know that we'll handle it in a safe way.

We have a world-class safety record. That really -- those 3 things combined, I think, creates the real competitive moat that gives the business overall value. But when you think about PFAS, going back to your question, Tyler, this past year, we did about $120 million of PFAS. Just like the 3 aspects of our business, our total PFAS solution includes remediation and handling of the PFAS materials upfront. It includes transportation and then ultimate disposal.

We are doing more water filtration than I think we probably thought we would a few years ago as it relates to PFAS. But when you look at the $120 million, most of that revenue is going to be within our Technical Services group. That's where most of this is. We're seeing the pipeline in that business growing 15% to 20% on a quarterly basis. The revenue grew about 20% in 2025, and that's what we're projecting in our guidance for 2026 is another year of 20% revenue growth.

A lot of people ask us, "Hey, are we at a point where we should really start seeing some steep increases in revenue?" We're not guiding that. We're not guiding an inflection point quite yet. But I think as we get more rules and as we, quite frankly, I think, help in defining those rules, this is a long-term opportunity for Clean Harbors. We can provide all aspects of PFAS cleanup, and we think we're in a really good position to continue to grow, but probably a long-term opportunity.

Perfect. So we've kind of gone through, again, a couple of idiosyncratic opportunities with captives, with PFAS. Reshoring is also a big opportunity for you. I feel like you guys are at the tip of the spear. And the interesting thing is when I think about high tech or pharmaceuticals or chemical investments or even auto, on the back end, there's going to be a hazardous waste stream. So talk about your exposure to kind of the whole nearshore, reshore theme because, again, that could be something that plays out over the next couple of years.

Yes. We certainly have customers that we're already seeing the benefits of reshoring drive volumes into our network. And we're also working with customers that have a long-term path over the next 3 to 4 years to build out larger sites in the manufacturing of their pharmaceuticals and semiconductors and to name a couple, that are working with us to help make sure that as they bring their plants online, they get a secure hazardous waste disposal agreement. Our network, our footprint allows for that.

Some of the benefits that we've been seeing already when we think about our environmental services that grew in mid- to high single digits, our Safety-Kleen Environmental, our Clean Harbors Environmental, those grew last year organically in the mid- to single upper digits and double digits. We're seeing that effect already there, and we're seeing this trend that longer term, over the next couple, 3 years as they build out their footprints that we're there to be able to provide the total solutions that we've been talking about this morning.

Okay. Perfect. So sorry. So now we've kind of even woven in a third kind of idiosyncratic story. So let's kind of park this truck. I mean at the end of the day, what should we be thinking? I mean, you guys hosted an Analyst Day a few years ago. When you think about it and you kind of sum it all up, I mean, what is the algorithm that we should be thinking about over and through a cycle for Clean Harbors?

Yes. I mean I think as Tyler alluded to, we put out kind of a Vision 2020 statement a few years ago with some metrics around growth. But when we think about our business, think about top line, the business is driven largely through GDP, but we think we have some competitive reasons that we should grow GDP plus kind of 1% to 3% top line. And then from an EBITDA perspective, probably growing long term, a couple of basis points over that. That's kind of the algorithm we put out.

What gives us confidence to grow above GDP? Well, a few things. I think all of the attractive assets we have in the moat does provide us as long as we continue to provide great service and ability to execute on pricing strategies and really gain that, especially as some of these tailwinds come on from reshoring, from PFAS and things like that. So looking for growth there. And then when you think about free cash flow, free cash flow is a very important metric to us. I should mention, too, our margin growth, which leads to free cash flow growth.

Our margins have grown about 800 basis points in our Environmental Services segment over the last 8 years and about 500 in the last 5. And so we've done a really great job driving those margins through volumes, incremental capabilities, pricing strategies, but that has now given us a free cash flow conversion rate of above 40%. We finished 2026 -- excuse me, 2025 at about 42% on an adjusted free cash flow basis and really looking to target and stay above that 40% free cash flow conversion kind of going forward. And that all gives us a super strong balance sheet, low leverage and feeling really good about the future in terms of continuing to grow our business from that strong balance sheet.

Okay. So the organic side of the business sounds great, very cash generative. We all love that. But part of that Analyst Day, too, was about external capital deployment. So now we could all argue whether that was good or bad over the last few years. But can you talk about your M&A strategy? It's probably been on the light side the last couple of years. But if we go back maybe 5, it's been actually pretty good.

So maybe if you could just talk a little bit about the external growth opportunities. This is still a fairly fragmented market. But there are also other players in the market that have interest in these assets as well.

Yes. Great, Tyler. So throughout the history of the organization, 45, 46 years being in business, we've completed over 85 different acquisitions, large and small, of how we use that to build the company on top of the organic growth. We're very, very disciplined about what we look at, how we look at it, our financial metrics and making a deal attractive to us that we think will fit under our swim lanes, our different business units and integrate it properly. So being good at it, we've been very surgical about looking at opportunities.

We have had -- last year was a little bit slower than previous years, but we were still active. This year, as we start into 2026, we see more opportunities on the surface. This year compared to a year ago at this time, seems a little bit more active. One of our most recent acquisitions that we announced in our earnings just recently on February 18, was this acquisition of what's called DCI, their environmental services division. They had 5 locations. They generate about $40 million in revenue, not big overall, but what's great about it is they're bolt-on locations to our field services network, to our technical service network. And it also comes with 5 different disposal facilities, 4 of which have treatment discharge permits.

So really nice bolt-on fit. We're seeing a lot of activity in that space. And we see others, and we think we have a path to continue to build on that as we go forward. But we're going to continue to be very disciplined with our financial metrics.

Perfect. So Eric Dugas, you're in an enviable position, right?

Right.

Balance sheet is at 15-year low in terms of leverage. We've already talked about inorganic or external growth opportunities. There's even organic growth opportunities. I think there was a $50 million backdrop announcement last quarter. So when we think about capital allocation, how do you think about deploying capital over the next few years?

Yes. I think despite 2025 and not being able to close a deal, I think from a capital allocation perspective, a very, very strong year. So we always balance when we think about our capital allocation strategy, we balance acquisitions with internal investments, with repurchases and then staying after our debt portfolio. In 2025, we bought back $250 million worth of shares, so delivered that value back to shareholders and really decided to do that because of the cash we are generating that I spoke about earlier and because those acquisitions got to a point where we just didn't feel like it was the right move. So we allocated capital in other ways.

We announced, Tyler alluded to, a $50 million rolling stock investment that will roll out evenly over the next 2 years. We'll deliver $12 million to $14 million of incremental EBITDA when it's fully baked in. So there's lots of projects that we do internally and that we have on the docket to continue to grow the business and use the cash that we're generating in the most accretive way possible.

In terms of repurchases, we've had a long history of repurchases. Last year kind of was a record year in terms of the volume there, but that will continue to be an avenue where absent acquisitions or with a strong balance sheet and a lot of cash, we can fund the internal investments for growth. We'll look to continue to kind of return capital to shareholders through repurchases.

Perfect. Okay. We've got a couple of minutes. We've got 1 or 2 choices. We can talk about base oil or maybe we could talk about technology because that's actually what I'm going more...

Let's talk technology.

Let's talk technology. I'm with you on that. So Alan McKim, interestingly, the founder of the company has moved from the CEO role, I think, into a CIO or CTO, I forget exactly role. But obviously, technology is very near and dear to you all. And you have a complex business. I mean, I think we would all agree.

So when we think about technology over the next few years and call it AI or machine learning, whatever you want to call it, I mean, where does that play a role for Clean Harbors? And where can that help you?

Yes, that's great. So we're very focused on how do we utilize AI in our business to be better at servicing our customers and b, more efficient within the organization. Today, we have about 40 different active AI-type projects, 17, which have been deployed already. And so we're actively involved. We've taken our structured and unstructured data, and we've become able to mine that through our own internal AI team of development. A few examples of that. We created a worksheet, an electronic worksheet that looks at how we build customers in the past and contracts that we've had with customers or have today with customers is able to extract that data and be able to offer it up on an electronic worksheet.

So if I'm a supervisor today working for Clean Harbors in the field, I get offered up to me an electronic worksheet on an iPad. And that's telling me everything for that customer that we can bill for. So what's great in that? Is that, number one, it's making our workforce more efficient. And number two, it's making sure that everything that's on that contract that we're preventing leakage, that we're billing for everything that we should be billing for. What we do is really hazardous. It's really hard, tough work, and we want to make sure that under that agreement and contract or quote that we're billing everything that we can bill for.

Another example of that is we -- when we go out and package laboratory chemicals at labs that are off-specd or dated, we've created a tool, a packaging tool that an employee can open up on their laptop, and it tells them based on that, the hazards of that chemical, how to package it, how to ship it, how to create DOT shipping documents, how to create labels for the drum. And when you think about that, instead of having to have a learning curve of a year to bring a new employee on and learn about how to package chemicals, we've reduced that down now to 3 to 6 months. We're doing it safer. We're doing it more compliant.

Our employees are more efficient. So a couple of great examples there of how we've already deployed AI in our workforce, and we'll continue to do that. We believe we're the leading edge of technology in the environmental business, multiple different products -- projects that I talked about in all different areas, from billing, invoicing to employee efficiencies. So we're dug in, and we're dug in deep, and we're going to continue to become more efficient and service our customers better.

Excellent. Right on time. Thank you, guys. Breakout downstairs. Thank you all for joining.

Thank you, all.

Greetings, and welcome to the Clean Harbors Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Michael McDonald, General Counsel for Clean Harbors. Mr. McDonald, 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, February 18, 2026.

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 Investor Relations 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. Starting off with safety. We concluded a record year of safety in 2025 by delivering a total recordable incident rate of 0.49 which is well below the prior year and industry-leading. Safety underpins everything we do at Clean Harbors, and I've outlined the many benefits on prior calls, such as reputation, teamwork, employee retention and cost savings.

Most importantly, though, it is about sending our team home safe to their families at the end of each day. To everyone on the team listening today, we appreciate all that you did this year and every day to keep yourself and your colleagues safe.

Turning to a summary of our results on Slide 3. We are pleased to report another outstanding year where in addition to a strong safety record. We also delivered record levels of revenue, adjusted EBITDA, adjusted free cash flow and saw our adjusted EBITDA margin increased by 40 basis points.

We capped off 2025 with a strong Q4 as we exceeded the guidance we provided in late October. Our performance was driven by profitable growth in both of our operating segments, with our Environmental Services segment delivering its 15th straight quarter of year-over-year growth and adjusted EBITDA margin. This run of nearly 4 years of consistent margin expansion against a challenging industrial backdrop reflects the successful delivery of our essential services to customers in execution of our growth strategy along with disciplined pricing, cost management, workforce productivity and network efficiency.

Turning back to our annual results. In 2025, we topped $6 billion in revenues for the first time in our history, while increasing our adjusted EBITDA by 5%. Our performance was led by our ES segment. which delivered adjusted EBITDA growth of 6%, while increasing its segment adjusted EBITDA margin by 60 basis points.

Our 2025 results also included a record $509 million in annual adjusted free cash flow. We also achieved several notable operational milestones this past year, including the successful first year ramp-up of our new Kimball incinerator, creation of our Phoenix hub, handling nearly 22,000 emergency response events, the issuance of our PFAS incineration study with the EPA and the reduction of voluntary turnover by 150 basis points to a 5-year low.

Turning to the segments, beginning with ES on Slide 4. We grew Q4 revenue by 6%, our largest quarterly increase of the year based on the strength in demand for disposal and recycling services, project volumes growth in POS services and emergency response work. Technical Services rose 8% and Safety-Kleen Environmental Services revenue grew 7%, driven by pricing and higher volumes within its core offerings particularly vacuum services.

Incineration utilization excluding the new Kimball incinerator was 87%, consistent with our expectations. At the same time, landfill volumes increased more than 50% in Q4 largely due to project volumes. For the full year, incineration utilization, excluding Kimball was 89% versus 88% in 2024. Field Services revenue grew 13% in the quarter, aided by large-scale emergency response projects that generated approximately $30 million in revenue.

Overall, despite some stubborn near-term market headwinds, our ES segment delivered strong Q4 results which underscores the resiliency of our business model, our broad range of service offerings and the diverse industry verticals we serve. Adjusted EBITDA for the segment was up 8% in the quarter. with Q4 margin up 50 basis points based on disciplined pricing, higher overall volumes, mix of work and workforce management initiatives. Overall, Q4 was another impressive quarter for our largest operating segment.

Turning to Slide 5. I wanted to take a moment to highlight the considerable momentum we are seeing around PFAS as we head into 2026. The PFAS incineration study we completed in partnership with the EPA as well as the Department of War was released in September and is generating inbound discussions with customers and key stakeholders. In November, I had the honor of speaking at a hearing before the U.S. Senate Committee on Environmental and Public Works about PFAS to raise awareness of our capabilities and the need for establishing regulatory thresholds.

In December, we announced a 3-year $110 million contract related to our ongoing PFAS water filtration work at the Pearl Harbor base that demonstrates the effectiveness of our carbon filtration system that has been in use there since 2022. This was followed by the finalization of the National Defense Authorization Act, which included language requiring the Pentagon to return to Congress within 180 days with recommendations for how the military will address PFAS removal and destruction and more than 700 U.S. military installations. In addition, the EPA is expected to develop and publish a regulatory framework for impacted soil and solids, update their water guidelines and finalize new manufacturing rules.

At the same time, state governments are moving forward to create their own rules and are evaluating take-back programs. All of these developments represent sizable growth opportunities for Clean Harbors. Even without new rules in place, we are seeing each element of our total PFAS solution grow and our pipeline expand. The guidance that Eric will share with you only assumes a 20% growth rate for our PFAS business in 2026 and which is consistent with the past several years.

With that, let me turn things over to Mike to discuss SKSS and capital allocation. Mike?

Thanks, Eric, and good morning, everyone. Turning to SKSS on Slide 6. The base oil pricing environment continued to weaken in Q4. And as expected, segment revenue was down slightly. In terms of profitability, segment adjusted EBITDA was $30 million, a 22% increase from the fourth quarter of 2024. For the full year, adjusted EBITDA for this segment was $137 million.

Despite difficult macro conditions, the team continued to execute well on our oil collection services and related pricing, which drove the increase in year-over-year Q4 adjusted EBITDA and a 310 basis point improvement in margins. We increased our charge for oil pricing or CFO in Q4, raising rates roughly 50% above our Q3 average. Managing the pricing associated with these oil collection services and substantially lowering our overall waste oil collection costs remain the primary levers to offset continued decline in base oil pricing.

Even when higher CFO, we collected 56 million gallons of waste oil to feed our re-refining network and keep our plants running efficiently. In addition, we once again delivered incremental growth in our direct lubricant gallons sold, which further supported our margin improvement. During the quarter, we also continued to grow our Group III production as those colons carry a premium to our conventional Group II volumes.

For SKSS in 2026, we will continue to proactively manage our re-refining spread through providing consistent, reliable and high-quality collection services at appropriate CFO rates supported by market conditions. We will also prioritize expanding direct blended sales, increasing Group III production and pursuing partnership opportunities.

Turning to capital allocation on Slide 7. we continue to seek opportunity to generate strong returns for shareholders through all elements of our capital allocation framework. We remain well positioned to do so, supported by strength of our balance sheet and our robust cash generation profile. On the M&A front, we announced today the signing of a purchase and sale agreement to acquire environmental businesses from Depot Connect International for approximately $130 million. These businesses are carve-out to PCI and will be integrated into our facilities network within tech services as well as our field services business.

This acquisition is expected to generate annual revenue of approximately $40 million, with $11 million of annual adjusted EBITDA or roughly at 12x multiple pay. We see a great strategic fit, given their 5 locations in Ohio, Louisiana and Texas and their fleet of trucks and other equipment. DCI currently offers wage handling, pan cleaning and railcar cleaning to its customers. Additionally, 2 of their facilities have wastewater treatment and solidification capabilities. We expect the acquisition to close in the first half of the year, subject to customary closing conditions.

We expect to remain active in the acquisition front in 2026, and we plan to continue to make strategic internal investments to accelerate our growth. Today, we announced a $50 million targeted expansion of our vacuum truck fleet aimed at capitalizing on growth opportunities we are seeing through our SK branch business. Due to the limited availability of these specialized assets this fleet expansion will occur over the course of 2026 and 2027.

This fleet growth program, which we anticipate will generate an incremental adjusted EBITDA of $12 million to $14 million in 2028 when fully ramped, is another element within the $500 million of incremental -- of the $500 million of internal investments we mentioned in our Q3 call. We anticipate that each of these projects will generate attractive returns for our shareholders.

We also continue to view share repurchases as an attractive way to generate strong shareholder returns as evidenced by $133 million of repurchases executed in Q4. We bought back a record number of shares this year, and we recently received board approval to expand our existing authorization by $350 million providing a total of $600 million of remaining capacity and giving management significant flexibility to return capital to shareholders going forward.

On the debt side, we refinanced a portion of our debt in 2025 at favorable terms with longer maturity. We're pleased to be entering 2026, having taken concrete actions across all elements of our capital allocation strategy. Looking ahead, we entered 2026 with momentum in our large core hazardous waste collection businesses. We expect our incinerator to run strong in 2026 and waste projects in PFAS to continue to feed our disposal and recycling network.

We expect to deliver growth in revenue and adjusted EBITDA that will culminate an enhanced company margins against this year. Our positive outlook is grounded on modest economic assumptions with additional upside potential. Overall, we expect another strong year of financial performance in 2026.

And with that, let me turn it over to our CFO, Eric Dugas.

Thank you, Mike, and good morning, everyone. Turning to our Q4 and full year results here on Slide 9. Our quarterly performance came in ahead of expectations we outlined in October, driven primarily by continued strong growth across both technical services and field services. It was especially encouraging to see the underlying strength in our core disposal and recycling volumes as we close out the year. and in light of some of the challenges we had experienced in some of our key verticals in 2025.

Total Q4 revenue increased 5% to $1.5 billion. As Eric highlighted, we surpassed $6 billion in annual revenue for the first time in the company's history in just 3 years after surpassing the $5 billion mark in 2022. Q4 adjusted EBITDA increased 8% and to $279 million, and full year adjusted EBITDA reached approximately $1.17 billion. Our Q4 revenue and adjusted EBITDA growth rates were the highest we've seen in fiscal 2025, tapping off another year in which we demonstrated our ability to continue to grow the business while expanding margins, and this provides us with positive momentum heading into 2026.

Our consolidated Q4 adjusted EBITDA margin was 18.6%, representing a 60 basis point improvement from the prior year period. This margin expansion reflected a combination of disciplined pricing initiatives, volume growth, effective cost control and continued efforts to maximize efficiencies across our network and transportation fleet. For the full year, we improved consolidated adjusted EBITDA margin by 40 basis points, led by strong performance in our Environmental Services segment.

SG&A expense as a percentage of revenue in Q4 increased slightly from a year ago to 12.9%, primarily reflecting third-party transaction-related costs and stock-based compensation. For the full year, however, we improved our SG&A as a percentage of revenue to 12.5% as we continue to tightly manage overhead and limit growth in nonbillable head count. Fourth quarter income from operations was $158.4 million, up 16% from the prior year. Net income in Q4 was up year-over-year as we delivered EPS of $1.62. For the full year, EPS was $7.28 a share.

