Q4 2019 Earnings Call
Greetings and welcome to the clean harbors Inc. fourth quarter 2019 conference call.
This time all participants are in listen only mode. A brief question answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Sure My during this conference is being recorded it is now my pleasure to introduce your host Michael Macdonald General Counsel for clean Harbors, Inc. Thank you Mr. Mcdonald you may begin.
Good morning, everyone.
With me on today's call It Chairman, President and Chief Executive Officer, Alan S., Mckim, Ethiopian Chief Financial Officer, Mike battles, and SVP of Investor Relations jump Buckley slides for today's call are posted on our website. We invite you to fall want.
Matters when discussing today that are not historical facts are considered forward looking statements within the meaning of the private Securities Litigation Reform Act 1995.
Participants are cautioned not to place undue reliance on these statements, which reflect management's opinions only as of today February 26 2020.
Permission on potential factors and risks that could affect our actual results of operations is included in our seen she filings.
The company undertakes no obligation to revise publicly released 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 harbors believes that such information clutch and 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 and 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.
Starting on slide three.
Before discussing our financial results I wanted to speak to our safety performance I'm proud to report that 2019 was the best safety or in our history with our total recordable incident rate and other key metrics at record lows.
For the past five years, we've seen our focus on safety drive real positive result for us.
Helped us protect our workforce better and better each year.
Our highest priority at the company is that each employee goes home uninsured everyday.
Turning to our financials, we concluded 2019 with another quarter of profitable growth in Q4 led by our environmental service segment, which achieved better than expected results on a combination of higher landfill in the incineration volumes project wins and strengthen our field services.
On the topline the SK branch business and our field service group, offset some industrial and energy related weakness and sluggishness and SK oil.
Revenues are up 1% for the quarter and favorable business mix drove an 8% growth up adjusted EBITDA.
And 800 basis points improvement in margin.
For the full year adjusted EBITDA grew by 10% on a 3% increase in revenue and we generated record adjusted free cash flow of $208.5 million.
Credit for our results belongs to our entire team who normally helped US set some financial records, but did so safely all year.
Turning to our segment results beginning with environmental services on slides for.
Revenues were up modestly as our facilities and field services offset some softness in industrial and energy services.
High single digit adjusted EBITDA growth fueled 140 basis point margin improvement.
As a segment top 20 per cent for the third straight quarter.
As it relates to our facilities it was largely a volume story this quarter.
Incineration utilization increased to 89% and landfill tonnage tonnage was up 40% from a year ago.
We had some sizable projects that fed both our instead of writers and landfills.
Our average price per pound for incineration in Q4 was flat with a year ago, primarily reflecting the the effects of a large project that we did in Q4 2019 that delivered a significant amount of low price volume.
Average incineration price per pound for the full year rose, 11% from 2018, largely due to enhancements at our facilities, which can now handle a mix of higher value waste streams.
Well there were no major emergency response events in the quarter for the full year, we recorded approximately 15 million of E revenue.
Moving to slide five safety Kleen revenue was up 2% on growth in our SK branch business and pricing of our core services, which offset yearend weakness in base oil and blended pricing.
Adjusted EBITDA in the segment dipped, 1% and margins declined from a year ago due to a lower pricing and SK oil and a drop in value a certain byproducts and are we refining process in the early days of IMO 2020.
Parts washer services were up from a year ago.
We still collection volumes were healthy at 55 million gallons well the charge for oil rate that was higher than a year ago and above Q3's rate.
Our direct Lou volumes grew by approximately 30% in the quarter.
And the business accounted for 7% of total volume sold in Q4.
Total blended product sales in Q4 were up 24%.
Were 24% up from 22% a year ago and for the full year of volumes of direct lubes sales grew by nearly 25%.
And we continuously.
Steadily grow this business and we believe will ultimately reach our long term goals for blended volumes as the market for sustainable products continues to expand.
Turning to our strategic update on slide six outstanding team of employees is integral to our success and a competitive differentiator for clean harbors.
During 2018 and 2019, we made substantial investments in our workforce.
Including greater retirement, and health care benefits as well as higher employee compensation.
In 2020, we are again, raising our form 10-K contributions and absorbing all health care cost increases.
