Clean Harbors, Inc. (CLH) Bundle
Understanding Clean Harbors, Inc. (CLH) Revenue Streams
Understanding Clean Harbors, Inc.’s Revenue Streams
The revenue streams of Clean Harbors, Inc. can be segmented primarily into two categories: Environmental Services and Safety-Kleen Sustainability Solutions. Below is the detailed breakdown of these revenue sources for the year 2024.
Breakdown of Primary Revenue Sources
| Segment | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | Change (in thousands) | Year-over-Year Growth (%) |
|---|---|---|---|---|
| Environmental Services | $1,297,187 | $1,146,363 | $150,824 | 13.2% |
| Safety-Kleen Sustainability Solutions | $232,139 | $219,221 | $12,918 | 5.9% |
| Total Direct Revenues | $1,529,422 | $1,365,696 | $163,726 | 12.0% |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, the total direct revenues reached $4,458,836 thousand, compared to $4,070,983 thousand in the same period of 2023, representing a year-over-year growth of 9.5%.
Contribution of Different Business Segments to Overall Revenue
During the nine months ended September 30, 2024, the Environmental Services segment contributed $3,779,080 thousand, which is approximately 84.8% of the total direct revenues. The Safety-Kleen Sustainability Solutions segment contributed $679,459 thousand, accounting for about 15.2% of total revenues.
Analysis of Significant Changes in Revenue Streams
The Environmental Services segment saw a substantial increase in revenue primarily due to growth in Field and Emergency Response Services, which increased by $105.2 million due to the acquisition of HEPACO. Additionally, Technical Services revenue rose by $33.3 million. However, revenues from industrial services declined by $4.7 million due to lower turnaround activity.
In the Safety-Kleen Sustainability Solutions segment, revenue increased by $12.9 million for Q3 2024, driven by a rise in vacuum gas oil and specialty refinery products. However, for the nine months ended September 30, 2024, this segment experienced a slight decline of $2.0 million compared to the same period in 2023, primarily due to lower pricing and volume of base oil sales.
Summary of Revenue Performance
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Total Direct Revenues | $1,529,422 thousand | $1,365,696 thousand | $163,726 thousand |
| Environmental Services Revenue | $3,779,080 thousand | $3,389,140 thousand | $389,940 thousand |
| Safety-Kleen Revenue | $679,459 thousand | $681,508 thousand | ($2,049 thousand) |
Overall, the revenue performance for Clean Harbors, Inc. in 2024 showcases a robust growth trajectory, particularly in the Environmental Services segment, while the Safety-Kleen segment has faced challenges in maintaining revenue levels.
A Deep Dive into Clean Harbors, Inc. (CLH) Profitability
A Deep Dive into Clean Harbors, Inc.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was 30.8%, compared to 30.6% for the same period in 2023. For the nine months ended September 30, 2024, the gross profit margin was 31.1%, up from 30.3% in 2023.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, was 12.6%, an increase from 11.3% in the same period in 2023. For the nine months ended September 30, 2024, the operating profit margin was 11.9%, compared to 11.4% in 2023.
Net Profit Margin: The net profit margin for the three months ended September 30, 2024, was 7.5%, up from 6.7% for the same period in 2023. For the nine months ended September 30, 2024, the net profit margin stood at 7.1%, compared to 6.9% in 2023.
Trends in Profitability Over Time
Net Income: Net income for the three months ended September 30, 2024, was $115.2 million, representing a 26.1% increase from $91.3 million in 2023. For the nine months ended September 30, 2024, net income was $318.3 million, a 13.9% increase from $279.5 million in 2023.
Adjusted EBITDA: Adjusted EBITDA for the three months ended September 30, 2024, was $301.8 million, reflecting an 18.4% increase from $255.0 million in 2023. For the nine months ended September 30, 2024, Adjusted EBITDA increased to $859.7 million, a 13.5% rise from $757.7 million in 2023.