Turning to the balance sheet on Slide 10. We ended the year with cash and short-term marketable securities of more than $950 million. Throughout 2025, we maintained a sharp focus on working capital management and cash flow generation. which drove record free cash flow in both Q4 and the full year. Our receivables balances declined by approximately $80 million from September a testament to the broader team's efforts as collections meaningfully exceeded our expectations in the quarter.

We closed the year with a net debt-to-EBITDA ratio of approximately 1.8x which is our lowest leverage in nearly 15 years. Our debt currently carries a blended interest rate of 5.2%. Given our cash balances and low leverage we have ample flexibility to execute on our capital allocation strategies.

Turning to cash flows on Slide 11. Our Q4 cash flow performance was outstanding. Operating cash flow in Q4 grew 17% to a record $355 million, and we also delivered a Q4 record adjusted free cash flow of $261 million. For the full year, adjusted free cash flow was also a record, reaching $509 million, coming in sharply above our guidance. driven in large part by the outstanding collection efforts I just mentioned, along with lower tax taxes paid. The $509 million we generated represents nearly 44% of our 2025 adjusted EBITDA and underscoring the highly cash-generative nature of our business.

CapEx net of disposals was $115 million in Q4, up from the prior year, reflecting our major growth investments. For the full year, our net CapEx spend was down $20 million as 2024 included the completion of Kimball spending and our Baltimore Hub project. For 2026, excluding an expected $85 million of spend on the SDA unit, and $25 million related to our strategic fleet investment discussed earlier. We expect net CapEx to be in the range of $340 million to $400 million, with a midpoint of $370 million.

As it relates to share repurchases, we continue to return value to shareholders in Q4 by repurchasing nearly 600,000 shares for $133 million. For the full year, as Mike mentioned, we returned a record $250 million to shareholders through the repurchase of more than 1.1 million shares. With the recent expansion of our authorization and based on our long-term cash generation and returns profile, we continue to view our shares as attractively valued.

Turning to our guidance on Slide 12. Based on current market conditions and business performance, we are guiding to a 2026 adjusted EBITDA range of $1.20 billion to $1.26 billion, with a midpoint of $1.23 billion. At the midpoint, the outlook implies growth of approximately 5% versus fiscal year 2025. Looking at our annual guidance from a quarterly perspective, we expect first quarter adjusted EBITDA to grow 4% to 7% year-over-year in our Environmental Services segment. and approximately 1% to 3% on a consolidated basis.

In terms of the 2026 capital spend we announced today, we are assuming only a few million dollars that annual adjusted EBITDA contribution from the fleet growth expansion in 2026 as those purchases will be phased in over the course of 2 years. With respect to the DCI business acquisition, our guidance currently incorporates an estimated $5 million to $6 million of annual adjusted EBITDA and reflecting the uncertainty around the exact timing of the close.

Looking at how our annual guidance translates into our reporting segments at the midpoint of our guidance range, we expect our 2026 adjusted EBITDA and Environmental Services to grow just over 5% for the year, supported by favorable demand trends across our key service pillars, as well as continued growth in PFAS and remediation projects. This initial 2026 guidance midpoint assumes that our SKSS segment delivers results similar to 2025. And today, we are guiding to approximately $135 million of adjusted EBITDA. While we have made great strides in our collection costs in 2025, we have yet to see any improvement in the base oil market.

Within corporate, at the midpoint of our guidance, we expect negative adjusted EBITDA to increase by approximately 2% to 4% compared to 2025. This modest increase is primarily driven by costs to support business growth, higher wages and benefits and a broad-based insurance cost increases. While we continue to experience some inflationary pressure across corporate cost categories, we have numerous cost savings and productivity initiatives underway that are expected to offset a meaningful portion of these headwinds. For 2026, we expect adjusted free cash flow in the range of $480 million to $540 million with a midpoint of $510 million. That level of generation represents a free cash flow conversion of approximately 41% of our expected adjusted EBITDA for the year.

In summary, our Environmental Services segment delivered an exceptional performance in 2025, capped off by a strong Q4. We are well positioned to continue growing the ES business organically and further enhancing its earnings potential. Technical Services, SK Environmental and our base field services business are all expected to generate healthy growth in 2026 and with Industrial Services generating modest growth. In addition, the Environmental Services segment will benefit from the continued ramp-up of Kimball incinerator as it takes on higher volumes and processes more complex waste streams.

Overall, we remain encouraged by the company's growth trajectory. We believe our strategic initiatives combined with current market conditions should support profitable growth embedded in our 2026 guidance. We entered the new year as a stronger company than we were a year ago, safer more profitable and generating more cash. And we believe that positions us well for 2026 and beyond.

With that, Christine, please open the call for questions.

[Operator Instructions] Our first question comes from the line of Tyler Brown with Raymond James.

Eric G., curious if you could maybe talk about and update us on how the conversations are going on the captive side. I know you talked about that in some prior calls. But do you think there'll be any closure developments in '26 and '27. And just any broad thoughts on incineration pricing trends into '26.

Sure, Tyler. Thanks. Yes, the captive market continues to be active. We are pursuing opportunities with a couple of key customers across the board. And we think with some changes that they have on their cost structure as well as utilization, that there is a potential clear path here for additional captive closures.

As you know, we continue to monitor and work very closely with all the captives across the U.S. and Canada. Today, there continues to be about 40 different sites that have captive incinerators that are also our customers generating waste streams into our network. So we have some very solid relationships. And again, do anticipate that there will be some captives that come off-line in the future. When? Still it's too early to tell, but discussions are active.

That being said, we also have a lot of opportunity to continue to drive financial performance around incineration pricing across the board in our network, we expect to continue to outpace inflation and drive price improvement into the mid- to upper single digits across our network. Incineration being a leading indicator there. And we still will continue to push those levers that we've done in the past. So a very active network overall, Tyler.

Okay. Great. Great update. I was a bit curious on the commentary around Industrial Services. So obviously, we got a better ISM print. So maybe we're going to see some improvements in the industrial complex at some point. But what does give you the confidence there? Is that based on some hard planned turnaround work, and kind of, again, Eric Dugas, what is in the expectation there for '26?

In terms of '26, Tyler, the guide, as I said in my comments, fairly modest expectations. I think we have seen some more positive -- maybe some more positive leading economic indicators around ISM and PMI and things of that nature, but the guide really kind of has current market conditions built into it at this point.

Yes. And I would add on to that, Tyler, that when we look at our industrial business, Q4, we began to see some nice momentum in some of our specialty lines of business within Industrial Services. Our base business has been consistent as we enter into 2026. We're working with over 400 customers of assessing their turnaround needs for the year. We're seeing some positive indicators, I would say, as we touch base with every single 1 of them with face-to-face calls. And we're getting ahead of their opportunities, and there appears to be some indications and momentum here. But we're still -- when we look at the overall guidance for 2026, as Eric said, we're pretty conservative on our outlook there.

Did you see Tyler that has kind of turned -- I would think it might have turned the quarter. If you think about the growth -- the revenue growth of the business, as you look at kind of Q1, Q2, Q3 into Q4 in IS, if you do the math, it's definitely leveling off. We do see some positive momentum as their set into 2026. Not [indiscernible]

Okay. Great. And then my last one here real quick, Mike. Can you guys talk a little bit more about the back truck and the field investments? And this is really a broader question about all the internal growth investments that you guys have done and you do see. But is this move really more because the acquisitions have gotten so expensive. And you've got a great market position, you've got buying power, et cetera. that the reality is that building may simply offer better economics than buying through M&A at this point?

Yes, Tyler, I'll start. This is Eric. So when we look at our back services, our 3 prominent business units that use Vac services. We have our Safety-Kleen environmental back our field service back and our industrial back. And those opportunities, those collections of backwaters drive organic waters, contaminated waters and solids and sludges into our great facility network. And that business across the board has been growing substantially in the 8% to 10% to 14% range.

So we've been adding more trucks. We're trying to have been keeping up with that pace. We have rented some trucks, which to fuel that organic growth. But really, what we want to do is continue that growth path of greater than 10% and build out more trucks internally, acquire more trucks, eliminate the subcontracting and just keep pace with those growth rates across all the business units. So it's really been a win-win. And as I said, it's fueling a lot of great water and sludges and solids into our network.

I would add -- to answer your question around, hey, is it -- it's just a pivot? Is this kind of a better answer? The answer is that our balance sheet allows us to do all these things. Our cash flow generation has allowed us to do M&A and do capital addition and we signed the for DCI and there's others out there that we're looking at. So I feel like we can do it all, given our cash flow generation, it's really just based on ROI and what's going on in the market.

Our next question comes from the line of Adam Bubes with Goldman Sachs.

Just picking up on the M&A point, beyond the DCI acquisition, can you just update us on the M&A pipeline in terms of types of opportunities you're looking at and range of outcomes for acquisitions in 2026.

Yes, this is Mike, and I'll start the -- we do have a lot of lines in the -- and frankly, we did all through 2025 as well. We weren't as successful but we do see a lot of opportunities there, mostly in the Environmental Services business. mostly similar to what we think in DCI, so that has some permanent facilities that have some -- we see those types of opportunities coming to market, and we've been very active. Now we haven't been as successful in 2025, but we see a lot of good opportunity. And primarily in Environmental Services.

And then I think the 1Q guide implies year-over-year declines in safety, clean EBITDA and then maybe a recovery in the balance of the year finishing flattish. So can you just talk about the drivers of that improvement in the balance of the year, is that coming from incremental charge for oil actions? Are there any assumptions for base oil prices improving in the guide?

Adam, it's Eric. I'll take that one. And you're absolutely correct. Kind of the way we see Q1 right now in SKSS is a little bit down year-on-year. It is almost all driven through kind of the base oil pricing challenges that we see here at the beginning of the year. Obviously, as we did in 2025, we'll continue to counteract that with providing great oil collection services at the right price there at the market demands. And so as we move throughout the year, things do get a little bit better, some of that oil collection pricing modification kicks in, but Q1 is kind of the year-on-year low watermark, if you will.

And Adam, we do have base oil pricing going down slightly in the guide over the course of the year. We do have that not at the same level happen 2025, but we do assume a slight decline in base oil pricing.

Our next question comes from the line of Noah Kaye with Oppenheimer.

There was a lot to like, I think, around the capital allocation and I want to get to that in a minute. But just on the core, Field Services, you called out the $30 million of emergency response work. It sounds like that basically drove the revenue growth year-over-year in the quarter. Can you maybe quantify the level of ER work you did total or anything outsized you would call out for 2025? And what you've assumed for ER work for 2026 in the guide?

Yes. No, I'll start there. Obviously, we had a nice fourth quarter with $30 million in large-scale emergency responses. If you look at the field services business over the course of the year and every year prior to it, we have ups and downs in large emergency response events. But throughout the course of the year, we drive some large events.

We did over 22,000 emergency response events last year that you can really consider that a good baseline business that continues in that core base FS for utility customers, manufacturing, rail, all those types of things. And then we also see good incremental events that will continue to happen. When in the quarter, they will, will or not, it's to be determined, but that's been a core part of our field services business for the past 20 years. those things happen. So we have that factored into growth of field service year-over-year being in that mid-single digits as a baseline.

I would say, Noah, that when you look at the 22,000 events that Eric mentioned, I mean, that's up by 5% from last year. So we still see a fair amount of events happening in the country in North America, and we've been there and winning our fair share. And when these large events, Adam, the company is built for that. It was built on emergency response. That's part of the business model. And because such a big business now with the acquisition has, it's been a great way for us.

Yes. No, just one last point on that. I think when you think about our network, what we build with field services branches, last year, we added an additional 18 field service branches to our network. And as you know, our strategy is to make sure that we have an operating branch of every business unit in all the key geographies throughout North America. And that presence when we think about fee service, that presence allows us to be the first call when emergencies happen and leverage through the rest of the network, people and equipment to be able to grow with those emergency response events.

So it's a core part of what we do. We do it really well. our sales team, our field services operations team. They are out there pounding the streets to make sure that for every customer who needs a facility response plan with an emergency response provider that we are the #1 call when things go wrong. And we've done a good job of that, and we'll continue to exercise that presence as we grow here throughout 2026.

Very helpful. I think just on the 1Q guide, just how much of a headwind will weather be? I mean, last year, I know it was a $10 million to $12 million EBITDA headwind. We were obviously between Fern and some other events have had a rough start to the year. Some other players in the space have talked about it. So just where do you kind of think that ends up for 1Q?

Noah, it's Eric Dugas here. I think when we look at -- when you think about weather year-on-year, I mean we're -- I think we've heard from some other folks that have come out, and we're seeing the same thing and weather impacts us in these winter months, January, early February here. seemingly kind of every year. And so when we think about our guide here in Q1, I would say the weather impact is flattish. We talked about SKSS assumptions in Q1. That's really the lighter side of our guide here in Q1. If you look at the ES business, we're still growing 5% to 7% year-on-year. A lot of the great things that we did throughout 2025 and in Q4 that we just talked about kind of continue into Q1.

We haven't seen [indiscernible] other that whether we have -- we've had some delays, but no plan out it. No plant upsets, which I think is an important point.

Our next question comes from the line of David Manthey with Baird.

My first question, a clarification here. I missed what you said about corporate expense for 2026. What was that growth rate?

2% to 4%.

2% to 4%, Dave.

Okay. So looking at 2025 as a whole, if Clean Harbors was able to grow EBITDA by roughly 5% in 2025, and that's in the face of field and industrial being down and a $10 million headwind from SKSS EBITDA. And then in 2026, you're saying that each of those things are going flat or positive, and then you got Kimball ramping and all these other growth initiatives. I'm not being critical here.

I'm just asking like when you look at all of those things, I'm wondering what -- which one or what segment are you seeing that's going to be a drag to 2026 EBITDA growth? Because it feels like everything in '26 is either the same or better than it was in '25, and you're guiding for the same level of EBITDA growth. If you could help me understand the bridge there.

Yes, Dave, this is Mike. I'll start. I think that our goal is to make sure that we provide a balanced view as we go into the year, mean there's a lot of -- I think to your point, there's a lot of positive momentum. We certainly see some of the [indiscernible] guys talking about that momentum, and we see it as well. January, as Eric said, it was a rough month from a weather wide standpoint, we got to -- we want to see it. We want to see it.

And my hope is we come back in a couple of months and talk about a great Q1 and a great Q2 and Q3 as well. But you want to be thoughtful as you set applications for the year, I think that a 5% growth, as Eric laid out in his script is a reasonable growth, is a good starting point. And certainly, in the face of what we see just -- if you look at industrial production, we had a great January, but 1 is not a pattern.

And so let's have a few quarters, a few months of this type of growth before we start claiming victory here. So that's kind of our view. And we want to be thoughtful about this, and we're hopeful that we come back here in a couple of months and say how great quarter was and how great Q2 and Q3 are going to be.

Yes. Yes. Got it. And on the first quarter, first quarter EBITDA as a percentage of full year has been about, I don't know, 20.6% for the last 3 years on average. And this year, you're sort of saying 19.5% based on the guidance midpoint. Did you quantify the weather? Is that the reason that we're down at some representing a smaller percentage overall.

David, it's Eric. I think a couple of things. As I said before, I would think weather impact is kind of flattish year-on-year. a little bit of year-on-year decline in SKSS. And then just to go back to the beginning, your corporate question of 2% to 4% for the full year.

Corporate is a little bit heavier in Q1 the way we've got it we've got it laid out. There's some natural inflation but also a little bit of incentive comp timing, a little bit more incentive comp in our guide for Q1 this year. versus last year, we had some backup just because of the performance in Q1 last year. So that's probably the piece you're missing. But the whole year calendarized out pretty similarly.

Yes. It's more of a Q1 corporate item, I think, Dave, when you look at it, in SKSS, as you saw, it's going to be a little soft in Q1, and that's really driven by some fell pricing, we still had a year-end still on the balance sheet that kind of ran into Q1. So Q1 was a bit of a rough quarter.

Our next question comes from the line of Bryan Burgmeier Citi.

Maybe just on Safety-Kleen, the charge for oil opportunity has been pretty compelling and successful just curious if you could characterize how much sort of room to run there is there? Do you maybe still feel Clean Harbors isn't getting proper value? Or is it maybe mostly about just kind of compounding at these levels now?

I think, Dave -- excuse me, Bryan, I think that our ability to continue to charge for dirty motor oil has been a differentiator, and I believe that we haven't really lost a lot of gallons in this process. So I feel like this has been a hugely successful endeavor and really have been able to offset kind of the base oil pricing that we see.

I feel like we've kind of taking a good step forward and really made some real changes. And I feel like that's going to continue to pay off. We're not -- as you saw from Eric Dugas' comments around the year for 2026, we're not assuming that, that gets a lot better. but we're hopeful that if oil prices stabilize even recover. That could be a huge winner for us.

Got it. Got it. And then just one follow-up. Is -- maybe just on the Group III oil production. Just again, from like a high level, if you can maybe frame that sort of size the opportunity for Clean Harbors. Is there any material contribution to '26. Yes, that would be really helpful.

Yes, Bryan, Eric here. So when we look at our run rate of our Group III production, we're in the neighborhood of 4 million to 6 million gallons increasing year-over-year. And that differentiation between the Group II is about $1 a gallon more. So it's meaningful. But what else is important here is that when we blend that oil, we also have an opportunity to really offset some of the Group II plus that we've been selling.

So there's -- it will continue to ramp up year-over-year the traction of the products and the blended products that we're making with our Group III has been excellent. And we're really excited about that continuing to have a meaningful contribution to EBITDA improvement within our SKSS business in the coming years.

Our next question comes from the line of Jerry Revich with Wells Fargo.

This is Jake [indiscernible] on for Jerry. The Technical Services segment saw a good acceleration in the fourth quarter. Can you walk us through the key drivers of that acceleration, whether it was project activity, pricing, mix, volume? And how much of that momentum carries into the first quarter?

I'll begin. It really was -- as we said in the script, it was really a combination of multiple different things when you look at it. Our TS business had really great volumes across the board. We saw about 8% increase in overall containerized waste volumes. In our Safety-Kleen Environmental business, strong waste collection, along with VAC services, we highlighted that.

When we look at the field services business, lots of ERs, large and small, good, strong base business. And then finally, our project business was very strong as well. drove some nice volumes into our landfills into our incinerators and the momentum in the project business around PFOS.

So it was multiple different things that contributed to the success of ES. And that was a great fourth quarter. It was a great year with our environmental services. We fully anticipate that momentum to continue here into Q1 and 2026 in all those areas that I just spoke about.

And Jake, the great thing about what Eric said is that this doesn't include any cap disclosures. It doesn't include no large we're not assuming that there's going to be a lot of bounce back in the chemical as a refining area, and we're not assuming a base oil recovery. I mean so we have a lot of good opportunity there though. So we feel like this growth that we're talking about this morning had is a reasonable assumption, but those things do turn around, and I think that will be incredibly [indiscernible] into 2026 and beyond.

Fantastic. Very helpful. And then just as a follow-up, I know you provided -- I was just hoping you could speak on the moving pieces of the Environmental Services, 5% growth guide for 2026 and any cadence on the quarters outside of the 1Q that you already provided.