Ill thing and millions more of incremental spend on our workforce.
In 2020, as we have in prior years, we're pursuing a broad array of cost savings that we believe well more than offset these investments.
Profitable growth remains a primary focus for us in 2020.
We've taken significant steps forward over the past three years, and we want to extend that momentum.
Our disposal recycling network will continue to be the cornerstone of our success in the coming year, we intend to further leverage our facilities and service locations through pricing and mix initiatives, along with greater project volumes and cross selling opportunities.
We're also in the early stages rolling out new ecommerce platform to enable customers to request our products and some services online.
By taking a next day delivery approach the delivering our products and services, we intend to make clean harbors and safety kleen much easier to do business with.
We've always been forward thinking company as it relates to technology in our industry and we think ecommerce holds great promise for US and in addition, we're rolling out the use of our AI technology to have our customers more directly interface with our waste profile systems to expedite the approval and acceptance process for hazardous waste disposal services.
Customers will be able to use our ecommerce platform to schedule a long ways pickups, the customer experience be much more improved and our ability to manage orders would deliver services will be enhanced as well.
Another key strategy for this year is capitalizing on the shifting market conditions brought on by IMO 2020.
We've already seen the rule drive changes in the value of high sulfur fuel oil as well as low sulfur fuel oil however, the crude oil and base oil markets today remained in a state of flux with pricing disruptions caused by the global Corona virus impact.
While the IMO regulation took effect in January 1st ships have until March to come into compliance with the rule. So we don't think any will have any real clarity on the impact from IMO 2020 for another couple of months.
In the interim we're aggressively managing our spread.
With the decline in how you so fuel oil that began late last year, we're continuing to push for increasing charge for oil rates on our used motor oil and maximizing our collection volumes.
In addition in 2020, we expect to pursue emerging growth opportunities such as PFS and take full advantage of the growing market acceptance of our sustainability offerings.
And as I outlined on our Q3 call. We provide a broad array of sustainability focused services that go beyond our being the largest collector and recycler of waste oil sustainability is core to our brand which is why we made at central theme of our recent marketing campaign.
Sustainability as part of clean harbors DNA for 40 years than we expected to only become a larger part of our story in years ahead.
Turning to slide seven.
We continue to regularly evaluate all four elements of our capital allocation strategy.
In 2019, we invested just over 200 million and capital assets.
Added two successful bolt on acquisitions divested a small non core business in western Canada and repurchase our shares.
In terms of our debt we refinanced the final tranche large tranche that was doing 2021, reducing our overall borrowing cost and as Mike will cover in his remarks, we enter 2020 with a strong count strong balance sheet.
Strong cash balance and we'll look to generate a highest level returns would that capital.
In summary, we achieved record adjusted EBITDA adjusted free cash flow anti R.I.R. and 2019.
The underlying underlying dynamics in both our operating segments remain positive and we anticipate a strong 2020, which also happens to be our fortyth anniversary as a company and for me personally it's something that I'm really proud of and we have lots of plants to celebrate that exciting milestone would the teams this year.
So with that let me turn it over to Mike battles Mike.
Thank you Alan good morning, everyone.
Turning to slide nine in the income statement as Alan indicated we delivered good profitable growth in Q4.
We increased revenue by 12.8 million, which represents 1% growth from the prior year.
Adjusted EBITDA grew by 10.3 million.
This reflects a mix of business, we experienced in the quarter pricing initiatives and operational efficiencies.
Gross profit perspective, we saw a decline in Q4 on both in absolute dollar and percentage basis from a year ago due to business next including the project work associated with the 2008, California, wildfires and higher cost related labor insurance and healthcare expenses.
Lets touch on insurance for a moment like many companies we are seeing costs in nearly every type of insurance rising, particularly property property auto in excess casualty.
We will continue to drive our cost saving initiatives to offset these higher insurance cost as well to continue to focus on safety, the lower incidence and severity.
Full year basis gross profit increased by approximately 30 million with gross margin essentially flat year over year.
X gene expenses were down significantly in the quarter compared with a year ago declining by 18.4 million.
Which drove a 240 basis point improvement in percentage terms.
Q4, 2018, we had a significant bad debt charge associated with the customer bankruptcy.