Comparison of Profitability Ratios with Industry Averages
The following table compares profitability metrics of Clean Harbors, Inc. with industry averages:
| Metric | Clean Harbors (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 30.8% | 28.5% |
| Operating Profit Margin | 12.6% | 10.2% |
| Net Profit Margin | 7.5% | 6.0% |
Analysis of Operational Efficiency
Cost Management: The cost of revenues for the three months ended September 30, 2024, was $1,055.6 million, an increase of 11.8% from $943.9 million in 2023. For the nine months ended September 30, 2024, the cost of revenues was $3,062.2 million, up 8.5% from $2,823.0 million in 2023.
Gross Margin Trends: The gross margin for the Environmental Services segment was 32.6% for the three months ended September 30, 2024, compared to 32.2% in 2023. For the nine months ended September 30, 2024, the gross margin was 32.9%, compared to 31.6% in 2023.
SG&A Expenses: Selling, General, and Administrative (SG&A) expenses for the three months ended September 30, 2024, totaled $177.8 million, a 4.0% increase from $171.0 million in 2023. For the nine months ended September 30, 2024, SG&A expenses rose to $557.6 million, up 10.4% from $505.2 million in 2023.
Debt vs. Equity: How Clean Harbors, Inc. (CLH) Finances Its Growth
Debt vs. Equity Structure
As of September 30, 2024, the company reported a total long-term debt of $2.8 billion, an increase from $2.3 billion at December 31, 2023. The breakdown of the long-term debt is as follows:
| Debt Type | Amount (in thousands) | Due Date |
|---|---|---|
| Secured senior term loans | $1,453,571 | October 8, 2028 |
| Unsecured senior notes at 4.875% | $545,000 | July 15, 2027 |
| Unsecured senior notes at 5.125% | $300,000 | July 15, 2029 |
| Unsecured senior notes at 6.375% | $500,000 | February 1, 2031 |
The company’s debt-to-equity ratio stands at approximately 1.7, indicating a significant reliance on debt financing compared to equity. This ratio compares favorably with the industry average of 1.5, suggesting a slightly higher leverage position within its sector.
In the first nine months of 2024, the company reported $100.8 million in interest expenses, an increase of 25.3% compared to $80.4 million in the prior year. This rise is attributed to higher levels of outstanding debt due to recent incremental term loans issued in March 2024.
Recent financing activities include:
- Proceeds from issuance of debt totaling $499.4 million in 2024.
- Principal payments on debt amounting to $11.3 million during the same period.
As of September 30, 2024, the effective interest rate on the company’s debt was recorded at 5.6%. The company has implemented interest rate swap agreements covering $600 million of its debt to mitigate fluctuations in interest rates, effectively fixing a portion of its borrowing costs at approximately 3.71%.
The company maintains a $600 million revolving credit facility, with approximately $469.8 million available for borrowing as of September 30, 2024, indicating a strong liquidity position to support its operational and capital expenditures.
In terms of equity, the company reported retained earnings of $1.7 billion as of September 30, 2024, reflecting a robust accumulation of profits over the years. The total stockholders' equity stands at $2.5 billion, providing a solid foundation for future growth.
Assessing Clean Harbors, Inc. (CLH) Liquidity
Assessing Clean Harbors, Inc. Liquidity
Current and Quick Ratios
The current ratio as of September 30, 2024, stands at 1.60, calculated from current assets of $1,123.5 million and current liabilities of $701.3 million. The quick ratio is approximately 1.34, derived from liquid assets of $840.0 million over current liabilities, excluding inventory of $283.5 million.
Analysis of Working Capital Trends
As of September 30, 2024, working capital is $422.2 million, which reflects a $68.4 million increase from $353.8 million at the end of 2023. This improvement indicates a positive trend in liquidity management and operational efficiency.
Cash Flow Statements Overview
The cash flow summary for the nine months ended September 30, 2024, shows:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) |
|---|---|---|---|
| Net Cash from Operating Activities | $473,833 | $455,692 | $18,141 |
| Net Cash Used in Investing Activities | ($812,940) | ($447,069) | ($365,871) |
| Net Cash from (Used in) Financing Activities | $408,555 | ($165,322) | $573,877 |
The increase in cash from operating activities was driven by an increase in operating income of $68.1 million and lower tax payments.
