Earnings Call: Q3 2019

Oct 30, 2019

Greetings, and welcome to the Clean Harbors, Inc. Third Quarter 2019 Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Michael McDonald, General Counsel for Clean Harbors Inc. Please go ahead, sir. Thank you, Kevin, and good morning, everyone. With me on today's call are Chairman, President and Chief Executive Officer, Alan S. McKim EVP and Chief Financial Officer, Mike Battles and SVP of Investor Relations, Jim Buckley. Slides for today's call are posted on our 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 30, 2019. Information on potential factors and risks that could affect our actual results of operations 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 in today's call other than through filings made concerning this reporting period. In addition, today's discussion will include references to non GAAP measures. Clean Hours believes that such information provides an additional measurement and consistent historical comparison of its performance. Reconciliations of non GAAP measures to the most directly comparable GAAP measures are available in today's news release on our website in the appendix of today's presentation. And now, I'd like to turn the call over to our CEO, Alan McKim. Alan? Thanks, Michael. Good morning, everyone. Thank you for joining us today. Starting on Slide 3, Q3 was another strong quarter for us as we drove high value waste streams into our network and achieved growth across many of our service businesses. It was our 8th consecutive quarter of profitable growth. We delivered nice revenue growth of 6% in the quarter and grew adjusted EBITDA by 11% on the strength of our business mix, pricing and higher efficiencies. Environmental Services was the primary driver behind our strong performance, and Safety Kleen contributed to our profitable growth. Turning to our segment results, beginning with Environmental Services on Slide 4. Revenues were up 8% in Q3 due to growth in our volumes, particularly incineration, the mix of waste that we received and the strong growth across multiple service businesses such as field services. Adjusted EBITDA increased 19%, which translated to a margin improvement of 180 basis points and put the segment above 20% for the 2nd consecutive quarter. That level of margin and profitability reflects the mix and volumes we saw in the quarter, supported by ongoing efficiencies at our facilities. As I mentioned last quarter, we also continue to realize the benefits of the regional structure that we instituted in 2018. Consideration utilization came in at 92%, up considerably from a year ago. The plants ran well in the quarter that helped limit our turnaround days, which we had expected to be low due to turnarounds that were shifted to the 2nd quarter. Our average revenue per pound for incineration increased approximately 12% from a year ago, primarily as a result of the ongoing shift to higher value waste streams, such as high halogenated compounds. Landfill tonnage was up 6% as base business was steady and supported by several projects. We generated about $8,000,000 in emergency response revenue, resulting from 2 on water fuel spills and the cleanup of a wildlife reserve devastated by Hurricane Harvey. Moving to Slide 5. Safety Kleen revenue was up 2% in Q3 due to the growth in the branches and pricing of our core services, which more than offset a lower spread in the Safety Kleen oil due to base oil pricing. Adjusted EBITDA also grew 2% with margin increasing 20 basis points. Potts washer services were up from a year ago. Waste oil collection volumes were strong at 63,000,000 gallons with a charge for oil rate that was slightly higher than a year ago. Direct lube sales accounted for 8% of our total volumes, up from 6% a year ago. Total blended product sales were 27%, up from 25% a year ago. Turning to our strategic update on Slide 6. As we conclude 2019, we remain on track for profitable strong profitable full year growth. In our disposal network, we are continuing to extend our pricing and improvements as well as pursue project volume. Blended sales have fallen short of our targets this year, both in terms of our closed loop and our distributor sales. Our closed loop offering continues to grow. And although we have surpassed 30,000 unique to reinvigorate both our closed loop and distributor sales into 2020 beyond. The Safety Kleen team is closely monitoring IMO 2020 and opportunities to take advantage of the expected shifts the change will cause in market dynamics. We've seen a few concrete changes in the market to date, but indications are that we should be able to gather more volumes of waste oil at favorable rates in future quarters. I know there's considerable Wall Street interest in PFAS and what it could mean to us, but is currently hung up with competing legislation in Washington. Customer inquiries about our capabilities are climbing. We don't expect any material effect until the gridlock in Congress on this issue is ironed out. One area I wanted to touch on briefly today is sustainability. Taking care of the environment and taking a sustainable approach to business is something that is central to our DNA here at Clean Harbors. Whether it is recycling waste oil or solvents or paints or precious metals, our business model since our founding has always been constructed around reuse when possible or appropriate disposal when all volume excuse me, when all value has