Acid that onetime item, we had a considerable improvement driven by higher revenue within both operating segments and lower corporate costs due to a series of cost saving initiatives moving employees to lower cost jurisdictions and reduced incentive compensation compared with a year ago.
On a full year basis X gene expenses were down 110 basis points.
For 2020, using the midpoint of our guidance range. We would expect asked you need to be up in absolute dollars from the prior year and slightly up on a percentage basis, given the onetime benefits we experienced last year.
Depreciation and amortization in Q4 was down slightly to $77.4 million, while it was up slated for the full year as we love some assets we've added some tuck in acquisitions in capital spending.
For 2020, we expect depreciation and amortization in the range about 290 300 million, which is consistent with past two years.
Income from operations in Q4 increased 26% to 52.3 million, reflecting the combination of our revenue growth and improved at June eight spent.
This is the same story with the full year as their annual income from operations also rose 26%.
On a GAAP basis E. S is 43 cents in Q4 versus 29 cents year ago, our adjusted EPS was 42 cents.
For your 2019, EPS was $1.74 versus $1.16 in the prior year and adjusted EPS rose, 50% to $1.86 from $1.26 in 2018.
Turning to the balance sheet slide 10, cash and short term marketable securities at year end totaled 414.4 million.
More than 85 million from September and inline with our expectations.
For the full year, we keep we increased cash on the balance sheet by 135 million.
Our current and long term debt obligations at year end, we're about 1.56 billion down 11 million in the prior year from a year ago, primarily due to mandatory payments under our term loan.
Our weighted average cost of debt is about 4.5% through a healthy mix of fixed and variable debt.
We conclude the year with a strong balance sheet and we sit at 2.1 times Levered at year end on a net that basis.
Turning to cash flows on slide 11 cash from operations in Q4 was up slightly to 128.5 million.
Capex net of disposals was 39.1 billion up from a year ago, resulting in adjusted free cash flow in the quarter of 89.4 million.
From an annual perspective, we ended 2019 with net Capex spend of 204.7 million in adjusted free cash flow, let's 208.5 million inline with our free cash flow guidance.
For 2020, we expect net Capex of 195 to 215 million, what's at the midpoint is essentially flat with prior year.
This number excludes the capital spend 20 to 25 million related purchase up and investments to be made in our corporate headquarters in 2020.
Given the expansion plans, we have this property it made economic sense to make this onetime purchase of our headquarters as it recently came on the market.
During the quarter, we repurchased 59000 shares of our stock at an average price of $84.28 a share for a total of 5 million.
For the full year, we bought back 299000 shares at an average price of $71, a 65 cents a share for a total of 21.4 million.
We remain committed to returning capital to our shareholders try buyback program and will continue to be opportunistic based on the stock price.
Moving to guidance on slide 12 based on our 2019 results and current market conditions. We expect 2020 adjusted EBITDA in the range of 545 to 585 million.
Mid point out that range represents 5% increase from 2019.
Looking at our guidance Mccormick perspective.
We expect growth in Q1, adjusted EBITDA to be inline with the full year with steady growth in the business pricing gains and operational efficiencies.
Here's our full year 2020 guidance translates from a second perspective.
And environmental services, we expect adjusted EBITDA to increase by a lows by low single digit percentage in 2020.
This growth will be driven by continued higher valuations and our facilities pricing gains projects and increases in various lines of business across multiple regions.
For safety Kleen, we anticipate adjusted EBIDTA growth in the mid to high single digit range, we expect to see steady profitability growth in the SK branch business due to pricing and operational efficiencies. We expect an expansion seats clean oil based on more effective spread management and continued increase in blended sales.
Our guidance today does not include any favorable impact from IMO 2020 added to it is too early to determine its impact.
Our corporate segment.
We in our corporate segment, we now expect negative adjusted EBITDA to grow by a low single digit percentage from 2019 due to increases in benefits as we continue to make investments in our workforce.
Based on our current guidance and working capital assumptions, we expect to 2020 adjusted free cash flow in the range of 210 million to 240 million.
In summary, Q4 was a solid conclusion to 2019 overall the company delivered an excellent year as we met or exceeded our guidance in all four quarters.
