ECOL - Earnings call transcript Q3 2019

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Operator

Good day, and welcome to the Third Quarter 2019 US Ecology Inc. Earnings Conference Call. [Operator Instructions]

I'd like to now turn the conference over to Eric Gerratt. Please go ahead sir.

Eric Gerratt

you us thank and morning for today. joining Good

Executive this Chairman Executive Marketing, and me Bell; President on Executive Steve are call the and Simon Officer, Feeler; Joining Welling. Chief Sales morning Officer, Chief Operating President Vice of and and Vice Jeff

call forward-looking Litigation Before begin, statements in Private Securities conference as Act that not of describe contained in certain defined we do statements historical Reform XXXX. note this please that facts are the

results factors that future statements may should limited with reliance forward-looking made. statements. place expressed materially that date differ include Listeners the expressed on determine undue risks implied forward-looking could are to and to actual or not are statements filings the uncertainties As which only in the Management on Securities views those differ many and results not include disclosed reflect cannot such but management's those from by statements Factors those Commission. materially results. such from company's predict Exchange control or cause

undertake or make to of otherwise. forward-looking information whether statements future any revise a new as update obligation other forward-looking to events any or or statements We no result

joining follow presentation. can For webcast along today's with by those you

determined and in Exhibit non-GAAP We our Throughout presentation adjusted can and reported these susceptible adjusted For XXXX release. earnings metrics on to and release adjusted forma adjusted guidance. phone accordance and and and EBITDA our are per referred the our share. Generally pro forma reconciliation varying access in believe adjusted are financial EBITDA definition EBITDA today, you of A in earnings earnings with A Principles at and results to useful calculation www.usecology.com. found per those metrics we listening call therefore statements evaluating can share be of yesterday's to presentation calculations. pro our by Accepted today's not are earnings website our Accounting adjusted These EBITDA

call over turn to With Jeff. like the to that, I'd

Jeffrey Feeler

everyone. morning, and Eric, Thank you, good

for morning's NRC comments call that this moving Eric our merger on and results for with of the a few on start summary on remainder financials XXXX it I'll update our out few our up point with details to released some At questions. then on over an XXXX with outlook pending quarter the before Holdings a I'll brief Group third call the update and turn our opening additional an before onto call for on comments yesterday. close

approved closing in with As we on tomorrow announced October announced yesterday an Group pending fashion and overwhelming the the release shareholders in NRC actually or our press XXrd November Holdings we as merger of Xst. sets joint occur both to

to expertise excited of harnessing two true are and industry. leader believe in by create services and companies experience We the we'll together a environmental organization each these the bring

our providing discussed call final months I in in cover and US As could later of this view yesterday will are of Ecology's in what two XXXX. the NRC we release contribute

statements have been Since companies both have would been merged. if separately these operating have already and companies that independently data publicly more companies reflect limited traded normally as financial operating

that questions address. unable we'll likely be result a As be there will to

have We can transparent to press in our provided with as release reconciliations our be expanded as assumptions. we

the Turning and X% an $XXX.X growth an acquisitions. organic third last reported delivering million US X% we third quarter by in increase quarter yesterday, driven to impressive XX% Ecology's revenue year over from results quarter

segment over both same growing XX% business our in XX% once continued a increase driven revenue environmental our strength business. This expectations in strong performance services again internal by the and Base event base last from year. quarter our exceeded resulted from

XX% XX expected, in the increases. growth contributing a our business more network As of quarter into row base saw disposal volume percent its plus going second to

Revenue cycled excluding from in X% the acquisitions our was that these Our and acquisitions. year. services X% have field saw reflecting primarily impact growth segment and yet quarter-over-quarter prior industrial the field industrial not down recent of business services from the

particularly aligned services some industrial in in those our markets softness with seen vertical. the have We business metals industry

