Q3 2021 Heritage-Crystal Clean Inc Earnings Call
Okay.
Ladies and gentlemen, this is the operator.
Operator, the call will begin momentarily until that time your lines will be placed on music hold thank you for your patience.
[music].
Good morning, ladies and gentlemen, and welcome to the.
It is crystal clean incorporated third quarter 2021 earnings conference call.
Today's call is being recorded.
At this time, all callers microphones are muted and you will have an opportunity at the end of the presentation to ask questions.
Instructions will be provided at that time for you to queue up for your question.
The herd.
We ask that all callers limit themselves to one or two questions.
Some of the comments, we will make today are forward looking generally the words aim anticipate believe could estimate expect intend may plan project should will be.
<unk> will continue will likely result would and similar expressions identify forward looking statements.
These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward looking statements.
These risks and uncertainties include a variety of facts.
Factors, some of which are beyond our control.
These forward looking statements speak as of today, and you should not rely on them as representing our views in the future.
We undertake no obligation to update these statements after this call.
Please refer to our SEC filings, including our annual report on Form 10-K as well.
<unk> earnings release posted on our website for a more detailed description of the risk factors that may affect our results.
Copies of these documents may be obtained from the SEC or by visiting the Investor Relations section of our website.
Also please note that certain financial measures, we may use on this call such as earnings.
Well as all interests taxes, depreciation and amortization or EBITDA and adjusted EBITDA are non-GAAP measures.
Please see our website for reconciliations of these non-GAAP financial measures to GAAP.
For more information about our company. Please visit our website at Www Dot Crystal desk clean dotcom.
Before.
With us today from the company are the President and Chief Executive Officer, Mr. Brian Ricardo and the Chief Financial Officer, Mr. Mark Devita.
At this time I would like to turn the call over to Brian Ricardo. Please go ahead Sir.
Thank you Julie good morning, everyone and thank you for.
Comps today.
On behalf of the entire Crystal clean team all of what our investors know how pleased we are with our record setting third quarter results, We released last night.
We produced several records during the third quarter, including total revenue net income earnings per share and EBITDA.
Joining me on several occasions, our third quarter results were significantly higher than our previous record performance.
Mark will provide additional detail, but total third quarter revenue exceeded expectations at $123 2 million, which helped produce record.
EBITDA of $36 million.
Now I would like to discuss our results in both of our reporting segments as I did last quarter I'll start with our oil business segment.
During the third quarter of fiscal 2021 oil business revenues more than doubled compared to the third quarter of fiscal 2000 $20 million to $58 million.
The increase in revenue.
Revenue was mainly due to an increase in our base oil netback bye.
About $2.17 per gallon compared to the third quarter of 2020 and by 63 per gallon compared to the second quarter of 2021.
Additionally, our base oil sales volume of $11 2 million gallons during the quarter was.
$12, 9% higher than the volume of base oil sold during the third quarter of 2020 and further contributed to our record revenue performance.
Oil business segment operating margin increased sharply to a record 42, 8% in the third quarter of 2021 compared to three.
Three 4% in the third quarter of fiscal 2020.
The higher operating margin compared to the third quarter of 2020 was mainly due to an increase in the spread between the netback on our base oil sales and the price paid or charge to our customers for the removal of their used oil.
Our re refinery to.
<unk> continued to execute well during the third quarter and it's been more than two years since we've had significant unplanned downtime in our rig refinery.
We produced a 12 week quarterly record of $12 5 million gallons of base oil, which was approximately 10% more than the third quarter of 2020.
We're very pleased.
It's good to see our re refining operation has demonstrated over the past two years.
Let's now move on to the environmental services segment.
In the environmental services segment revenue for the third quarter of 2021 was $72 3 million compared to $62 4 billion.
With the same quarter of 2020, an increase of $9 9 million or 15, 9%.
The increase in revenue was mainly due to our continuing to recovery from the negative impacts of the COVID-19 pandemic.
We experienced volume increases across all service lines in this segment when.
Compared to the third quarter of 2020.
While it was great to see our improvement relative to the pandemic impacted results from 2020.
We were even more pleased to see that our revenue for the third quarter exceeded revenue from the third quarter of 2019 by four 9% in this segment.
Environmental services profit before corporate selling general and administrative expenses were $17 3 million or 23, 9% of revenue compared to $14 six or 23, 4% of revenue in the year ago quarter.