Margin performance and cash flow generation throughout the year were strong and consistent with our our goal to deliver on our promises and hit our targets.
As Alan outlined our core lines of business entered 2020 with healthy momentum and some favorable trends.
We expect another profitable year, another profitable growth not a year or profit growth for clean harbors in 2020.
And finally I wanted to mention that addition in addition to our normal full slate of more than it doesn't conferences and investor events, we intend to host in Investor day in the back half of this year. We're currently targeting mid September but will issue a save the date announcement once we finalize a date and location.
At this event, we will showcase our broad management teams trend outline our strategies for growth for each business and provide some longer term targets for the company.
With that Melissa Please open up the call for questions.
Thank you we will now be conducting the question and answer session. If he would like to ask a question. Please press star one on your telephone keypad a confirmation total indicate your lines in the question Q.
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My first question comes from the line of no Okay with Oppenheimer and company. Please proceed with your question.
Hi, good morning, Thanks for taking the questions to four incinerator I appreciate you calling out the large project a impact on pricing trend this quarter, but still you got double digit price growth for the year.
What is sort of the right <unk> price mix range that we should be thinking about on incineration for 2020, what do you have on the guide.
Yes, Hey, good morning, and so I think that at the end the day, we've had a steady growth up both mix and price and as we said in previous calls.
Two thirds mix one third price I think that continues into 2020, I think that we still have kind of a strong mix. As we ended Q4 of kind of higher value waste streams, and we continue to two to manage our price increase prices on customers and we'll do that and we did that 29 team was going to do that 2020.
And going forward.
So maybe then you know just that alone should give you some really nice.
EBITDA growth if that sustained.
In 2020, how should we think about maybe some of the offsets that you're thinking about within the yes.
I mean, the incinerators in our landfills have done really well we've had had some struggles in the industrial services business. We've we've tried to expand margins in that business and we'll continue to do that you know that we're not we're not planning on a lot of good growth out of that business in 2020, as we think about it we're trying to hold the line and take some costs out and manage that more prop.
Probably.
Excellent.
You know at a high level, what are you going to do with all this cash I mean, it's really the question now you talked about a little bit in the prepared remarks, but you know at <unk> at this trajectory you're going to be under Levered, you're generating a lot of cash this year exiting the year without cash balance.
Can you tell us a little bit about you know.
Yeah, just as it sits today your thoughts on prioritizing debt repayment, M&A or or share repurchases, where where is sort of the.
The bias at this point.
[noise] I mean, clearly we would we would like to do a.
A significant acquisition at a reasonable price and we are you know really well positioned to do that we have.
We've been looking out a lot of deals there's been a lot of deal books flowing around.
And I think we're well positioned to do that we've also been.
Certainly trimming some of the one off businesses that we have that maybe came through prior acquisitions and.
As we mentioned sold a couple of businesses, we actually saw one yesterday. So we're we're really I think doing all the all the things to position ourselves to be really laser focused on our environmental business and our safety kleen business and looking at opportunities through acquisition to expand those those businesses.
That would be that would certainly be my my talk a little less priority for the cash.
Okay excellent Allah leave it to others. Thanks, so much thanks now.
Thank you. Our next question comes on line of Luke with Baird. Please proceed with your question.
Hey, good morning, guys funny. It look so first question just regarding I'm. A 2020 appreciate it's still early here, but just curious anecdotally at least what you're seeing on the ground from blenders. Another purchasers of used motor oil so far this year and in a similar vein just wondering how are you seeing this did the utility export market for recycled fees.
Oil right now.
Yeah I can start I you know we were really came into the.
The new year here with things looking really favorable as it relates to IMO 2020, we started seeing high sulfur fuel oil.
Really come down in value.
And really become.
Quite oversupplied.
And we also saw a base oil prices begin rising by all the major base oil suppliers. So everything sort of was playing into what we had forecasted.
And then I think over the last six weeks has certainly been some significant disruptions on a finished products, whether it be jet fuel or fuel oil or or other products like base oil and and as well as crude oil decline to significant decline in crude oil. So it's a little but you know difficult for us to really anticipate what.
The end result will be for IMO 20, particularly because all the ship owners need to come in full compliance with no exemption after March.
But you still got this whole global you know sort of crisis going on right now.