We business in larger as from not in the XXXX. also have at same XXXX level total saw line reoccurred our projects waste lower management revenue

excess and quantity small quarter well during the due Lab Our by service remediation Pack in strong achieve still to which timing business projects grew masking headwinds our logistics original in all expected transportation our business will for of is year LTL we our quarter. we Nonetheless retail gains as with these led as an in down are our believe results primarily but outlook of fourth the of offerings the and strong business. generation XX%

XX% forma interruption facility recoveries to we claims for Idaho business $X.X pro last associated Overall, approximately of periods quarter same We during delivered over from adjusted our reflecting of submitted quarter incident million the XXXX. March EBITDA year. with the the the XXst recognized growth

be expect the to negotiations interruption us remaining now the for is work additional our at and As are in received a to business we're through and we record that likely Ecology. US XXXX. we open recovery I'm in to extremely with our the complex quarter claim trends we on the and are results pleased that periods seeing year the due Overall for anticipated recoveries third business pace

to back I'll Eric. that, With turn it

Eric Gerratt

Jeff. Thanks

services of from was compared year. a partially third the million XXXX. was million offset was XX% quarter last $XXX.X revenue. the third XXXX X% on treatment the in decrease This a revenue for for disposal $XXX.X third X, and $XXX.X As by quarter transportation third shown Slide driven to million up the by in million XX% growth quarter in quarter increase $XXX.X segment services environmental Revenue the revenue of for in

services business from of mentioned business represented treatment of the quarter and of third segment to year revenue. environmental represented was and Event last increased quarter ES base XX% up treatment the segment last and for year XX% third disposal Jeff XX% the XX% and revenue. the As disposal compared for

XXXX. reflects quarter our in of out the up Services The Ontario as Industrial from XXXX of field The Group in Group the million $XX.X third was of delivered primarily and XXXX Midland Industrial third in of Sarnia revenue August services and Services million based Texas of increase Field of quarter as Field industrial in XXXX. segment our X% in $XX.X quarter acquired Dallas that third well the acquired

Excluding quarter primarily activities the third the X% of XXXX these FIS waste from down in Services acquisitions lower of third remediation XXXX. driven Industrial revenues total by were management and quarter

these business. declines As generation offset on Jeff revenue our quantity mentioned, were by increased partially small

largest revenue Slide for Treatment transportation business base increased manufacturing by XX verticals. and breaks broker nearly the and TSDF occurring our in across verticals. Base Environmental Disposal down the with industry chemical both all increases and verticals event business Services

decrease in the manufacturing vertical. metals by primarily in increase business driven and was metal offset increases The partially were transportation in government increases a verticals. the the industry manufacturing event These by

$XX.X profit gross XXXX XX% million quarter from in the XX up Slide third million in $XX.X year. of last to Turning quarter the was same

compared gross of in year. Xrd segment in $XX.X quarter to Environmental Our same million contributed the quarter last $XX.X profit the Services million

insurance to in which XX% Disposal Environmental recognized services Idaho XX% to gross profit third were in quarter benefited the of facility, business quarter XXXX. the from recoveries quarter compared approximately last were the year. margins third in third related and $X.X for the interruption million Treatment

margin to million the and Industrial Services segment or XX% third down of the year. XXXX. compared million third in in Field was third SG&A Gross XXXX quarter the the was XXXX of in compared in of XX% $X.X for XXXX. profit the third from $XX.X in million quarter to administrative third quarter Gross million general quarter $XX.X spending quarter was Selling last of $X.X the

and with expenses merger associated NRC as was business increased in with intangible the higher as partially due pending property incentive amortization. development increase taxes This primarily to labor asset and $X increased million well compensation

income third included in $XX.X business. and $X.X same charge quarter our quarter last mobile income year of Operating a solvent the million $XX quarter to goodwill the million the year. asset recycling compared last was for Operating third intangible in impairment XXXX on million

$X.X was interest the quarter to quarter the the and result expense million completed increase of third year. debt to the outstanding XXXX $X in for XXXX levels last same Net in XXXX. acquisitions the of million compared due third in was The higher quarter

in expenses of XX% year are the purposes. last third is the income the up income from business quarter quarter XX.X% not in increase effective company's for this tax The tax primarily The that of result quarter for rate deductible development was third the third year.