been extracted. With the closed loop offering and Safety Kleen, we're pursuing maximum sustainability of the waste that we collect. We're literally selling customers back their own very own oil. Even within our disposal network, our destruction of CSCs is avoiding millions of metric tons of carbon dioxide emissions. Within our fleet, we've established 4 refurbishment shops that are extending the lives of our vehicles and more than 80% of the parts we use are recycled. Within field services, we respond to approximately 6,000 emergency responses each year, where someone else has released harmful pollutants or chemicals into the environment. Sustainability is truly a core component of our brand, and we are still in the early innings of telling our full story to customers, our partners, employees and investors, but it's something we are focused on as an organization and are making it a priority for 2020 and beyond. Turning to our capital allocation strategy on Slide 7. We continue to execute on all 4 categories in 2019. We're on track for our net CapEx target this year as we focus on internal capital on the highest levels of return. We've added 2 successful bolt on acquisitions this year to support both segments of our business. We also recently divested a small non core liquids hauling business in Western Canada, which is consistent with our strategy of pruning the portfolio in areas where we believe we are not the best natural owner. We have also bought back a normal amount of shares this year. We continue to evaluate additional repurchases along with repaying debt opportunistically based on timing and market conditions. So in summary, we entered the Q4 of 2019 with strong momentum. We anticipate achieving solid profitable growth in Q4. While we see some small pockets of industry specific weakness, the overall outlook for our markets remains very positive. We remain on track to deliver a record level of annual adjusted EBITDA and adjusted free cash flow in 2019. With that, let me turn it over to Mike Battles. Mike? Thank you, Alan, and good morning, everyone. Turning to Slide 9 and our income statement. As Alan highlighted, we delivered good results across all our key metrics in Q3. We increased revenue by 48,500,000 dollars while growing adjusted EBITDA by $15,300,000 an incremental margin pull through of more than 30%. This quarter saw we saw good growth supported by higher pricing and operational efficiencies. From a gross margin perspective, we saw a 20 basis point improvement in Q3 from a year ago due to better asset utilization, business mix and pricing. SG and A expenses were up $1,100,000 in absolute dollars, but improved 70 basis points in percentage terms. This improvement was driven by a series of cost saving initiatives as well as efficiencies achieved to our Safety Kleen customer care center, which we have invested in over the past 2 years. Using the midpoint of our guidance range, for the full year 2019, we now expect SG and A to be down in absolute dollars with an improvement on a percentage basis of 80 to 90 basis points versus 2018. Depreciation and amortization increased slightly to $73,800,000 which reflects assets we've added from tuck in acquisitions and capital spending. For 2019, we now expect depreciation and amortization in the range of $295,000,000 to $300,000,000 which is essentially flat with prior year. Income from operations increased 22 percent to $80,400,000 reflecting the combination of our revenue growth and improved margins. On a GAAP basis, EPS was $0.65 versus $0.55 a year ago. Our adjusted EPS was $0.72 Our effective GAAP tax rate was 32.8% in the quarter. On an adjusted basis, our tax rate for Q3 was 32.5%. For the full year 2019, we anticipate that our tax rate on an adjusted basis will be in the 30% to 31% range. Turning to the balance sheet on Slide 10. Cash and short term marketable securities at quarterend totaled $329,100,000 up nearly $70,000,000 from the mid year and in line with our expectations. DSL at quarter end was 74 days, consistent with the end of Q2 and a 2 day improvement from year end. Expected a bit more progress this quarter given the programs we have in place and initiatives underway. DSO remains a primary focus of our team. Our debt balance was $1,560,000,000 down $10,000,000 from year end. Our weighted average cost of debt today is 4.6%, down slightly from prior year. We feel good about our balance sheet as it stands today. Using a trailing 12 month adjusted EBITDA and our current cash balance, we were 2.3 times levered at the end of Q3 on a net debt basis. Turning to Slide 11. Cash from operations in Q3 was up 24 percent to $146,200,000 CapEx net of disposals was $54,600,000 up just $1,500,000 from a year ago. Adjusted free cash flow was up 42% for the quarter at $91,600,000 dollars This followed a strong Q2 and keeps us on track from an annual perspective. For 2019, we continue to expect net CapEx of $190,000,000 to $210,000,000 Most likely, we'll be at or slightly above the midpoint of $200,000,000 as we focus on investments around safety and operational efficiencies across our network. During the quarter, we repurchased 68,000 shares an average price of $75.25 a share for a total of $5,100,000 Moving to guidance on Slide 12. Based on our year end performance and current market outlook, we raised the lower end of our 2019 adjusted EBITDA guidance by $10,000,000 to a range of $530,000,000 to $550,000,000 