HCCI - Earnings call transcript Q2 2019 | Heritage-Crystal Clean, Inc.

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Operator

Good morning, ladies and gentlemen and welcome to the Heritage-Crystal Clean, Inc.

Second Quarter 2019 Earnings Conference Call. Today’s call is being recorded. [Operator Instructions] Some of the comments we will make today are forward-looking. Generally, the words aim, anticipate, believe, could, estimate, expect, intend, may, plan, project, should, will be, will continue, will likely result, would and similar expressions identify forward-looking statements. number to and anticipated differ forward-looking a cause that by involve statements. results actual materially statements of uncertainties risks could these These from those which variety and factors, include risks our a These some uncertainties of are beyond control. of today as on representing in These views should future. as you of statements not and forward-looking our the speak rely them undertake no call. this obligation We to after update these statements our Form website filings, our XX-K our a that refer SEC including release our posted report factors earnings to description on well as results. detailed on for as more risk of our Please annual the affect may Copies Relations of may section from obtained Investor website. or our the SEC these documents of the by visiting be

before adjusted measures for or certain note Also, measures interest, may EBITDA please depreciation earnings financial we EBITDA these measures. of and to website are amortization our on GAAP. Please see this non-GAAP and use financial that non-GAAP taxes, reconciliations call, as such

www.crystal-clean.com. more information our visit company, please For website about at our

company and With Mr. from the and DeVita. Chief Financial Chief Brian Mr. us Recatto; the Executive Mark Officer, Officer, the today are President

would to At I to ahead, sir. like Please time, turn over the Brian this Recatto. call go

Brian Recatto

the of we diluted earnings of us for standpoint the to recorded XXXX. quarter income which strong and XX-week to demonstrate our $X.X which record million, quarter performance to of us am share joining in in a Thank share share XXXX. reported compares in income compared to second improved results of per We both per second the team. $X.XX of segments We of an quarter From this is and I million, to share with $XXX.X second revenue during diluted morning. report welcome income you talent $X.XX allowed $XXX everyone and quarter of our net this you second margins that thrilled dedication record quarter. the quarter a million per

excited am standpoint, field This of when X.X% and in performance. was last level project Service quarter the second of that this From growth third growth a our to more I large year. and segment XXXX. I discussing segment even Environmental our of begin unusually compared services impressive we the is will results revenue delivered quarter part consider you second

XXXX Our represents record want which growth, made million The quarter. during cost impact associated to a from second was $X.X incurred and with during second new which XXXX. performance revenue quarter a million in during revenue. organic resources of the $X.X during revenue XX-week approximately XXXX consecutive generated on branches the investments for quarter second added comment in I the the approximately we we

the for and As last year. previously aggressive of to service be with sales more mentioned, our resources plan compared addition is year to this new

XXXX XXXX. of new also Our branches during approximately plan the X includes addition

X we half of During added XXXX the first branch.

the resources and new generating For XXXX, while in in and new year revenue the in sales added of and XXXX, incurred million $X.X quarter million full to $X.X million for expect operating year. in branches service $X.X resources revenue. cost we the collectively approximately $X.X cost second Through approximately we this million add

Our our future. on of this Environmental we Better was the disposal to improvement XX.X% quarter cost the drive same and margin XX%, year compared the second build to XXXX from ago. plan a Services in in the year progress management quarter of helped operating last up into

customers. by to our including expanding some capabilities, waste expect by sites our waste of of management of at some the be cost non-hazardous generated driven internal We improvement consolidation our

base quarter record in the oil business, our oil quarter an revenue business the was results posted compared base second were oil by oil of increase to fiscal selling volume or the second price sold. partially of revenues in in by XXXX. X.X% fiscal gallons XXXX, on driven the decrease of decrease down million offset of Moving The our in $X.X in to a we the

quarter the XXXX. last base year, per during $X.XX gallon but compared of to gallon increased the by netback oil compared decreased to quarter Our first second $X.XX per

improved for quarter, and a used customers of began our service moved during of back half quarter second the our the first collection discipline during we position. oil the we oil charging the for pay half into While

On for a as a for slight still weighted pay on second position average basis the quarter we were whole. oil the