the prior year to Additionally for quarter XXXX favorably by returns. of impacted adjustments planning was tax third tax of strategies favorable the implementation the effective income rate one-time in resulted that

Excluding effective have the our would income third business development expenses tax for quarter rate been XX%. the approximately

quarter per share We reported diluted and net of $XX.X of last in of $XX.X XXXX per quarter third and third of $X.XX the to compared income share in million earnings income the year. diluted net of $X.XX earnings million

which EBITDA year. in million third last share was $X.XX excludes compared quarter was diluted XX% the expenses million XXXX. of XXXX development per the up $X.XX in forma of earnings for Xrd from Pro quarter adjusted third Adjusted quarter the Xrd $XX.X business the quarter $XX.X to in

nine results was Slide for to the million of of to Services Environmental segment $XXX.X on in Turning nine first revenue the Revenue the $XXX.X million XX, for total nine the first XXXX. $XXX.X $XXX.X Services compared of delivered million of to in million for was compared XXXX months first XX% months million months the which up period $XXX.X in first up XX% The of to XXXX same months of Field revenue compared year. the million months was segment nine XXXX. the last Industrial $XXX.X in nine first

of adjusted compared XXXX was nine $XXX.X $XX.X million the $X.XX was $XX.X first months last this or year forma Net Adjusted for or to diluted $X.XX per year. for million for the nine $X.XX nine of first months income first nine EBITDA of share million year. XXXX. the share nine XXXX $XX first to the compared first share the the of million for per months last nine per diluted for compared earnings Pro months of months first was to months for $X.XX

includes $XX.X acquisition. Free related free and development cash as reflects in million business XXXX XXXX well was for approximately million $X.X nine months also of of $X.X first the the million expenses Idaho insurance cash Our first rebuild. as flow the facility to months related flow $XX recoveries of to million nine the primarily the for property NRC

strong sheet $XXX.X XXXX balance and our of X.X end net ratio approximately on borrowings XXXX low the of as range. remains revised of of guidance leverage times million September Our a XXth with based

turn I'd With to call Jeff. to the back like that,

Jeffrey Feeler

Thank you, Eric.

business the on continue into and in the our components from to to operations underlying momentum and look the outlook very Ecology expect address end of to going two NRC. I'm year stand-alone to positive we we strong contribution by a the final US expected note. see XXXX As separating quarter

expect event XX Looking and of range at see to million and our led base business our guidance Slide are strong we the EBITDA Environmental standalone strength core performance as will US now business. forma Ecology raising to basis on segment This deliver on pro you million. a in the bottom can $XXX adjusted continued from $XXX in Services be EBITDA by both end

finish previous base year now We X%. the ranging expect business X% of X% above from to guidance range with growth our to full X% the for to year

event business expected Our XX% grow is the full year. to for approximately

Services of XXXX Our experienced strength Industrial similar areas Field headwinds to with business other verticals auto the expected in quarter business. and in industry to masking those third of and is the the see metals

and takes cost Our guidance in are $XXX property insurance Revenues million to million. our expected of exceeded. was targets are incentive anticipated some XXXX from business account be reduced into internal US costs the for our and $XXX financial with to headwinds recoveries programs increased earlier also hitting casualty Ecology in interruption regard to what as increased from to year range now compensation expected

from Ecology's expected the million and adjusted of year between expected EBITDA a combining expect benefit NRC approximately will business million forma million with the is $XXX we to $XXX NRC. pro range million. $XXX US from for million range full between and contribution Revenue $XX $XXX When outlook

Ecology adjusted We performance issued are to year be merger. connection X.X dilutive common operating to impact our and of addition and expected reflect XXXX guidance other the the shares equity share the US of the for instruments NRC million warrants incremental the earnings revising and of with the the increased in full per of assumed

the equity million X.X of issued additional in instruments The in and approximately and which be are they'll the two the months shares impact XXXX. shares expected result newly for warrants assumed to other dilutive outstanding dilutive common in

expect merger. which per a $X.XX for per now share per connection we approximately combined the of will XXXX and $X.XX effect result earnings range equity issued from assumed for to a for adjusted the company $X.XX in with reflects share share As dilutive our