This represents a midpoint increase of $5,000,000 from our prior range and a new midpoint of $540,000,000 would represent a year over year growth of 10%. Looking ahead, we continue to expect adjusted EBITDA in Q4 to grow in the mid to high single digit range compared with Q4 of 2018. Here's how our full here's our current full year 2019 guidance translates from a segment perspective. In Environmental Services, we now expect adjusted EBITDA to increase in the low to mid teens percentage in 2019. This growth will continue to be driven by higher value waste streams, performance in our facilities, projects and increases in various service businesses across multiple regions. For Safety Kleen, we now anticipate adjusted EBITDA growth in the low single digits. We expect the year will be along the lines of what we saw this quarter with profitability growth in the SK branches offsetting a year over year decline in SK Oil. In our Corporate segment, we now expect negative adjusted EBITDA to grow by mid single digits from 2018 due to increases in benefits as we continue to invest in our workforce. We are reiterating our adjusted free cash flow guidance and continue to expect to finish the year in the range of $200,000,000 to 220,000,000 As Alan mentioned, we are increasing our focus on sustainability across many areas, including our workforce, where safety remains our top priority. The top 60 senior leaders in the company, along with the entire operational leadership, had safety as part of their incentive compensation to ensure that we keep our people safe. We are also instituting a new corporate wellness program in 2020 to enhance the well-being of our people, our most important asset. In conclusion, Q3 was a strong quarter another strong quarter for Clean Harbors, led by our disposal network combined with good contributions from all our regions in North America. Margin performance and cash flow generation were excellent in the quarter. Our near term growth prospects continue to look promising and we anticipate a solid conclusion to the year. We are aware of macroeconomic uncertainties that exist, but we have not seen any meaningful slowdown in our core lines of business. We are maintaining a positive outlook and we continue to see favorable trends within our key lines of business. I'd like as I'd like to reinforce each quarter, our goal remains to consistently report predictable results. With that, Kevin, please open up the call for questions. Thank you. We'll now be conducting a question and answer Our first question today is coming from Noah Kaye from Oppenheimer. Your line is now live. Thanks and good morning. Just a couple from me You mentioned at the outset, Alan, that the PFAS opportunity and gridlock in Washington being a gating factor there. It does look like there's been a couple of developments recently. We saw you're participating in a program with Washington State on incinerating firefighting foams. So I guess the first question is just from a technical perspective, are all of your incinerators or the majority permitted to destroy PFAS substances? Have you proven to the regulators that incineration is fully effective as a disposal method? Would it require any CapEx into the plants to deal with PFAS? Just your thoughts there. We do see it's still non HAZ, right? So we're still waiting to get some determinations from the Feds and ultimately how are the states going to administer the programs. But we also know that we have a strong pipeline of opportunities. A lot of them are predominantly to deal with groundwater and in situ kind of treatment systems. And we are essentially booked out with our treatment units, and we're looking at next year to invest a lot more in our treatment plants, so that we could get more and more of those rental units out, not only to support our customers directly, but also to support a number of our partners that would like some of the technology that we have, particularly again on the groundwater. I think it's too soon to tell from an incineration standpoint just which ones we would be earmarking as the regulations come forward here. But obviously, the rotary kilns would be the most likely sites that we have and we have several of our plants the rotary kiln technology, which would be most appropriate. Okay. But from a permit perspective, there's no gating issue there? Yes. No, this is Jim. There are no permits yet because Alan said that it's still nonhance. So until the regulators come, no one has a permit. Yes. And I think we also saw that there may be waste streams coming into your Sarnia landfill, just as some landfills in the state of Michigan, for example, are refusing to take PFAS waste. So, just any thoughts there on maybe understanding how the design standards and the operating requirements of your landfill maybe offer a bit more control over PFAS? Just understanding how that happened? Our Sarnia landfill did go through a pretty exhaustive permit expansion that took about 6 years and was issued to us a couple of years ago. And so that gave us a lot more capacity and meeting a new design standard certainly was part of that. And we also put in the thermal treatment unit there. We have an incineration incinerator operating at that site as well, but it's only liquids only. So that wouldn't be one that would be used for any solid contaminated material. But that particular landfill has got some real unique capabilities to it with that