Cool. All right, let's go ahead and get started with the next presentation. Good morning for day two, the Raymond James Conference. For those that don't know me, I'm Tyler Brown, Senior Analyst here at RayJ. I cover a variety of things. You've maybe seen me in a presentation already, but I do the waste industry. We do heavy construction materials as well as some transports, which we have later on today. This morning, I'm very excited to kick it off with Clean Harbors. Presenting today, the company's Co-CEO, Eric Gerstenberg, the company's CFO, Mr. Eric Dugas. Jim Buckley is out in the audience. There's Jim. Does a great job on the IR effort. I think, you know, at this point, you guys have been coming down for a few years.
I think a lot of people kinda know a little bit about Clean Harbors, but the reality is Clean Harbors is a complicated business. You have a lot of different lines of business. You do a lot of different things. I know we don't have any slides, but it is a generalist conference. Eric, why don't we just kinda get kicked off and maybe just tell us a little bit about who you are and what you do. We'll kind of jump into a Q&A. There's a lot of people, so if you guys have questions, please let me know. We can do that interactively. Eric?
Great. Thanks, Tyler, and thanks for everybody for joining us today and all the interest in our company. Our mission as a company is really based around sustainability. Our job is to make sure that we're creating a cleaner, safer environment through the proper disposal and recycling of hazardous waste. We have a great business model. We're a really resilient business. We have 24,000 employees strong today. We manage over 340,000 customer locations. We have 900 branches located throughout all of North America. We co-locate in our branch offerings six different business units under two reporting pillars. Let me first touch on our environmental business. Our environmental business has four different business unit branch types, and our Safety-Kleen Sustainability Solutions has two different branch types.
Under the environmental services side, we have a technical service branch business unit. What they do is they go out and package and collect large quantities of hazardous waste that route into our network. We also have our Safety-Kleen Environmental business unit that collects smaller quantities of hazardous waste at our customer sites, servicing smaller customers, particularly around manufacturing and automotive. We also have a field service branch type that responds. It's about $1 billion of our $6 billion of business that responds to emergency responses and supports the utility industry. All of the major utilities throughout North America are part of our business platform, customers that we serve. Last year, our field service business unit responded to over 21,000 emergency response events, both large and small. Finally, the fourth business unit within our environmental services is industrial services.
In industrial services, we work for the largest chemical refining manufacturing plants throughout North America. We have embedded people. Our people work on-site at our customers, providing services in collecting hazardous waste to route into our network. Of our 24,000 employees, we have 2,600 day in, day out that work actively providing these environmental services at our customer locations. That's a high-level look at our Safety-Kleen Environmental. On the Safety-Kleen Sustainability Solutions, we are the largest collector of used motor oil. We collect over 250 million gallons of used motor oil at these customers, 160,000 customers that we collect from that also need our environmental side.
We collect that used motor oil, route it into a wonderful refinery network, we make a great base oil product and blended oil products that we sell to some of the largest refineries. They use our blended oil products to brand under their brands. It's a great sustainable model that complements our environmental services. That's a high-level look at the beginning of our business model, Tyler.
Okay. I'm a simple guy. You know this. When I think about your business, it's kind of the collection, the transportation and disposal of hazardous waste. Maybe we'll kind of walk through that whole supply chain and start on the collection side. You talked about environmental services, you talked about field services. Just talk a little bit about what you do for customers, helping them manage the front end, which is collecting the molecules, and then we'll talk about how you get them to their final destination. I'm kinda curious, in terms of the competitive mode, is the collection side more competitive than maybe the back end? Maybe we can talk a little bit about that.
That's great. That's great. Let me go back to the point about our 900 service branch locations and those 6 different business units that we have. Those service branch locations, in many cases, we have co-located business units. Why do we do that? We do that because we offer over 60 different lines of business to our customers. Large customers, such as Dow Chemical, they need 40 of our 60 lines of business. Our service branches, when they're going to Dow sites, realize that they have 40 different products that they can sell. Our sales teams that are aligned to those business units are cross-selling all those lines of business at that customer, and their job is to go out and work on their sites.
That was alluding back to the 2,600 people I talked about, but also drive out our equipment, various tankers, box trucks that go out to these customer sites and collect that hazardous waste. That service side is really what that branch offering is. They are the spokes. We have a spoke hub final facilities network that we'll get into in a minute. Those branches work, and they have competitive dynamics depending on the geography where they are. We're the largest collector of hazardous waste, so there's a lot of fragmented pieces or collectors out there as well, but we certainly have the dominant share.