The improvement in operating margin would've.
Have been greater if not for inflationary headwinds caused in part by supply chain challenges, which are affecting many industries today.
Before we look ahead I want to provide an update.
Relative to our M&A activities.
Happy to report we closed on three acquisitions in the past two months.
One.
Interaction closed at the end of the third quarter and the other two transactions closed at the beginning of our fourth quarter.
These transactions are provided several benefits to us.
First two of the businesses operate in the Western U S, which helps build our density in these important growth markets.
These acquisitions.
<unk> also provided additional wastewater treatment and non hazardous containerized waste processing capabilities as well as expanding our internal technical field services offering.
We can now internalize more projects such as lab pack field work, which should increase our win rate and profitability for these projects.
<unk>.
Most importantly, we're very excited about the new additions to the crystal clean clean family as a result of these acquisitions.
Now I would look forward and discuss our outlook for the future.
In our environmental services segment, our growth compared to 2000.
In 19 is an indication that we are working hard to put the impacts of the COVID-19 pandemic behind us.
We achieved the growth compared to 2019, even though our manpower loss time hours were up approximately 27% during the third quarter compared to the third quarter of 2020.
While there are still risks relative to the Delta variant of COVID-19, we are confident that we can operate effectively and continue to drive revenue growth in the current environment.
During the fourth quarter, we expect to continue to grow our environmental services segment revenue at a mid single digit rate compared to the fourth quarter.
2019.
From an operating margin percentage standpoint, we have been facing and expect to continue to face supply chain issues and inflationary pressure for containers fuel third party logistics waste disposal and other items.
We are.
Are working hard to counteract the negative impacts of these items by internalizing more non hazardous waste processing and by implementing our annual price increase at the beginning of the fourth quarter.
We have early indications that the rate of customer acceptance of the price increase is higher than what we might expect in a typical.
Quarter.
Despite the cost pressures, we're experiencing we believe our price increase along with increased internalization of customer waste streams will.
It will allow us to improve operating margin in Q4 compared to our Q3 results.
From an oil business segment perspective, where.
Year to see more balanced supply and demand with mid to light grade group II base oils as we move further into our fourth quarter.
While our current base oil netback or slightly higher than our average during the third quarter we.
We expect seasonally reduced demand and higher feedstock prices is offsetting factors.
Beginning with should keep our product pricing stable through year end.
As we look forward to 2022, there are several base oil refinery outages planned for the fourth quarter of this year and the first quarter of 2022.
This will reduce available supply and should provide support for base oil prices into early.
Next year.
On the used oil feedstock side of the business, we saw our cost increase with the bullish move upward in crude oil pricing during the third quarter.
With crude prices still on the rise we continue to feel upward pressure on used oil feedstock costs.
However.
Early makers moderated more recently and we do not expect significant additional upward pressure on used oil pricing during the remainder of the year.
As planned we completed an extended rig refinery turnaround during the beginning of the fourth quarter.
The turnaround generally went as planned and we have another shorter turnaround.
<unk> for the next month.
The two turnarounds will somewhat limit our base oil production during the fourth quarter, which we expect will be approximately $13 3 million gallons.
For the year, we are still on pace to produce over 49 million gallons of base oil.
From a profitability.
Ability perspective, we expect fourth quarter operating margin to be in the mid to high 20% range as continued high base oil pricing is somewhat offset by less production volume caused by our planned downtime.
As well as constraints on the availability of hydrogen.
In addition, it appears that higher national gas natural gas.
Prices will increase operating costs for the remainder of the year and into the first quarter of 2022.
The outlook I just provided assumes a general economy will continue to recover from the COVID-19, pandemic and the supply chain disruptions will gradually subside.
Should this not be the case this could negatively.
Back to our outlook.
Before I turn things over to Mark I want to let everyone know, we recently took a significant step forward in our ESG initiative with the release of our first sustainability report.
You can find a copy of the report on our website.
We believe we have a very.
<unk> story to tell on the issuance of the sustainability report as.
As a first step in our continual process to communicate the many ways in which we are striving to protect the Earth's resources by helping the business world run cleaner and positively impact the people and communities, we interact with on a regular basis.
With that Mark will take us through our third quarter financial results.
Thank you Brian Good morning, everyone, it's great to be Lithia today.