permanent expansion we have. Okay. And then just following up in your comments on IMO 2020, maybe kind of take us through a little bit your thought process right now. What impacts do you expect us to have on UMO demand? How likely is it that you'll be able to put through a price increase as we exit the year? Just your thoughts on how the overall environment is shaping up relative to your expectations and opportunities for pricing? Yes. So I think what we've seen here is the used motor oil that wasn't being re refined through companies like us was going into the utility market predominantly, and much of that market has driven dried up. A lot of the utility market now is being served with this much lower cost high sulfur fuel oil where they have the scrubbers and they have the ability to take this material. Heavy number 6 oil, that is really what's been disrupting, I believe, the used motor oil market. And so the market is somewhat long right now. And we just recently did put out a price increase because of that. And we know that many collectors who are not in the re refining side of the business are going to have some real difficulties getting rid of their oil because of the whole shift that's going on with the high sulfur market. So we feel very good about our position in being able to service our customers, be able to handle more used motor oil. We're expanding our California VGO capability there. The VGO market is really strong right now, so we're not going to be making more base oil just yet, but we are making and converting more used motor oil at that plant. So I think we are feeling very good about the used motor oil side. What we haven't seen yet is any of the impact of swinging some of the material over into the diesel side or the marine diesel side, which subsequently may have a positive impact on the base oil market. We haven't seen that yet. Yes. And Noah, one I want to add to Alan's comments is that although we didn't do a price increase and I think that was as Alan said, we're seeing kind of signs of life, There's not much of an impact in Q4. I think that it does take time to kind of roll through the system. And so I'm not anticipating that being a big lift for Q4 per se. Mike, you anticipated my question. So really this is a benefit to 2020. Is that right? That's right. That's right. Okay. Thanks. I'll turn it over. Yes. Okay. Thank you. Our next question is coming from Tyler Brown from Raymond James. Your line is now live. Hey, good morning guys. Good morning. Hey Tyler. Hey, Allen. I just want to unpack the comments around seeing some industry specific weakness on the macro front. I'm just curious what specific industries or end markets that you are talking about there? Yes. I just think sort of broadly thinking about what you hear about transportation and manufacturing being a little bit soft. I think company or our customer base per se, but that's just sort of the noise that we hear out there that there are some slowdowns. Maybe some of it had to do with the GM strike. We don't know how that might kind of work its way back. We certainly saw a little bit of that in the blended oil market. So there was some impact by that. But it was just a reference that there has been comments particularly about those three particular areas that are important markets for us. Sure. Okay. But then you were quick to note that you do have a healthy backlog in the disposal network. And whenever you're talking about that, is that more on the incineration side or the backlog in the landfill project work? Yes. I think this was a good quarter for our landfills. We do have a big backlog. I think our deferred has grown quite a bit. So that's sort of another sign that we've got a lot of material there. Do you have a comment to? Yes, Tyler. It's over $11,000,000 deferred revenue has gone up $11,000,000 since year end. And so I feel like Alan's comments are not immune to macroeconomic factors, but we see nothing today as we look at the near term, both our pipeline in Q4 and in early 2020, we don't see anything yet. But again, we know that we're not immune to it. That's kind of Alan's point, whether it be in manufacturing, whether it be in transportation, whether it be in utilities. I mean, that's just some of these factors are impacting them, and I'm sure they'll impact us. We just don't see it today. But I think as we finish the year strong, as we go into our seasonally slower quarter, we've got a heavy backlog of material. That's right. And we also have, I think, a very strong pipeline coming out of our sales organization for both projects as well as ongoing waste streams. So I think we haven't yet seen any real impact yet, I guess, what we're saying. Okay. So it feels that the backlog is good. You've got waste in the pipe, so to speak. The incineration pricing continues to have momentum. I think and correct me if I'm wrong, but you have fairly easy comps in the first half from some exogenous events. So I guess my question is why wouldn't ES maybe grow mid- to high single digits next year just outside of the macro really falling apart? Yes, Tyler. We're going through our budget process kind of as we speak right now. And obviously, we're excited about the progress we've made in 20 18 and in 2019. And I'm hopeful that as when we get through that process and we can go and review that with our Board and get their sign off, we'll be able to come back and kind of give you kind of some