Right. Okay. We have kind of collected the molecule. We're out there, you know, doing remediation, all sorts of different work. I think one of the things that is underappreciated in your business is your transportation network.
Yes.
You know, you guys have an extensive portfolio of assets, all sorts of different types. Maybe talk a little bit about that, because once we kind of go through the collection process, we've got to get it to that more technical service piece or final disposal. Talk a little bit about the mode and the competitive advantage you have in the middle part of that supply chain.
Great. Great. Nationally, we're the 14th largest private motor carrier out there. Pretty impressive statistic. Above and beyond our fleet of trucks and vehicles, we also manage over 2,600 different rail cars. A really vast collection network of rail cars, van trailers, tanker trucks, vacuum trucks, a lot of specialty equipment that provide these services. In addition to that, we also have six of our own refurbishment build-out centers. We really take and build our own equipment and refurbish our own equipment, which gives us a competitive advantage. We get feedback from our drivers and our customers about different shapes and sizes and tailor our vehicles to meet our customer needs and our driver needs. Very important. That network of fleet of vehicles transports all that hazardous waste into our back-end disposal network and technology.
Impressive footprint of vehicles and capabilities servicing all these different types of waste streams we see.
Right. Okay. The molecule's been generated, the molecule's been moved. Talk about the final end disposal. You guys have probably the widest array or portfolio of disposal options. It's a huge competitive moat. Let's kind of just talk a little bit about that, what you do on the back end.
Yeah. We have a unparalleled network of disposal and recycling facilities. Really, really unique stuff. Let me start by talking about our hubs. That starts where we talk about the service branches as the spokes. They are traditionally collecting and routing material back to our hubs. Our hubs start as what we call TSDFs. We have about 33 of them. Those TSDFs, Treatment Storage Disposal Facilities, they're aggregators of hazardous waste. They bulk consolidate. We put things into tanks, we commingle. Through those TSDFs, we make it more efficient for long-haul transportation and rail and tanker trucks and van trailers to our really unparalleled network of disposal and recycling facilities. Going top to bottom after our TSDFs, we have 10 incinerators throughout North America, and those incinerators manage approximately 70% of the commercial incineration waste that is generated today.
Pretty proud of that, strong footprint. We just completed last year bringing a new incinerator online that we built. It was a $230 million capital investment in Western Nebraska that complemented a site we already had there. Very difficult permits to get. Really proud last year of how we brought that unit online and managed over 38,000 tons in a startup mode bringing that unit online. 10 incinerators. We also have a collection of seven landfills, hazardous waste landfills that we manage throughout the U.S. They are what's called Subtitle C landfills. What does that mean? That means that they're taking materials that get stabilized and have a double liner. Not like your traditional Subtitle D trash landfill, more around and built around hazardous waste.
We also have 11 wastewater treatment facilities that take acid material and caustic material and neutralize it and treat it for discharge. We also have eight solvent recycling facilities and then nine refineries that are taking that 250 million gallons of used motor oil and recycling and making a wonderful base and blended oil product.
Yeah. Perfect. Obviously, I think we can all say an extensive portfolio, but I want to touch on the incinerator. You said if I just kind of parse out and think about it specifically, 70% of the commercial market is maybe Clean Harbors, but there's more than just the commercial market. There's an entire captive market where Dow or DuPont or whoever may own a captive incinerator that is only, you know, used to burn their own waste. The number of those have been going down for decades. Can you talk a little bit about that opportunity longer term for you?
Sure. Captives, as Tyler just alluded to, is when one of our customers has built out their own incinerator for their waste streams that they manufacture or make as a byproduct of all the great products that they make. If you think about 20, 25 years ago, there was approximately 90 different captives throughout North America. Today, there's about 40 different captives. All of those captives owned by our customers, we service those customers for other environmental needs. We're pretty close to them. Not only do we manage their environmental needs, but we help them to evaluate their long-term strategy. As the suite of products that they're making has changed, their incinerators that they've built have not really kept up with that change.
The utilization, the amount of material that they put through their own units has declined. Our estimate today is that for those 40 incinerators, captive incinerators, their utilization on an annual basis is probably in that neighborhood of the 30%-50%. Dramatically different than how we operate our utilization of our plants, which is in the mid-80s to 90%. They, they really have, some of them, have a cost evaluation to do, and that dovetails into an opportunity for us to work with them on really managing all of their needs, take that incinerator offline, eliminate the environmental aspects of it. Let us do our job, let you make your sticky stuff or your chemicals, your products.