This compares of $X.XX to $X.XX our share. previous guidance to range per

assumptions components of see Given interest counts parts and and made the interested refer at in moving the for to share of anticipated intangible parties earnings guidance the to release and adjusted arrive impacting number the guidance. to our preliminary earnings reconciliations amortization guidance those per the this included costs share I depreciation

expenditures. Shifting gears to capital

company between as capital several million to reduction for $XX are $XX the expect into our million Ecology's million of approximate expenditures million XXXX. to capital merged for million spending a XXXX. to previous $XX total projects guidance We $XX million move $XX and will from range US to $XX

As we we see growth XXXX business. for signs continue Ecology look positive US the to to for

through continue growth but strategic in we our working completing the look shifts to our plans still are economy. We any for process budgeting XXXX to pending major macro and

side expecting in we to continue our lingering factors with are to cost These insurance labor the headwinds, as impacts on and we of rebuild. idle see the facilities

the domestic business continue NRC's Environmental to business Services international look operations. and we As business we see standby opportunities growth to in

as are to in ramping and announced oil early challenge challenging be onset as ramp the we opened of the Permian-based region. the in quickly of the markets and in The two likely also recently deal most of and when stage landfills predict the gas Sprint which be constructed appears conditions what the and and not that to June to expected will business activities given segment softer back market operates due

operate shared about While understandably could business we and Therefore were the transaction we be we've what between to since the in companies. limitations reviewed announced NRC's great a two have two deal there independent companies. continue learned as

merger a of into Following to the dive completion deeper we aspects business forward the and of strategy. look the all taking

plan long-term to guidance more detailed and process as plan bullish budgeting remain we can NRC's February assets We provide XXXX. return the the We potential. and guidance business contribution the on complete our overall create underlying and our for on

and is be company. potential for I future positioned In conclusion, can't more our about Ecology excited US where the

Our EBITDA in should adjusted for Ecology terms year forma core assets of per are earnings delivering be adjusted share. revenue what pro US a and record

geographic from automation growth And our us capital NRC and to service through high-return smarter that enhance on a with continue of acquisitions intelligence projects to of deployment contribution true will as strategic the in such line. the our differentiation investment we regions position tuck-in retail this providing that without the our with considering of waste the classification our with bring artificial retail strengthen company and

open that expect XXXX growth many pivotal Further, we combined company again new the market the look provide add year waste up our the have years road Ecology's presence this fundamentally evolution. with we offerings strengthen down This will assets. verticals our several NRC transformed for service will at and I we'll when shareholders complementary see US back a opportunities. as

With the for that, please up operator, will you call questions. open

Operator

question [Operator Stifel. Hoffman Instructions] with Our first comes from Michael

Michael Hoffman

Jeff, of treat gang, treat XX% how it deal organic and growth trick. instead of was rollover? or a a trick Nice Happy it's instead much how of Base Halloween. a nice Eric, of much

Eric Gerratt

organic. the organic see is we Michael, that calculation into acquisitions when So, it so is of until that XX% cycled base all come so don't them the end all calculation we've the

Michael Hoffman

the and sort an just begs a or - that's region some end market concentrated was then in of a So there that well exceptional? - was

Eric Gerratt

was look the was it was one was up. as at on really all across Yes, the every business up and were in metal verticals rest was you them that it the of side it vertical only down significantly almost the fantastic

Michael Hoffman

to an to all it's country slower in recession a case. to think going the starting you I more about growth And with five the a place? about three but of and as we're a long-term but talk going there we and the the into about hard make back are pockets XXXX industrial think are mean the hard debt to prudent macro don't outlook as into usually underlying a you I industrial recession