indication and some thoughts around 2020. That being said, as Alan said, there's a lot of good indicators and we come in with a backlog and a seasonally weak quarter. So I'm optimistic, but I think that it's important that we kind of respect this process and we've been good at doing that and I think we'll continue to do that. Okay. I had to try. I appreciate that. Just real quickly, sorry, a conceptual question, Alan, about Safety Kleen. So am I right, is it about the 2 thirds of the EBITDA is really housed in the branch business with maybe the other third kind of making money on the oil side. Is that conceptually right? And I know that that branch business is very sticky, but it's probably slow growing, Whereas that other third of the EBITDA, the Olin business, that's where you're going to see the influence from IMO and maybe closed loop. Is that the right way to think about it? Yes. Okay. Okay. Let me make sure I had that. And then my last one here. So Mike, I think this is the 2nd or third EBITDA raise this year. So is your incentive comp accrual tracking over 100% here in 2019? Tyler, so it is a second, I think. I don't think we raised guidance in Q1. I think we did it in Q2 and we did it again this morning. But I think that the challenge is that our accruals are obviously booked toward what the bonuses are every quarter. We tune those up every quarter. We're very diligent. That being said, we have some very aggressive safety goals and we're running although we're doing better than last year, we're not kind of getting to those safety goals right now. And as such, that accrual is probably a little lower than where it was last year. But as you can imagine, the base business is doing well. We're really good we're really close to budget. A lot of good bonuses are accrued, just to be fair. But safety is although a great improvement from prior year, and we said internally, we said tough we have high expectations for ourselves, and we're filing a little short of that at the moment. Okay. All right. I appreciate it. Thanks, guys. No problem, Tyler. Thank you. Our next question is coming from Michael Hoffman from Stifel. Your line is now live. Thanks. Good morning, Alan, Mike, Jim. Michael. Ken, let me I want to knock something on the head on PFAS. You're not going to do drinking water. If whatever you're going to do is going to be on people. Yes, exactly. We may support the larger E and C companies out there that need some of the technology and units that we have, but absolutely not, you're right. Okay. And so Alan, you've been at this a long time, and I give you credit for often seeing where the puck goes. Is this an asbestos or a PCB opportunity? I think it's probably more of a PCB, but it's going to take the regulatory driver to make it that way. And so I think, obviously, that is the difficulty right now is to try to understand whether we can whether something will get done in Washington or not. So your view is you need a Fed move, not just the states, because the states are being in front of the feds at this point. Yes. I mean, I think that's typically where the funding comes from and how the states can get more money and make sure that all the states are aligned. I think that's the best place. That's where the money comes from, normally Michael, it's from the state now. Yes, okay. And then you've touched on the unbilled AR. So there is this positive trend that's been happening each quarter and there's nothing to suggest that that trend is changing either when you try and correlate it to a macro? Right. No, I think when we look at the real details behind our agings and where all the components of DSO are. Our buckets of receivable are in pretty good shape. We just need to do a better job of getting our bills out to do a little bit faster, which has the most impact on DSO right now. Okay. And then this is a tough question, but the last cycle, Clean Harbors had some challenges being able to look forward and predict the business as it compressed. What have you done in the business model to improve the ability to predict it? Because there's a slowdown is inevitable, business have cycles. What have you done to improve that predictability this time? I think our exposure in oil and gas is relatively small today. EBITDA is in the $15,000,000 $20,000,000 range versus $150,000,000 range. So, we have divested a number of businesses and sold off a lot of assets in that space as we saw that impact, particularly in Western crude oil and the reductions in the amount of plants that were being proposed and built. And so I think our exposure there is relatively low. I also think that we've put in place some, I think, very good tools to manage the spread in the business, particularly in the Safety Kleen business. When you think about the EBITDA that we got when we bought it in 2012, where we are going to end up this year, we essentially doubled the EBITDA of that business outside of maybe some corporate allocation that you could argue about. But we still believe that there is good margin improvements that could be made in the Safety Kleen business with other initiatives. We're sort of at that 7th inning as compared to where I've spoken before. But I do think that managing the spread is probably the thing that will help us as we hit maybe some type of downturn in the crude oil values, let's say, if it went down to $20 again, I think we're in a good position. Okay. And then lastly on