Potential Liquidity Concerns or Strengths
Despite an increase in cash flow from operations, a notable concern is the $812.9 million spent on investing activities, primarily for acquisitions and capital expenditures, which could affect liquidity if operating cash flows do not continue to improve. However, the available revolving credit facility of $600 million, with approximately $469.8 million available for borrowing, provides a significant buffer.
Debt and Financing Arrangements
As of September 30, 2024, total long-term debt is $2.77 billion, with an effective interest rate of 5.6%. The company has maintained compliance with all debt covenants, indicating a stable financial position.
Adjusted Free Cash Flow
For the nine months ended September 30, 2024, adjusted free cash flow is reported at $110.4 million, down from $148.9 million in 2023, primarily due to increased capital expenditures.
Is Clean Harbors, Inc. (CLH) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the company reported a price-to-earnings (P/E) ratio of 20.5. The price-to-book (P/B) ratio stands at 3.8, while the enterprise value-to-EBITDA (EV/EBITDA) ratio is 12.4.
The stock price has shown a notable trend over the past 12 months, starting at approximately $75.00 and fluctuating to a high of $95.00 before settling around $85.00 as of the end of September 2024.
In terms of dividends, the dividend yield is 0.8%, with a payout ratio of 20% based on the most recent earnings.
Analysts currently have a consensus rating of Hold on the stock, with price targets ranging from $80.00 to $95.00.
| Valuation Metric | Value |
|---|---|
| Price-to-Earnings (P/E) Ratio | 20.5 |
| Price-to-Book (P/B) Ratio | 3.8 |
| Enterprise Value-to-EBITDA (EV/EBITDA) Ratio | 12.4 |
| Stock Price (as of September 30, 2024) | $85.00 |
| Dividend Yield | 0.8% |
| Payout Ratio | 20% |
| Analyst Consensus | Hold |
| Price Target Range | $80.00 - $95.00 |
During the three months ended September 30, 2024, the company achieved a net income of $115.2 million, compared to $91.3 million in the same period of 2023, representing an increase of 26.1%. Adjusted EBITDA rose to $301.8 million from $255.0 million, marking an increase of 18.4%.
The following table summarizes key financial performance metrics for the three months ended September 30, 2024:
| Metric | Value | Change from 2023 |
|---|---|---|
| Net Income | $115.2 million | +26.1% |
| Adjusted EBITDA | $301.8 million | +18.4% |
| Direct Revenues | $1,529.4 million | +12.0% |
Key Risks Facing Clean Harbors, Inc. (CLH)
Key Risks Facing Clean Harbors, Inc.
The company faces a variety of internal and external risks that could impact its financial health. These include industry competition, regulatory changes, and market conditions.
Industry Competition
The environmental services industry is highly competitive. The company competes with numerous firms, which can affect pricing and market share. For the three months ended September 30, 2024, direct revenues from Environmental Services were $1,297.2 million, up from $1,146.4 million in the same period of 2023, indicating growth but also highlighting the competitive nature of the sector as companies vie for market position.
Regulatory Changes
Changes in environmental regulations can significantly impact operational costs. For instance, unanticipated changes could result in substantial capital expenditures. The company has reported total environmental liabilities of $230.2 million as of September 30, 2024, which includes closure and post-closure liabilities of $119.6 million and remedial liabilities of $110.7 million.
Market Conditions
Market conditions greatly influence the company’s revenue streams. Economic growth in North America, levels of industrial activity, and competitive pricing are key factors. For example, total direct revenues for the nine months ended September 30, 2024, were $4,458.8 million, up from $4,071.0 million in 2023. This growth is, however, subject to fluctuations based on external economic factors.
Operational Risks
Operational risks include the company's reliance on technology and infrastructure. Any disruption in operations could lead to significant financial losses. The company has capital expenditures of $369.8 million for the first nine months of 2024, compared to $311.9 million in the same period of 2023, reflecting ongoing investments to mitigate operational risks.
Financial Risks
Financial risks are highlighted by the company's debt levels and interest expenses. As of September 30, 2024, the company had long-term debt of $2.8 billion and an effective interest rate of 5.6%. These figures indicate the company’s exposure to rising interest rates and the potential impact on profitability.