In the third quarter of 2021, we generated $123 2 million of revenue compared to $87 1 million in the same quarter of 2020.
Increase of $36 million of 41, 4%.
The increase in revenue was mainly driven by higher base oil pricing and continued growth in recovery from the impacts of the COVID-19, pandemic and our environmental services segment businesses, which negatively impacted 2020 revenues.
Net income was.
An acre at $18.
$5 million or <unk> 79 per diluted share for the third quarter of 2021. This compares to net income of $4 million or <unk> 17 per diluted share in the year earlier quarter.
This past quarter was not only the second quarter in a row in which we had record high net income, but net income for the quarter.
That was 22, 5% higher than the second quarter of this year, which represented our previously quarter previous quarterly record.
Let's get into the details of our business segment results.
Oil business segment revenues for the third quarter of fiscal 2021 were a quarterly record $50 8 million.
An increase of $26 1 million or 105, 9% compared to the third quarter of fiscal 2020, and an increase of 41, 9% compared to the third quarter of fiscal 2019.
Brian mentioned the increase in netback drove higher revenue and gave you the change in net back on a year over year and sequential basis.
But from a pre pandemic standpoint, our netback increased by $1 56 per gallon compared to the third quarter of 2019.
From a profitability standpoint oil business segment profit before corporate SG&A expense increased $20 9 million to a record 42, 8% in the.
Quarter of 2021 compared to three 4% in the third quarter of fiscal 2020.
The increase in operating margin compared to the third quarter 2020 is mainly due to an increase in the spread between the netback on our base oil sales and the price paid or charged to our customers for the removal of their used oil.
Third.
This spread was up $1 73 per gallon compared to the third quarter of 2020, and <unk> 50 per gallon compared to the second quarter of 2021.
Compared to the third quarter of 2019 profit before corporate SG&A expense was higher by $18 million driven by a spread increase of $1.
<unk> 43 per gallon.
From our used oil collection standpoint on a weighted average basis during the third quarter, we experienced a net change of <unk> 44 per gallon compared to the third quarter of 2020, as we move from a charge for oil position in 2020 to a pay for oil position this year.
Compared to the second.
For 2021, our pay for oil increased by 13 per gallon.
From an used oil collection standpoint, despite an 18% increase in the number of oil sales and service reps, we were able to keep our used oil collection route efficiency essentially flat during the third quarter compared to the prior year quarter.
As.
As you might expect the cost of third party used oil feedstock also increased during the quarter. However, the constant as feedstock increased by only <unk> <unk> per gallon from the second quarter to the third quarter.
The reason for this modest cost increase was a decline in demand for this material during the third quarter, we lowered our third party feedstock.
<unk> purchases by 35% compared to the second quarter.
Now, let's discuss the environmental services segment.
Rental services segment reported revenue of $72 3 million, an increase of $9 9 million or 15, 9% compared to the year ago quarter to 15, 9% increase in.
It was mainly due to the lessening impact of the COVID-19 pandemic on our business during the third quarter of 2021 compared to the third quarter of 2020, we saw volume increases in all of our lines of business compared to the third quarter of 2020.
As Brian mentioned compared to the results for the third quarter of 2019 third quarter 2000.
Revenue revenues were also higher this growth was led by our containerized waste business with our wastewater vacuum field services and antifreeze businesses also showing growth.
Environmental services profit before corporate SG&A expense increased $2 6 million or 18% in the third quarter of fiscal.
$21 41, compared to the third quarter of fiscal 2020.
Operating margin for the third quarter of 2021 was 23, 9% compared to 23, 4% in the third quarter of 2020 and 25, 7% during the third quarter of 2019.
The increase in operating margin.
<unk> was mainly driven by higher revenues due to the waning negative impacts of the COVID-19, pandemic, which produced improved leveraging of fixed costs during the third quarter of fiscal 2021.
Partially offset by increasing costs for items, such as containers and disposal services.
The increase in operating margin.
<unk> made a decrease in operating margin compared to 2019 was primarily due to increasing costs in the areas I just mentioned.
Total company operating costs increased $12 4 million or 18, 5% during the third quarter of 2021 compared to the third quarter of fiscal 2020, which was mainly.
Higher labor cost health and welfare costs transportation related expenses and a higher use of our feedstock costs as a result of more business activity due to the lessening impact of the COVID-19 pandemic.