that, just to be clear, Mike, you came into the year thinking you would flat would be good from the SKO contribution to EBITDA, maybe it's slightly down, but SKE was continuing to improve average branch revenues, good solid organic growth there, which is driving operating leverage. And so that's why it's up. That's still the right way to think about it. And then IMO helps next year or if crude oil goes up higher than base oil prices go up anyway, but that's how to think about it? Yes. No, I think that's exactly how you look at it. I think that we had a tough start. As you remember, with some of the flooding and frozen barges and so forth, we had a tough start to the year and that kind of put a lot of pressure on the SK Oil business. I think that but I totally agree with you that the growth is the growth this year is coming from the branch network and better pricing and leveraging that business. Right. Because it's looking like it's mid single digits or better where SKO might be flat or down and there's your low single digit blend. There you go. Yes, sir. Okay. And then I just want to make sure I heard you correctly. You are biasing the free cash flow midpoint or higher. So you didn't change the guidance there, but you're acknowledging the EBITDA trend would lead you to midpoint or higher. Yes, I think that, Michael, the challenge around cash flows, it's very difficult to predict down the stretch. Working capital is volatile as far as when we get paid and so forth and what we owe and when we owe it. And so I think that we were hesitant to kind of raise, although we did raise EBITDA guidance to feel very good about that. I was hesitant to raise cash flow guidance just because there are a lot of ambiguities beyond my control that I want to make sure that I consistently exceed expectations. Got it. Thank you very much. See you on Sunday. Okay. Thanks, Michael. Thank you. Our next question is coming from David Manthey from Baird. Your line is now live. Yes. Thank you. Good morning, everyone. Good morning, David. First off, I think you said you ended the 3rd quarter in a charge for oil position. Did you say that you further raised those charges at the end of the quarter? Just so I heard that right. Yes. Go ahead, Paul. Yes, David. We ended the quarter up a little bit, and we put a price increase in place subsequent to quarter end, actually this month, yes, subsequent in the quarter. Okay. So upward bias there. HCC, when they reported, they sort of had an expectation of choppiness in UMO markets in the Q4. I guess I contrast that, Alan, you sounded very confident that things were going to get better from here. And I'm just wondering what gives you that level of confidence relative to some of the ebbs and flows of the supply and demand in these markets as we move towards IMO 2020? Well, just really just a feedback that we're hearing from our team in the oil side of our business where purchases of 3rd party oil or swaps that are going on or traders that are trading in UMO basically shut it off from any further sales. I mean, we've seen some of the bigger trading firms say, look at the utility market is closed. We don't have an outlet. We have product really sitting stranded in some cases, and we're not going to be taking on anymore. So now that's particularly on the 2 coasts, obviously the East Coast and West Coast are where you really see that. And maybe Heritage being in Indianapolis maybe doesn't get as much color around that as we see it. But we're pulling oil from all over North America and we get a good idea of sort of where inventory levels are and what outlets are at. So I feel pretty confident about it. Okay. That sounds good. And further on pricing beyond the charge for oil and you also gave us incinerator pricing. Were you able to achieve price in any of the other lines of business, the industrial environmental services, parts washing? I would say on the industrial side, particularly after the Veolia acquisition, we have really done some deep dive in what probably the top 30 or 40 contracts. And in some cases, we have lost some of that business as we were more aggressive in our pricing strategies there to try to get more of a reasonable margin for some of the business that we acquired. So I think overall, industrial will be down because of some of those initiatives. But we also think that in other cases where we have sort of a nice bundled service approach to some of these customers where we're getting their waste streams, we're doing their industrial work, we're doing their emergency response work, we see some opportunities for price improvement in those scenarios. So but I would say just pricing in general and industrial has been a real focus of ours. Okay, sounds good. Thank you very much guys. Okay. Thanks, Tim. Thank you. Our next question is coming from Jim Ricchiuti from Needham and Company. Your line is now live. Thanks. Good morning. Question on SG and A, you seem to be doing a nice job on that score. And I know you're early in the process and thinking about 2020. But I'm just wondering, is there anything you can say as it relates to SG and A expense as a percent of revenues going forward? Is there much more that you can get, do you think, from that area? Yes, Jim. So we're not going to talk about 2020 in as part of this process, but we didn't see anything unusual this year. We did do some like the team is always trying to think about not just the quarter