We'll manage all your hazardous waste into our network, and that's part of why we continue to think about evaluating our capacity. There's about 500,000 tons of captive waste being incinerated out there, those customers generate opportunities for us. We were really successful four years ago, five years ago, working with 3M. 3M had the largest captive incinerator in North America. We worked a great deal for them, so they could go make sticky stuff and all the wonderful products they do, shut down the incinerator. We'll manage and take down the incinerator for you, we'll manage all those waste streams that you have in your 80-plus sites into our network and give you guaranteed capacity. That's the type of opportunity that continues to present itself for us.
Yeah, appreciate the 3M example. That was very interesting. A very idiosyncratic story that could be a benefit. That's a long sales cycle, so we'll see how it goes. Something else that's very idiosyncratic to you is PFAS. I know, Eric, you actually testified in front of Congress. Can you talk a little bit about...? I'm still, frankly, again, I'm a simple guy, confused as to where exactly we are in this whole PFAS cleanup story. Maybe you can give a little bit of detail and talk about the next few years and what you see there.
Sure, that's great. PFAS is a chemical that's been manufactured long time ago and helps to repel water and is called a forever chemical. That forever chemical has penetrated into our groundwater, into contaminated soil, and it's a very hazardous material and causes effects of like cancer. We're providing solutions to manage the environmental cleanup of PFAS contamination. We have a Total PFAS solutions. What does that mean? That means that we can go out and work with our customers to sample their contaminated soil, their water. We can provide analysis, and we can provide the proper management disposal of that. We have drinking water systems. We have industrial water treatment systems. We offer our Subtitle C landfill solutions. We offer our incinerator solutions. Why is that important? Because there's different thresholds of that PFAS contamination.
The higher the contamination really suggests that that material should be excavated and sent for incineration. Some of it that's lower, drinking water, industrial waters, that has to be treated at a lower threshold, and we provide treatment systems to do just that. When Tyler alludes to going in front of Congress and the Senate, I went in front of the Committee on Environment and Public Works. Also had the opportunity to meet with Lee Zeldin, who is the head of the EPA. One of the things on his top priorities is to make sure they institute more governance around PFAS regulations by actually creating their own thresholds of what requires what type of disposal technology and remediation and cleanup.
We as a company, we actually, when I was testifying in front of Senate and meeting with Lee Zeldin, laid out what we believe based on how we're managing our customers, what we believe those thresholds should be enacted. That's today how we're operating with our customers. Depending on their contamination level, we're gonna suggest a path to limit your long-term liabilities, to clean up your sites and manage it into our network. We have the capacity and the wherewithal and the technology to be able to do it for you today. That's what we're pushing with Congress and the EPA to get enacted.
Yeah, perfect. Today you're doing PFAS, PFOS cleanup work. Eric Dugas, can we talk about financially how big is that business? I know everybody wants me to just put it in my model real simply, but the problem is that that touches many different pieces of the ES segment. Maybe talk just a little bit about it from a magnitude perspective and what you see maybe over the next few years.
Sure. Sure. Maybe before I jump into that, maybe just to wrap up this last section, because I think there's one piece we talked about the great collection assets we have, the great transportation assets we have, and then lastly, and most valuable, probably the disposal assets. When you think about the competitive moat, obviously there's a competitive moat in each of those three areas. I like to think about the competitive moat as that entire process. When you think about Clean Harbors, and you think about our customers, and you think about the types of waste we're handling, you know, if I'm a customer, I wanna go to one company to be able to handle all three aspects. You know, the handling and collection upfront, the transportation, as well as the disposal.
From a customer perspective, to be able to come to a company, Clean Harbors, that can provide them those services coast to coast across North America, can track that properly through our proprietary software, and then know that we'll handle it in a safe way. We have a world-class safety record. That really... Those three things combined, I think creates the real competitive moat that gives the business overall value. When you think about PFAS, going back to your question, Tyler, this past year we did about $120 million of PFAS. Just like the three aspects of our business, our Total PFAS Solution includes, you know, remediation and handling of the PFAS materials up front. It includes transportation and then ultimate disposal.
We are doing more water filtration than I think we probably thought we would a few years ago as it relates to PFAS. When you look at the $120 million, most of that revenue is gonna be within our technical services group. That's where most of this is. We're seeing the pipeline in that business growing 15%-20% on a quarterly basis. The revenue grew about 20% in 2025, and that's what we're projecting in our guidance for 2026 is another year of, you know, 20% revenue growth. A lot of people ask us, "Hey, are we at a point where we should really start seeing some steep increases in revenue?" You know, we're not guiding that. We're not guiding an inflection point quite yet.