And it's sort of given us uncertainty about just what we would benefit from IMO 2020 this year.
On the used motor oil side no volumes are very strong for us certain parts of a you know the markets are very long the outlets for oil is very constrained you know we are communicating with our customers to keep them informed.
You know, making sure that they know that we will be therefore, they are served to be their service provider because a lot of the outlets have dried up for used motor oil that's not going into a re refining operation.
That's a that's great and then I guess along a similar one there's obviously been quite a bit movement and basal prices. So far this year as you noted Alan.
Right of increases month, or so go now some concerns around current events starting to creep in more recently can you just help us understand what's baked into the guidance for based so pricing sitting here today.
No I'll take a look I'll take that wasn't actually.
And so we've tried to say kind of base all pricing kind of as it stands today with the price increases and the price decreases we have as we always try to do this we try to take up they.
Kind of where it is today and that can change, obviously tomorrow, but our our guidance includes you know.
Price drops it happened very recently, if you will.
Okay.
Cool and then last question just a tentative.
You have a number here in terms of the a new one of the one more thing. It's it it's I wanted to stressed that the base business is very strong. So we talk about IMO, we're talking about how we're going to manage our spread and we think that the rest of the business whether it be GSK branch business, whether it be the E.S. business, that's going to continue to be very strong and we don't see anything out there that we get little stuck.
On IMO that we'll see anything out there that would cause us pause and we really great great bullish on on 2020, so I want that to be very clear here that we're not guiding for IMO were concerned about you know we saw pricing dropping and all that good stuff, but on the underlying base business and our ability to manage the spread nothing has changed there and we're really.
Great positive on it so I think I think when we put together a budgets that and got those approved in December you know that was based on pricing at that point and even though pricing went up in January and all the majors went up and we're starting to see some price declines today, you know our price and what's in our our forecast for the year was based on.
Old price. So that's right, we're probably looking pretty good we're probably okay. Okay. That's helpful. And then just last question on the base business. Just wondering if you could expand on the opportunity from here to continue to drive those high value waste streams into network. Both in terms of what the market's giving you any additional internal actions that you have to.
In the free up capacity.
Yeah, we continue to look for ways to you know de bottleneck and add more processing capacity at our incinerators to get more throughput.
And that really over the next two or three years, we're going to continue invest capital whether it be and I'm sure.
Shredders or and feed systems, we have an ex you know very large backlog of waste coming into the year. Our deferred revenue was up our volumes and inventory of strong and and quite frankly, the demand for a lot of our customers is very strong right now the chemical industry is really very strong for us and looking at those.
Those are those real difficult a waste streams and we've seen some chemical plants coming online.
So I think our expectation on incineration as we continue to look at ways of getting more volumes through our network of incinerators, because we have a very strong backlog there.
Oh leave it there thank you.
Excellent.
Thank you. Our next question comes from line of Michael Hoffman with Stifel. Please proceed with your question.
Thank you everybody for taking the questions.
Mike I get asked my favorite question can you see your cash conversion.
Has actually improved quite nice I mean in 16 your.
17, a half a percent of.
EBITDA for free cash so now you're up to almost 40 <unk> how would you and then cash flow from ops, something like 4% of sales to 12, where are we in your sort of rolling five year plan, a where this could go.
Yes, that's been really a function of as Alan mentioned in his in his remarks kind of better systems and processes to kind of come to get that builds out the door and get the cash in the door I think that is that and is it we have a lot of customers and take a lot of work and this and the lot of hard effort by by led by the team.
Im hearing no well to kind of really drive that and you're starting to see that in the results I'm hopeful as Alan talks about better technology and a focus on that we'll continue to see that type of better conversion and getting up those out faster, having better terms and conditions and asset is getting a cash faster and driving working capital down. So I'm really I'm really pleased with it could as you.
Hey, Michael we've had some decent progress in that area.
As far as if it had a cash flow conversion I'm hopeful that just continues.
Okay. So theres upside to these ratios and that's a combination of efforts around financial controls is also the its demonstrating the through a predictable repeatability of the operating leverage of fixed assets right I mean, that's right.
And you see it you see it now I see two no matter how you calculate it we've actually had a huge increase in how I see over the past the past two or three years and in our metrics, how we calculate it it's doubled over the past.