Our decreased during compared to re-refinery operated second capacity year. base first during am second of $X.XX I gallon the compared at quarter to for second and quarter of oil the quarter. quarter $X.XX that to average XXX% increased last the pay oil the our per happy report XXXX

During the quarter which quarter X.X% we and margin. a operating resulted in same double-digit the delivered production to compared increased record ago, almost base oil helped production by year

of Looking to forward, Used have the prices been a we we reliability base operation. perspective, engineer. to utilizing To of steady this no have XXXX third enhanced oil programs, prices. competitive reliability markets hired quarter continue to be in part to due oil new have integrity collection IMO work higher re-refinery noticeable our impact in oil from mechanical improve a expertise and our also From yet. as early continue goal motor the crude third-party support with

In portions both As improve we product continue initiative and limit this spread. the the our believe will quarter, of improve to feedstock regard will finished to we to discussed IMO unplanned last downtime to metallurgy continue future. in XXXX,

as of of the anticipate exact timing of end we magnitude we impacts. effects these certain not some or XXXX, from seeing IMO XXXX prior to the the are While to

hard will we re-refinery effectively. operate and spreads For now, to continue to our manage the work efficiently

we opportunities. XXXX, believe tougher look to high XXXX XXXX. figure. expect our results through see range detail. financial the second walk be we will We for Also, in now – XXXX closing margin on From support percentage us our additional growth as comparisons despite operating second an growth the more in our same supplement Environmental by our organic Service quarter for momentum acquisition we Mark remainder will in during to segment quarter of single-digit organic will perspective, that continue

Mark DeVita

growth quarter. acquisitions due The made is primarily largest X the revenues continued Environmental to the $XX.X our first of of driven volume containerized primarily quarter antifreeze, increase majority with The revenue was vacuum of with in lines parts gains these in second our were most businesses price of XXXX the Beginning and in contributors. increases. business in being the growth of quarter the segment, service business quarter. waste record our from and the the XX-week ago compared antifreeze a and lines by due Brian. was in growth business year million product $XX.X million in to driven the X.X% cleaning we Services Thanks, during was The to increase In XXXX.

a these services the our million to second quarter. revenue approximately total during million project. Revenue if was results, It’s acquisitions $X.X XX.X%, Services XXXX from quarter important which our large you generated exclude Environmental second was from field from was unusually note $X.X growth an that

this Excluding growth XXXX have from second our our the quarter the same of during could quarter impact results, project organic been XX.X%.

The quarter before XX% labor or and in million million X% quarter. margins by mainly the basis services of in in came in the previously costs disposal same the on XX%, revenues corporate by year. benefit second higher was compared partially year-over-year was Environmental $X.X higher a approximately or with revenue branch impact excluding SG&A lower basis project. offset XXX $XX million to Our than ago approximately segment field $XX.X last during employee Profit the driven year margin expense Services grew the increase at costs. along better points Operating mentioned

during record XX.X margin second the in In price in compared sold base the XXXX. the sale selling $X.X quarter of compared this of the approximately from base the the to Oil expense drop XX.X second was million speed last decreased the by we high produced of oil base and mainly gallons quarter during corporate XX.X of as The fell second quarter million to decrease XX.X% operating between SG&A in and for a second oil feedstock our before Profit gallons Business business XXXX. costs pricing year oil the base spreads million fiscal the we XX% record the oil. quarter our gallons oil driven to quarter million in segment, the resulting segment year. during decline the From percentage million second a gallons in of XXXX XX.X standpoint,

overall second lower the a the tax income XX.X% bad severance revenue, of as percentage came revenue, second to from at lower XX.X% to was XX% higher tax XXXX fiscal compensations of XXXX. rate fiscal this compared mainly benefits for and SG&A compared stock year debt on compared Our quarter effective in principally the XX.X% rate quarter greater by associated the attributable compensation the a corporate by year of costs The difference XXXX. quarter second effect expense in higher company’s rate is The to second tax with driven of expense, to offset share-based ago windfall quarter, the in having of partially expense. quarter