Jake, I would say, just to point out a couple of the big drivers in that 2026 growth. And yes, we talked in our script it year 2 of Kimball incinerator. So you talked about an incremental kind of $10 million to $15 million of EBITDA there across the network by continuing to ramp up that facility. PFAS opportunities and a growing pipeline there, a 20% increase into 2026 is in our guide. And so those are probably 2 meaningful discrete pieces, continued field services growth in some of the new branches and new agreements we're getting into with existing customers that Eric highlighted a moment ago.

And then you really have all those great things that we continue to do in Technical Services and Safety-Kleen branch around growing volumes and pricing strategies and being diligent around those. And that's all wrapped with continuing to provide just great service to all our customers.

So I would say those are the big drivers. And yes, in terms of calendarizing out the quarters, I would say that it very much kind of calendarizes out kind of 5% growth roughly in each quarter year-on-year. So hopefully that answers and clarifies your question.

With the acquisition in the back half of the year, that was the only thing I'd add to that.

Our next question comes from the line of Larry Solow with CJS Securities.

Great. First, congrats on the cash flow. On the quarter and really for the year, I can remember, I don't know, 10 years ago when cash flow was a sort fall, but now it's a real highlight. So I [indiscernible]

Thanks, Larry. Good to hear.

Yes, absolutely. Been around for too long. So I guess the question, Eric G., just on the -- I really appreciate the PFAS, a lot of good stuff like the picture on the slide too. The -- it feels like operationally, regulatory momentum is really stronger than it's ever been. It sounds like you can do about $150 million this year, plus or minus. But are we getting closer to an inflection point where I don't know where that inflection plant takes us, but where we could really see an acceleration in revenue growth over the next few years.

Yes, it's a great point, Larry. I think we do believe that we're getting closer. Having the opportunity to go down and talk to the Senate Committee on Public Works was a great opportunity for us to not only share what our total PFAS solutions are, but more so to talk to them about that there is capacity and infrastructure to handle PFAS remediation and cleanup and that there is existing technologies and capacity to handle the growth and deal with this significant issue.

I think the other key point, too, is that during those discussions, we laid out very clearly based on our experience of managing the cleanups that we've already been doing and the treatment that we've already been doing. We laid out what we thought the regulatory parameters should be. And we've got some great feedback on that.

Those regulatory parameters, we've been communicating those to the EPA. But more so, we've been communicating those to our customers. And the way we got to the revenue that we are today is by saying to our customers, hey, to limit your risk to manage it properly. These are some thresholds and parameters that we can help you employ with our total PFAS solutions and make sure you don't have any long-term liabilities.

So I think all that put in together I really do think and I think we all believe that the momentum of getting some really defined thresholds with the EPA is in sight. We're hopeful about that. We continue to drive that, but we also see our customers acting very disciplined today even without that in place.

All right. And I guess a question for Eric Dugas. Doesn't the 3-year contract that you signed, doesn't that almost get you to that 20% growth by itself this year. Kind of busting chops a little bit on that one, but isn't that kind of fair? Or is that all not incremental that $110 million over 3 years?

Yes. Keep in mind that we do some work there today, Larry. And so that $110 million is the total. It's increasing $15 million to $30 million, I think, in any given year over that 3-year period from what we do today. So there's still to run on that.

That's fair. And I guess my second question for you, Eric, just on the margin improvement, again, also really nice we don't need to call out the streets, but you may not be able to predict it continuing every single quarter, but up to 26% EBITDA margin. As you look out 3 to 5 years, could this continue to expand? I mean could we be talking about a 30% EBITDA margin business when we reached 2030.

Yes, Larry, we think 30% is certainly kind of in the future for us. And internally, that's the target, the reset target that maybe we have now, but it's 30% and beyond. Now what year we hit that, I mean I think we're going to continue to strive to expand margins at a minimum of 30 to 50 basis points a year. That's what we said, and we've been able to kind of overachieve on that. So exactly what here we're going to be above 30%, I can't tell you, but that's the internal goal.

I guess just one thing that I'd like to share relative to that is with our margins in Environmental Services here, just about 26% for the year, we're exceeding those margins that we had assumed in our Vision 2027 a couple of years ago in fiscal 2027. So call it, 2 years ahead. But certainly, we see a lot of runway in margins, continue to grow margins through volume, pricing initiatives, internalization of costs greater use of technologies, all those things, holding on to our people and reducing kind of turnover. That's been a great thing for us the last couple of years. So we're going to keep doing those things, and we'll see margins expand.

Yes. Larry, just to build on that. Our aspirational goal is really to get to those 30% margins by 2030, 2032. And when you look at the past 4 or 5 years, everything that we've been driving, there's a clear path to get there. We have a number of opportunities that Eric just articulated. We're going to continue to get more efficient. We're going to continue to route our trucks well. We're going to continue to lower turnover. All those things and driving pricing ahead of inflation will drive our margins and continue to expand as we build the platform of the business and leverage what we have with our unparalleled disposal network.

The last thing I'd say to that answer is that we have in every single manager's compensation EBITDA margin as part of their targets. And I think that's really helped drive behavior. I think -- and we can talk about what year we hit 30%. I don't think that that's a goal at just a stopping point. So I'm of the view that we continue to expand margins even beyond that 30%. I mean we a date when you want to hit that, but I think I'm of the view that that's not a goal that that's just a good way to measure ourselves.

Our next question comes from the line of James Schumm with TD Cowen.

Mike, can we just talk about SKSS a little bit. What -- you gave some breadcrumbs, but like where are you for leading-edge pricing? Are we like $0.50 a gallon or are you above that? And then just where are you in terms of utilization of your refineries? Any thoughts to closing another refinery or do you feel good about where you are now? And then just any color on the -- or update on the Castrol partnership?

Sure. Sure. I'll take care of all of these. The first of which is that we are north of $0.50 as we get into 2026 here. I think we've done a good job of driving price improvements in our yield oil pricing, and I feel like the team has done an excellent job of really changing the marketplace. And where we were a year ago, kind of where we are now, it's really unbelievably good as the team has done a nice job of hold in line.

And the good news is that we haven't really seen -- we have lost some gallons, but we haven't lost nearly as many gallons as we thought. And as such, we haven't had the need to -- as we sit here today, to close any more re-refineries. And I think we've been able to feed our network. I said in my prepared remarks, we able to feed our refinement with the used motor oil, we've been able to collect at really good pricing. When you think about the future in our capital partnership, it's been successful.

We've had some good wins there. has been as successful on it would be probably need some more work there. But it's a long selling cycle. We understand that. The team at [indiscernible] has done a good job of driving that. We've been good partners with them. We have that a couple of good wins, but there hasn't been a big of a needle mover as we probably thought when we went into this.

Okay. Great. And then just in terms of the pricing, it's kind of hard to get base oil pricing or could you help us understand where your average sales price was or is now? Is there anything any help you can give there?

Yes, James, it's hard to -- we have a lot of different customers. There are a lot of different price points, but it has been down. I mean just cutting through it all, there have been a fair amount of base oil pricing declines kind of all through 2025. And I think it's been in the mid-teens rate as far as the overall base oil pricing.

But remember, we are managing a spread. And so that really forced us as an organization to drive that UMO pricing up to manage that spread to deliver the number that we told you back last February. We told you we're going to deliver the number for SKSS, and we're right there. So something we're really proud of.

And James, just to build on Mike's comments a little bit further. One of our key goals that we've mentioned multiple times is to really drive our direct blended sales growth. And that's the most stable pricing that we can do and work with our customers to not only pick up their UMO but deliver to them really high-quality direct blended oil into their network. And we're successfully beginning to grow that. It's not as fast as we would all like.

But that's our true -- really true north across our business is growing that direct blended, getting stabilization on that back-end price while we continue to improve our UMO pricing. And the market today has really has accepted that UMO is -- it's really a hazardous waste and it needs to be collected and managed. And we do a nice job across our network of customer service and collecting the gallons when they're tanks are full, and we'll continue to drive those opportunities.

Great. And just lastly for me. Veolia bought Clean Earth, as you're fully aware, do you expect to lose a certain amount of volumes or EBITDA with that transaction? Is there any impact to 2026 that you guys are contemplating?

No, not all, James. We -- yes, they were obviously the successful acquirer of that, but we do not anticipate losing any volumes to what they have going on there. In fact, we overall think there's opportunities to continue to grow our services with our customers, and we're not concerned about that in the lease.

[Operator Instructions] Our next question comes from the line of Tobey Sommer with Truist.

It's been so long since we've had sort of a good industrial economy. Maybe could you remind us what your growth in revenue and EBITDA would look like in a good industrial economy here and maybe contrast that with the guide?

Toby, I'm happy to answer that. It's kind of tough to improve it. We haven't had it in such a long time. It's tough to remember. But if you remember, some years, we were growing ES revenue double digits. There was years when industrial production grew and we were growing that ES business at really good rates and that kind of that kind of began the 15 straight quarters that Eric mentioned earlier, of EBITDA growth.

So tough to see what good looks like. I'm telling you right now, it's going to be good, but it does have to happen. And so if it does happen, I think it will in 2026, we start seeing that certainly in our pipeline. I'm hopeful that we have kind of 4 good quarters of beat raise and we come back to you and how great it was because of great industrial production.

Right. And what parts of the business of the portfolio do you think would see it first so that if we're -- as we work our way through the reported quarters this year, if we start to see improvements in what areas would that lead to greater confidence in the industrial recovery?

I mean you see it in Environmental Services. I mean, it's hard to say what -- I think you see it in all 4 parts of our -- of the lines of business that would make up environmental services, whether it be or TS, FS, IS, SK brands, you see all for those with increased industrial production. We feel like they would all be the beneficiary of that, maybe TS more -- maybe TS and IS more so, but I see all of those lines of business, which make up the Environmental Services segment improving because of that. Of course, the base oil pricing improves. As we talked about earlier, I think we see some real good EBITDA growth in the SKSS business.

Last one for me. If you dream the dream for PFAS, what's the best catalyst that you could think of in terms of the regulator, perhaps the DoD, what kind of event could transpire that would really catalyze growth there?

Yes, Toby, I'd really say and we point to regulatory framework around thresholds of PFAS contamination and clearly articulating it for industrial water, soil, solids and driving remediation of those with those thresholds. And we're getting there. The market is disciplined. However, we really would like those in place. It would be the greatest catalyst to really put it on steroids, so to speak.

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

Thanks, Christine, and appreciate everyone joining us today. Our next investor event will be at the Raymond James Conference in Orlando in a few weeks. We hope to see some of you there and at other events. Have a great rest of your week, and please keep you safe out there.

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.

Good morning, and welcome to the CJS 26th Annual New Ideas for the New Year Conference. I'm Larry Solow, a research analyst and partner here at CJS, and I'm joined by the management of Clean Harbors.

To briefly remind everyone of the format for our conference fireside presentation since we're still early in the day. We're going to start with a 10-minute -- 10, 15 minutes or so overview from the company. After that, we'll open the floor for Q&A, which I will be moderating. Please feel free to submit any questions you have through the portal don't be shy, and we will absolutely try to weave them into the conversation.

With that said, I'm happy to welcome Clean Harbors this morning. As most of you know, they are a leading provider of environmental, industrial and hazardous waste management services across North America, very strong track record and favorable long-term growth outlook.

With us today are Eric Dugas, Executive Vice President and CFO; and Jim Buckley, Senior Vice President of Investor Relations. Gentlemen, please take it away.

Thank you, Larry, and good morning, everyone, joining us today. I hope that everyone had a great holiday season, and the new year has kicked off nicely for everyone. And I really appreciate folks spending some time with us this morning. As Larry mentioned, this is Eric Dugas, I'm the CFO of Clean Harbors, and I'm joined today by Jim Buckley, our SVP of Investor Relations.

Larry asked me to kind of just kick off for a few minutes here. And for those that may not be as familiar with the story of Clean Harbors, just give a little background and talk through the different aspects and key components and key strategies and what sets us apart here at Clean Harbors. So I'd like to do that. But first off, to just share the very basics of the company. We are what we believe to be North America's leading premier environmental and industrial services provider. Our company has been around for about 45 years founded by a gentleman named Alan McKim, who remains the Chairman of our Board today. Today, the company will finish 2025 with about $6 billion of revenue and we employ approximately 24,000 people across North America.

When you think about our business, we operate in 2 operating segments, the first one being the Environmental Services segment, where that is predominantly where we collect hazardous and other types of waste. We recycle everything that we can and then dispose of what we cannot recycle or reuse in any other way in a responsible manner. In doing that, a very large fleet of vehicles that we use to transport things, over 100 disposal sites and a branch network that's well into the hundreds, I believe, about 700 branches is the current count across the company. So that is our largest segment, about $5 billion of the $6 billion of revenue.

Our second operating segment, and I'll come back to ES in a moment, but the second operating segment is our Safety-Kleen Sustainability Solutions business, approximately about $1 billion business, where we are the leading collector of used motor oils and other lubricants. We bring that into the network. And just like we do on the ES side, we take that used motor oil, which in many states is a hazardous material. We bring that into our re-refining network and recycle that dirty lubricant into a clean base oil that they can go into other lubricant applications including clean synthetic engine oils. So really a nice business, all centered around collection and then kind of feeding our large disposal and recycling plants.

If I go back to our Environmental Services segment here and just kind of walk through, there's generally 4 business units underlying our Environmental Services segment. So again, think about $5 billion. The largest underlying business unit is what we call our Technical Services business. Technical Services will do about $1.7 billion of revenue in 2025, just shy of $2 billion. That is the business unit that includes much of our rolling stock, includes those disposal assets that I talked about before, probably the primary disposal assets that people think of and the most predominant ones in our business are, first, our network of hazardous waste incinerators. So we are clearly the largest owner-operator hazardous waste incinerators in North America. We currently operate 10 of 14 commercially licensed hazardous waste incinerators, and those truly are kind of the jewels of our disposal network.

They can burn the nasties of the hazardous waste streams and we continually are finding more ways to increase throughput and earn these harmful materials in a safe and efficient manner. Other things include in Tech Services, which I would highlight as having a really good year in 2025 is our project work. This is remediation work, Superfund sites, I'm sure we'll talk a little bit later about PFAS, which is a huge opportunity for Clean Harbors. Much of the revenues around PFAS are in our Tech Services business.

Complementary to Tech Services, the second business unit that I would usually like to talk about because it's very, very similar in terms of what they do with collecting waste and bringing into network is our Safety-Kleen Environmental Services business. So that business, complementary to -- very complementary to Tech Services, another kind of $1 billion-plus business there. But think about it very similar to tech, although more of the medium and small businesses that generate hazardous waste.

So think auto body shops, think machine shops things like that, where there's very much a routine, almost like a subscription business where we're going out to those sites could be once a month, a couple of times a month, once every couple of months depending on the customer. But on that visit, that customer might have a parts washer, which is very much a central thing in this business. This is a machine that an auto body shop may have to help clean parts and whatnot in their normal service. We'll go out there. We'll change the fluids in that parts washer at a normal kind of 6- to 8-week interval, as I mentioned. But at the same time, we'll collect any containerized weights that may be generated by the site. They'll often have drains and things like that, where we may do some back services as well. So really a nice repeatable business for us.

Over the last several years, we've seen this business grow around 10% per annum, and we're seeing about 7% in the latest quarter here in Q3. Going back to Tech Services for a moment. We saw a 12% revenue growth in Q3 in that business, led by great disposal volumes and some project work. So those 2 businesses are really kind of key businesses, environmental services that are taking in waste and like I said before, recycling what we can or disposing of it in a very responsible way for many, many customers, including much of the Fortune 500.

If you think about the final 2 business units in Environmental Services, the first I'd like to talk about is our Field Services business. That business, again, another $1 billion-plus business here in 2025 for us. Last year, in 2024, we did a very strategic acquisition of HEPACO, which added another $300 million to $400 million of revenue for us in that business unit. That business unit this year, a little bit slower growth rate than 2024, even on an organic basis. But in 2024, we really had a lot of large and medium-sized emergency response jobs. And so far, in 2025 or as we close out 2025, the business continues to grow, but really difficult comp with 2024 because we just haven't seen large-scale of urgency responses at the same level we saw last year. We're still seeing those emergency response work. The same number of them. It's just the preponderance of large ones that are a bit lower. But really excited about this business and its growth prospects.

We continue to open new Field Services branches. Much of the work that those Field Services branches is routine regular cleanings and things. So it's not just the emergency response work but it's also very much repeatable business that we get every year with a strong customer base that we have.

The last business unit I would talk about is Industrial Services about $1.3 billion, $1.4 billion of revenue in that business, a little bit slower this year than we would have liked. We saw some of that in the recent quarter that we reported on in Q3. But it's really been a continuation in the last probably 12 months of the customers in that business unit, really feeling cost pressures. These are largely refinery customers, chemical customers who have really been hit with some real good cost pressures and the way they react to those cost pressures is they oftentimes reduce the scope of turnaround services. So what we do in this business is -- about 50% of the business is on-site everyday work, where we'll work with the customer. We'll help them with their day-to-day maintenance needs with folks with Clean Harbors employees that are on site could be a team of 4 or 5, it could be a team as big as 10 or 12, where they're on-site helping the customer with their day-to-day maintenance.

The other part of the business is more turnaround and specialty service work which is on routine, but from here -- and repeating. But from year-to-year, the size and scope of those turnarounds can change. And as I alluded to a moment ago, with cost pressures that those customers are seeing here in 2025, the scope and size of that turnaround activity has been smaller than prior periods. It is a cycle that we've seen before. We do expect that the cycle to break and the size and scope of these turnarounds to increase to more normal levels. When that will break, we're hopeful to see that here in 2026 but we're not quite forecasting that and probably won't until we see it.

So again, a very complementary business, shares a lot of the same customers with Tech Services. This year, it will be rather flat on the revenue line, flat to down a little bit, but we're hoping that will reverse in 2026. And hopefully, with improving crack spreads, and a little bit of improvement on the chemical side, we will see that in 2026.

Lastly, just touching on SKSS in that operating segment a little bit more. Again, as I said, collection of used motor oil, turning that into base oil lube as well as blended oils that can be used back in car engines or other industrial functions. $1 billion of revenue. We'll do about $140 million EBITDA in that business in 2025. For those that are familiar with this story, this aspect of the business, the SKSS business unit, a few years ago, we did see upwards of $300 million. The catalyst for that were really the time period coming out of COVID, strong base oil demand from reduced supply as the Russia and Ukraine war kicked off and reduced lot supply in the marketplace and drove base oil pricing to levels we had never seen. And so when you look at the results, largely '21 into '22 and then on into '23, really strong results in that business. Since that time, base oil pricing has continued to drop at a pretty good clip. We've been able to manage through that difficult pricing environment through changing our used motor oil pricing on collections upfront.

So one strategy that we adopted a little over a year ago now was when we looked at this business, we looked at what we were charging customers for used motor oil collection, it was actually in a pay for position, meaning in November of 2024, we were paying for used motor oil. Since that time, the team has been entirely dedicated to changing that pricing structure, continuing to provide good service, but charging for used motor oil gallons that we collect. We had to do it because the economics. We continue to provide good service to customers and we're able to execute on those pricing strategies.