Our overall corporate SG&A expense of $14 4 million represents an increase of $3 9 million.
Due to a 41, 4% compared to the year ago quarter driven.
Driven by an increase in our bonus reserve as well as the absence of temporary wage reductions and the lack of a suspension of our 401K match, both of which occurred during the third quarter of 2020.
EBITDA of $30 6 million was a record.
And up $19 6 million compared to the year ago quarter. This was the fourth consecutive quarter of record EBITDA in the third and third quarter EBITDA was $16, 8% higher than the previous record from the second quarter of 2021.
The company's effective income tax rate for the third quarter fiscal.
Fiscal 2021, 25, 1% compared to 22, 7% in the third quarter of fiscal 2020.
The rate increase is principally attributable to consistent levels of profitability as compared to the same quarter in the previous year.
Looking at the balance sheet, we had an increase of $8 million in cash.
During the third quarter, which resulted in a balance of $75 3 million of cash on hand at the end of the quarter, Despite an $11 $4 million cash outlay for the acquisition Brian mentioned earlier.
Our primary sources of liquidity for the quarter, our cash flows from operations and funds available to borrow under our revolving bank credit facility.
We generated $24 2 million in cash flow from operations during the quarter, which represents a 384% increase compared to the third quarter of 2020, we also generated free cash flow of $27 million during the third quarter of 2021 compared to a $1 6 million.
<unk> third quarter of 2020.
As Brian mentioned earlier, we recently closed on multiple acquisitions. We expect these businesses will contribute approximately $25 million to $30 million in annual revenue.
Even as we work to integrate the newly acquired businesses. We continue to identify other potential acquisition targets, which we believe can.
During the flow of our business and achieve our mission.
To summarize we are working hard to combat the negative impacts of inflation is having on our business in order to restore the margins in our environmental services segment, and we are thrilled with the execution in the oil business segment and our ability to continue to take advantage of the favorable market conditions.
Help us. This concludes our prepared remarks, I will now turn the call over to Julie to take your questions.
Thank you ask a question you will need to press star one on your telephone.
John Your question press the pound key.
Again that is star one to ask a question.
Please standby, while we compile the Q&A roster.
Okay.
Okay.
Yeah.
Your first question comes from Michael Hoffman with Stifel.
Thank you very much Brian and Marc procurement.
Okay.
Hey, Michael how are you good good final frogs hair as I say in my part of the World.
<unk>.
Used oil just to be clear when we had our second quarter call you gave us a maintenance schedule of sort of three five days in <unk> and eight to 10 days in for because of the strong performance.
A good dose did you push it all sort of 11% to 14 days in the <unk>.
No. We didn't we didn't change anything Michael we may have Miss communicated on Q2, but we're right on plan relative to our turnaround schedule.
We just got we just got to pegging towards the end of this year, which.
We always do.
<unk> four so so nothing has changed but we took downtime in <unk> III.
Okay. Okay. So you had a really good quarter and you took more downtime.
Yes.
Comment.
Yes, it's still produced the record production and we it's not like we cheated and pushed it all into beginning in Q4.
And Keith.
This next question is a little philosophical but.
Do you can you quantify in your mind.
<unk> has actually impacted the shifting between the charge for oil scenario in our pay for oil.
As you are paying less than you might have been if this was.
Okay, 2019, and oil prices were where they were because of IMO.
Yes, no doubt if I remember correctly, we talked a little bit about this on the Q2 call.
Absolutely what were seeing.
Lower price than we would normally pay for used motor oil out in the marketplace.
I actually look at the math, it's 10 to 15 cents lower than we would normally pay for used motor oil, there's ample supply Michael still out in the marketplace.
Bit worried with crew.
Crude pricing shooting up like it is in natural gas pricing going up then we may we may see more.
I'll add in the winter months for.
Converting use motor oil to some type of waste fuel, but we're not seeing it now we've still got ample supply and we're getting in at a pretty good price.
We've talked a lot about the shift in our oil segment driven by the fact that we think IMO 2020 has.
Helped the business fundamentally and will help us over the long haul so structurally we've seen the changes on.
On the flip side of that we were.
Out of the base oil conference last week and lots of activity around ESG and the.
The desire to.
Purchase our base oil because of the.
And on the fact that we've recycled the hydrocarbon molecules. So we feel really good about demand.
Because of the fact that people are focused more on sustainability.
I'll take it.