EBITDA was million was in the quarter million for quarter. quarter the in a to of year Second $XX.X Adjusted $XX.X $XX.X $XX.X million XXXX. record quarter compared second EBITDA second the ago to million of compared

on diluted was quarter. basis the As Brian a mentioned, income per during second share $X.XX

in Environmental If a we back been costs, diluted share would on former late acquired closure XXXX, have adjusted you $X.XX. exclude to FCC our a the impact per location basis income primarily site related of

the million debt record From the on end the a at Total XXXX. hand a million generated at operations $XX remained We at during $XX.X of sheet in of the quarter in steady compared flow million to second $XX.X cash from perspective, cash stood balance quarter million. $XX.X quarter year-over-year.

feel our acquisition drive business on our work our shareholders. targets potential deploy for focusing to on and to opportunities continue we improve growth excess will identifying help and organic We value initiatives cash,

the focused In our second are quarter profitability executing hard strong XXXX. growth summary, and of in pleased results, and the of we for with Clean the Crystal of remainder remain delivering very team strategy we on work

call Thank will questions. operator take joining the you over your I today. turn to the for now to us

Operator

first Fredrickson from [Operator Our Baird. from question comes or Quinn comment Instructions]

Quinn Fredrickson

morning guys. Good Hey.

Mark DeVita

Quinn. morning are Good you? How

Quinn Fredrickson

Good.

XQ. you mentioned there? the think Oil you of steady year segment thinking segment the are of the Business, I how in the in pretty being rest about ES Curious margins guys the for half the with So margins year back for

Mark DeVita

get For about record the at But I what have high XQ, here. manage direction We term in potential Business, assuming that this where how performance we digit. the that’s same we obviously can re-refinery, from we we’re always near expect the to we spreads don’t gave last at perform you know probably we Oil we’re thinking everything single and and production that time on in over which but targeting, we depends it that’s decent quarter, that had the see really our is point. this the

Brian Recatto

agree would that. Yes, I with

Quinn Fredrickson

perceiving the there awareness how at this guys just uptick But customers XXXX. about then IMO from has collectors characterize from you Got in are it. at in that And other and of curious, collectors this awareness kind talked an benefits or the yet you point point? not from market, you would seeing been both

Brian Recatto

of are no will go by expect going it pricing No. to mean to become of that certainly yet not look doubt people that end the of with we X because over as you There’s of January, impact certainly value there’s is We’ve among some Well, until the X. because the aware No. futures fully to related the I see an at that to re-refinery. it. impact are down the field – collectors not angst the the it but year. there angst affiliated it’s

back it the to that we see, year. we’d oil of market We develop haven’t half of the expect the we softening but used thought over seen fully motor the

Quinn Fredrickson

it. Got

very Okay, much thank you guys.

Operator

you. Thank

of Our Steinke comment or next with Barrington line Research. from Kevin the comes question

Kevin Steinke

Good morning.

Brian Recatto

Kevin. Morning

Kevin Steinke

So the on following-up ES margin. I curious was about operating

management cited a disposal of cost there. You as driver better

and for the you about more Just what to helping on a forward ES that is continue that if elaborate could the opportunity little wondering margin? going bit

Brian Recatto

and we’ve can. Yes, these we responsibility for costs. our the that internalize got of helping an responsible really managers obviously, Kevin. waste And split up us hard lines, know operating From worked they’re as as standpoint, product we’ve to each manage to amongst in-disposal the as service much

enhance value ability that’s we the a cost our initiative our we’re You’ve And transportation our on, our really our better developing and in add We’ve some over waste heard to hubs focused some team the our logistics past these calls waste move the – waste branches streams. significantly at to also this in-house couple water structure. years treatment of to own to cheaper that that cost. capabilities, ability through conference upgraded of on

of us management invest logistics So little vendors hazardous continue organically. internalization, I focus our are a think bit to waste the better But of items maintain us margins. we for some that of our to want and help

money our to continue to add as best going use We’re of today. the resources

So it flip on got people. the like branches by a working that pressure We on the operating openings organic put of will obviously a back little get we’ve side. hard margins. bit adding On to and side,

Kevin Steinke

that ‘XX believe X at I margin Okay, be in will got first than quarter, as you plan in it. interesting second was opened branch that it I expect for even ES was said first the higher X level And like similar year. openings thought sounds you half it of the second to new remain the you half. and the the half branch the

from So we in other you’ll openings to able with I should cost but expect the X those initiatives? guess, second pressure half, the be offset