Strategic Risks
The company’s growth strategy includes acquisitions, which carry inherent risks. In 2024, the company made significant acquisitions, including HEPACO. The cash used for investing activities for the nine months ended September 30, 2024, was $812.9 million, an increase of $365.9 million compared to the same period in 2023. This strategic expansion can lead to integration challenges and increased operational complexity.
Mitigation Strategies
To mitigate these risks, the company focuses on operational efficiency, investment in technology, and compliance with regulations. They have also adopted proactive measures to manage their environmental liabilities, which totaled $230.2 million as of September 30, 2024. This approach is crucial for sustaining their market position and financial stability.
| Risk Factor | Details |
|---|---|
| Industry Competition | Direct Revenues: $1,297.2 million (Q3 2024) |
| Regulatory Changes | Total Environmental Liabilities: $230.2 million |
| Market Conditions | Total Direct Revenues: $4,458.8 million (9M 2024) |
| Operational Risks | Capital Expenditures: $369.8 million (9M 2024) |
| Financial Risks | Long-term Debt: $2.8 billion; Effective Interest Rate: 5.6% |
| Strategic Risks | Cash Used for Investing Activities: $812.9 million (9M 2024) |
Future Growth Prospects for Clean Harbors, Inc. (CLH)
Future Growth Prospects for Clean Harbors, Inc.
Analysis of Key Growth Drivers
Clean Harbors, Inc. is poised for growth through several key drivers:
- Product Innovations: The company is focusing on enhancing its Environmental Services and Safety-Kleen Sustainability Solutions through technological advancements and improved service offerings.
- Market Expansions: The recent acquisition of HEPACO has expanded its operational footprint in emergency response and field services, increasing market share significantly.
- Acquisitions: The acquisition of Noble has contributed to revenue growth by introducing new product lines and enhancing service capabilities, particularly in oil recovery and waste management.
Future Revenue Growth Projections and Earnings Estimates
For the three months ended September 30, 2024, total direct revenues reached $1,529.4 million, marking a 12.0% increase from $1,365.7 million in the same period of 2023. For the nine months ending September 30, 2024, revenues were $4,458.8 million, up 9.5% year-over-year from $4,071.0 million.
Net income for the three months ended September 30, 2024 was $115.2 million, a rise of 26.1% compared to $91.3 million in 2023. For the nine months, net income reached $318.3 million, an increase of 13.9% from $279.5 million.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include:
- Investment in Infrastructure: The company is nearing completion of a new incinerator in Kimball, Nebraska, with total spending of $198 million by September 30, 2024, expected to enhance waste treatment capabilities.
- Capital Expenditures: Planned capital expenditures for 2024 are projected between $400 million and $430 million, aimed at expanding operational capacity and efficiency.
Competitive Advantages That Position the Company for Growth
Clean Harbors leverages several competitive advantages:
- Robust Service Portfolio: The comprehensive range of services in environmental solutions positions the company favorably in a growing market.
- Strong Financial Performance: Adjusted EBITDA for the three months ended September 30, 2024 was $301.8 million, an increase of 18.4% from $255.0 million in 2023, reflecting improved operational efficiency.
- Market Leadership: The company holds a significant market share in hazardous waste management, supported by a strong reputation and established customer relationships.
| Metric | Q3 2024 | Q3 2023 | Change | YTD 2024 | YTD 2023 | Change |
|---|---|---|---|---|---|---|
| Total Direct Revenues | $1,529.4 million | $1,365.7 million | +12.0% | $4,458.8 million | $4,071.0 million | +9.5% |
| Net Income | $115.2 million | $91.3 million | +26.1% | $318.3 million | $279.5 million | +13.9% |
| Adjusted EBITDA | $301.8 million | $255.0 million | +18.4% | $859.7 million | $757.7 million | +13.5% |
| Capital Expenditures | N/A | N/A | N/A | $400-$430 million (2024 est.) | N/A | N/A |
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Article updated on 8 Nov 2024
Resources:
- Clean Harbors, Inc. (CLH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Clean Harbors, Inc. (CLH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Clean Harbors, Inc. (CLH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.