Okay. So the next question then as a point of leverage on that so the debt markets practically giving money away. We've got companies that are raised money at 2.5% on 10 year money I mean, that's almost free cash or you are you have positioned to try and take advantage given what you've done in the last year year and a half enough on the next severe fixed versus variable.
All in your your fixed swaps into that nature.
The short answer Michael is yes, when we put this.
New leverage in place we made sure that it was covenant light. So that we had it transactional event that Alan talked about earlier to do something that's something really large we would have done the leverage capacity to do just that and so when we refinanced all our debt. We've done you know as you know last three years, you've done large large refinancing to lower.
Our interest rate I quite a bit and so we're really proud of that and we have a good.
75% fixed 25% variable rate. So we still experience some of the good news today, and so I'm really hopeful that if there's an opportunity out there for the market that we that that makes sense, both strategically and financially will be there with that with that.
Dry powder, if you will have to go to go execute on that.
All right well, so that kind of lay up into the next question. So there's a very big chunk of assets just got sold.
Curious what was appealing of about that for clean harbors was 600 million or revenues and hazardous waste don't come available very often so.
I got to assume you look so well what what are you looking for if that wasn't it.
[noise] you know, we're very familiar with those assets, we've we've looked at them.
So over the last 10 years as they've changed hands from you know a public company the private equity ownership through.
Two bankruptcies and subsequently acquired by you know what are the other bigger players in the industry and we certainly know those assets really well and you know we just.
We're not able to put together a deal that we felt was the right deal for for our company and.
You know there are other opportunities out there.
That that might be better from a value and strategy strategic standpoint, the Michael but you know clearly a you know we're looking at all opportunities that we can.
Okay, and then Alan you and your comments made a statement about chemical activity there's good.
Can you frame that in the sense of where you think.
That that goes from here because we have had a fair amount of couple of hundred billion dollars has been spent developing new capacity in the Gulf coast. So how do you think about where that trend line is.
And chemical and then and then particularly on the current environment around the current a virus and yeah, what that may or may not portend.
I think the real difficult to handle streams and and you know what we would call our direct burn volumes have never been higher.
And how it.
He cases, you know where where.
Constrained and how much we can handle a due to our you know capacity from a from a permit standpoint air pollution control standpoint, and so you know, we're not able to meet some requirements that customers have and they're not finding a outlets as well for for that at another competitor to sort of.
Speak there are additional plants coming online we see you know what you know the forecast for natural gas being where it is that you know, it's a very favorable environment to produce chemicals, and we don't know with this disruption in supply chain.
That we're seeing whether more will be brought back to the states or not but we are.
Looking at ways that we can expand our incineration capacity because we think that it's not just the you know a stronger economy, that's driving it there's some real increases and overall volumes being generated.
Okay. So that takes the question about what's your reaction is to be earlier buying gum Springs, and what you think may or may not come out of that transaction.
The only thing I would tell you is we've competed with gum strings fruit for years and years, so with the capabilities and the permits that they have and and so from US you know, it's an ownership change but.
I think you know as as a killing like that which is very much similar with southern cone and we've competed with other cement kilns Ah you know when they are part of the mix and handling you know hazardous waste out there. We we don't see a change or they do compete on some low price lean water streams, but.
I think that's probably the only thing I would comment on Michael right. Now is it something that we've competed with for years and Michael that as you may know they required to continue to take the spent pot liners and so and so that is that they're committed to doing that in this transaction and those those we compete but a little bit on but they're they're going to be tied up with those quite a bit.
Anytime.
Yeah. The use of lot of capacity. It seems like it was almost more of a landfill play than incinerator play around PFS.
I I would anticipate that yes.
And so to that end or are you potentially looking at sort of what I'd call more the equipment or fixed asset side.
Approaches around either granulated active carbon or reverse osmosis, or even ion exchange and sort of tackling a PFS from that perspective as well yeah. Yeah, we're not landfilling PFS and you know we're really much more into the treatment side at this point and and so our focus is not going up the large piece.
Yes opportunities right now there are you know some very large projects out in the Midwest and then other markets that we've seen but you know we are seeing some real demand on our remediation equipment or our water treatment equipment and so to your point you know part of that whole expansion of products.