I think as we get more rules and, you know, as we, quite frankly, I think help in defining those rules, you know, this is a long-term opportunity for Clean Harbors. We can provide all aspects of PFAS cleanup, and we think we're in a really good position to continue to grow, but probably a long-term opportunity.
Perfect. We've kinda gone through, again, a couple of idiosyncratic opportunities with captives, with PFAS. Reshoring is also a big opportunity for you. I feel like you guys are at the tip of this spear. The interesting thing is when I think about high tech or pharmaceuticals or chemical investments or even auto, you know, on the back end, there's going to be a hazardous waste stream. Talk about your exposure to kinda the whole nearshore, reshore theme, because again, that could be something that plays out over the next couple of years.
Yeah, we certainly have customers that we're already seeing the benefits of reshoring drive volumes into our network. We're also working with customers that have a long-term path over the next three to four years to build out larger sites in the manufacturing of their pharmaceuticals and semiconductors and, to name a couple, that are working with us to help make sure that as they bring their plants online, they get a secure hazardous waste disposal agreement. Our network, our footprint allows for that. Some of the benefits that we've been seeing already when we think about our environmental services that grew in the mid-to-high single digits, our Safety-Kleen Environmental, our Clean Harbors Environmental, those grew last year organically in the mid-to-single upper digits and double digits.
We're seeing that effect already there, and we're seeing this trend that longer term over the next couple, three years as they build out their footprints, that we're there to be able to provide the total solutions that we've been talking about this morning.
Okay, perfect. Sorry. Now we've kind of even woven in a third kind of idiosyncratic story. Let's kind of park this truck. I mean, at the end of the day, what should we be thinking? I mean, you guys hosted an Analyst Day a few years ago. When you think about it and you kinda sum it all up, I mean, what is the algorithm that we should be thinking about over and through a cycle for Clean Harbors?
Yeah, I mean, I think, as Tyler alluded to, we put out kind of a Vision 2020 statement a few years ago, with some metrics around growth. You know, when we think about our business, think about top line, you know, the business is, you know, driven largely through GDP. We think we have some competitive reasons that we should grow GDP plus kinda 1% - 3% top line. Then from an EBITDA perspective, probably growing long term a couple of basis points over that. That's kinda the algorithm we put out. What gives us confidence to grow above GDP? Well, a few things.
I think all of the attractive assets we have in the moat does provide us, as long as we continue to provide great service and ability to execute on pricing strategies and really gain that, especially as some of these tailwinds come on from reshoring, from PFAS and things like that. You know, looking for growth there. When you think about free cash flow, free cash flow is a very important metric to us. I should mention too, our margin growth, which leads to free cash flow growth. You know, our margins have grown about 800 basis points in our Environmental Services segment over the last eight years and about 500 in the last five.
We've done a really great job driving those margins through volumes, incremental capabilities, pricing strategies, but that has now given us a free cash flow conversion rate of above 40%. We finished 2026, excuse me, 2025 at about 42% on an adjusted free cash flow basis, and really looking to target and stay above that 40% free cash flow conversion kinda going forward. That all gives us a super strong balance sheet, low leverage, and feeling really good about the future in terms of continuing to grow our business from that strong balance sheet.
Okay. The organic side of the business sounds great, very cash generative. We all love that. Part of that Analyst Day too was about external capital deployment. Now we could all argue whether that was good or bad over the last few years, but can you talk about your M&A strategy? It's probably been on the light side the last couple of years, but if we go back maybe five, it's been actually pretty good. Maybe if you could just talk a little bit about the external growth opportunities. This is still a fairly fragmented market, but there are also other, you know, players in the market that have interest in these assets as well.
Yeah, great, Tyler. Throughout the history of the organization, 45, 46 years being in business, we've completed over 85 different acquisitions, large and small, of how we use that to build the company on top of the organic growth. We're very, very disciplined about what we look at, how we look at it, our financial metrics, and making a deal attractive to us that we think will fit under our swim lanes, our different business units, and integrate it properly. Being good at it, we've been very surgical about looking at opportunities. We have had last year was a little bit slower than previous years, but we were still active. This year as we start into 2026, we see more opportunities on the surface. This year compared to a year ago at this time seems a little bit more active.