Eric Gerratt

more Michael, yeah But budgeting and but is more seeing think, of I we're to you that to into that going process. would this looking our in at X% range the be going to we're X% point XXXX in middle come. I Yes, tell what probably normalized early that, we're to the I'm

Michael Hoffman

deal at at the there. you numbers on set data a of you that Jeff then can a And you you do NRC, look put some it look out

$XXX how million specifically from E&P? talked we EBITDA So potential relative that to suggested originally changed them, what around of pursue adjusted of contribution XXXX about you you number does a

Jeffrey Feeler

mean teams Yes, lot our Michael, deal plans. integration announced about the amount tremendous since a learned field we've that's the a on we good NRC in question. a working I business of the

of XXXX All for know that much but we've been you only trade at financial forth again data we look able and so operational to when and and NRC. back

Environmental that positive the emergency business and response industrial the activities. light spill response the see in standby are the services Services developments domestic the business the the businesses cleaning businesses standby to international and do continue these oil We

The now what new and the current segment and now is haven't XXXX conditions landfills into down expected Sprint called delays market now headwinds that are in two down to as occurred that have right quickly construction the going Permian had well market overall be as or during that conditions as they and they Ford. their this the that Eagle - we're as Oil on seeing be this year right down Permian and year hoped region operational services trending they plays which been the year. expected to next Basin are in ramped given they

when merger headwinds some that going we post So the this, see area. is look into at this area we

was Of services expected of was around XX% EBITDA the $XXX and to that XX% around be gave area. from expected the million we would that about there is three landfills it the generated about be operating

the new with the one market execute that we as extremely on all just but deliver to a in of in. transaction so still we look strongly of to piece a remain We're XXXX. We that dynamic going that it's little is be strong deal. still bit the and on bullish So entering area, performance it also onset it can large we think

Michael Hoffman

that's So $XX probably pace that something XX was I XX Reagan of of that the Pecos to each. ramp to at and was about County seven and original mean some a XX expecting to like Karnes million and looks

So where - is down Karnes as well. coming

Eagle Permian ramping? is not well just or the Permian as the as Ford it's So that the soft

Jeffrey Feeler

down markets the to trending are throughout projected be in Both are both both down, are down been trending or to XXXX rigs they basins. down, be year trend and real down, fields have in

Michael Hoffman

Right.

in the point the at offset less this something you the pieces? XXX is by at no So you longer other do or think strength XXX it

Jeffrey Feeler

it's expecting going less we're Yes, to the than XXX. be

Operator

[Operator Raymond Brown comes our question with James. And from next Tyler Instructions]

Tyler Brown

have Just revenue legacy we're the so guidance you the XXX looking Inc so that's clear, at it and Ecology to XXX, business I EBITDA to US raised XXX right? XXX

Jeffrey Feeler

Correct.

Tyler Brown

So it sounds strong. like business base really is

through from obviously pulling My that the of this comp you're incentive versus BI raised revenue few but expected you and you isn't couple is maybe hunch light in million a what really on to You is million it EBITDA. of coming headwind. dollar a year

Jeffrey Feeler

correct, you're Yes, aren't terms as to the we BI, $X the in we range. this probably year to million expected going in of much in bring million as $X

So of the correct that BI. terms in is

Eric Gerratt

very of couple part QX The Tyler, will it. so hit million It as you're close. of a or incentive of compensation, dollars be

it that Idaho other thing a The that's fairly which claim we that market their was renewals driven customers. our are overall and increase we programs to of just property the along in also to carriers saw we conditions there have all partially that on pass most in casualty but as experiencing renewed sizable and

Tyler Brown

like were for you something BI, five basically. on XXXX And expecting

Jeffrey Feeler

Yes.

and over year-to-date So BI claims to Idaho. million related $X we've months a little through done nine the

Idaho we we million So when to related our and in guidance the to $X about BI. we're yeah we into net going $X drag million get what coming which estimated with the EBITDA was did to year talked

the $X probably $X expected a we million coming to what of into year. So yeah short we're again million

terms what - made business guidance. in we're parts despite of So the of that have doing with other up

Tyler Brown

though Yes, be in I XXXX to hate wash, but split you're hairs, going that likely XXXX? to year-to-year a into so can because receive

Jeffrey Feeler

Correct.

will over back up shortfall into will additional for get speed this on to XXXX We Until claims year we and the have to likely expect carry as definitely go. we full that facility.