So again, flashing back to last November of 2024, we're probably in a pay-for-oil position of about $0.05, and we've transformed that. And today, we're nearly -- I think the latest numbers are close to $0.50 a gallon. So just an extraordinary thing that the business has done there. People have continued to execute well from an operations and delivery of services perspective, and we've been able to do that, stabilize the business and deliver about $140 million of EBITDA, both in '24 and '25. And that's been a real success for us in the current year.

A couple of last comments as I look out, close out '25 into 2026. Some of the tailwinds we are looking at here in 2026 and believe will help us grow -- continue to grow the business, certainly reshoring activity. We've talked about that as more reshoring projects take place, begin and come to completion. All that requires materials in the process of building those. There is hazardous waste generated, and we're starting to see customers and some of that activity come to us. Obviously, PFAS is a very large opportunity.

In 2025, we did about $120 million of PFAS-related work. We expect that business line to continue to grow at about 15% to 20% annually, and we see a really strong pipeline in the recent Q3 quarter. And then into Q4, we continue to see good movement and good growth there, hoping to see some more legislation and more rulemaking around PFAS to really help grow that business. And then lastly, I should have mentioned it a moment ago, but our new facility in Kimball, Nebraska, our new incinerator that we opened up about a year ago now continues to ramp up well. It contributed -- probably it will contribute close to $10 million of EBITDA here in 2025, and we look to -- for that EBITDA contribution to double in 2026 as we continue to ramp up that facility.

So hopefully, that provides a great oversight for folks here. Again, I want to thank folks for joining us today. And Larry, I guess I'll turn it over to you for any questions.

Great. I really appreciate that, Eric. Very good conference overview. A quick reminder for folks out on the webcast. If you have any questions, please type it into the portal. We'll try and get them into the conversation. I guess, Eric, first question for you, for Eric and Jim, kind of more just a high-level question we're asking our presenters today. And you discussed a bunch of the kind of puts and takes for '25. Just as we sit here today, current environment as you look out over the next 12 months plus versus where we were when we sat in front of this very same fire place a year ago, if you will. How do you think -- how would you compare progress or where we stand today versus last year?

Yes. It's a great question, Larry. And obviously, thinking about a lot about that right now as we're finishing out the year and beginning 2026. I guess I would say a couple of things. I think if we go back a year here, and maybe I'll talk about kind of the entirety of Q1 2025, administration change. I think a lot of uncertainty around tariffs and things like that. I do believe that, that created a lot of what now type questions for some of our customers that made it difficult to plan. When you think about some of the customers that -- some of our largest customers manufacturing, chemical, folks that supply to the entire world, really kind of that tariff uncertainty led to operational uncertainty and folks not quite knowing -- not having as bright clear crystal ball a year ago.

And I think we saw some of that in some of the volumes that have been available to us in 2025. I think we've seen some of those nasty bulk streams coming out of chemical and things being slower than we would like. But we've made up for it in other areas, both through retail waste and things like that. So even amongst that difficult backdrop of 2025, we were still able to grow our volumes. But again, going back to a year ago, tariff uncertainty, administration change, crack spreads, particularly as it relates to our Industrial Services business, but crack spreads related to our refinery customers really tight. Those all led to kind of, I think, an environment that was difficult for most of 2025.

If I flash forward to today, continuing to see those large tailwinds that I think will continue to allow us to grow. But I think some of the tariff uncertainty has loosened up a little bit. We're having discussions with customers that are talking about increasing their production in 2026. So that's a great sign. Going back to crack spreads for a moment, those are improving. So hopefully, those loosen the purse strings of some of our refinery customers. Certainly, a little bit of interest rate help here late in 2025 on into 2026, that should spur increased capital spending at customers and generate waste streams. And then lastly, some of the things we saw from the One Big Beautiful Bill Act. That was -- there's a lot of positive things out there that should be -- that should give us momentum into 2026.

So I think if you look at Clean Harbors, even through the difficult times of -- you say last year was slower. A few years prior to that, we had pandemic. We've had oil slowdowns. The company has always been able to kind of grow through those difficult periods. So we're hopeful that here in 2026, with the long-term catalyst still in place and some of these changes in the environment turning in a positive way that we can, again, kind of deliver growth and profitability.

Great. I appreciate that. Second, very more high-level question. Just on the AI. Mark increasingly talks about AI build-out. And just -- what does that mean for Clean Harbors? I feel for you probably in the early innings, but maybe a little discussion there. Is it benefiting you? What areas are you kind of targeting?

Yes. On the surface of the question, I think people instantly make a connection between AI and data centers and things like that being a catalyst for Clean Harbors. But I would ask folks to kind of think about it this way, from a couple of different angles. One, all these data centers need to be built. And so the materials that are going to go into building these data centers. Hazardous waste is created in that process, and that will benefit Clean Harbors as we build out these large data centers and that network.

Secondly, these data centers are going to require a tremendous amount of electricity. On the Field Services side of the business, we do a lot of work, electric companies and power generators are some of the largest companies on our customer list in the Field Services business unit. And we see an opportunity providing services to the data centers. The third piece of it, I would point out, and Jim may know the technicalities here, probably does a little bit better than I. But when you think about these data centers and the HVAC systems and the cooling systems, they require certain, I believe, solvents and other things to operate, and we can help customers kind of recycle and dispose of those types of fluids and things on a regular basis. So I think there are truly a lot of catalysts kind of from the AI data center side that should provide growth to our revenues as well.

Great. All right. Why don't we dig in a little bit more just into Clean Harbors itself. And obviously, the Environmental Services, the larger of the 2 segments and the driver of a lot of the great performance last few years. Particularly margins, too, and ES have been on the rise the last few years. Maybe you can give us a little more color on that, the margin expansion. I think it's been driven by a couple of things, mix, price, operating efficiencies, but maybe peel back the onion a little bit for us on that one.

Yes. So it's been a great story, something we've worked really hard on and see some really strong results. So when you look about our entire Environmental Services segment, Larry, based upon our guidance for the full year 2025, we'll probably land at operating margin or EBITDA margins of about 26% which would be -- which would represent about a 70 basis point improvement from last year. And I believe last year was a similar sized margin improvement. So at 26% here, finishing off the year or thereabouts we've already exceeded some of the margin -- the EBITDA margin goals for Environmental Services that we set out in our Vision 2027 a couple of years ago.

So what I mean by that is at 26%, we're exceeding our EBITDA margin that we had for fiscal year 2027 in that model. So it's really been something that the company focuses on and a great story. Now I think contributing and driving that margin growth, a couple of underlying things you mentioned. Certainly, pricing has been something that we've been pointedly focus at over the last couple of years. I think we've always been able to price kind of disposal pricing, incinerator pricing. We've always been really good at that.

However, I think coming out of COVID, high inflation, we really kind of ramped up our game from a data collection, market intelligence and tracking perspective internally. And so what we've been able to do across the Environmental Services segment is get more data down to the customer level, looking at all of our customers, looking at the types of services we provide them, looking at the job profitability that we see by customer, looking at the market rates that are available out there and taking all of that information and setting very specific margin and pricing goals for all the work that we do. And so we meet as a team on a monthly basis today.

We monitor our pricing strategies. We communicate what we think are appropriate pricing to our sales and operating folks and ask them to go execute that pricing strategy, ensuring that we get the margin that we believe we deserve based upon the work that we do. And so that's been a really good success story. I think some of the best things we've done is, once we do implement pricing, we track it and we make sure that we're hitting our targets and we adjust accordingly when needed. But really just, I think night and day as compared to 6, 7 years ago in terms of what the team is able to do because the information that's provided and as I said, we've always been good with disposal pricing, but now we're also going out and getting pricing on our labor, on our equipment and all the other components of our revenues here across the Environmental Services segment.

The other thing that I would point to in pricing is probably the largest contributor, but right behind it is volume growth. So when you look at the last several years, we've seen incremental volume growth and utilization across our network, so not just incinerators, but utilization and our TSDFs, utilization on balance at our wastewater treatment plants. We're just getting more volumes into our largely fixed cost network and getting those volumes through our assets and driving more revenue and driving more EBITDA and therefore, greater margins that way too. When you look at kind of revenue growth at 4%, but EBITDA growth at almost double that on average the last few years, that really speaks to what we've been able to drive through the network and drive greater margins and greater EBITDA.

Obviously, there's been things in part of our DNA is looking at our costs every single year, trying to use technology or other objectives to drive down costs. It's like, as I said, part of our DNA, it always will be. And so we set our cost savings goals every single year. We continually look to internalize as much labor, as much transportation, as much disposal as we possibly can and we've done a nice job there. And then lastly, technology. Technology is at the core of what we do every day. We're continuing to improve our technology. We're leveraging AI and other more current technologies to drive more efficiencies, save costs and drive more revenues and ultimately increase margin.

So a great story, like I said, this year, should be about 70 basis points of margin growth. Long term, 26% today. We see no reason that longer term, we can be a 30%-plus margin in this business. And if you look back 5 years, we've increased our margins over 500 basis points in those 5 years. So certainly, the ability to do that, and that's kind of our new long-term goal is to exceed that 30%. The timing on that, I can't speak to specifically, but that is what we talked about here at Clean Harbors today.

Got you. And you mentioned, obviously, the volumes have been strong across verticals. And -- but I just want to speak a little bit more about incineration in particular, and obviously, one of your anchor assets just on the disposable side. And I think that's helped the opening of El Dorado 7, 8 years ago, now it's getting up there. Obviously, I think has helped mix improvement over the last few years and now your Kimball is ramping. And maybe just an outlook just on that side of the business as well as potential captive closures that could help volumes.

Sure. And so as I said, volumes have increased across the network. One thing I would say and I alluded to it earlier, is maybe the nature of the volumes here in 2025 are a little bit different. Some of the slowdown with chemicals, some of those bulks, nasty streams, probably not growing at the same rate as we would like, but we're finding other waste streams that we can capture and bring into our network to make up for that, and that has led to the growth in Tech Services that I point to earlier and ultimately, the margin expansion. When you think about Kimball, Larry, you're exactly right, kind of opened that facility about a year ago now. We're hitting all of our throughput goals here. We have hit them in 2025. It has contributed about $10 million to the network here by opening that facility.

That facility is really a blueprint of the incinerator, which was new at the time and that we opened in 2017 down in El Dorado, Arkansas. And so we knew what to expect. It's got a few extra bells and whistles and things, but largely a very, very similar blueprint. So very happy with its performance here and its contribution in 2025, and we're looking to grow on that in 2026. So EBITDA contribution, we're looking forward to double, to be $20 million to $25 million of EBITDA contribution here in 2026. And so really excited about that and see a pathway to get there. Ultimately, as we exit 2026, we believe we'll be around a $40 million run rate, and that will be the -- that's the expectation for the EBITDA contribution for that asset into fiscal '27 and beyond.

So it had many benefits beyond just that EBITDA generation but also to have another plant that can handle the type of waste streams that it can handle. It improves our routing. So transportation costs should see some benefits. It improves our handling. Waste streams don't need to be touched as much as they move through our network. So really a lot of positives there. And today, our network utilization, we've seen some quarters here in 2025, where absent the new incinerator, we're at greater than 90% utilization and kind of in that low -- or excuse me, high 80%, low 90% utilization rate is where we want to live there in the utilization network. And certainly, we believe that the incinerators, they'll play a key part here in the future with PFAS opportunities.

And a good segue into PFAS. I know we have a few minutes left. As you mentioned, did about $120 million last year. It's been growing nicely. And I think the backlog has been even growing faster. Perhaps you can just discuss sort of the current market. I think people believe this can grow exponential over the next few years. What are some of the milestones to look for, perhaps even as early as this year? Maybe you can also briefly touch on just the National Defense Authorization Act. I think there were some positives in there as well. So I'll give you a couple of minutes on that.

Larry, it's Jim Buckley, that's one of my favorite topic, so I can start on this one and Eric can jump in. In terms of '26, there's a few things we'll be looking for. You mentioned the Defense Authorization Act within that. There was some language that the secretary has to come back to Congress in 180 days. The bill was signed in mid-December. So by the end of the first half of this year, we should see the Defense Department or war department, whatever I'm supposed to call it now, come back with disposal and destruction guidelines for PFAS at the 700 or so military installations that are contaminated, that's going to be an exciting opportunity for us.

We believe that our high-temperature thermal destruction at our RCRA facilities are the answer, the best answer. But certainly, we just want a part of the puzzle solution here. And so we've been working with DoD. They were at our last incineration study on PFAS and participated in that on site. And so we're having discussions with them now, and we expect within the next few months for at least some preliminary guidance to come out and then have Secretary and his team present that to Congress.

So that's one thing to look for. There's also the EPA track, which isn't on a timetable like that. But they've given us drinking water standards that everyone is conforming to now, and we're looking for some soil rules. So the potential for that to come out this year. I know that Eric Gerstenberg, Mike Battles, hosted the Secretary of the EPA -- I'm sorry, the administrator at our Deer Park incinerator and which was subsequently followed by the study being published by the EPA.

So in those discussions with [ Lee Zeldin ], he mentioned he's still committed to PFAS and it's something he wants to go after. And so there's the EPA sort of track, which is separate from the DoD track. Then you've got a number of states making rules. It's hundreds of bills around PFAS that are currently in process. You have New York State is kicking off a take-back program that may become a model for the rest of the country. And so we'll see how that proceeds. You've got things trough of litigation happening and so you've got all kinds of settlements.

In terms of the addressable market, you didn't ask that specific question, but that's one that we get a lot. It's -- there's already up to $40 billion that have been allocated either through 3M putting up some funds. You have the infrastructure bill at $10 billion earmarked for PFAS. You've got a number of other earmarks. I think the DoD is up to $12.9 billion set aside. And so our PFAS total solution lays across a lot of that, whether that grows and how fast it grows, that's a challenging question. We always say, hey, we grew 20% last year. We're probably going to grow 20% or better for the next several years, difficult to model when we would hit an inflection point. But we certainly have had some great progress in all the areas where we play.

You may have seen our announcement about expanding our installation in Pearl Harbor, which was -- is our largest water installation. So we've got momentum on the carbon filtration side of getting PFAS out of drinking water. We've obviously got momentum on responding to AFFF change-outs and ERs and opportunity set there as well as kind of taking it and ultimately destroying. And so a lot of momentum. As you mentioned, our pipeline is probably growing faster than that 20%, Larry. There's just so many tentacles to this, whether it's been at airports or what do you do with leachate coming out of solid waste landfills. And there's just a big opportunity set for us here.

The market is going to take decades to kind of get through all this, but I think we've got some significant momentum. We'll be providing guidance in the next month, and I think we'll -- we've been very careful not to hype PFAS because it's been quite a slow road to get here. You and I been have probably been talking about it for 7 or 8 years now. But it looks like things are coming over the horizon and the opportunity set for us is large.

Great. I appreciate all that color, Jim. All right. Well, we're just actually about out of time. I have a couple more questions, but we'll have to pass on those for today. I want to thank you both. And I just want to give you back the floor if you have any closing remarks that you'd like to share.

I'd just like to thank everybody for joining us. I truly believe that the company is well positioned in the future for future growth and increased profitability. And if you're an investor already, thank you so much. And if you're not an investor, please keep considering Clean Harbors. Thank you all.

Thank you. Thank you, everybody. Have a great productive rest of the day.

Good morning. We're going to -- first of all, welcome to the 28th Annual Needham Growth Conference. The next presentation is a fireside with Clean Harbors. Pleased to have with us today from the company, the Co-CEO, Mike Battles. And we also have in the front row, Jim Buckley, who is SVP, Investor Relations, Corporate Communications. My name is Jim Ricchiuti, Senior Analyst in the Equity Research Department at Needham, covering companies in the industrial technology space.

I think most of the audience is familiar with Clean Harbors. So Jim, Mike, thanks for joining us at the Needham Growth Conference.

So why don't we start off by recapping what occurred through the first 9 months of '25. Probably fair to say that the year, and this is not always a surprise for companies, didn't go exactly as planned with full year adjusted EBITDA guidance narrowing as the year progressed. What were some -- Mike, what were some of the puts and takes that led to the tightening of that range towards the lower end?

Yes. So first of all, thanks, Jim, for having us. Thanks for the Needham Group to have us. It's really quite an honor to come here and present. And I really like this time of year, it forces me as the CEO of the company -- co-CEO of the company to reflect on the year and think about 2026. And so having this conference as a way to force you to kind of the forcing mechanism over the [ break ] to kind of reflect on these things is actually pretty healthy exercise. It helps us like the same slides at the same analysis I did preparing for this conference, which I shared with the Board last week and with the executive team just to make sure we're all aligned on goals. So it's actually a good exercise. Thanks for doing us. Thanks for having us.

When you think about Clean Harbors and you think about 2025 as we finish out the year, I would really say it's kind of a tale of kind of 3 cities. So the first is let's talk about the people love talking about the oil business. The SK oil business, we pick up dirty motor oil -- pick up about 250 million gallons of dirty motor oil. We run it through our re-refineries and make a base oil of that. We sell that base oil kind of back to our customer back into the marketplace. So it's a commodity business. It's a spread business.

And that business people who've covered us for a number of years has been struggling. They've been struggling for a number of years and really was 1 year when the Ukraine war broke out and inflation, it was a $300 million business, and now it's like $140 million business. So we kind of had a real challenge there as oil prices kept declining, kind of finding bottom in that business. And so what we did last -- about this time, maybe a couple of months ago last year is that we decided to say, forget it, we're not going to worry about collecting 250 million gallons. We're going to worry about collecting high-value used motor oil. We're going to drive that price up. And if we lose gallons and we have to close re-refineries, well, so be it. And we actually did have to close a couple of low-margin re-refineries. And so we did that.

But really, what happened was terrific because we gave out guidance in February of last year of doing about $140 million of EBITDA in that business, and we were going to do about $140 million. So I think we've kind of stopped the nonsense of kind of it was 300 millions, and then it was 250 millions, then it was 225 millions and it was like -- and then I spent all my conference -- all my time at these wonderful conferences explaining it to you guys why that was okay and why it was going to go to here. So we just kind of fixed that.

And so what we did was we changed the paradigm, and we drove -- we said we're going to let the pricing of the used motor oil drive the profitability of the business, and we're going to let the gallons come as they may. And the industry came with us because we are the 800-pound gorilla in this industry, the industry came with us and we started making a lot more money. I think the industry made a lot more money and I've had people come up to me at conferences and thank me for our leadership in this area to drive UMO pricing because it is a waste, you can't throw in the dumpster. You can't pour it down the drain. So we treat it like a waste like we do for everything else. It's not simple, and it takes a lot of collection network. It takes a huge amount of investment, so we need to get a return on that, and we have.

So I'd say that's the oil business. And my goal, as I think about 2026, because I know it's one of your questions, is to make that business relatively boring, drive -- we did have price declines and oil price declines in 2025. We didn't talk about them. Why? Because we drove that UMO pricing up to offset that volatility, we kind of stopped talking about it, which is really kind of what we should be doing.