One of our most recent acquisitions that we announced in our earnings just recently on February 18th was this acquisition of what's called DCI, their environmental services division. They had five locations. They generate about $40 million in revenue. Not big overall, what's great about it is they're bolt-on locations to our field services network, to our technical service network, and it also comes with five different disposal facilities, four of which have treatment discharge permits. Really nice bolt-on fit. We're seeing a lot of activity in that space and we see others, and we think we have a path to continue to build on that as we go forward. We're gonna continue to be very disciplined with our financial metrics.
Yeah. Perfect. you know, Eric Dugas, you're in an enviable position, right?
I, I-
Balance sheet's at 15-year low in terms of leverage. We've already talked about inorganic or external growth opportunities. There's even organic growth opportunities. I think there was a $50 million vac truck, you know, announcement last quarter. You know, when we think about capital allocation, how do you think about deploying capital over the next few years?
Yeah. I think, you know, despite 2025 and not being able to close a deal, I think from a capital allocation perspective, you know, very, very strong year. You know, we always balance when we think about our capital allocation strategy, we balance acquisitions with internal investments, with repurchases, and then staying after our debt portfolio. You know, in 2025, we bought back $250 million worth of shares, delivered that value back to shareholders and really decided to do that because of the cash we were generating that I spoke about earlier and because, you know, those acquisitions, you know, got to a point where we just didn't feel like it was the right move. We allocated capital in other ways.
We announced, Tyler alluded to a $50 million rolling stock investment that will roll out evenly over the next two years. We'll deliver $12 million-$14 million of Incremental EBITDA when it's fully baked in. There's lots of projects that we do internally and that we have on the docket to continue to grow the business and use the cash that we're generating in the most accretive way possible. In terms of repurchases, we've had a long history of repurchases. Last year kinda was a record year in terms of the volume there, that will continue to be an avenue where, you know, absent acquisitions or, you know, with a strong balance sheet and a lot of cash, we can fund the internal investments for growth.
We'll look to continue to kinda return capital to shareholders through repurchases.
Perfect. Okay, we've got a couple of minutes. We've got one of two choices. We can talk about base oil, or maybe we could talk about technology 'cause that's actually what I'm more...
Let's talk technology.
Let's talk technology. I'm with you on that. Alan McKim, interestingly, the founder of the company, has moved from the CEO role, I think, into a CIO or CTO, I forget exactly, role. Obviously, technology is very near and dear to you all, and you have a complex business. I mean, I think we would all agree. When we think about technology over the next few years and call it AI or machine learning, whatever you wanna call it, I mean, where does that play a role for Clean Harbors, and where can that help you?
Yeah. That's great. We're, we're very focused on how do we utilize AI in our business to be better at servicing our customers and be more efficient within the organization. Today, we have about 40 different active AI-type projects, 17 which have been deployed already. We're actively involved. We've taken our structured and unstructured data. We've become able to mine that through our own internal AI team of development. A few examples of that, we created a worksheet, an electronic worksheet that looks at how we've billed customers in the past and contracts that we've had with customers or have today with customers, is able to extract that data and be able to offer it up on an electronic worksheet.
If I'm a supervisor today working for Clean Harbors in the field, I get offered up to me an electronic worksheet on an iPad, and that's telling me everything for that customer that we can bill for. What's great in that is that, number one, it's making our workforce more efficient, and number two, it's making sure that everything that's on that contract, that we're preventing leakage, that we're billing for everything that we should be billing for. What we do is really hazardous. It's really hard, tough work, and we wanna make sure that under that agreement and contract or quote, that we're billing everything that we can bill for.
Another example of that is when we go out and package laboratory chemicals at labs that have off-specced or dated, we've created a tool, a packaging tool, that a employee can open up on their laptop, and it tells them, based on that, the hazards of that chemical, how to package it, how to ship it, how to create DOT shipping documents, how to create labels for the drum. When you think about that, instead of having to have a learning curve of a year to bring a new employee on and learn about how to package chemicals, we've reduced that down now to three to six months. We're doing it safer. We're doing it more compliant. Our employees are more efficient. A couple of great examples there of how we've already deployed AI in our workforce, and we'll continue to do that.
We believe we're the leading edge of technology in the environmental business. Multiple different products, projects that I talked about in all different areas from billing, invoicing, to employee efficiencies. We're dug in, and we're dug in deep, and we're gonna continue to become more efficient and service our customers better.
Excellent. Right on time. Thank you, guys. Breakout downstairs. Thank you all for joining.
Thank you all.