Harken back to what we talked about on the Q2 call our loved.
Love to see us not have to discount our base oil and I think we're headed that way.
Well that'd be interesting suggestion I understood.
Understood some of the COO.
Comments in the script.
You do expect some normal seasonality and supply demand starting to level, but between the.
The strength in the <unk> the normal season.
Seasonality.
Comment was and am I right that.
We should be flat sequentially on the spread so neither expands our compresses and <unk> and then potentially starting to compress again in <unk>.
We've seen a little bit of an uptick in spread we're not expecting much more and thats driven by the fact.
Fact that we're hitting the seasonal period, where demand is lower but because of the version of refineries are paying more for feedstock.
Do expect that Theyre going to probably change posted pricing at this continues but net net we're thinking it's going to be a relatively flat spread into Q4.
Certainly think supply will be diminished because of the heavy fall and spring turnaround season.
We've heard a lot of that last week at the conference.
I expect supply to be.
Certainly muted because of that and that will give us some shreds headed into Q1.
Okay on pricing.
And then.
Yes.
We will have to fight the used motor oil side of it and then you have the operating cost savings by mentioned, you've got Nat glass hydrogen.
Our allocation on hydrogen should be done.
December one is at least the latest report we had a plant that was feeding our vendor that.
Literally shutdown and what was the.
Occidental chemical plant in Idaho falls on speeding our vendors that cost as well costs of production in Q4.
But we're still going to produce.
49, plus million gallons of base oil for the year, so on an outstanding year for us.
Okay.
Your comments about inflation is that spread over a lot of things or is there one item, particularly an issue in the Es business I mean, it's kind of all over the map, Michael but I mean as you know we rely on a lot of third parties. We are working hard to internalize as much of that waste as we.
We possibly can but we're seeing it.
Logistics cost.
We're certainly seeing it in our third party disposal cost we're seeing it on labor, we're seeing it on general supplies to support our customers.
It's all over I mean, it's been tough.
Tough tough to manage.
We got the price increase over we should've done it a bit earlier, a little disappointed that we didn't but we got it done and we're seeing it.
Be fairly sticky as mark talked about in his prepared remarks.
At this 0.7 plus percent that sticking right now so we're pretty happy with what we did on the price increase.
Another area of anytime yet it seems that commodity complex, so steel as far as containers or even on the oil side, the poly containers all of our containers.
<unk> gone up materially suddenly upfront.
It's obviously not across the whole thing that some of them in the extreme are 50% to 100% increase though right.
Now suddenly got about.
Hard to get equipment, Michael we've got trucks that were parked because we couldnt get sensors I'm sure you've heard that from other other.
Are there other industries that's.
Beginning to improve at one point, we had 40 plus trucks down we're now at about 15.
But it's been a grind and our people have done an excellent job.
Our service and our customers in spite of all of this.
Bit short staff, but because of the way we pay our people they get out and hustle and get the work done we haven't left any work out in the field that's for sure.
Well, that's good to hear and then Mark.
<unk> been suggesting we should do as far as the $30 million divide by four and allocated all in CES predominantly and at what margins should we add that.
Mega divide by four and through the 12 weeks thing in the SaaS, Yes, it's mostly it's mostly out there'll be a little bit of oil and.
And one of the Intuit and three deals is it a little bit of oil collection, but.
Probably not a ton of revenue.
From that so it's most of the Es.
Our margin depending on what we see.
<unk> going to be on an EBITDA basis in that 20% range for what we acquired in the low twenties.
Michael we have some integration work to do obviously with any new acquisitions prefer not to give you.
EBITDA target, yes, let us do our work and we will get yourself.
Soon.
Yes, great great assets, though.
Asset out in California, we loved.
<unk> because it gives us a physical asset in the marketplace that we're driving to expand into that hasnt oil perm, but it hasnt not as consolidation firm. It Hasnt, California has firm that we're going to add antifreeze, we're going at a hub out there, which will cut our logistics cost.
That really was more of an asset deal for us and we will grow off of that business.
Feeding most of our west coast branches will begin to start feeding that location.
And we will pull product out of that location, which will save us quite a bit of money over the long haul, but we've got we've got some hard to do to get there right there youre referring to coal.
Yes, yes. Okay. Then the other one is just like us there.
The waste brokerage company.
A lot of small to midsized generators and.
<unk> go on direct third party, they've got a great technical field services group, which will.
Grow out west and try to internalize as much of that work as we possibly can that's a goal for us across the United States. So we will look for.
Other opportunities on the East coast and do the same thing.
Okay, and then we bought we bought a wastewater plant down in the southeast which has not has consolidation capabilities.
Do port work out of that location supporting the Miami, Florida area. The cruise lines will recover so it will be to possess.
Positioned to get that work back and then it takes it in small quantity generator non as waste, which fits good with us.
Perfect. So that's that.
Perfect segue, so I was at the EI Digest conference in late.
Late September.
Some of the chatter around that conference was that the heritage group, which is one of your large shareholders.
Rethinking their portfolio allocation.
To the degree that you can comment on any of that.
Are they contemplating a possible sale of any of their assets and would that include you all.
Michael I can't I can't get into what the Heritage group is thinking I'm not on the board of the Heritage Group.
Certainly.
Our job is to continue to focus on creating shareholder value.
<unk> been in this deal for 25 years, and great long term shareholder and we love having them part of our having them as a part of our company.
Okay. Thank you very much and nice job, it's always fun to have the wind at your back isn't it.
It is nice.
Unless we can get the wind at our back from an operating standpoint.
It's tough to tough to be a senior leader of a company. These days.
Yes.
And your next question comes from Jim Ricchiuti from Needham <unk> co.
Jim Hi, how are you guys.
Thank you.
Yes, most of a lot of questions were answered I just wanted to.
Focus a little bit on the M&A side, because you did allude I think in the last call to some additional acquisitions, where do you stand with those and and Mark maybe you could talk to whether there was any.
The acquisition related expense.
You feel should be called out either in the quarter just ended or the quarter.
Now.
I'll take the first part and I'll take the balance of it over to Mark.
We're going to slow it down a hair just at the end of the year I mean, we.
Focus on integrating these three.
We certainly have a long pipeline as we alluded to on our Q2 conference call. So we're going to continue to.
Pursue acquisitions with the goal of getting.
Another three to five done in 2022 and as always we're looking for.
<unk>.
Something that could bring us even more scale, but those are few and far between but we're pursuing them and.
And I'll kick.
Business related economics over to Mark.
Purely related.
Acquisition cost as we reported we have accounts.
And our general Ledger model.
Quarter over $1 million.
And that would only be most of that would be related to the coal is one of the other two deals.
That we closed.
Add it all up it's probably a little less than 1 million box by the time, you add up all the legal fees and all that stuff.
Or are those three transactions.
<unk>.
Got it.
I'm curious how long were you guys talk into these folks before you.
Came to an understanding we're able to close these deals so I'm just thinking about.
Brian as you're thinking about next year.
It sounds like you've got enact.
The pipeline, but I'm just kind of curious just given the environment. We're in whether folks are a little bit more.
Valuation sensitive here, where given whats happening in the market.
Yeah, I would say the two deals that were not being managed by investment banks, we've had dialogue with both of these companies.
Two and a half years I mean, that's how long it takes to.
Yes get the entrepreneurs in a position to be willing to pull the trigger on selling a company that they've grown from.
More often than not from scratch.
So it is an emotional battle to get the owners to pull the trigger so it takes.
To build relationships I want to make sure that people are going to be in good hands with an operator that cares about employee. So I would say on average it takes US 18 months to two years to get these guys.
Agreed to do a deal and then you've got to get it closed and that takes another.
Three to six months to get it closed the other one a little bit quicker because it was a deal.
Todd was being managed by an investment bank and they had.
Little bit more bandwidth than a typical entrepreneurs and we were able to get it done a little bit quicker.
Kind of look backwards.
Being a director of M&A position for a little more than two years. So now at this time it fits right.
I'm mentioning.
The old 18 months, probably more appropriately probably worth a little quicker on Sundays, because you've got to really take out six months or so before the pandemic we were dead in the water.
There is many market would see stuff. So I think we're executing fairly well is my way of interpreting against what I think is a great baseline Brian Gaines.
But.
That part of the business is.
And your last deal so we got to keep pushing forward and we're going to focus on some integration here in the coming months, but.
But after that.
We will turn it loose on getting some of these other once closed.
Got it thank.
Congratulations by the way thank.
Thank you.
And your next question comes from Kevin Steinke with Barrington Research.
Hey, Kevin Good morning, Kevin.
Hey, good morning, Brian and Mark.
I wanted to.
Just.
Clarify in my mind.
Guidance for mid single digit growth in environmental services.
In the fourth quarter of 2021 versus fourth quarter 2019 as that.
On an organic basis or are you.
Factoring in the acquisition.
Contribution into that.
I still think even when you do the math.
Youre kind of in that same range, obviously, we werent getting a set number but in that mid single digit growth.
Range and be the answer for I think we'd be there organically in them.
You heard the revenue numbers, if you do the math.
It's not going to be that much different.
Right. Okay got it okay that was the original guidance that to do it on a purely organic inorganic will be a little Qs I don't know it depends how you define high.
It might not get to into what.
You would consider high single digits.
Yes, I agree.
Okay right, Okay understood.
And you mentioned, obviously, the inflationary pressures in environmental services, but you expect some.
The sequential improvement in the margin there in the <unk>.
Got some quarter.
Should we think so that maybe that approaching 27% goal by the end of the year is going to be a little more challenging than you might have thought last quarter.
Yes, im not going to go there and tell you we can get to 47% we feel we feel.
Feel good about it given that.
The bulk of our projected price increases sticking and we've worked hard to make sure the guys.
Force it to happen out in the field because of the inflation that we're seeing everywhere.
So we feel good I'm not going to sit here and say, we're going to get to 27%, but it's certainly going to be an.
Forthcoming over where we were in Q3.
Yes.
If you do the rough math based on where some of the percentages become in yet.
And that kind of contradict Brian just to reinforce its certainly possible, but there is.
We saw 12 weeks ago at least I'm pretty sure I can speak.
To improve.
Things were going to be a little more transitory I'm, not saying, they're going to stay forever, but there is a little more legs.
Hi chain disruptions and some of the knock on effects. There. So it will be hard work to get that done we think the inflationary pressure in the transitory issues that we've dealt with a straw.
And even Q1 Q2 based on what we're hearing from our suppliers.
Difficult conditions out there are difficult for people to get staffed up.
Make the products, we need which is causing pricing to go up.
Right understood Yeah fair enough okay.
Did you give the just the capacity utilization at your re refinery if not what was that it was 111%.
Didn't give that.
And then to put that into my model.
Okay, Yeah again another phenomenon.
Record production.
And I am sure you Youre not SaaS, but remember that that is based on an annualized nation and whatever.
Whatever quarter, we take our larger turnaround a longer more extended turnaround which is used in Q4, we got back on that cadence. This year youre going to expect that good because if you add them all up all three quarters, so far you're saying well.
As a.
It's number this annual capacity well, it's really not Brian mentioned, we'll probably hit it will probably be right around 100.
For the year, maybe a tiny bit higher but.
Thats still thats why the math seems lumpy through three quarters.
Right right it will pull back.
Aspects of the pullback in <unk>.
Fourth quarter with the turnaround okay.
Alright.
You mentioned.
I think in your prepared comments that you lowered the volume of third party use.
Oil purchases as I believe by 35% sequentially.
B what enabled that did you have I think maybe you are experiencing some logistical challenges in getting used oil to the.
Plant, but.
What enabled you to lower the third party used buying so much.
I mean, our goal in general is to have it.
To build.
What one automotive our vehicle maintenance focused.
Initiative I think we're pretty sure we talked about last quarter.
We're using a big part of that is driving better oil collection and we are just now I mentioned our route efficiency, usually you would expect when you add several.
Oil sales and service reps is now going to come on right away and that Ralph is going to be a fiction again, we are comparing it last year to a pandemic low.
<unk> had some furloughs and whatnot, but we add these people back and we didn't Miss a beat so it's basically just collecting more used oil and that is in line using the win with one program and just our other.
To collect more and have more.
<unk> relationship with the generators have them be customers as opposed to having a third party so having only about 17% of our feedstock.
That was setting to the re refinery beat from third party that might even be a record low so.
Usually in the summer.
Africa quarters, it's a little easier so I don't expect it to hold there forever, but overall, we are looking on an annualized basis to continue to drive that down.
Okay, Great that's helpful.
Great. That's all I had for now thanks for taking the questions.
Yes. Thank you thanks, Kevin.
Kevin.
And there are no more questions at this time will there be any final remarks.
No no. Thank you.
Thank you ladies.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Tom.
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