And services that were going to be making is really to help meet the needs of the a the industry for for this treatment side of the business.
All right and last one for me do you have any visibility on when the deal we market analysis every refining used oil will be out there late so throughout the summer.
They are late and we've been pushing a michael but the answer to your specific answer to your question is now we do not have an estimate today yeah. Michael We know the study we know the study is complete but it's a it's it's with some regulatory body. So that nothing's been released yet as you know.
Okay.
So what are your got your teams by the way at a conference I was yesterday I'm there they had their p. fastest play out there and they were surrounded lots of people were talking to them.
Yeah, there's a lot of uncertainty certainly with those Ah you know forever chemicals that you're hearing about out there we would definitely get a lot inbound interest that's for sure Michael.
Thanks for taking questions. Thank you okay.
Thank you. Our next question comes from the line of Hamzah Mazari with Jefferies. Please proceed with your question.
Hi, This is John Mizzone filling in for Hamzah could you comment any changes in the competitive landscape, you're seeing and hazardous waste with viola.
Recently, getting larger and also with harsco among others. Thanks.
Well certainly I think the harsco transaction that was it was announced a would story.
I think there you know probably going through their you know their process, there and we do business together with a those companies so.
The company does about $100 million of business with our competitors very much like the chemical industry doing business with each other and.
I think particularly with harsco, we hope to be a preferred supplier with them, if and if they choose us for waste disposal needs. As we we were with other players and so oh, because they don't really have disposal assets like we have I think you know, we'll hope to develop a good relationship there and.
And we have continuously use their facilities other clean north facilities for example, as well in the case of you earlier I think it's really <unk>, we haven't seen any real change at all.
Are you know from from what they're doing you know they the divested you know their energy business here in the North America and you know we've been quite surprised quite frankly, because they've really been selling off businesses like their solid waste business or energy waste energy business. So you know that that was somewhat of a surprise for us.
Yeah.
Great. Thank you I just have one more question I'll turn it over Oh, I've noticed that you've taken a lot of cost out of the business over the past few years can you comment on how much runway is left on the cost takeout either on the gross margin line or S. gionee and the big buckets.
You know we think that.
We continue to deploy the you know technology as a way of taking costs out of our business and automation, whether it's you know robotic process automation or AI or other things that that clearly can make us more efficient.
We're also expanding our inside sales and and our whole a customer call center or we just relocated our Richardson headquarters to no well, we shifted or roughly over 300 people and we now have a small.
Richardson office, so with about 50 people or so and through that consolidation.
Which was essentially a the former safety Kleen headquarters.
That we acquired in 2012, you know there was some real synergies and and doing that and as we have done that consolidation, we see a continuous opportunities to take up more cost and automation.
We will play a key role in that as well.
Great. Thank you for the color okay.
Thank you. Our next question comes from line of Jeff Silber BMO capital markets. Please proceed with your question.
Thanks, So much one of the shift over to your direct live programming you highlighted the strong growth in the quarter, but I think in the press release useful said it was below your internal targets I'm is there something going on internally is at the market acceptance of this any color would be great. Thanks.
Yeah, I think because we meet with the team and I don't understand I'm you know the successes that we've had in some of the you know disappointments we've had in the last two and a have three years.
We're seeing certainly many companies that are interested and the you know the 70 or so different products that we have and Oh you know we continue to have a real strong pipeline.
On the service delivery side I think on the supply side the supply chain side I think we really have a put a lot more focus on that because I think you know the stickiness it hasn't been where we want it to be you know our Oh are you know customer were only getting about 60% you know where repetitive purchases were.
Historically in the safety Kleen business, it's very much a subscription business and we're getting you know 80 or 90% subscription. So I think that's been something that from a supply chain standpoint, we're addressing and I hope as we continue to grow will hold onto more of those customers that we're bringing in and do a better job of servicing them. So I would say that would be the.
If there was a check mark there about you know something that we haven't done as well as we should have a b in that space.
Okay. That's helpful and my follow up I guess will be from like more of a numbers question you highlighted the large project impact.
On a pricing perspective, and I guess, obviously it impacted revenue can you just called that out just to help us a modeling what the impact was in the quarter. Thanks.