So you think about the other -- so that's of the $6 billion business, a little over $6 billion this year, about $1 billion of that -- a little under $1 billion is the oil business, which I just spoke of. The other $5 billion is the Environmental Service business. I think most people in this room are in the stock or investing in the stock or should invest in the stock because of the Environmental Services business. And in there, it's not as simple as, okay, the Environmental Services business did well but it's really kind of a tale of 2 cities within that ES business. So you have, let's say, the disposal assets of the field service -- excuse me, the technical services business going to large scale, going to the Dows and DuPonts and picking up large quantity waste generation.

So that business continued to do very well. That did 12% revenue growth in Q3. Over the first 9 months of the year, did 7% revenue growth, a lot of it on price, some of it on volume, kind of that train continued in the TS business, some PFAS work, I'm sure we'll talk about. I mean that business did very, very well, and that will continue to do well. I think as I reflect on 2026, there's nothing that would change in my view as far as the TS business continuing to get good price. I mean we never -- as we joke and Jim and I joke incineration never goes on sale. It's never a Black Friday and incineration is always going up. And so we'll raise that price up in 2026. For large quantity generation, annual contracts that come up for annual renewal, we do have good tools to manage our profitability, and we'll continue to do that.

The second part of the business, that's about $1.7 billion of the $5 billion, about $1.3 billion of the $5 billion is the SK branch business, Safety-Kleen branch business, which is connected to the oil business, which I'm happy to get into but that's going out and getting small quantity generation. Still a lot of its hazardous waste, whether it be solvents, whether it be 55-gallon drums of dirty rags and Kevin's Auto Body shop will go pick up dirty rags or dirty -- stuff you can't throw into a dumpster that you have to -- we pick up. There's small quantity generation. It's all about route density. It's all about planning that route out, very similar to the solid waste business, and that business has been a great business. That business has also grown 7% through the first 9 months of the year and nothing to think that, that won't be high single digits.

If you went and did the look back on that business, that's been growing high single digits for 5, 6 years now. Even take the pandemic out, it's like a heartbeat just keeps on keeping on. So that's a great business that I think those 2 businesses, that's about $3 billion of the $5 billion, if you will, maybe $2.7 billion of the $5 billion, that business is doing just fine. It's growing, and it's awesome, good margin expansion and good stuff like that.

When you go to the Industrial Services business, about $1.3 billion business, that business has been struggling. And that business is separated into 2 different parts. You have kind of the base business, we call it the onsite work. That means like a bunch of 5 or 6 of us, maybe Kevin and Jim and I and Jim and others go out to the same site every day, managing all that waste and doing cleanups at that site. It's not a lot of hazardous waste but some of that comes out of that.

But then also these large plants have turnarounds, annual turnarounds. So that's about 20% to 30% of the business. And those turnarounds have been slowed. They've been pushing out the amount of turnarounds they do in the scope of the turnarounds, the amount of turnarounds have all been slowed down, and that's resulted for the first 9 months of the year, negative revenue growth, negative 5% revenue growth. That's what's happened in this business.

So the question really I think about 2026 is there going to be a turnaround there. Is there going to be more -- is that going to come back. I think as we've given -- as we thought about 2026, I'm not really that keen on calling that yet. We've had some problems in that business. I think it's -- hopefully, it stops going backwards. I'm hopeful that it stays flat, maybe goes up a little bit, and we made some leadership changes there if you've been following us. And so we think there's a better trajectory as we go into 2026. We certainly are budgeting a much higher number.

But I think as I think about 2026 in the Industrial Services business, I'm hopeful we just stop going backwards. I do think you can't postpone these turnarounds forever, like you just can't do it, right? We own re-refinery, we own 10 re-refineries. We know they need industrial cleaning work. They know they need repair work. We know they need to happen. You can't run to failure. And if you run a failure, it's much more profitable for us if you do run failure, frankly. And I'm assuming -- we're not assuming that we have a big rebound year in 2026 but we're going to have a decent year there. And I'm hopeful just we stop going backwards. And I think the leadership change is going to be helpful on that.

Well, historically -- yes, historically what -- how long can they differ turnarounds?

Yes. I mean the question is like -- and we've seen a few failures. If you've been reading the news, there's been -- Jim can round them off the top of head, there's been 5 or 6 run to failure type of thing fires that happen in plants. Those, I think, are more unplanned downtime, which I think you're running to failure. So look at, is it -- I don't know what the cycle is. I don't want to call bottom but I think that I'm hopeful with the new leadership team, a new revitalized sales force, better tools, better analysis, I'm hopeful that we're going to have -- we'll have some growth there, even modest growth.

And the last piece, which I love this piece is the Field Service business. In the Field Service business, we support the utilities. Q3 was -- we didn't have a lot of midsized work, no large-sized projects, no midsize, which is kind of rare. And we're a public company. If you look over the longer horizon, you can see in our financial statements, we've had good low to mid-single-digit growth in that business. We just didn't have that in Q3, and that was part of the surprise that happened. I think that that's -- if I look at Q4 and I look at 2026, I think that problem is solving itself. It's just over a 90-day window, it wasn't that bad. And so us and others in the space, you heard from a colleague, they actually spoke of it and the Republic guy spoke of it, there wasn't a lot of events in the quarter. So that's just a lumpy thing.

And so I'm of the view that we do 6,000 emergency responses a year. There's plenty of them out there. There will still be plenty in 2026. And I even see it kind of like as soon as we issued the quarter, there were some events that came up that we're going to be part of that's going to be a good growth engine for us.

Despite all that, the challenges in the IS, I mean, you guys showed pretty healthy margins.

Absolutely.

And maybe you could talk...

14 is great quarter. Just thanks for bringing that up.

Worth noting talk about what's been driving that and some of it is price.

That's right. So I think there's 4 or 5 large engines. So the first of all is price. And as I just talked about, when we talk about pricing, we're very disciplined on price, like the solid waste guys are, and we'll continue be disciplined there. We're not going to -- especially when it comes to disposal assets, they're scarce assets, they're impossible to replicate. So we're going to continue to drive price on that.

I think that Kimball opening and having a good year in Kimball. I think the Kimball plant for people who don't know the story, we opened up a new incinerator very late in 2024. We had about -- I'd say, about $8 million to $10 million of incremental EBITDA in 2025. I think that goes to $20 million to $30 million in 2026 as that plant rolls -- goes through all the shakedown process but there's going to be a fair amount of tons coming into the network and coming into Kimball coming in there. I think that PFAS continues to grow. We'll talk more about PFAS. You have as a later question but that's up 20% this year. And I do think that we end up getting some good volume wins. And I think we're getting some of that as well. So all those things have led to 14 straight quarters of year-over-year margin growth in Environmental Services.

I'd also say, Jim, that if you think about our incentive comp and incentive comp, we can't ignore it. Every single person from me and Eric down to a branch manager is incentivized on margin. And so it's not 100% of your bonus but it is a very material part of your incentive comp. I think that really helped both the short-term targets and the long-term targets are both tied to margin improvement. And I don't think that's an accident that we've had 14 straight quarters. I think that's part of the story, incentives drive behavior, and I think that's been a good story for us. And I think that's -- obviously, that incremental margin drives incremental cash flows that kind of helps DCF models and multiples, it's kind of all good all around. I think.

Yes. And you brought it up. Let's go to maybe pivot to PFAS, and then we'll talk about Kimball. So is there a way to think about -- I feel like PFAS covers some ground within that ES business. But is there -- what -- how big a driver is it to the Technical Services part of the business? Is it, Mike?

I'd say most of the -- so just to frame PFAS. PFAS is probably fluorinated, I can't pronounce it. It causes [indiscernible] defects, it causes cancer. It's in everything. It's in Teflon. It's usually kind of a DuPont 3M type of thing. But the -- but that business went from like I say, $100 million to $120 million this year. So it's growing. And the way I think about it over the long term, I think you just put a 20% growth engine on that. No matter what happens to industrial production, I think you put a 20% growth engine in your models kind of running out for as long as you want because I do think that's the type of growth.

And whether we're hitting an inflection point where it's going to go faster than that, it's kind of an open question. I'm not forecasting that but certainly, it's been growing pretty well. We won a project in Hawaii, which I'm sure we're going to talk about. But I'd say what's happened in the past, since we last talked, Jim, kind of 3 things have happened that gets a lot more eyes on it. The first of which is that -- we met with Administrator Zeldin in Deer Park. He's obviously been an advocate for PFAS remediation when he was at Congressman in the state of New York. He's been very vocal on that. He's going to come out publicly and talk about having a PFAS-R. He's doing that. And that was a great opportunity to spend some time with Administrator Zeldin in our Deer Park incinerator. It was a great opportunity to meet him.

We issued -- the EPA report got issued soon after that, which is -- which validates the fact we are the only large-scale incinerator disposal at scale that can do it today, which has been EPA and DoD tested and proved at high temperature RCRA incineration, the only way to actually destroy it at scale.

And the third thing is my Co, Eric Gerstenberg got to present in Washington at a hearing that talked about as an expert witness on PFAS remediation. So this is getting a lot of eyes on this as an expert in the industry. We've issued out preliminary guidance what we think should be the standard. We're using that with our customers today. It's part of the minutes of the meeting. And so I think all that's getting a lot of good eyes on that and a lot of good support on that, and we're getting a lot of traction and momentum on it.

And just so we're on the same page, PFAS incineration, is that safe? Is it not safe? We've proven through our technology, it is through a 2 to 8x better than any state emissions -- air emission standard. So we know it's safe. We know it's a great way to do it. We think the world is coming to us, and we're in a great spot to take advantage of it.

What kind of interest are you seeing from customers following the publication of that backlog in September?

Yes, September, I think. September. Yes. So I'd say -- so we do 8 different -- we're a total PFAS solution. We're a total PFAS solution. So we talk about 8 different things that we do as far as anything from sampling to testing to drinking water quality, to industrial water quality, AFFF firefighting foam to remediation to disposal and incineration. So we do all those things. And I think the 3 areas we're getting some good traction on is water -- drinking water remediation and the AFFF and the incineration. Those 3 areas we've been growing but we do a lot of different things, and we have an army of people kind of working and hard and selling all different 8 legs of our wheel, if you will.

Yes. You touched on that announcement in Hawaii, Pearl Harbor announcement, which we don't normally see announcements like that from you guys but maybe let's just elaborate on that a little bit.

So first of all, most customers don't want to talk about the fact they deal with Clean Harbors. So let's start right there. Like most customers don't even want [indiscernible] we go through the back door and not through the front door. It's not something that people want to talk about. No one wants to say that we use Clean Harbors but they do, almost all the Fortune 500 do but okay. The Department of Defense allowed us to use their name because we're remediating wanted to use them as a reference, and it was a great opportunity for us to talk about the fact that we do a lot of different things, including water remediation and at Pearl Harbor, we're quite proud of, and that's going to be a good growth engine.

It's not -- we're going from maybe $15 million to $30 million of revenue on that. So it's not going to be life-changing amount of money but it's going to be good growth, and that's going to be on top of any normal growth we're going to get in that business, and that's going to go on for the next 5 years. So we're really excited about that opportunity to partner with the Department of Defense to remediate the state of Hawaii's drinking water, which is critically important.

Kimball. What's the latest on Kimball that you could talk to us about how that's scaling. And you've talked about other opportunities as having Kimball now being able to drive more network efficiencies with the addition of this new incinerator. So maybe just talk to Kimball.

Sure. So I went out to Kimball in December to meet with the team. And I will tell you, as a shareholder, you want this leadership team to be managing. I mean just walking around the site with the branch manager and the plant and the project leader and kind of how they describe how they're managing the waste that comes into their site and some site goes in the older incinerator, some goes in new and how they're mixing and matching those waste streams to maximize the volume throughput through that site because they're measured on revenue and EBITDA and EBITDA margin.

I mean it's just awesome. It's awesome to see. And as a shareholder -- as a steward of your capital, you should be proud of what they're doing to manage that efficiently as possible. It's a big spend. It's a $200-plus million spend, and they're doing that. And they understand that, and they're measuring that very well, and they're really getting good volume out of it. So we're going to end the year, I'd say, $8 million to $10 million in the good. We said publicly about 28 million -- 28,000 tons of waste. We're going to beat that. They were 25 million for the first 9 months of the year so we're going to beat that number for the year.

We're going to -- I think that -- so let's say the $8 million to $10 million of EBITDA in 2025. We said publicly that goes to $20 million to $30 million in 2026 as that things start to ramp itself up, doing all its proper shakedowns. Nothing that would change my view today as I went -- met with the team earlier in December or even when I discussed it with the Board as part of a budget process for 2026, I think that we're right on line. I think the team is doing a great job. Remind everybody, it's on time, on budget, and it's a great opportunity for us.

And so what's next for us? What's next? And so we did an incinerator in El Dorado, Arkansas back in late 2019, 2020. We built one in Kimball, Nebraska. There's an opportunity to do one in Naga in Utah outside of Salt Lake. Could we do that? Sure. I think the goal right now is to get the Kimball, the plant up and running well and then go from there. And we want to be late to that party versus early because we don't want to create too much capacity in the network.

And if you're confident about that scaling in 2026, you've also given some targets even looking out to '27, what could contribute....

That's right. That's right. And is that I think on a full run rate, absolutely, $40 million, I think that's very fair. When it's up fully operational, getting that high 80, low 90 utilization like the rest of the plant network does, there's no reason to think that we couldn't do that. I think it's a function of getting the plant up and running, taking the tonnage and getting the price points up.

Okay. I wanted to also pivot to something that you guys have talked about even going back to the Investor Day that you did a few years ago. But -- and that's the opportunity to go after some of the captive business. Some of this is also potentially driven by having Kimball. But just in general, how are you thinking about the captive opportunity? And maybe remind us how many of these captive incinerators there are out there. I think there are 40 but I...

Yes, there's 40. That's still, Jim. And so we still have regular -- so just to people who aren't familiar with the story. So we have 10 of the 14 hazardous waste incinerators. That takes about -- that's 250,000 tons. There's almost an equal amount of captive incineration out there in the network. Maybe in total, there' 400, we take about half of it, so 250. And there's another -- there's captive incinerators out there. So there's about 40 of them. And we have consistent conversations with our customers around closing those captives and giving that waste to us. The challenge with that is that -- and the chemical industry, as you know, and most of them in the chemical space. The chemical industry is under incredible price pressures. You read the news about misses and earnings challenges that they have. So they're under pressure to kind of find cost savings, and we can provide those cost savings, and we have a great reference point with 3M. We did that a few years ago.

The challenge with a captive closure is that there's kind of no going back. And you are -- and once you close a captive and lose that permit, starting that up is almost impossible. And so you really are committed to closing that kind of forever. And there is a remediation cost. When you close the site and abandon the permit, well, then that -- you need to rem clean up the site. And we can help them with that, but that's not a free -- that's not free from cost either.

And so it's a big decision that people don't make lightly. We have regular conversations with their captives. We have -- we talk about captives all the time. There will be some closures. Certainly, as we've opened up our plant in Nebraska and one of our competitors is going to open up one in Arkansas later this year, I think there'll be more opportunity for them to take advantage of that and a captive closure whether it comes to us or come to our competitors is a good thing for the industry. It creates more waste into the network.

But it sounds like it is -- this is a slow transition, as you said, these are decisions not made by...

It wouldn't be part of any guide. We would not be speaking -- we were not going to talk about until it actually happens.

And there's not a whole lot, I guess, Mike, that you guys can do to accelerate this. This is...

I think the answer is that we have -- we understand those customers because they do turnarounds, they do shutdowns and we take their waste while they're off and nothing changes that. But I think that we're going to continue to take advantage of that.

Okay. You touched on pricing, and that's something we've heard more from you guys, I'd say, in maybe fair to say, the last 2 years. How are you thinking about pricing? And remind us again, typically, you have these conversations in the early part of the year, is it varies?

So Jim, contracts go all through the year, right? So these are annual contracts and normally, they happen when the contract is up for renewal. So it's a long-term agreement with annual price discussions, annual term discussions, and we do that once a year. But it's not like a January, everyone gets a price increase. It's more like when these contracts come due. So it happened throughout the entire year. So we'll have a rollover what we did in the back half of 2025.

Was it a little easier to pass through some of these increases when the inflation rate was a little higher. We're seeing some signs that maybe that's -- what's the pricing environment?

It's never easy. I'd tell you, it's a hand-to-hand combat. It's -- I think that we've been able to get price but it's never an easy conversation. There's a lot of negotiations. I do think we have armed the sales force with better data, better analysis around our inflationary pressures that we're feeling. And so it gives them more ammo to have these more thoughtful conversations but I feel like it's mid-single digits, and it's been that way for a long time and will continue but it's not -- certainly not easy. I don't -- when I've been part of some of these conversations, it's a painful conversation.

Let's talk about M&A. Historically, Clean Harbors has had a pretty strong record for doing accretive M&A. Your net leverage exiting '25, probably less than 2x. So certainly have the wherewithal to do deals. But I'm wondering to what extent is just pulling the trigger harder just given some of the higher multiples we're seeing out there?

Yes, it's fair, Jim. I think that we've looked at a lot of deals. We haven't executed on a lot of deals. That's a fact, right? But we're going to end the -- we're going to end the year with $1 billion in cash. We're going to end the year with leverage kind of under 2x. And you're going to find out when we report numbers that we're going to have the best -- the highest buybacks in the company's history. So we have been reinvesting it, doing more buybacks, and we'll continue to do that. I feel like I'm in the -- I'm not in the Empire business, I'm in the shareholder value business. And so if it means that we -- it takes longer to realize Vision 2027, that wasn't -- that's a vision, not a mandate.

And so I feel like it's more of the fact that we're going to make sure that we get good returns on our investments, and we're going to be disciplined about it. And if people want to pay some very high prices, we can't get ourselves to, well, that's fine by me because what that does is it's put pressure on them to raise price. When you think about, for example, and I'm just -- this is me speculating, per speculation. So please take it for whatever it is. But when Veolia spends $3 billion, $3-plus billion and pays 19x for the Clean Earth assets and then the CEO talks about increasing that business by 10% EBITDA growth per year. We, you only do that and you only get that type of return when you raise price. right?

So that's -- so in my mind, that's a good thing, not a bad thing. Would I like to have had it? Sure, sure, I would have. But the fact that they're going to go in, they're going to try to grow that business through volume, they maybe win or lose some of those I get, they will horse trade back and forth, we'll create some paint. But then also they're going to get through price. No other way to do it. And so that's actually -- to get that type of return, they're going to have to, I think. And so that's going to be a good thing for us. Good thing for the industry, frankly.

Have the priorities in terms of where areas of the market you might look at changed at all just with the current environment?

What I encourage investors to do, it's a good point. Go look at the 2023 Investor Day and look at the pie charts where we kind of break out our piece of where Clean Harbors is in connection with the whole total addressable market for different size, whatever it be SK branch or TS, they're mostly in environmental services, to be fair. There's a big chunk of other in there. There's usually 40%, 50% is like private company-owned businesses that are small that probably no one in this room would even know they even exist. They're regional players or smaller players. Well, there's plenty of things to do there. There's still plenty of assets to go acquire. They're just the bigger names, the Clean Earth names, they're off the table.

And that's not -- I don't care, fine by me. I don't -- I would -- personally, I would rather do a bunch of smaller deals and roll it up that way than go do a game changer and have it not be successful. You only need 1 or 2 of those. If you're doing 4 or 5, 1 or 2 of those do well and you're kind of okay. You see what I'm saying. So there's a big pile of other assets that are out there, privately owned, some are family owned, some are private equity that are available for it.

We have a lot of lines in the water. We're going to do deals. I'm not -- people ask me, am I concerned about it? I'm totally not concerned about it. I think that we're doing a buyback strategy. That's fine by me. I think our leverage is in a great spot. We're going to have a great opportunity to leverage on it. And there's plenty of things out there. If interest rates come down, maybe there'd be more opportunities out there.

And there's also, I think, fair to say, more internal opportunities that you guys have embarked on, including even in SKSS.

That's right. So for people who have been following us, we're going to build a new add-on to an existing re-refinery. And really, the way I think about that is that, first of all, it's got great returns. It's got really good returns. But I know that people don't get into the stock because of the SKSS business. So maybe people don't love the fact that we're putting another $180 million of their money to work and building more capacity there. But really, what we're doing there is solving a problem because without getting too technical is that when you re-refine used motor oil, there's a byproduct that comes out of this, right? It's called VTAE. I don't ask me to pronounce vacuum tower asphalt extender, I think it's what it's called.

And then -- so that is a byproduct we use -- we sell it sometimes for a little bit of money in roofing and in paving. Well, in paving, less and less states are allowing us to use that VTAE as a product used in paving. So as such, we need to find a home for that stuff. So it was actually solving a future problem as well as having a decent type of return. That said, this will probably be it for the SKSS business as far as investments go, but it's going to be a great plant. It's going to have great returns. It's going to return a good return to our shareholders, incinerator type returns but that's out there. 2028 is the...

And obviously, we all focus on Kimball but in the ES side of the business, you've made some internal investments as well.

Absolutely.

And are there some other opportunities there?

Absolutely. And so when you -- we talked about in the earnings call about $500 million, that doesn't include a new incinerator in Aragonite or anywhere else. But that does include these things on Megahubs, which are -- we have in Baltimore. We have one in Phoenix. We're going to open one up in Illinois as well that add more -- kind of do all the things we want to do in a network at one location. And so those types of investments to buy the property to move things around cost a little money. And so that's part of the growth opportunity there. There's also more capacity. We add more capacity into our incinerator network as far as adding more drum incineration capacity into the network, and we'll be doing some of that as well.

So Mike, these Megahubs mainly offer afford you guys the opportunity to drive better margin improvement? Or is there -- it sounds like there's also some top line opportunity as well.

Sure, absolutely. What that does is it allows us to kind of -- I think it's more of a margin play, Jim, because it allows us to all work together, share resources better, leverage the assets that's there, whether it's got a permanent facility, permanent foot -- it's not usually on a permanent footprint to drive more cross-selling and sharing of costs.

Okay. Well, we're winding down to the end, if you don't mind, can we ask any questions from the audience?

Sure.

Okay. I guess we may have covered it all. Mike, thank you.

Great. Thanks, Jim. Thanks, everybody.

Hi, everyone. I'm Adam Bubes with Goldman Sachs. And today, I'm delighted to host Clean Harbors. Joining us from Clean Harbors is Eric Dugas, CFO of Clean Harbors; and Jim Buckley as well, SVP of Investor Relations.

Great to be here.

Eric, Jim, thanks for joining us.

Thanks for hosting.

To start the conversation, if you look at your Environmental Services business and the margin track record, I think since 2019, you've expanded margins by around 480 basis points. What's structurally changed this cycle to drive that inflection in performance?

Yes. It's a great question and something we like to highlight. I mean, to simplify it, Adam, we oftentimes talk about roughly 500 margin -- or excuse me, 500 basis points of margin over the last 5 years. And even if you go back further, about 800 over the last 8 years, so really truly a great story. I think a couple of things that I think about over that time frame that's really kind of driven those margins is when you think about our business, first off, a lot of great assets where we can handle a lot of different types of waste streams. And what we've seen over that period is we've been able to garner more volumes into our network, whether that be because of strategic things, like our arrangement with 3M, where we took over a lot of their waste streams a few years ago, whether that be growth in some of the underlying verticals that we serve.

And certainly, pricing. I think pricing has been something that we've really focused on over that period, still delivering great value to our customers, still delivering great service, but really looking at during the high inflationary period that we had, making sure that we price accordingly. So those have all been great stories, but I would go back to really kind of getting more volumes into the network, serving more customers, growing with our customers. And as I look out into the future, I see a lot of tailwinds for our business where we can continue to do that. And our margins this year in Environmental Services will finish the year just over 26%. And longer term, we're looking to kind of stretch those to 30% and above.

And so let's talk about that bridge a little bit from 26% to 30%. What are the major drivers to get there -- price cost is clear? Any leverage beyond price cost?

Yes. Certainly, I mentioned volume a moment ago and continuing to bring volumes into the network. Certainly, no surprise, our largest vertical is chemical. We've seen chemical companies slow down a bit here over the last year or 2. But we've been able to drive more volumes into the network through relationships with some of our retail customers and other verticals that have helped that. So when I think about levers, volume and price will always be 2 of the important ones and making sure that we deliver great service to drive that price, which we'll continue to do.

But then some of the tailwinds around reshoring, continued infrastructure build-out, PFAS opportunities that I'm sure we'll talk about, all those things are going to continue to grow the business. And we'll do -- we'll continue to do our normal cost cutting, looking to internalize, looking to do workforce management improvements that we've been really dedicated to, all those things that will continue to drive margins in the business.

And so there's a lot of businesses within Environmental Services to unpack that are part of your vertically integrated offering. Let's start with incineration. You just brought on the Kimball incinerator online. I think that plan is trending towards $10 million in EBITDA this year and on its way to a $40 million incremental EBITDA run rate. What are your latest thoughts on the timing of that ramp and upside or downside potential to that $40 million number? What would drive that?

Yes. I mean we're really proud of the new Kimball incinerator. I would -- I would remind folks that this is the second new incinerator that we've brought on in the last number of years. We introduced a new incinerator in Eldorado, Arkansas back in the 2017 time frame. And that was the first new incinerator since the early '90s that came aboard. The Kimball facility that we opened about a year ago this time, almost exactly a year ago this time was really kind of a carbon copy of that facility, but also with some new kind of bells and whistles and new capabilities just based upon where the market was going or where we saw the market. So really happy about that facility.

We spent the last 12 months kind of in ramp-up mode. We're really happy with the throughput that we're seeing in that facility. That's probably exceeding our goals for the year. And we're kind of right on track for that $10 million of incremental EBITDA. As I think about 2026, the way our plans lay out for that is probably next year, maybe $25 million to $30 million of EBITDA, but we exit 2026 on that $40 million run rate, so that in '27, we're ready to deliver that. When I think about -- I think those are very fair, conservative kind of estimates. So I'm not sure there's a lot of downside to that other than complete kind of industrial recession meltdown type things, but certainly some upside.

If you look at some of the tailwinds, getting more kind of high haz waste through that system, which that facility is capable of, that would deliver upside. And then I'd say the other piece of the upside of this new facility that it's not super easy to precisely calculate is having another facility in our network that can handle very hazardous waste streams has really helped our network move waste around, maybe unclog some bottlenecks that we have and kind of save on transportation costs and shipping costs. And that number, again, certainly a benefit to Clean Harbors, a little bit difficult to measure, but it's great having another like high-powered facility in the network.

And so that's a good point you make. I just want to pick on that. How much of the incremental volumes that are flowing to this new plant are from the existing network versus coming from maybe they were going to another provider previously? Can you just help us conceptualize that?

Yes. Certainly, some of it were -- there were volumes that were going somewhere else before, and we're taking that in. But I would say before this facility was opened, certainly, the entire industry, there was a backup. And we even had to tell customers on certain occasions, hey, we were going to be a little late picking up waste or things like that. And so there was a lot of waste streams that kind of got kicked out of the incinerator network. They perhaps went to a different technology. But those are coming back now, and those will help kind of fill the facility along with some of the some of the tailwinds that we see.

And so you just brought Kimball online. Veolia also brought an incinerator online, I believe. Just -- what are you seeing in the marketplace right now? Any incinerator developments that you're tracking? And how do you see those additions impacting overall supply/demand?

Yes. In terms of our new facility, that's one I know of, we brought that online, as we've talked about. The Veolia facility, certainly, they've been very public about that. I'm not sure when it will start up yet. I'm not sure the exact date. I think it's in 2026 at some point. But in terms of the overall market, I still think there's a lot of -- we're seeing continued good demand. And so we believe that we'll be able to fill our facility. I think if you listen to public comments, not from ourselves or other waste companies or even companies that have incinerated, I think the belief is that the market tailwinds and things like that we'll be able to fill both facilities.

And so I think historically, you've operated in a mid- to high 80% utilization rate at the incinerator. Is that the right way to think about it on a go-forward basis?

I think that's fair, Adam. If you look at our most recent quarter in Q3 here and you look at utilization, excluding the new facility that's kind of in the ramp-up mode, we are operating in the low 90%, in fact. And so I think mid- to high 80s is where we've lived for the last several years here. But I do think PFAS being a catalyst, we'll look to operate maybe a bit higher than that because of some of those waste streams coming in. But high 80s, 90%, that's kind of, I think, a good way to think about it once we're all ramped up.

And the theme that you've spoken about for a while now in incineration is the captive incinerator opportunity. I think there's 41 active captive incinerators out there. Are you seeing these captives starting to divert more waste to CLH? Is there an opportunity in the near term for something that looked looks like what happened with 3M a few years ago?

Yes. So maybe just to level set, I see a lot of faces in the room and maybe just to give a little bit of background around the captives because I think sometimes in our -- in our meeting rooms, some people are more familiar to this topic. And I think it's an important one. But Adam, you mentioned today, there's 41 captive incinerators out in the marketplace. And for those that aren't familiar with the topic, when you think about the entire hazardous waste market that goes to incineration, about half of it is -- goes to commercial incinerators like ours, where we're the leader. We have about a 70% market share there with 10 of the 14 commercially licensed incinerators. So that's about 50% of the market, maybe 55%. And then the remaining hazardous waste that goes to an incinerator is done at these captive incinerators that are owned by companies that produce the waste.

The key difference is in those captive incinerators, those companies that operate them, they can only burn their waste. They're not licensed to take third-party waste. And so a few years ago, Adam alluded to our arrangement with 3M. 3M, I believe it was the largest captive incinerator in North America. And for a variety of reasons, they made the election to shut that plant down and move all of their waste streams to Clean Harbors. So a great arrangement for Clean Harbors. I think, a great arrangement for 3M as well. It allowed them to be able to close that facility and really focus on their core operations. So the whole captive story, I think it's one of the many tailwinds we have.

But when you look at, again, 41 captives being out there today, 20 years ago, there were maybe 100. So there's been a trend for these captive markets and these captive units to close down and move volumes into the commercial space. They do it to cut costs. They do it because they are incinerators, they can't handle maybe some of the waste streams that are being produced. And so we believe that will continue. A lot of those companies that operate these 41 captive incinerators are customers of ours today, and we keep close contact with them. And hey, just like we did with 3M, we talk to them about how we can save money, how we can handle their waste streams that maybe they can't. We can help them prevent them from having to pay additional capital on things to reinvest in those facilities as regulatory rules around emissions, in particular, become more stringent. And so really, it's a win-win for everybody.

So I believe, and I think we believe at Clean Harbors that, that trend will continue. Having 3M as an example of how that can be beneficial is great. But we believe that will continue. The timing of such because there is a lot that these companies need to consider before they close, the timing of which we'll see, but certainly a nice tailwind for us.

And let's just say in a scenario where you saw a wave of captive incinerators close, what does that look like for Clean Harbors? Does that mean you're more selective on the streams of waste that come in your existing facility? Does that mean there's potential for greenfield opportunity at for incinerators in years to come?

Yes, a couple of things. I think it looks -- it would look a lot like -- when 3M came aboard and we received those incremental volumes, we didn't have Kimball open yet. And certainly, there were some other lower value waste streams that could be handled elsewhere that no longer came into incineration. And it caused kind of the value of the waste streams that were coming into our incinerators to increase, and that was one of the drivers of the margin increase that we talked about at the beginning of the conversation.

So again, I think it would depend on the waste streams coming in through those captives. I'd like to think it would certainly upgrade the value of the waste streams coming into our network. I think it would also be -- and we have plans long term for this already, but it would be a catalyst for us to do some internal capital projects that can increase the throughput through some existing facilities of ours. And then ultimately, is there another site where we could do another new incinerator if the demand and the market support it? Absolutely.

And to wrap up the incinerator part of the discussion, I don't think we've talked about pricing directly, but it sounds like supply/demand remains tight, expecting incremental volumes. How are you thinking about pricing over the next 3 to 5 years?

Yes. I mean, I think pricing will continue to be a good story for us. We deliver great service to our customer. And ultimately, that's what they pay for, that in our capabilities. So when you think about our pricing strategies, it's predicated on that. But certainly, we look at inflation. We try to price above inflation to cover those costs, and we'll continue to do that. But incorporated in our price increases will be customer service and looking to deliver as much value as we can across our more than 50 lines of business to that customer so that they see that, too.

So let's shift gears, talk about another large piece of your Environmental Services business, which is Industrial Services, where you're providing cleaning, maintenance and turnaround services. So I think roughly maybe 50% is recurring maintenance and a large balance turnarounds. But help us understand the mix there. And then I think recently, you've seen some turnaround work slow as refiners have deferred shutdowns. Just talk about the dynamics going forward.

Yes. Yes. So our Industrial Services business is about $1.3 billion. Many of the large customers that we provide these services to on the Industrial Services side of the business, we also handle their hazardous waste on the technical services side of the business that we just talked about. But when you break down the nature of those services, Adam, I'd say -- above 20% is probably turnaround-related services. So that's when those sites are in turnaround, they're doing their maintenance, which is typically at least once for many factories or many plants twice a year. Those are those turnaround services that we're doing there. About 30% of the revenues are what we call specialty services. So those are maintenance services, but of a higher degree, could be done during a turnaround, but maybe not. And then about 50% of the business is day-to-day maintenance that these facilities have to do that we can help them with.

One of the unique things about Clean Harbors is much of that revenue is supported by insight teams. And so what that means is these are Clean Harbors employees that are out at these locations each and every day. They share a lunchroom. They get to know the employees of the customer, and we're helping them kind of manage their day-to-day maintenance of the facilities. When waste comes out of that process on a daily basis, they'll handle that and will turn it over to our tech services group. But these insight services, I'd like to emphasize that these are important because they're the eyes and the ears of Clean Harbors on site every day looking for opportunities here.

So a little bit slower this year in that business, largely due to the turnarounds and the scopes of turnarounds that we're seeing at some of the re-refinery customers and a little bit of the chemical customers because of the price pressures or cost pressures, I should say, that they're feeling. But certainly, a business that ultimately, these turnarounds, these customers need to do them to keep these multimillion dollar plants safe and operating effectively, and we expect to see that turn here in the future.

And how are you thinking about the timing of that cadence of deferred large maintenance projects returning? What are you hearing from customers?

Yes. I mean, I think things will improve in 2026. I'm cautious to say that, hey, they're going to be going through the full spectrum of the turnaround services that are required. But I would analogize to past cycles that we've seen where from time to time, turnaround services and the scope of those turnaround services are delayed. But ultimately, as I mentioned a moment ago, they have to be done. So is that in 2026, we're hopeful. But if past cycles and past patterns prevail, which we believe they will, we'll see that business return.

And so it sounds like in the meantime, you've done some nice things on labor management, reducing labor as a percent of revenue over time, it sounds like it's coming down. So can you just talk about some of those initiatives? And to what extent can this business emerge with higher mid-cycle margins?

Yes. I describe them as a lot of self-help type things. So certainly, in Q3 here, we focused on -- or we discussed some of the labor management and internalization of work and equipment rentals and things like that, that we've done across Industrial Services, but also really across the entire business, but focused on Industrial Services in some ways. So when this business returns, like we saw in fiscal '22 and '23 when this business had great years because the scope of turnarounds increased, I think we'll be in that much better position to continue to drive margins in that business because of these self-help activities.

And then just to round out the discussion here, the industry has done a really good job of pricing in Industrial Services to achieve an acceptable return in recent years. But historically, we had talked about this thing as maybe a more competitive part of the business. So has that dynamic changed? Are you starting to see any pockets where you're hitting price elasticity? Or do you expect pricing to outpace inflation here on a sustainable basis?

I mean, certainly, when you're talking about the types of services we provide here, kind of more labor and equipment, the pricing power is probably not as great as tech services. But certainly, as long as we continue to deliver good service, the pricing will be there above inflation. And again, these are customers that we provide a wide variety of business to, including some of the disposal services we talked about earlier, and we can leverage some of the pricing and the full suite of services we deliver to them in regards to that.

So I want to talk about the PFAS opportunity. You alluded to it earlier. You have sort of a total PFAS solution, which I'd love to hear more about. And I think PFAS revenues are around $100 million today, growing 20%. So as a starting point, what does that look like? How much is disposal of revenues versus cleanup versus water treatment?

Yes. I'm going to turn it over to Jim. He -- this is a hot topic for Clean Harbors. I'm sure we're all interested and Jim talks to many of you and hundreds of people a week. So...

Yes. PFAS is a hot topic, one of my favorite topics. It's been years in the making. So it's actually great to see us. It's 2% of our revenue. So still a small part of the story, but a real growing part of the story, up 20%, 25%, as you were saying. And it's hard to give an exact number because we do a lot of jobs that might have PFAS as a component of something we're cleaning up. So we tend to give a range, $100 million to $120 million this year.

In terms of the breakdown of it, maybe 1/3 of that is kind of water filtration and maybe 1/3 of that is going out in our field service teams doing AFFF change-outs in fire suppression systems or responding to fires that have happened or other kinds of cleanups or again, doing spill response where PFAS may be part of something that came from a ruptured tank. And then there's a disposal element to it and really probably a small component of that is some of the sampling and analytics work that we're doing as part of a total solution because basically, we're going to customers, many of whom really don't know what to do yet with PFAS and saying, hey, we can sample your soil and water. We can filter that water for you. We just announced a contract this week, which maybe you're going to ask about, Adam.

But one of our largest installations to date has been out in Pearl Harbor at the naval base, and that was something that we kind of fell into through a jet fuel spill that then turned into, hey, this water is really heavily contaminated with PFAS. And so we grew our system there, and they love the installation they have. They love the system we had. So we're doubling the size of that. And that was part of the announcement that we announced this week. We're going to be there for at least the next 3 years, generating over that time period, $110 million of revenue on the water side. And I think that's an emerging opportunity for us. I think if we were sitting up here 5 years ago, we would have said drinking water, not really historically something Clean Harbors has played in. But we've done such a terrific job with this initial installation that the military actually has taken us to other bases and other locations.