in front of us, but next year and the year after some of the moves we made in 20 18 'seventeen of consolidating operations are starting to pay off this year. And there's no reason to think that we're not going to start thinking of some more creative ideas in 2020. So can it get better? I'm hopeful. But I think that the team is always thinking about kind of how to take out costs, how to consolidate locations, how to do things more efficiently, how to put better systems in place, all those things are to drive kind of SG and A, SG and A as a percentage of revenue. All those things kind of allow you to get that better leverage. And the team does an excellent job of doing that, led by Alan and the whole organization focused on that exact point. Got it. And just turning to the ES side of the business, you noted a couple of areas of pockets of weakness, but it sounds like what you're seeing is actually fairly healthy demand. I'm wondering, are there any parts of the market where you're seeing unusual strength, a better momentum that you would have expected? Nothing that I can Mike, I'm not sure if you have anything that comes to mind. I mean, we've known the chemical industry is really strong for us right now. That's what I'd say, Jim, is that the chemical investment that's being made, especially in the Midwest and in the Gulf, continues to kind of pay dividends for us. I mean, we were and we have that we have the network, we have the teams in place there. I mean, that has been a winner for us for a year or 2. I think that will continue to be a winner for us prospectively. I just think that that type of investment that's being made, 1,000,000,000 and 1,000,000,000 of dollars being invested in the region and the low price natural gas and ability to labor. I think it's really been helpful for us and that sees no sign of slowing down in my opinion. And then final question for me. I'm just wondering if you could elaborate at all on just where you are in terms of reintegrating the sales on the closed loop side. It sounds like you've made some changes. And I'm wondering what we might anticipate near term from some of the internal changes you've been making. So I'll start now and feel free to jump in there. We are up over 40% in the direct lube kind of year over year. Now that's not our own internal with our numbers that we have higher expectation for that. We've made a lot of investments in people and processes. We're hopeful that there's further progress. But I think that I think on just taking a step back and looking at it from here, 30,000 customers, good stick rate, good growth every month with more volume being and the team really excited about it. I'm hopeful that continues to grow. Is that going to be a needle mover in 2020? I hope so. I'm not sure it will or not. But I do I am excited about the team is very excited and I'm very excited about the growth that they've made. Again, not as fast as we wanted it to do. A lot of things we had to work through, but I think the team is really excited about the prospects going forward. Yes. Certainly, customers are adapting to our products and they like the value proposition that we're offering them. So we're seeing, as Mike said, good repetitive sales with over 30,000 customers. And so as long as our team continues to drive those kind of subscriptions, where we're just building more and more of our customer base, we're going to continue to see a nice steady growth in that business. Last point on this one, Jim, is I think that the sustainability angle that hasn't been a focus of ours, it hasn't been a focus of our customers over the past couple of years, starting really to take hold and take root. I mean, we are this is all recycled oil. It's at higher quality than from crude and we're really excited about the prospects over the long haul. It's again, it takes longer to change attitudes and so I think that those attitudes are starting to change. Got it. Thanks very much. Thank you. Our next question is coming from Larry Solow from CJS Securities. Your line is now live. Great. Thanks. Good morning, guys. Just a couple of quick follow ups. Just on the back to the on the pricing on the incinerator side, You guys have done an excellent job and you focus much more on the high value waste streams and you've gotten Eldorado performance really improved a lot. And I think you had an easier comp too as you go back a couple of years ago and you've built on that this year. Going forward, offset some of offset some flattening of volume in some pockets that you spoke of? Well, I think we just went through sort of a 3 to 5 year strategic plan. And when we look at debottlenecking and opportunities to continue to expand our incineration capabilities and adding more processing, whether it incineration capabilities and adding more processing, whether it be drum shredding, to be able to process more drums faster or ash handling and other kind of technologies. We see real opportunity to continue to get more tonnage through the plants. Clearly, we have a high demand situation right now, and we think that's going to continue to grow because of the whole renaissance of the chemical industry here in the U. S. Low price and natural gas is really, we believe, what's brought back a lot of major chemical companies here. So I think that's how we think about the incineration business, Larry, right now. Okay. And on the mix, specifically, you mentioned you continue