Jeff I don't have that that handy I think that there were a it's it a couple of smaller projects that you know kind of added together along with a couple of large ones. So it's really hard for me to put a real real number on I would say that our growth and pricing for the year was consistent throughout the year and it was just being diluted that by the level of.
Projects and I think we saw that in January we had a very strong January right and so you know that the trends both on topline in March and were well above our budget going into January now, we got an extra extra day. This quarter. So that'll help us a little bit, but I think just the weather has been good for US you know a volumes are really strong and I think.
That that large project, obviously, we had to get that in the door, but the backlog was is certainly there as well that's right.
I appreciate the color. Thanks, so much.
Thank you, ladies and gentlemen, as a reminder, if he'd like to join the question Kim. Please press star one at this time. Our next question comes online at <unk> with Needham and company. Please proceed with your question Hi. Thank you. Good morning, just question on.
I was interested in some of the commentary about the E. Commerce initiatives you have underway should we think about these is gradual but what I'm wondering is if as you as you roll these through a and expand this if there's a potential for this also to help leverage some of your Costco.
Going forward.
Absolutely we've expanded to 23 distribution centers and those were assets that we had already owned and so we expanded.
Those distribution centers to move Moreover, our what we call our allied products sales as well as all of our loop packaged and drum product sales.
But what we what we really have found is that you know to be competitive you know we need to be able to deliver next day in some cases to meet customers' expectations and so as we roll out you know this whole ecommerce initiative, it's all going to be designed around not only trying to leverage the existing trucks that are going out there in providing those routes.
But also to make sure that were not you know missing that service, where that customer calls up and and needs that service next day and we have historically at least for delivering a products have not been you know sort of a next day delivery company and now we're going to move to that model.
And I think from a cost standpoint would be relatively minor just putting in the supply chain the system to basically handle that and so that'll be launched in the second quarter and we think that will help both on the direct side safety. Kleen has had you know very good success selling you know 60 $70 million a year of.
A whole variety of branded products around safety and absorbing syndromes and all kinds of things that the automotive industry needs clean harbors customers will benefit a lot from those same kind of purchases and we can leverage our transportation to get those delivered to them you know at a at a real low cost so were.
Leveraging that for sure.
Got it and it sounds like in general the that the business looks strong pretty much across the board, but you did <unk> I think comment a little bit about some struggles in the industrial services area and it sounds like you're you're.
Not assuming a whole lot of growth there I'm just wondering what you what you're seeing there if you could be a little bit more specific and if there's a you know if you feel that that has the potential to soften further or we kind of bottoming out there hey, Jim. This is Mike I'll I'll take and then Alan you know feel free to to jump and we looked at turnaround schedule for 2020, both in the U.S and Canada and.
We feel that it's it's flat to up and so we're hopeful that the level of turnarounds that are happening.
In both the U.S. in Canada, as we look at the schedule of planned turnarounds and the size of the turnaround you know we're hopeful that we can hold the line we have put them leadership in place and industrial services and we're really helpful that a better focus of that of that have that businesses is warranted as you can see issue our financial statement you in few minutes industrial services.
And if I got the lines of business is down a bit kind of year over year. So that's something that we did we just need to continue to focus on we did we did it for the right reasons walking away from unprofitable clients were trying to raise price and as such the revenues down a bit I'm, hoping that but the margins are up and that's hopefully continues with with with better revenue.
And just say that would have you all your acquisition you know as we.
Get our arms around some of the contracts that we inherited you know the margins were not anywhere near where you know we believe from a risk and investment standpoint that we have to make to do a good job on those contracts with so we've been going back in some cases, losing some of those contracts because you know we realize that there they're not as profitable as we know.
Lead them to be and so there's been a little bit of shifting going on as a result that the acquisition. We made there that's right.
Got it that's helpful. Thank you yeah. Thanks, Jim.
Thank you ladies and gentlemen, this concludes our question and answer session I'll turn the floor back to Mr. Mckim for any final comment.
Excellent. So thanks for joining us today, we're presenting at the Raymond James Conference next week and participating in several other a bench later in March we look forward to speaking with many of you at these and other investor events have a great day.
Thank you. This could include this concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation.