Clean Harbors, Inc. (CLH) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to the 24th Annual Needham Growth Conference. My name is Jim Ricchiuti, Senior Equity Research Analyst at Needham & Company. Our next session is going to be a fireside chat with Clean Harbors, one of North America's leading providers in environmental and industrial services. We have with us today Mike Battles, CFO; and I also have Jim Buckley, Clean Harbors' Director of Investor Relations. The company has gone through a few quiet years on the M&A front. But last summer, things picked up a little bit. There are two notable announcements, the acquisition most recently of HydroChemPSC, provider of industrial cleaning and specialty maintenance and utility services. That deal was done, I guess, early October. The second acquisition currently pending regulatory approvals, the acquisition of the used motor oil collection, recycling, and assets of Vertex Energy. So welcome, guys. Mike, let's -- why don't we start first with HydroChem. For those who may not be familiar with -- as familiar with the business. Tell us why this is a good acquisition for Clean Harbors. How it fits with your existing Industrial Services business.

Sure. Thanks, Jim and the team from Needham for having us here. I'm Mike Battles, I'm the CFO here at Clean Harbors, and I'll start. Jim and I are in two separate locations, so we're just going to [ add it ]. Jim, you want to add anything, please feel free to do so. But HydroChem, we closed on in early October, October 8. It is about $780 million to $800 million in revenue, $115 million in EBITDA. We think we can generate about $40 million in run rate synergies, of which we'll get about half of that this year, maybe a little more than that. But what HydroChem is, it is #1 in the Industrial Services business, which is kind of going out to a customer site, a chemical plant or a refinery and doing kind of annual or semiannual turnaround, cleanouts. And we bring in our people, our specialized equipment, clean all that up to get the plant rate and run again efficiently and then dispose of that waste. And as Jim mentioned, we also have a very similar business. And so we view this acquisition of HydroChem is very complementary to our business. The business -- the acquisition costed about $1.25 billion as we closed it again in early October. We used it -- we were [ borrowing ] about $1 billion worth of debt, and then we ended up using available cash for the rest of it. The difference between, let's say, our Industrial Services business and now HydroChem's business, it's a couple of things. First of all, is that they made a lot of investments and focused a lot more on automation instead of kind of having a guy with a power washer, if you will, cleaning on a heat exchanger. They used automation and more mechanical work, it kind of do that automatically. And that should say -- that didn't help from a safety standpoint, but also from a cost and a margin standpoint. Their margins are a little higher than ours had been historically. We also feel like there's a fair amount of synergies, whether it be in a combination of the fleet or the back office support or the geographical footprint, they're all in the U.S. That business is all in the U.S. and so that $800 million business combines with our $400 million, $450 million business to create, I'd say, a powerhouse in the marketplace. I'd say that it's early days. It's actually been just a little over a quarter since we closed on the transaction. We're really excited about what we acquired. Now, it's a little concerned is buying companies from private equity and kind of what you're getting, but that really was kind of -- I feel a pretty well-run business. And we've definitely got some good people who we brought on to run the consolidated combined business. So again, we're really excited about the business. It seems like it's doing pretty well. And no real surprises. Obviously, keeping people and attracting talent has always been a challenge even without this acquisition, and it's been challenged from that as well. So -- but overall, really pleased with it and really excited about not just bringing the business on, taking out the cost and running it, but then also the cross-selling ability of that. So because the HydroChem team would never look at whether or not they need to have hazardous waste on site or other types of work that can be done and the fact that they have almost 200 different insight locations is going to be a bigger pool of people we can go kind of tackle and customers can go tackle and do other services for beyond just industrial services.

Got it. And we can dig a little deeper into some of that. One of the things I wanted to see if we could talk about is I think -- correct me if I'm wrong, you talked about HydroChem adding about $15 million of adjusted EBITDA in Q4. We know when the deal closed and then if you go back, it's supposed to add about $115 million or so annually. And so talk to us a little bit about maybe is there more seasonality in this relatively modest contribution and what's almost a full quarter as part of Clean Harbors. And maybe how do we think about the seasonality of this business over the course of the full year. Just because we don't have that much experience?

Yes, sure, Jim. It's actually a really good question because we've gotten in a lot when we gave out the earnings and on the surface, they seem kind of pretty modest and you say, "Oh, it's $115 million business, and we're only doing $15 million in a quarter, that doesn't feel very good." But think about it for a second. These turnarounds are incredibly expensive to do. When you shut down a plant, it is actually a huge exercise well beyond just kind of bringing in our cleaning business and doing some industrial service work. So they don't -- they being -- our customers don't usually do them in the winter months. So November, December, January, February are really low, slow months for us during the course of the year. And then Q2 and Q3 are the warmer months, so they don't have -- I mean they can always have a weather event, but they try to minimize the impact of the weather event by shutting down the plant for a very short period of time, doing all the work that needs to get done in that short period of time and then opening back up again and starting to run again. So it really is -- it's a multimillion dollar deal to shut down a plant. And so to do that, you really want to make sure that when you do it, you don't have a kind of a cold snap come through and delay the start-up again because that would just cost a lot more money. So the business is not seasonal. Our Industrial Services business, it's either kind of Q2 or Q3 due to the big quarter, kind of depends on a lot of different things, and that will be the same thing with HydroChem. So I wouldn't anticipate. Let me give our guidance for Q1 at the end of February, I would anticipate us being a little conservative. We'll talk about the whole year. We're talking about numbers for HydroChem for the whole year, but we'll give you some guidance for Q1. And I would imagine it's should be pretty tepid because of the fact that kind of Q2 and Q3 had their big quarter, just like it is for our Industrial Services.

That's helpful, Mike, thanks for shedding a little bit more light on that. So you talked about the $40 million of cost synergies that were into this 3 months or so into this integration process? Are you seeing some opportunities where potentially that number could be higher or it happened faster?

Yes. I mean I think that there's a lot of -- there's a lot of puts and takes, Jim. It's kind of fun with spreadsheets until you actually start talking about taking people out and moving and emerging systems and internalizing repairs and internalizing disposal. There's a lot of puts and takes there. I think ultimately -- I think that -- I feel pretty good about that number. The number is kind of happening kind of as we speak. I'm hopeful that it goes kind of faster than slower. But I'm more concerned about getting to that $40 million run rate by the end of the year. And we've got to pay for the cost of doing that. And there are some dis-synergies like severance and also better benefits for Clean Harbors versus for HydroChem so there's some dis-synergies associated with this as well. I think that's the underlying account. I don't see any anticipation of us not hitting that. I'm actually very positive about it. I don't think it's going to be much higher or lower. It's going to be a lot of different pieces, probably than what we thought, and we really let it out. But at the end of the day, we'll get to the same number.

How is the integration going from a cultural standpoint? It's only because this combined company, part of this is the cross-selling opportunity, the revenue synergy opportunity. Any early color on that? Or is it just too early to talk about that.

Yes. I would say that -- I think that -- I can't speak with the HydroChem employees, but I think they're happy to have someone who understands their business pretty well, who does the same business. And so culturally, I think it has fit really well, the personalities of the certain leadership team I've been, some of the [ pioneer people ] we're keeping other, seems like they fit very well with our own teams. And so really kind of on us to try to drive that cross-selling and to train our employees and their employees about all the services that are available. Because if you think about it, Jim, if you and I were going to down Midland every day, and we are part of the Clean Harbors team that's going there. It's part of every day dealing with their turnaround and cleanout work. Well, you want to make sure that we were trained to look for other things as well. That we could sell and bring in specialists to help sell that. And so that's kind of on us to make sure that we are incentivizing our people properly, training our people properly about all the services that we offer. And so as they're going in and doing this work for our current customers or their customers, they can try to sell those opportunities. The challenge with it, Jim, really is to kind of quantify that number, right? Because let's say, for example, that you and I sell a parts washer, Safety-Kleen parts washer. Well, is that us kind of saying, hey, they can use the parts washer right there or let's take out a competitor. Or is it the salespeople who are calling on that customer saying, "Oh, no, I did that. I made that sale." It's very odd. Some will never know. At the end of the day, the parts water gets put in there. It's a winner for Clean Harbors, and so that's a good thing. But it's going to -- I never tried to put a cross-sell number in a financial model or in an earnings estimate because I feel like it can be really difficult. I think there's real numbers there. I think it's material. It is really hard to put a number on that as to what that could be. I think it's upside to the model. I think it's very real. And I think that our customers -- we understand those customers very well, and so we can sell the services to them.

Okay. No, that makes sense. Let's turn for a second to the Vertex assets. I guess, getting a second request from the [ FTCs ], kind of new ground for you guys.

Yes.

But maybe you can talk to whether you're still confident of this closing in the first half? And then I've got a couple of other questions relating to it.

Sure. So as you said, we haven't experienced a second request before it is quite a data request. And as we said in the Q3 call, we're working hard to comply with that data request. And so not much more I can say there other than it is quite an exercise to all to pull together and the train continues down the track, if you will.

Okay. So assuming it closes, can you tell us about what -- we're having these 2 re-refineries; one in the Gulf, one, I guess, the other -- in the Midwest, that is for the SKSS business. It's just going to improve the overall efficiency, maybe enhance prospects with large national accounts? With -- maybe that happens with or without the Vertex assets and we'll touch on that in a second, but maybe you can just talk to us about what this deal brings to Clean Harbors.

Sure, sure. So it does provide re-refining capacity in the Gulf, which is valuable, right? Because when we pick up oil in Houston or in Louisiana, we have to ship that to Kansas or up to Indiana. So that is -- that shipping cost is on us. And so if we had some more incremental re-refining capacity in different geographies, it's very valuable. Just from a logistics standpoint, for getting everything else you know around the spread and how wide the spread is and other things around that, but just the logistics of getting that dirty motor oil from the Gulf for Texas up into our network is not any significant cost. So that is a big -- forgetting that's a big winner kind of how I think about that and certainly provided kind of a justification for the transaction. I think that there's also opportunity though that whether we kind of buy it through the Vertex acquisition or build it ourselves, I mean those things are easier to permit than, let's say, other types of facilities like an incinerator, for example. So who knows, maybe we'll do both, right?

Yes. On the topic of SKSS. This is kind of a question that's more longer term in nature. But let's say, I think it comes up occasionally from folks who are looking at where the auto -- mode of market is heading. I mean, on the one hand, you've got average age of cars [ for road ] of 12 years, and I was shocked that a 1/4 of the fleet, I think, is 16 years old. That's good for choice -- change in oil, right? But on the other hand, you've got EV penetration, and it's less than 4%. So we're not seeing a big uptake yet. But obviously, there's -- we're moving toward this point where EVs and the traditional ICE vehicles, they get every approach cost parity. What is that -- and what are those puts and takes? How are you guys thinking about all of this?

Yes. So as you say, Jim, it's not a huge part of the overall -- any combustion engine car today average life is 12, 13 years, if not longer. And that's good for us. People are keeping their cars longer. I think that means there are more repairs being done, more oil changes being done. It's more than just the oil itself. It's the actual brake pad, I think they create. Some of the parts of the car are hazardous, may need to be disposed through a containerized waste program, where if you and I owned a body shop, those parts, you just couldn't throw them to the dumpster. You got the drum into a drum and we pick them up and dispose of them properly through incineration process more than likely. So anyway, my point being is that it's still a pretty small part of the story today. And we think that there's a lot of cars in rolling there will be -- and as the economy continues to reopen and recover, we're hopeful that, that means that there'll be more travel and more cars on the road. But to your point though, we're not blind to it. EVs are coming, and they become a bigger and bigger piece of the pie, and that becomes -- and they need -- obviously, you don't need motor oil and they need less repairs in general because they are less moving parts. So kind of what do we do about that? What do we do about our SKSS business when that business gets slower and slower. First of all, I'd say that peak oils were still not there yet, but let's put that aside for a moment. I'm of the view that, let's say for a minute that, gas station we didn't have as many gas stations and gas station's started closing, which could very well be some time in my lifetime. And so those gas stations all have gasoline tanks. And those tanks are permitted just like our assets are permitted. And when you stop using those assets they need to be disposed of. And so our tank cleanout and remediation business is a big part of our Environmental Services business. And those tanks average $150,000 to $180,000 to clean out and remove assuming there's no contamination beyond that in the soil. So let's assume the drum holds together in these 20-, 30-year oil gasoline drum probably [ down ]. All that needs to be cleaned out and disposed of, and that's a big business for us. So part of me feels like, okay, what do we do about the SKSS business and terminal volume, this is kind of what your question is. I'm -- let's bring on the EVs because that type of business, all -- that's just gas stations, getting all the piping, getting all the refiners, bringing all these other parts of the world that we feel is going to be a great opportunity. And also, Jim, one last point, which I think is getting lost in all those. If any of the big major oil companies, they're not going to go build a new refinery in the United States ever. It's over, right? But over time, these continue to die and fall out. Well, there's still going to be a demand for oil. There's not going to be as much refining capacity in the United States and what's better than we refine long oil. And so my view is that I wonder in the next decade, the price of oil doesn't go up because there's going to be less supply of refining out there than there ever was because again, people realize that the long-term nature of oil needs to be -- it's going to get smaller and smaller. So I'm of the view that we'll see how it all takes out, but I'm of the view that oil prices stay high, the value of our re-refined motor oil stays strong. And oh, by the way, it is the greenest solution you can have as the ESG teams are kind of running out of good ideas and they're trying to switch from combustion engines to electric vehicles, and they can't do it all because of different challenges they have. Well, re-refined motor oil is a great mid step, if you will, as you make your way to electric vehicles.

And meanwhile, SKS has had just a remarkable year, right, in terms of the kind of spreads you've enjoyed? And a couple of questions. And one of your competitors has been talking about it. They've been pretty visible about just talking about IMO 2020, maybe we're actually changing the market dynamics. And I'm wondering how you guys are thinking about spreads over the next year?

Yes. No, it's a good point because we've been talking about -- for people who have been following us for a while in this call, we were talking about IMO 2020 back in late 2018, when they started talking about -- and we talked about the impact and the nickels and dimes and all kinds of phone conversations. The fact of the matter is that IMO 2020 did happen. It was material. It just got lost in the pandemic. When the pandemic hit and ships were going across the ocean, IMO became kind of who cares because we've shut down re-refineries. Right now, in 2021, do we see the benefit of that. And as you just mentioned, Jim, one of our competitors on a live call like this mentioned that he thought that the impact of IMO 2020 could be $0.10 to $0.15 a gallon. We agree with that. It's probably a little conservative. But you take that, we collected about 240 million gallons. Well, it's a simple math, gets you $30 million, $40 million of incremental EBITDA forever. Because the question is that, hey, look, we had some really -- the world has kind of opened back up again really fast last year. We had frozen. Texas got froze out. We all kind of -- we're fired on the big refinery. I mean there's a lot of pressure on oil. And maybe that pressure in 2022 or some [indiscernible] starts now. So that price starts to go back to some last spreads and come back to some level of reasonableness. It hasn't happened yet by the way. And every day that goes -- it took 6 to 9 months to kind of get it that way. I wonder it's going to take 6 to 9 months to get it back down to whatever normal is. And as Jim said, that was in the IMO 2020 impact, which may last -- which should last forever. So in the pandemic -- prepandemic year, we did about $120 million, $130 million of EBITDA for that SKSS business. And this year, we're going to be north of $200 million and what's the right number is? It's hard for me to say today. But every day that goes by and the spread stays pretty wide. There's one more day, I think 2022 is going to be awesome. That's as simple as that. I don't know, Jim, if you want to add anything to that, Jim Buckley.

Yes. No. I think it's somewhere between those 2 goalposts, but the wider we stay, the closer it looks like it's going to be last year versus 2019. And the IMO 2020 impact is in perpetuity as in the changes we made in our Safety-Kleen Sustainability business when we pulled that supply organization out of the branches and married it up with the re-refining assets. So I think -- and we're going to grow on the blended side, which really wasn't a focus last year. So we think we're in great shape for that with an opportunity to add incremental EBITDA in other areas as that spread starts to narrow.

And then shift back to the U.S. business. It looks like a decent industrial economic picture, industrial production was up in November, I think 3 years close a 3-year high. Costs are up. And we keep hearing about that across the board. You guys have talked about it. You've been passing along some increases to customers, which I guess is fair because you absorb some things going back to when the pandemic really hit. And are you able to put through these kind of multiple price increases? Is the customer now more conditioned given that they're seeing it in all parts of their business?