Brian Recatto

Yes.

also organized, Just It cost. we’ve are resources, the half – the same past typically takes a in additions to the leases of our get resources hired. to our the it in people branch understand years, time get added But is branch as of quarter. fourth increases branch lot which most getting latter or done,

Now that’s it an opportunities well. organically at initiative as for stable us important grow the us to branches gives important, revenue our

any the in So why happen that margins, can we’re of of confident which absent the maintain issues we the most year, new field. in additions is the branches late will

Kevin Steinke

Okay, great.

second utilization second really or utilization? you be should re-refinery else half? the mean so planned we at anything shutdowns half operating anything terms thinking of in about anticipate thinking lower obviously, strong of the And cause – in I that performance that might the for

Brian Recatto

out of the planned No. plant. ordinary No of shutdowns the

of any capital the We’re at the not large back doing projects year. half

are maintenance. that just routine mainly turnarounds for normal our have We upcoming

to and oil oil late good base solid it. pretty but about QX we begins we’re market seeing at seasonal you strong obviously, the feel more So have mean that I same happen in the softness pricing. demand still of today, base fall

near good pretty feel is plant running So term, great.

Kevin Steinke

terms you that the to And making other upgrades you are you Okay. any or mechanical are the other of various how you upgrades in metallurgy – far that complete with in or are re-refinery? wanted along

Brian Recatto

upgrades We’re working our turnaround, our that That’ll now round turnaround. of of We sure we’ll a mechanical that which more work program at make be making phase What have system to exists integrity as remarks we’ve in next scheduled the another is improvement. large fall be and I sure on help as engineer prepared mechanical on we help our rotate and in good industry, in as to build brought systems, make added and some commented equipment integrity. that of the to reliability the is we our a is

is So more of the it same.

Mark DeVita

Brian Yes. in said But reemphasize what earlier his ago. a comment minute to

do We where have for this planned this some outage that we have of QX we were going to work.

long QX, anything nearly We’re because one clear not planned outage near XX last days that, that’s sure as want of that as downtime. planning just anywhere I make the year’s was to

least of other those, X-day at longer be have well are end to XX-day to – one around beginning those usually of of things. type of not times QX in than X- usually So QX this we a be other one that is of scheduled going or ones the one This year, that isn’t the the typical to year. periods

Brian Recatto

Correct.

Kevin Steinke

Thanks question my for taking got it. Okay,

Operator

next [Operator Butler question the Our line from Brian from comment you Thanks comes or Instructions] Stifel. of

is line Your open

Brian Recatto

Hi. Brian.

Brian Butler

questions. Thank morning. you Good for my taking

How Environmental first service that quarter much project second – or service was quarter field the Just on in Service of piece. I the mean ‘XX. third or

that So quarter? see this we much how going of should – a is headwind next with much how

Mark DeVita

was it $X.X million And QX about think should of I million. It be in last year. $X technically

ramping it lion it was QX. I prepared down of – in then QX was $X.X the our year lion and So it of share last in said remarks. we’ve share think million The was

Brian Butler

first least for then to about another that to way XXXX, be When think about is branch think for you headwind that margins half, back when going Is the the weighting of the at what Is going not year, And headwind think kind you the it? – end full the right XXXX? if that to another And that? basis points? XXX additions. into Okay. to back of about XX is

Mark DeVita

you – pace that and you’re – smaller more we’ve on it’s decide we’re we that to branches. going number overall additions think don’t being ramp-up When I a these think versus headwind. and about smaller big larger talking base the larger than what unless about additions stated,

seasonality. that XXX XXX won’t don’t than that don’t from know, basis point at overall. typically additions, margin our we is from anticipate lower. really XX know – potentially be there’d erosion to much regular So I or this We driving – more anything But QX could, always points basis be it But be points maybe – possibly. that’s less new

Brian Recatto

them of at deals. can we expand smaller robust And new opportunities got some Brian, those obviously, to come We’ve as pretty of look our as acquisitions And footprint. locations from pipeline a well.