And then that's grown into some municipal water wins. So we're never going to be probably #1 in that space. There's been folks that have been doing that for decades, but we're getting a piece of that market, and it's that part of the PFAS ecosystem is a multibillion-dollar opportunity. And then obviously, the holy grail for us is going to be destruction. And we would need some EPA standards around that because the current EPA has really only gotten to a drinking water standard, which is a very restrictive standard. So we're still waiting on the other side. There are a couple of anecdotes around that, that I think are worth mentioning is one, both our co-CEOs hosted Lee Zeldin, Commissioner Lee Zeldin -- Administrator Lee Zeldin down at our Deer Park incinerator. He spent a day with them there. It was a really great opportunity for us to talk about all the things that Clean Harbors does, but have him tour that facility and really talk about PFAS destruction.

And the study that we had done with the EPA, which was to prove out that we can safely destroy PFAS has sort of been held up in their public affairs department and maybe some of that was the [indiscernible] of people or changing of jobs. But probably not a coincidence that the week after that Lee Zeldin visit, that study hit the tape and the EPA put that out, and that's generated a lot of customer interest. And then more recently, Eric Gerstenberg appeared before the U.S. Senate 2 weeks ago as kind of the expert on PFAS disposal as -- and a couple of other folks on that panel. And it was a really interesting kind of 1.5 hours. And I think if you watch the whole thing, the key takeaway is that thresholds are needing, regulatory framework is needed, and I think that was echoed by a number of the senators. So great opportunity, good visibility for us.

And the next catalyst would be just worth mentioning is the current National Defense Authorization Act, which is currently in committee with the House and Senate version getting married before it goes to President Trump's desk. That has an amendment that will lift a moratorium that's been in place for the last 3 years for incinerating DoD way. So that's not going to change our fortunes overnight, but that's going to open a huge sales channel for us if we can go and go to those 600 or 700 contaminated military locations and say, we can take that from you and we can safely destroy it.

Terrific. I think you answered all my questions on PFAS, Jim.

Well, that's the advantage of you being nice enough to send them long in advance. I just tackle them all at once.

I think it's just a great long-term opportunity for Clean Harbors. And I don't think there's any company that's better situated to help solve this problem.

Super. So I want to shift the discussion to M&A and capital allocation. I think over the past 5 years, you've allocated almost $2 billion toward M&A and at 9 to 11x type multiples on an EBITDA basis and then you take post synergy maybe 2 to 4 turns off that. Talk to us about the leverage that you're able to pull from a synergy, what's sort of your value-add algorithm on M&A?

Yes. I mean, certainly, any time we evaluate a potential acquisition, synergies is obviously a huge piece of that. When you look at the value that we've been able to bring to some of these targets and synergize that number down, obviously, there's always kind of the back-office support and things like that as a large public company, we have those types of things in place. But some of the other larger buckets -- our large labor force when I think about the HEPACO deal, we've been able to internalize a ton of that field services work where they used a lot of subcontractors. We've been able to internalize that, do a lot of things for our employees that retained them and really saved a lot of money there in terms of synergies and drive margins.

Transportation side of things, again, a very large transportation network that we can bring a lot of value to. Obviously, waste disposal. To the extent that any of these acquisitions, we're spending money on waste and hazardous waste disposal, we can help there as well. So I guess the last one I'd mention, and it's an important one is just from a technology perspective, a lot of these companies that we bought in history, they may have multiple underlying operating systems that they utilize to get them information and to operate their business. And when they come into the -- into Clean Harbors, we apply our proprietary operating systems onto these targets. It has many, many benefits, but the benefit of being on one common platform for information, both from an operating perspective as well as a financial perspective, really brings a lot of value. And again, our operating system kind of homegrown, proprietary, built over the course of the last 40 years, we feel like we've solved all of our operating problems or many of them through the use of this technology. And so that brings a lot of value to the targets that we acquire.

And so it's been several quarters since you the allocated capital toward M&A and the recent focus has been on high-return organic investments while you maintain a disciplined approach towards M&A. But just talk about that dynamic a little bit. Does that reflect maybe higher valuations for prospective M&A or simply more attractive internal opportunities?

Yes. It's a combination of both. Certainly, kind of valuations here in our space have gone higher. That doesn't mean that we've been boxed out of -- out of deals, but we have seen some deals go to levels where from a financial perspective, when you weigh the opportunities and probably more importantly, the risks associated with the deal, it's gotten to the point where we've not won or we've decided to step back, right? And we are always going to remain in -- financially disciplined. I think that's a core tenet at Clean Harbors. We don't want to do acquisitions that take on risks either operationally or financially that we don't find acceptable.

So in the meantime, since we did HEPACO and Noble a few years ago, certainly, we've allocated capital internally with some nice accretive projects, finishing up Kimball, which we spent a long time talking about a few moments ago, developing some regional hubs. And these are $20 million capital ideas, but they're bringing all of our business units and all of our lines of business together within a region, sharing assets, sharing labor, bringing on some more kind of waste transportation type activities that are advantageous. So allocating capital internally.

And then lastly, continuing to deliver value to our shareholders through share buybacks. That's been something we've done. The level of share buybacks here in 2025 is a little bit more than we've done in the past because we remain financially disciplined on acquisitions while still allocating money internally on capital projects, but generating a lot of cash flow and looking for opportunities to best deploy that and turning -- including kind of returning value to shareholders through buybacks.

And on your latest earnings call, I think you talked about a path to potentially investing over $500 million in internal organic investment initiatives and that includes a $200 million plus investment in a processing plant that you can speak more to. But what would the rest of that investment look like?

Yes. We talked about $500 million. We talked about the $200 million that is a required investment kind of an SKSS side of the house. But the remaining investments are all kind of on the Environmental Services segment focused. They range from some of the things we're doing around the regional hubs that I just mentioned about. There's a couple of opportunities remaining there. They're also increasing throughput. I mentioned through some of our existing incinerators, there's some opportunities, we believe, to increase throughput and capability at some of our existing sites. And so those are very accretive ideas. And then there's things that we can do with some of our equipment and rolling stock to continue to kind of build internally.

We have a number of refurbishment shops where we're actually building our own vehicles that avoid supply chain hangups, but also allow us to build things customized to our needs. So looking to continue to do some more of that to reduce outside rentals and operating leases and things like that. But we're always looking for things to continue to smooth out the movement of waste, give us more capabilities, allow us to reduce our handling and transportation costs, and we'll do all things like that. But most of that incremental investment or virtually all of it aside from what we talked about relative to SKSS was on the ES side of the house.

And while we're on the topic of M&A, there's been continued consolidation in the industry, recently some larger consolidation. How do you see just the competitive landscape broadly shaping up as consolidation continues to take hold?

Yes. Certainly, it's a competitive market. We are able to hold kind of the #1 position in many of the lines of business that we operate in. So that's certainly good for us. But I think with consolidation, it forces us to get better, which has been a great thing. It also supports pricing initiatives and things like that, that can be helpful. But in terms of competition, certainly, competition has always been there and increases. But I think from our perspective, we continue to get better. We continue to provide high levels of service to our customers, and we welcome the competition and believe it makes us better, too.

And so I want to sort of circle back to the Environmental Services business because there was one piece that we didn't -- well, there's a couple of pieces we didn't cover, but one notable piece is the Safety-Kleen Environmental segment, and that's been sort of, I think, an underappreciated part of the business. It's growing high single to low double digits since you consolidated into that segment. What's changed there? And how should we think about that algorithm going forward?

Yes. Maybe I'll start on that one. Our Safety-Kleen branch business, I always -- when people have the first call with me and they say, what's one thing people don't understand about Clean Harbors? And I always say the value of our Safety-Kleen branch business is wildly underappreciated because it feeds all of our facilities. And so yes, those permitted assets are great. They're scarce. They have great pricing power. But the secret sauce with Clean Harbors, and we've seen it in this last year or 2 or 3, even when chemicals and some of our large producers of hazardous waste have been in the doldrums, and you've seen ISM has been negative most of the last 3 years.

One of the ways we've still grown as a company has been through our Safety-Kleen branch business because it's the one area where we really do look like solid waste. We go into these local markets, these box trucks go out. It's an awesome business model. It's usually on a subscription basis, and we're going out there every 8 or 10 or 12 weeks. And we're forcing those drivers to allot a certain amount of their time to go prospecting, and we've been densifying those routes and making them more efficient and really just creating an incredible amount of shareholder value.

And so you look back in our disaggregation table, since we split that business out as a separate item, you could see for the last 5 years, I think the lowest growth quarter has been 5% or 6%, and there's been a lot of 7s and 8s and 9s and 10s in there. And we've just really continued to do that because it's such a terrific model. And only 30% of the waste that gets picked up by that business goes to incineration. So everyone thinks of its linkage to that, but it really -- 70% of it is going to fuels blending and landfills and solvent recycling and all the cool and neat things we do with recycling and disposing of waste. So it's really been kind of a differentiator for us. It's a stabilizing force for us, and it's a real growth machine for us.

Okay. I'm seeing that we have just over a minute left to fit in 1 or 2 Safety-Kleen segment questions. You've been contending with a softer base oil environment, but you've continued to execute levers in your control, namely increasing charge-for-oil collection pricing. So just talk about where base oil sit today. Are there further charge-for-oil actions that you can take for customers? Or should we expect the current spread to hold? And then how do you just think about this segment over the next cycle as you continue to pull on those levers, whether it's the Group III initiative, et cetera?

Yes. So I'll take this one. You mentioned kind of the spread a moment ago, Adam, and that's the key to this business. And we've done a great job in the last year in an environment where base oil pricing continues to weaken to change the upfront costs and how we acquire the used motor oil feedstock that we use and re-refine into that base oil product. We have -- we're well into a charge-for-oil position now with some of our -- or virtually all of our customers. And it really truly is a service. And I'll go back to some comments that I mentioned a moment ago where we've continued to deliver high levels of service to those customers that has allowed us to change to a truck oil phenomenon, and we've had to do it to offset base oil pricing. So we'll continue to pull that lever. That's the strongest and biggest lever that we have, but we'll also see growth opportunities in the business.

So you mentioned kind of more Group III opportunities. We'll strive to do that. There's other strategic arrangements we've gotten into with folks to partner with them and look to drive continued sales on the blended side, and we'll look to continue to distribute and sell our blended products internally to many of the SK branch customers that Jim and you spoke about a moment ago. So really proud of what we've done in that business, really look to stabilize it and have done so this year. But the environmental service side of the business is where there's a greater growth algorithm.

Terrific. Well, Eric, Jim, thanks so much for joining us. Appreciate the discussion.

Great. Thank you.

Thank you.

Greetings, and welcome to the Clean Harbors Third Quarter 2025 Financial Results Conference Call. [Operator Instructions]. 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 Harbors believes that such information provides an additional measurement and consistent historical comparison 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. As always, let me start with our safety results.

Through September 30, we were at a TRIR of 0.49 putting us on a track record for another record year. We are extremely proud of that performance. 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 Slide 3. Our Q3 performance reflected year-on-year growth from an increase in overall waste volumes into our network. Pricing gains and increased productivity even in an environment where soft conditions resulting from macroeconomic factors have impacted some customers. Our ES segment grew on strength in Technical Services and SK branch. Our Safety-Kleen Sustainable Solutions segment performed in line with expectations, mainly due to our charge-for-oil program and product mix.

Driving margin growth continues to be a focus for us as we were pleased to see our consolidated adjusted EBITDA margin increased by 100 basis points from 1 year ago to 20.7%, demonstrating the effectiveness of our pricing, the leverage in our network of permanent facilities and cost saving strategies.

Within all of the underlying ES businesses, we drove pricing gains and improved productivity while lowering costs driving better margin contributions. Corporate segment costs were up from 1 year primarily due to higher insurance expenses and health care increases, offsetting partially by cost-cutting actions. Overall, Q3 results fell slightly short of our expectations due primarily to slowness in Field Services and Industrial Services, combined with some higher-than-anticipated employee healthcare costs. We remain optimistic with the continued growth in momentum in our waste collection and disposal assets. 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 4. 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 drove our revenue increase as that more than offset the slowdown in Industrial and Field Services.

Looking at revenue by the segment components. Technical Services lead this quarter with 12% growth as demand was steady. Incineration Utilization remained high, and our Landfill volumes were up 40% from 1 year ago. Incineration utilization was 92% versus 89% in the same period of 2024. For comparison purposes, our utilization excludes the new unit in Kimball as we continue to ramp up. With Kimball included, our utilization rate was still high at 88%. As we've seen in the past several quarters, incineration demand has remained high due to the diversity of our end markets as well as projects underpinning our growth. Our sales teams have done an excellent job winning volumes in an environment where some of our customers have been impacted 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-Kleen Environmental Services rose 8% through a combination of pricing gains and growth in our core service offerings. The number of parts washer 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 5 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 and Refining verticals, limit their spending on turnarounds as they remain under significant cost pressure. As a result, revenue was down 4% from 1 year ago.

In light of these market conditions, we focused on cost management, including workforce and equipment utilization. While we are hopeful that maintenance deferrals from IS customers we've seen for the past few years improves, we do not expect any meaningful recovery in revenue opportunities for Chemical and Refining customers before the spring turnaround season. Based on our service platform and extensive lines of business we provide, we are focused on growing our wallet share with these customers.

Turning to Slide 5. We will highlight our recent successful PFAS Incineration Study, done in partnership with the EPA as well as the DoD. This study, which we completed in late 2024 in Utah facility was a milestone achievement for the company. The study published by the EPA in September, provided the type of scientific data sought by customers and regulators. The study was conducted using the EPA's most recent and rigorous emission standards. Study confirmed what we already know. Our RCRA-permitted high-temperature incinerators, cannot only safely destroy these forever chemicals in various forms, but can do so at a cost-effective commercial scale.

In addition, our total PFAS Solution has continued to gain traction in the marketplace with offerings ranging from lab analytics to water filtration to site remediation to disposal. We are in active discussions with customers on projects across many of these fronts and expect PFAS to generate $100 million to $120 million of revenue this year, up 20% to 25% from a year ago. Moreover, based on our pipeline and our momentum in the marketplace, we expect PFAS related sales to further accelerate in the years ahead.

With that, let me turn things over to Mike to discuss SKSS and capital allocation. Mike?

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 value from other initiatives. During the quarter, we dramatically lowered our waste-to-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 54 million gallons of waste oil, which is consistent with the second quarter. On the top line, our revenue decrease as expected. In terms of profitability, our adjusted EBITDA was essentially unchanged. The result was a 100 basis point margin improvement, largely [indiscernible] 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 III production and those gallons carry a premium to our traditional Group II volumes, and we remain on track to add 7 million gallons of Group III this year.

Turning to Slide 7. Today, we announced plans to construct a state-of-the-art processing plant that we refer to internally as the SDA Unit. By using an industry-proven Solvent De-Asphalting process and combining it with our existing hydro-treating capabilities, 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. 600 Neutral is a high purity base oil that is typically used in heavy-duty industrial applications due to its durability and high-performance characteristics. Total spend on the SDA unit is expected to be $210 million 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 million to $40 million, a 6- or 7-year payback on the investment once completed. Such a return will arrive at what we've seen from similar size [indiscernible] projects and represents an additional growth opportunity for SKSS. Turning to capital allocation on Slide 8.

We remain 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 bolt-on transactions and larger acquisitions that will provide leverageable assets with high synergy potential that support our market position in a particular business or geography. We believe that in our space is best to be patient and prudent and pursuing the right transactions. We've also been evaluating a series of internal investments, including today's announcement of the SDA Unit.

Including that facility, we currently see a path 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 expansion and additional incineration capacity. We look forward to sharing more of these plans with you in the coming quarters as plans for individual projects get finalized.

We also view share repurchases as an attractive capital allocation opportunity to generate strong shareholder returns as demonstrated by our $50 million of repurchases in Q3. Looking ahead, while we believe that the challenges we faced in Q3 are temporary and market-driven with year-over-year growth illustrating our resiliency, we expect our incinerator to run strong from year-end and waste projects to continue to feed our entire disposal and recycling network.

Tariff-related uncertainty and other macro factors in North America and the economy have ripple effects through some of our customers over the past 2 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 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 refineries will loosen in the coming quarters and [indiscernible] conditions improve.

Overall, our project pipeline remains substantial with growing PFAS opportunities expected to contribute meaningfully to future activity. We also were excited about the steady ramp-up in production and mix in our new Kimball incinerator and the work toward full capacity.

For SKSS, we believe we've stabilized the business with our efforts around CFO, partnership and Group III production and are looking forward to the new SDA minute. We expect to achieve our profitability targets for the business in 2025. And with that, let me turn it over to our CFO, Eric Dugas.

Thank you, Mike, and good morning, everyone. Turning to our Q3 results and income statement on Slide 10. While our quarterly performance came in below our expectations due to the factors Eric outlined, primarily a shortfall in Industrial and Field Services plus elevated health care costs, I want to highlight the underlying strength in our business.

Total revenue increased to $1.55 billion in the quarter, with Environment Services growth stemming from a wide range of service offerings and diversified customer base. Adjusted EBITDA increased 6% to $320 million, demonstrating our ability to drive profitable growth through a steadfast commitment to margin expansion. Our consolidated Q3 adjusted EBITDA margin expanded to 20.7%, led by a 120 basis point improvement in Environmental Services. This 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. SKSS delivered more than $40 million in EBITDA, its strongest quarter of the year, demonstrating operational resilience in a soft base oil market.

SG&A expense as a percentage of revenue increased from a year ago to 12.2%, reflecting higher healthcare costs, professional fees and compensation. We are maintaining our full year SG&A guidance as a percentage of revenue in low to mid-12% range. Depreciation 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 million to $455 million, primarily due to the strong landfill performance.

Income from operations in Q3 was $193 million, flat versus the prior year as our 6% adjusted EBITDA growth was offset by higher depreciation and amortization, as I just mentioned. Net income grew modestly year-over-year, delivering earnings per share of $2.21.

Turning to the balance sheet on Slide 11. The continued focus on cash flow generation and a record level of free cash flows in the quarter. 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. Our recent refinancing was executed at favorable terms as we replaced our 2027 senior notes with 2033 senior notes and replaced our term loan at a more favorable rate of SOFR plus 150 basis points. This refinancing provides us with more surety, extends the maturity of the debt, increases our flexibility and demonstrates market confidence in our credit profile, with net debt-to-EBITDA below 2x and a blended interest rate of 5.3% to maintain a conservative capital structure.

Our credit profile remains strong just 1 notch below investment grade on our overall debt rating, while our secured debt carries an investment-grade rating, reflecting the quality of our asset base, cash flow stability and overall capital policies.

Turning to cash flows on Slide 12. Our Q3 cash flow performance was exceptional operating cash flow of $302 million and a Q3 record adjusted free cash flow of $231 million which was up $86 million year-on-year, underscores the generative nature of our -- the cash-generative nature of our business model. CapEx net of disposals of $83 million was down from the prior year, reflecting disciplined capital allocation. As previously highlighted, we began construction of our high-return Re-refinery project investing more than $10 million in Q3 to launch this exciting initiative that we expect to deliver excellent shareholder value.

We also continued advancing our strategic hub facility in Phoenix, further strengthening our network capabilities. For 2025, excluding the SDA Unit, the [indiscernible] project -- we now expect our net CapEx to be in the range of $340 million to $370 million. This is slightly down from our previous 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.