Yes, Jim, I'd say that I've never had a conversation with the customer and saying, "Hey, we're going to increase prices and then say, okay, let's just start there. That -- there is some pushback in negotiation discussions. We showed them a lot of analysis, a lot of data. As you know, we're pretty transparent about these things. We're not -- we're a publicly traded company. You can see what's happening in our margins. And so they kind of get it. The stick rate has been pretty good. Our customers haven't been accepting it. We're trying to figure out to make sure that when we go and ask for price, we're asked kind of onetime, right? So we try to make sure that, that price covers the cost that we have and maybe future costs. So that with the idea we're going to price faster than inflation to drive incremental margin into the business. And so that's been the goal. It's kind of tricky to do because it's a bit of a moving target, but we are trying to be aggressive in our pricing and go after our customers and share with them the analysis. We're not trying to -- we're not trying to [indiscernible] but we're trying to cover off on our cars cost because if you think about some of the bigger cars you see in the marketplace, wages, which have 20,000 employees, their wages we're going up. Transportation, I mean, that's a big part of -- we're a shipping company embedded into a hazardous waste disposal company. And so we're the 17th largest commercial shipper in North America. So my view on that is that all that's going to cost more as well. And so we've been able to take that data, compile it, give it to our customers and have those types of positive conversations to try to drive that. If you have to take time, is it all going to -- we don't kind of snap our fingers in October and prices go up and we cover everything out. But I do think that we are in a unique spot given our highly coveted permanent facilities to be able to drive those prices. And remember, Jim, too, that in the overall cost of a product, the waste disposal aspect is a pretty small amount. And so even though it's going up, although I'm sure no one's happy about that answer. It's not like this has been a huge material part of the overall cost of the manufacturing a product. So as such, we're hopeful that those costs are kind of get lost in the rounds as they go back and charge more pricing -- more for their own products. So we're working on it. We've got 3 priorities, right? 3 priorities that we -- that in every meeting that I spend at least 75% of my day on is: safety, hiring and retaining employees and pricing. And so those 3 things are really kind of what we do every day to ensure that, that is -- if you ask me kind of what the secret of 2022 successes, are those 3 things. If we can do those 3 things -- there's 30 different priorities. But if you do those 3 things, I think we're putting in pretty good shape.

And meanwhile, the activity that you're seeing, I think, is pretty strong. You've had -- it looks like you're entering the year with pretty strong momentum. You deferred revenue, which is a good metric, I guess, for the U.S. business. They increased flat 5 consecutive quarters, at the end of September $87 million, which is, I guess, the highest level in the company's history. So any color you can provide on just the level of activity that you're seeing out there?

Jim, so that's a good question, a very bold one. I'm here to tell you that it's not a demand problem, it's period. I mean we have enough work. If we get more employees -- if we had -- we would easily be able to -- we'd easily be able to service more customers and really it has been just a challenge, it's not a demand problem. In the past, we've had challenges before. There's been demand problem. Services dried up. It went here. It got pushed out, different problems. That's not the case. We've got more work. We know what to do with and so that certainly is. And so when you think about deferred, that's a decent proxy and it's something to talk about, and we certainly mentioned it. But normally, Q2 and Q3, we kind of -- in a normal year and 2021 was not -- 2020 was not a normal year. Q2 and Q3, we build and then we cut into it in Q4. And so as people kind of slowed down for Christmas, we can get up a little bit. I think I'm hopeful we see that again this year. We don't want to get deferred to get out of control, Jim, because that can create compliance issues and other types of challenges. So there's a limit to where you want to go there. And frankly, there's deferred revenue that we go to your site and pick up a drum of hazardous waste. Well, that's considered deferred revenue in our networks. But there's other stuff that we even can't pick it up because you can't get drivers to come pick up your waste. And so that's like the deferred behind the deferred, if you will, that we're working on. So I'm of the view that we got enough waste to last us for quite a while. If there was -- and god help us if there is some other form of the lockdown, I think we did have enough waste to keep us busy for quite a period of time.

Yes. And that kind of segues into the next question, Mike, just the topic of COVID. Yes, you -- you're managing through this. On the one hand, by the way, I mean there is some benefit from this. We thought there was -- the decontamination work was going to fall off really sharply. I mean, I don't know, is it falling off less sharply given what we're seeing?