Tyler Brown

the press the release QX it's Jeff mentioned pro need look in XXXX count share think which I in to somewhere And just and the count I around share you forma? but

Jeffrey Feeler

Yes.

acquisition. with about just all the for million around shares when So additional year shares into for you fourth but issuing dilutive it's the million QX the full standalone for as million stand-alone effect million X.X for million year, working quarter shares the six then XXXX dilutive we full the year an go additional about XXXX. it's full X.X, but year the for next for take it's the dilutive we for do year and it for full X.X counts And NRC the till to about six to full shares hit year it's acquisition the about will the shares X.X cycle

Tyler Brown

a I It then jumping-off point. gives apologize. me good And do

bit black of that a to the you So in and just NRC Is that landfills the other I XX XXX the be is still region. basically in to so want was box me, right? a said in of were clear but services held XX%

Jeffrey Feeler

That's correct.

Tyler Brown

I'm just generally? curious, those entail what do services other

Jeffrey Feeler

some is other rentals there but has is out services is some treatment some biological waste plays in platform of those do the regions the to There fields other various with there. from type there oilfield then transportation

Tyler Brown

as D&A how maybe you actually you split. idea just any for then XXXX D&A and to XXXX, give specifically think can And

Jeffrey Feeler

range through working of to still we have that so tell to what if and intangibles and I work EBITDA you the purchase there on can we look would US guidance at based Ecology you in D&A a NRC on But and the the Tyler. acquisition. the that of know release do guidance the we're accounting related Yes, for press today lot for we on see give and are. the you right what amortization

what proxy a pretty seeing cup you months NRC, on that's pretty based going are the NRC you year. that get business only a XXXX for annualize to those if worth for you're in two next as and be expect going I got for close to close we've And today.

Tyler Brown

that into wrong I potential at CapEx on look any, was XXXX just XXXX thought to have could maybe then CapEx combined? but CapEx similarly on down just NRC any And be going

Jeffrey Feeler

is Tyler investments in lot we There XXXX little to to a number determine to to up going and and now a have to deploy it's with that we're a of going come early we're a CapEx. don't that. right good capital make too where get on things have of to view we're going Yes, where

Tyler Brown

but likewise And anything probably tax rate perspective, difficult change on normalized any the so a speaking? question, any a cash then NOLs my and idea deal tax last your will just in from position one here there a generally tax or that were

Jeffrey Feeler

if going which probably guesstimate we're carry for effective now. year we XX% some We've those of how get the think frankly would so be does my for what in for studies and look as none those balance of kind including rate acquisition out modeled Yes, in year around assumed NRC that But are of have NOLs. those to so over and next for survived with assumed and works a any we've well. still of business if wiped that you because of NRC lot out this doing many ownership change best

Tyler Brown

a or more there? full cash And tax Okay. less

Jeffrey Feeler

Correct.

Tyler Brown

I know lots of details to work out.

we to be I forward So time. those, but appreciate looking the will

Jeffrey Feeler

Sure.

Operator

currently Instructions] the questions showing at this time, in [Operator And no queue. I'm

Eric Gerratt

attended progress in for call the you and months. we you, updating on thank forward conference Well, Thank Great. those all that you. to look coming today future the

Operator

and teleconference. that Thank concludes gentlemen you. Ladies today's

may You now disconnect.

Eric Gerratt	EVP, CFO and Treasurer
Jeffrey Feeler	Chairman and CEO
Steven Welling	EVP, Sales and Marketing
Simon Bell	EVP and COO
Michael Hoffman	Stifel
Tyler Brown	Raymond James

US Ecology (ECOL) 2 Nov 192019 Q3 Earnings call transcript