to shift towards more highly higher halogenated compounds. Is there Eldorado, is that still room for improvement there or is it now sort of handling the what you call the nastiest of the nastiest waste? Well, that plant that brand new plant there, as you know, was designed to handle those more difficult type streams. And so we've continued to ramp that plan up. We're still not where we want to be with the throughput of that facility, but we are the team has really made some great progress since its initial start up there. And we do have some additional investments being made in El Dorado, which we hope will allow us to take even more of those materials through the plant because it's not just getting the material into the incinerator, but it's actually getting the material prepared and able to be efficiently incinerated within the plant. So a lot of the preparation side of our incineration business, we can add a lot more value to. Okay. And just switching gears on Safety Kleen on the closed loop, obviously, it's grown rapidly, as you said, but from pretty small numbers. And you talk about a little bit of internal reallocation of investment and whatnot. Potentially, do you still think maybe there are some external opportunities you might be able to make to sort of kick start it a little bit more? I think so. I mean, it's about a 2,300,000,000 gallon market, and we're just a tiny, tiny fraction that you know. And so to get to where we want to get our base oil, blended oil split, which is sort of shifting it from seventythirty to sort of thirtyseventy blended now. The market is there. We've been adding people. We've been bringing on more experienced folks to manage that business. We have a new leader in Craig Lenington, who's running our SKUEL business, who came over from Shell and Jiffy Lubes because he's got a lot of great experience. And so we have high expectations that we're building the right team now to fine tuned the fine tuned organizational structure, which you've mentioned last couple of calls. It sounds like you're certainly starting to reap some of that benefit. Do you see that sort of are we in the early innings of that? Sometimes these things take a while to really to bear fruit. So perhaps that you'll benefit that for the next several years going forward? I think as we look at the regional structure that we put in place 18 months ago or so, the team has really done a nice job of tying in our field, our tech, our industrial and now even getting Safety Kleen closer together with that new regional structure is something that we're really working on to kind of build more of a single platform so that even though we'll continue to have Clean Harbors and Safety Kleen as our brands, we know that from a service delivery, we can work closer together to service each other's customers, particularly as we have grown in areas like our retail business, where there's tremendous opportunity to leverage each other's service Okay. And just one last question, if I may. You Okay. And just one last question, if I may. You mentioned sort of you recently I think you said internally you guys sort of discussed a 3 to 5 year outlook. I know looking back maybe 10 years ago, something you had put out sort of a longer term outlook and that was when your company was somewhat different and so more oil focused. You haven't put out sort of that longer term number. Any thoughts going out over the next 6, 12 months where you might discuss a little bit more of long term nature and what you think the business can do? Yes. Why not, Larry? I think we certainly should think about doing that and sharing sort of our long term vision with you and The Street. So let us put let's think about that and get back with the team. Awesome. Thank you. I appreciate it, guys. Yes. Thanks, Larry. Thanks, Larry. Thank you. Our next question is coming from Jeff Silber from BMO Capital Markets. Your line is now live. Thank you so much. Just a couple of quick follow-up questions. When you were discussing the Environmental Services segment, you talked about some major ER events that contributed, I think, about $8,000,000 in the quarter. Are those all done? Are we going to see some kind of roll off into the Q4 as well from that? Probably the one major one is still ongoing. And so we continue to work on a pretty large event down in the southeast, a water event. So I would say that particular one. And I think the wildlife reserve is still going as well. So I think a couple of those were still ongoing here in the Q4. Yes, Jeff, pretty small, but yes, there'll be some rollover effect. Yes. So smaller than the $8,000,000 you saw in the Q3? I believe so, yes. Yes. It's always difficult and there could be others that could come on. I mean, it's hard to very hard to get to maximal, thanks. That's fair enough. And then in your prepared remarks, you talked about adjusted EBITDA guidance by segment. Forgive me, I kind of cut out here. Was that for the Q4 or was that for the year as a whole? Jeff, what we do is we always give guidance for the full year by segment, and we adjust that accordingly as the business has changed. So that would be you can just do the 9 months and back into it. Got it. Okay. Thanks so much. Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to management for any further or closing comments. Okay. Thanks, Kevin. Thanks for joining us today. We're participating at the Stifel event and presenting at the