Brian Butler

guess perspective of until least can down, next at expansion, look kind margins to XX to somewhat kind they really of expand you at they is I is branch expansion But what geographic of it. additions that in another still margins guess, when way to that growth into limiter Right. XX that a slow that, And place from look of the is be, a be, the are, right? I reasonable a where starts months to

Mark DeVita

Yes. see that this we segment that our is talk know, should next that pace the XX% incremental months. in here XX XXs to to to We achieved still mature branches get at about, to we based be of expansion, not but going we XX probably certainly months, or capable XX, that, some XX that low that even on to [printing] see – it’s if maybe start maybe this to actually start months, not is

Brian Recatto

I capital any absent acquisitions. use of – But mean a good our

to yes a on in growth, impact marginal have it’ll continue and will We organic percentages. invest

Brian Butler

this that of quarter, had site quarter ‘XX? is then those Okay. And into third the you roll there costs on closure any

Mark DeVita

almost I’ll this very would is be one we largest site we’re remember of most years be sites. one For it that most you acquisition other or – and issues. some ago the of sites. honest, the that the probably do running that on from in We little it we And have probably largest because even complicated, sites this operated has is the that. other acquired never X that X now. site And

So to this cost they have we typically behind put to we’re closure Yes, occasionally time? Will time this happy won’t be chapter magnitude. from but site us. just

Brian Recatto

expect to the Brian, property. we sell our we cash And when recover

Mark DeVita

material There call we’ll – get what And for out it. want a that there’s we assuming if be might we gain.

So we’ll property had remember, – Florida $X-plus in couple the we million And that know I know sold I – we years Southern think have a on like don’t you we if in of I ago. gain one. don’t

So – and we called out. that

Brian Butler

Okay. quarter just the look – to And it quarter guess first Business, like improved in or then on part on – the pay it oil going second trend side sounds first early quarter for for I the spread Is of What’s Oil I definitely pay it quarter. that in third the but here? still still you’re improved? environment, mean is pricing in like –

Brian Recatto

spread picked prepared expecting quarter-over-quarter. up And mean not in – that you change We’re our much I improvement remarks. spread from could’ve of a QX. $X.XX XX% I think

flat expect QX. to be in it We relatively

Brian Butler

And those the just a fourth then scheduled in scheduled your for Okay. are last one, quarter what – or the turnarounds? downtime, third in quarter on

Brian Recatto

is in X-days This typical short shutdown, us. Yes. shutdown QX. which for

Brian Butler

the fourth And then in nothing quarter?

Mark DeVita

or last that’s more – closer we the had to as around And like opposed No. again, – would that XX-day something longer plan the like QX. be Remember are a days to there. XX then have But one. that the those one

Brian Recatto

a major this construction year, capital project last did it we’re not We doing year.

Mark DeVita

Yes.

our about. doing We’re – talked we things are we some other lining

if the mechanical are And and of The mentioned any up ongoing. initiatives big don’t of Brian metallurgy are project’s beefing these remarks the the you’re we that have integrity ones part that you projects. the are it to can the have Brian his strides do in So place. within planning mentioned project right you those taken our that we’ve in that ones systems – you well, put

work. able You be it routine unison some of with in do to should this

Brian Butler

have any – the down Okay. downtime, XXX... you quarter, second But any so didn’t that turnarounds in or

Brian Recatto

in downtime some – QX. a had We No.

Mark DeVita

Yes and...

Brian Recatto

routine maintenance to have we’re in going Normal, to what similar QX.

Brian Butler

Okay.

Mark DeVita

in in basis. previously. QX QX, we going and consistency just show unfortunately had here, as about But the we if look last you about that months-or-so there’s chance we’ll like we talked a base far on for If can re-rate good plants talked this we said year, un-planned which maximum probably forward, though oil the a as output outage we maximum the that X

Brian Recatto

in planned to for goal XX year, of – maintenance any our And downtime. our normal And XX issues still thoughts. mechanical consistent a absent that’s is days

Brian Butler

my Okay, questions. great. Thank you very much taking for

Brian Recatto

you. Thank

Mark DeVita

Thanks Brian.

Operator

Thank thank day. the and questions additional have you. at today’s like that would I queue you presentation. showing Everyone, for may time. this your now no now gentlemen you am I wonderful to participation, in Ladies concludes a disconnect.

Heritage-Crystal Clean (HCCI) 29 Jul 192019 Q2 Earnings call transcript