Turning to our guidance on Slide 13. Based on Q3 results and current market conditions for both of our operating segments. We are revising our 2025 adjusted EBITDA guidance to a range of $1.155 billion to $1.175 billion or a midpoint of $1.165 billion. This adjustment reflects the Q3 EBITDA results factored into our annual guide. Importantly, we anticipate any [indiscernible] for carryover effects in the Field Services or Industrial Services will be offset by our facilities performance, project pipeline and PFAS opportunities. Our long-term trends in PFAS remediation and re-shoring create substantial upside potential with recent developments like our EPA Incineration study further validating our strategic positioning. For the full year 2025, our revised adjusted EBITDA guidance will translate to our reporting segments as follows.

At our guidance midpoint, we now expect 2025 adjusted EBITDA in Environmental Services to increase by more than 5% from 2024. While recent economic turbulence has impacted some aspects of our business, we're optimistic about our future and ability to navigate the current landscape. SKSS 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 operational improvements, CFO strategy, and initiatives that Mike outlined have established a stable foundation for this business.

Within Corporate, at the midpoint of our guide, we expect negative adjusted EBITDA to now be up 3% to 5% compared to 2024, driven by growth-related expenses, higher wages and benefits and rising insurance costs. We continue implementing multiple cost savings initiatives to partially offset these increases. We are raising our full year adjusted free cash flow guidance to a midpoint of $475 million, based on year-to-date performance and favorable provisions passed in the U.S. Tax Act this summer. This represents more than 30% growth from 2024, underscoring our focus and ability to convert earnings into substantial free cash flow returns.

While Q3 presented near-term challenges, our highest-margin businesses continue to grow and demonstrate competitive strength. Our incinerators, landfills and other permanent locations drove our profitable growth 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, we remain confident in our prospects despite the absence of medium- and large- event work in the third quarter. SKSS 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 places 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.

[Operator Instructions] Our first question comes from the line of Tyler Brown with Raymond James.

So 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 a 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 healthcare issue? You brought it up a few times. Was that onetime? Or is that a go-forward step-up in cost?

Sure, Tyler. So in terms of the total takedown of $15 million, a lot of that is reflected in our Q3 results. Industrial Services being the most predominant piece of that. We estimate maybe $7 million Field Services, 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 healthcare in the Environmental Services segment is about $4 million and probably about $6 million overall to the entire company. So 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, the tech services and SKE and think those will perform quite strong kind of here into Q4, and going into 2026.

I guess the last point on health care, Tyler, 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 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 costs than we would have liked here in Q3.

Tyler, this is Mike. The one thing that I'd add to what Eric said, we did have a fair amount of high-cost claims. That's much higher than let's say, averages for the past 2 or 3 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 in 2026.

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?

Yes, Tyler, I'll start. Certainly not expecting a real rebound of Industrial turnarounds until the spring. However, we're going to continue to grow our EBITDA across our Waste Collection businesses and our Environmental Services businesses as well. So we're looking at next year, preliminary, we're still of a [indiscernible] process to go through. But 5% EBITDA growth. I mean we're really still targeting that. We think we can do that based on the demonstration of cost-cutting initiatives and volume and pricing growth in those Waste businesses.

Okay. That's extremely helpful. And then I do just want to come back to capital allocation. Mike and -- 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?

Tyler, the answer to that question is yes. So we are looking at larger deals. We're looking at smaller deals. I think that -- we obviously talk about the SDA and have you go into that and maybe other projects we're thinking about. But in the interim, 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 try to be very thoughtful about it and make sure we're getting a good return on our shareholders' investment. And I think there's plenty of things out there, both large sizes, publicly available and smaller things that are out there.

So we remain very active. In the interim, we did buy back some shares. I don't think that it has changed in trends. That's more that, we saw opportunities there to take advantage of some market dislocation and we took advantage of that. And we bought back over $115 million worth this shares. And so I think that's a good return on our shareholders. 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.

Any one follow-up, too, Tyler. If you think about the 5% that Eric mentioned, obviously, budget processes is in that area code. It's probably -- most of that's going to be ES, with a little bit in SK and a little bad guy in corporate. I think as I think about the [indiscernible] to that. .

Our next question comes from the line of Noah Kaye with Oppenheimer.

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 we talked about, Eric, 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 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 path-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?

Sure, Noah. So this is Eric Dugas. I think you're absolutely right. The free cash flow generation has been fabulous this year, a lot of initiatives on that front. 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'll be pluses and minuses to that along the way for -- the minuses would be these accretive capital investments that we mentioned that will be adjusted out of that, and we'll call that out and explain those clearly. But those are really growth projects that we see, and that will be a detriment to the 30%. But normal bailie 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 of cash collections, managing our spend and you really see it in the margin improvement. And that's really helpful trying to get to that point and hopefully beat that over the next few years.

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

Yes, you got it, Noah.

Okay. And then, I guess, just to double-click on the specific investment. I think just help us understand some of the key assumptions you made in underwriting this. I mean you talked about the 6- to 7-year payback. Obviously, we've seen the value of base oils fluctuate a lot over the company's history. What is it sort of dependent on to hit those target returns from a commodity value, if at all?

Yes. No, this is Eric. I'll start. It's really a great investment for us. It's a bolt-on technology out of our Chicago refinery and it's upgrading a product that we already produce called VTAE Vacuum Tower Asphalt Extender and it's moving it up the value chain, by implementing this technology and taking over 30 million gallons of what we already generate and sell and creating it at a better market value. There is some -- certainly some fluctuations in the price of that 600N product. It's not as -- it doesn't fluctuate as much as base oil. It's used in heavy-duty applications. So it's a more stable price look at when we sell that product. So we're excited about that.

Overall, though, it's just a straight baseline upgrade of that 30 million gallons into a new arena, bringing that up the value chain, proven technology, with a hydro-treater backdown on the back end. And so we're excited about that incremental $30 million to $40 million of EBITDA once we start up in 2028.

Noah, one thing I'd add to that is that, as Eric said, we're using kind of our -- the byproduct or 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 we're not -- this won't fill that, that 30 million gallons won't fill the new product. We'll have an opportunity to grow 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, it came up with a $30 million -- $30 million to $40 million that we spoke of them in the line, I think there's plenty of upside to that model.

I think that we -- I thought Eric and I went through the analysis with the team, were very reasonable in our assumptions as far as how we build it when we think about the price of VTAE, 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 the plant. We thought through that. We've had many, many meetings on this with the team and with the Board to ensure that we're doing this in a thoughtful way that. So we continue to do what we've done in every large project on time, on budget hit the numbers we say we're going to hit. Simple as that.

If I could sneak one more in. I think you were clear now on sort of the delta versus expectations in the Industrial and Field Services. I guess just from a forecasting perspective, I know usually, IS tends to gather steam into September, and then October is kind of the big month. So with that particular line of business, was it just the case that these deferrals really started to manifest late in the quarter and continued through October here, and that's what we're seeing. And is there some way to think about normal seasonality in the future perhaps being different at all than what we've seen in the past?

Yes. No, I'll begin. This is Eric. When you look at kind of what occurred in the quarter, our turnarounds have been the number of count of turnarounds has been pretty stable. There's been some pushes. But overall, when we get into working for the turnarounds at our customer sites. The scope of the turnaround ends up being a little bit less than what we originally quoted or scoped with that customer. They really wanted to get the units cleaned and back online as quickly as possible.

As we proceed into the fourth quarter, we took that into our guidance for the fourth quarter. We're still having turnarounds here as you mentioned, as we flow into October here, and that's solid. But we're -- we really didn't -- we [indiscernible] back a little bit of what we expected based on the third quarter results. And we truly expect as things continue to stabilize, as we get into 2026, we're not losing turnarounds to any competition. We're performing all the turnarounds, and we're going to -- we expect it to have a little bit better growth path as the economy recovers a little bit and particularly in the Chemical and Refinery sector.

I think just to add one thing to what Eric said and one thing that we can see in our P&Ls and 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, Noah, I can see much better labor management. So I can see labor as a percentage of revenue in a better spot. I can see over time coming down as a percentage of revenue. I can see us using less subcontractors, internally taking more work. So despite the financial results here in Q3 and what we [indiscernible] 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 benefit to that hopefully next year, but definitely in coming years.

Our next question comes from the line of Jim Schumm with TD Cowen.

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? What's the total demand? Just how should we think about this? Like what's the total demand this year? What was it 5 years ago? Is demand expected to grow, why? What's the end market? Just help us understand. This is a fairly big investment for you guys. So I just want to understand that this market a little better.

We have an hour on the call, so we're not going take it now as I try to explain that 600N base market. But I will tell you -- I will tell you that it is used primarily in industrial applications, but tend to be a little more resilient and gear oils, heavy-duty diesel engines, hydraulic oils. It's not as sensitive to electrification as passenger car engine oil would have and that we've had a lot of customers express interest in this high value, buying as high as 600N oil, and we've kind of worked out. We've got even in samples and 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, we'd be a very, very small player in a very large market. It tends to trend a little bit with Group II base oil, which has been down over the past couple of 3 years, but at a much higher premium. And it's been a consistent dollar premium to what we're doing in the Group II base well.

In most of the country, I have to import 600N today, including from Korea and from other placaes. And so it's hard to kind of put a thing on what's it going to be 3 years from now. We're assuming that the trend we see is a decrease -- we're assuming decreases over the modeling period. We're not expecting any plan to get turned out until 2028. So we do have some time there. But I do think that we've cut this -- We've cut this seven different way. So let's assume that base oil as group of 600N pricing is down. I think there's other levers out there, including taking additional VTAE from other customers to help offset that.

I think the model that we put forth, a very balanced model. Hard to predict what happens in the base oil. Hard to predict what happens in the 600N oil, but we think we have enough levers in the afore model. But even if 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, we consistently put together a large-scale construction projects that are on time and on budget that hit or exceed the EBITDA numbers that we have quoted. I think this is no different.

Mike, I just wanted to clarify, it sounded like were you saying the consumption you're expecting the consumption to decrease over the next couple of years of this oil?

No, no. It is more about we have assumed pricing goes down a little bit in the modeling period, not the demand -- not the demand per se. At the point, I think that maybe I misspoke is that when we produce this 600N oil, we'll still be a very small player in a very big 600N market, I guess what I'm trying to say.

Okay. All right. maybe switching over to the SKSS guidance. I kind of -- my recollection was just that it was sort of the $140 million was the number. You guys just referenced a midpoint. What is -- just so everybody is clear, like what is the range for SKSS this year? So -- and then what's the confidence level in hitting that $140 million midpoint

Jim, Eric here. I'd say that as we sit here today, we're very confident in that $140 million 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 of service we continue to provide and the fact that we [indiscernible] have it lost customers, mean that really is the area that the team is 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 million is a new watermark, and we grow from there.

Our next question comes from the line of David Manthey with Baird.

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 gave the data specifically in the 10-Q later today, but could you talk about specific growth rates for Industrial Services, Field Services, SKE and Tech Services?

Sure. Dave, it's Eric. I'll take that, and I'm sure the guys will add on. In terms of incineration pricing, there's pockets, but over the entire population, we're looking at mid-single digits again, I think pretty consistent with prior quarters. In terms of the different sub business lines or business units underneath ES, you'll find our Tech Services business, really great revenue growth there, some nice volumes, good pricing, but some of our -- as we alluded to in the prepared comments, kind of waste remediation projects, those types of things really saw a really strong quarter. So you're looking at double-digit growth there.

Safety-Kleen 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. 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, over 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, about, I think, a 3% or 4% decline kind of year-on-year there largely related to the turnaround services.

That's great. 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 since you put out the Vision 2027 goals, we're a little bit past halftime here. I think hydro-chem was already in that 2022 starting point, and you've added Thompson and HEPACO 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?

Yes, Dave. This is Mike. I'm sure Eric and Eric have some thoughts on this as well. But the SDA Unit has no reflection, no reflection on our M&A appetite. That was -- 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. It's a material asset that we need to make sure that our investors understand 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 what where we go next with this, things like adding more hubs or making some investments in other incineration capacities. These are not new topics. We 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 awesome returns that you saw from the math that we're doing on this. So that's just a good use of capital. We're going to have $1 billion in cash by the end of the year. We're going to generate another high $400s million of cash flows in 2026. I mean those are -- we're going to have plenty of capital to do a variety of different things, including good M&A.

As Eric mentioned in his Eric Dugas in his remarks, the leverage market is very -- our leverage is very low. Our appetite for debt -- from our debt investors is very strong. It was way over-subscribed. We got the rates. 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, and that was always big -- just as it was -- it was a vision of where we 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 will continue to capitalize on that. So -- and so I don't do that. Nothing has really changed with that announcement with the SDA announcement. I just want to make sure that you understand that this is more of a kind of a timing issue that we've been talking about for a number of years, that we want to share with the investing public because it's going to be a [indiscernible].

Our next question comes from the line of Larry Solow with CJS Securities.

Question just on the guidance again, not to beat a dead horse, but the miss in the quarter you guys clearly outlined that a little bit of Industrial, a little bit of Field Services. But it sounds like you kind of -- you've bucketed that miss out in the quarter and it's [indiscernible] after 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 turnaround seemed to be a little bit less even than expected? So do we -- why -- what gives you the confidence that we want to get back to where you thought we were going to be in Q4, not to kind of get into the details, but if you get where i am going with the question.

Certainly, Larry. And as we digested kind of our Q3 results and then projected our thoughts on kind of Q4 and the guide there. I think one thing that gives us makes -- 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, the 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 it's softness in certain verticals that we mentioned around chemical and refinery. We continue to increase volumes by collecting from other customers and bringing 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'd say one more thing, Larry, to that end, I'd say that kind of all our LOBs -- all the businesses and they got SK, 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, well we have stabilized that business, we're concerned about free cash flow conversion. Well, we're going to have great free cash conversion this year and continue to grow. When you think about EBITDA margins and the mark to 30% margin, I mean, that's on ES, that continues unabated. It's 14 straight quarters of year-over-year margin growth. So I mean I feel like -- I feel like we're kind of hitting all our strides, but it's a miss. I get that. I get the point. But really, it really is, and I think very temporary, as I said in my prepared remarks.

Absolutely. I appreciate it. And I'm condoning how this miss -- how you put this on a go-forward basis as opposed to just a miss. I just want to make sure that going forward, obviously, it's only 1 quarter, but you throughout -- I appreciate a little bit of color for next year in that 5% number, which I'm sure can move around. That's just kind of baseline. We get all that. But I just want to make sure that you're not -- it doesn't sound like you're building in a rapid improvement in Industrial and Field Service. So just kind of trying to say then if you weren't building that in, in this quarter, then why we have the miss, but I get the extra color really does help.

Just shifting gears real fast. Just on PFAS, it sounds like things are continue to go well internally. To get a real acceleration, obviously, 2025 [indiscernible] growth rate, but I think your queue is growing a lot faster than that. To translate that into actual sales, right? We'll need some governmental -- some kind of legislation or something, I guess, right, 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?

Yes, Larry, this is Eric. So obviously, getting our -- the results are test 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%, 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 how our prospects are panning out and the opportunities in front of us. So we feel pretty good about it. We think it's just going to accelerate. And as far as the Department of [indiscernible] lifting that moratorium. That's just -- that will be just another accelerator for us, and we're optimistic about that as well. Sure.

Our next question comes from the line of James Ricchiuti with Needham & Company.

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?

James, Eric I'll begin. No, we haven't. We really, as evidenced by our results in Q3, our volumes have been growing across our waste businesses. It's really strong through Q3. We're beginning Q4 very strong. So where there's been this pullback a little around IS spending around turnarounds and chemical spending around turnarounds. On the waste side of the business, it's been strong, volumes, price into the network and project growth with PFAS, but other projects happening across the board. So we feel pretty good about what we've seen from manufacturing, from retail, from the whole list of other verticals that we service. And that's really very resilient in our waste collection business because of all the diverse verticals that we service. Everybody is generating hazardous waste and what they're making out there these days. And we're certainly a beneficiary of driving those volumes into our network, which we continue to seek and projects are a lift.

Okay. 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 the discussions you're having with customers -- and yes, you've talked in the past about better network efficiencies that come as a result of this and then potentially some lift to margins. And just talk to us about maybe how Kimball plays out in 2026?

Yes. So in the third quarter this year, we -- the new Kimball Incinerator [indiscernible] unit processed over 10,000 tons. When we came into the year, our plan was to burn an incremental 28,000 tons in our network, and we're doing that with the Kimball expansion. It's been great. The ramp-up has been solid. Typical start-up type things. We expect that tonnage to continue to grow as we've laid out, nothing -- everything that we see continues to see a path to hit our ramp-up objectives of that new unit going into 2026. The network efficiencies are live and well. The routing of our -- how we manage our customers' waste into our units, the transportation efficiencies, those are 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, the trend continues on how our network provides them a really security in being able to have multiple units service their needs and well positioned 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 the interest of what we have now. It continues to be strong. Those captives are [indiscernible] as we've mentioned, our relationships with them are strong as they continue to evaluate their cost positions we have active discussions. So we're just adding Kimball to our network continues to prove to them and those large generators of hazardous waste that we have the network and the capabilities to supply their needs.

Last question, just on M&A. And again, you touched on this, but is valuations or is that the main challenge with respect to the potential for larger opportunities that would 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. Certainly, valuations have gone up from where they were in the whole industry, including our stock has experienced kind of some valuation appreciation which is well deserved, probably could go further. But I think that we have the best opportunity for the larger deal to provide the most amount of synergies that are out there, and that would provide me when you look at it 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 [indiscernible] so many. 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 [indiscernible] 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 it.

Our next question comes from the line of Tobey Sommer with Truist.

I'm going to ask another capital allocation question, but maybe from a broader perspective over the next 2 years plus. If you look back at your Investor Day like 2.5 years ago, you have about $3.4 billion you thought at the time you -- 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. What was the -- if you could compare and contrast sort of today's capital allocation profile between acquisitions, share repurchase and internal investments versus what you thought 2.5 years ago. what are the differences in that mix of spend?

Toby, this is Mike. I'll start and Eric 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 fourth legs or fourth being debt repayments. I think that we have maintained a consistent posture on both internal growth projects like the Kimball Incinerator, now like the SDA unit or buybacks a steady growth of buyback assuming a little higher than normal, but we buy back flow plus depending on the market that's out there. We still have $350-plus million of availability under our current authorization.

When I think about M&A, I mean, M&A is lumpy, takes two to tango, and we got to make sure that we're getting a good return on our investments. We never said it was going to be a straight line to get to that level of growth. We always said that it's going to be -- this is a message to the Street that this was our Eric and mine's intent to do M&A, but it's got to make financial sense. And as such, there have been deals that we got to a point where we stopped. Deals that didn't fit very well that we talked to the Board about a couple -- three times. It didn't fit well that we decided not to go forward on. So these are all in the process of being very cash disciplined, getting -- trying to make sure we get a good return. And I think our long-term shareholders are happy about it.

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

Yes. Tobey, 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 health care costs in general will increase. However, I think some of the reasons for our increase this year that Mike mentioned around 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 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 Stephen's event that Jim will be presenting at in Nashville.

Also, have a great day today and 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.