Yes, Jim, I've been wrong on that number every quarter since we started the pandemic. I have always assumed and maybe it's the optimist in me or just I don't understand it very well. I assume that the decon work would kind of slowly fall off. And we thought that again in Q3, it really -- I'm not sure if I'm happy or sad about this, to be quite candid with you, but it still is going at a pretty good clip and probably kind of better than where we originally expected back in November when we had this conversation kind of with the investors and with you. But it kind of cuts both ways, right, Jim, because you have that decon work, which we like and we can talk about and it's pretty material. And we have talked about the $120 million in 2020, another $40 million, $50 million in 2021, but it does prevent our landfill business. There's a lot of project work that continues to get slowed down. There's maybe impact on driving and on our [indiscernible] business. And so there are parts of our business that we really do want for a whole lot of reasons. Just with the overall fatigue, we want the pandemic to kind of work its way through America -- North America and us get back to our lives and not just -- and I think -- and I'm on the view that we do have a natural hedge with that decon work, which is helpful, and that still maintains it, but really I'm of the view that I wish the business was -- that was going away because I didn't speak to some benefits that we have in the business and the overall economy.

And you guys like a lot of companies out there on [indiscernible] at this conference has also been talking about the challenges, too, that not only has COVID problem, but just in general, retaining folks. And what -- how is the -- how are you dealing with that issue?

Yes. I mean we've always been short. People were always struggling to hire and maintain and retain people. The interesting thing about it, we bought on the HydroChem employees, about 4,500 employees related to HydroChem and their benefits are -- our benefits are better. I wasn't really sure we've done benchmarks every year on our benefits, and we -- I thought they're in the middle of bags [indiscernible] told by the mercers of the world, but to come to find out, it's actually probably better than that, and we've been able to bring on some employees and give them a better benefits package and a better 401(k) math and other things they probably didn't have. And so I'm hopeful that those types of things mean something to people. I mean, I'm not sure what the world is today and a great year of resignation or whatever you want to call it these days. But we offer very competitive salaries, good benefits and a real career. And the fact that the founder of the company still is here every day and focuses on the lowest levels of the organization -- a lot of people take pride in that. And I think a lot of people value that. And so -- and whether it be myself or others in the organization moving up internally is a good message, and that's what we got to continue to do.

Okay. Let's talk capacity for a second. I know Kimball -- the Kimball incinerators is a ways off in terms of receiving waste streams with the first half in 2025. But I'm wondering, having this project underway, does it help advance discussions with captives and that maybe some like [indiscernible] considering there's -- it's better to just turn this work over to you and move a step down the path having this?

Well, we're not building the incinerator to -- we need captives to fill it otherwise for debt. Frankly, I was talking to investors this morning, and I've talked to the Chief Operating Officer about this a couple of times. They kind of wish the player was ready to go tomorrow because we certainly have the waste to do it, and we kind of turn away other types of waste stream because we're trying to get the highest value wastes into our incinerator. And as such, we really -- if we had another incinerator, we could take that type of waste and deal with it. So I'm of the view that will it be an incentive for other captives to close and put more to make the pie bigger, to make the addressable market larger? I think it will be. I also think that kind of the reshoring of supply chain closer to its end customers is helpful. I think the low price of natural gas and growth in the Gulf of chemical plants is also helpful. I mean, I'm of the view that there's a lot of good catalysts, the PFAS regulation and where they're going to land on that, knowing full well that it's going to be labeled as hazards because it is hazardous today. I think there's all kinds of good catalysts that we could use that incinerator for. Again, the only down part, Jim, is I really want it tomorrow, and it's going to take a few years. And we just had a meeting on it last week about kind of how -- if there are things we can do to make it go faster, there isn't much, but small thing.

Yes, I would imagine that it's not something that you can accelerate dramatically. What...

Well, they have a good -- they have a good -- the team has a good road map. They just did it in Arkansas 5 years ago. Many of the same players doing it again and they have a good process. So we got to respect the process.

How are you guys thinking about capital allocation? I mean, you got a lot on your plate right now, you got the HPC debt. You got the acquisition -- the pending acquisition of the Vertex assets, higher CapEx. We just talked about Kimball. I'm wondering and I don't want to add other things, but do you still have an appetite for additional M&A? Because you guys occasionally will talk about, well, if it's something that comes along, it's one of those real opportunities that come along. Do you have an appetite right now, Mike, or are you just kind of focused on what you've got going on, which is a lot?

I mean at the end of the day, we've got a bunch of things going on, but I was telling an investor this morning, well, it's just another [indiscernible]. We have followed this for a long time. We always have a lot of things going on. It's good stuff. We've been able to execute, I think, really well and drive the business forward for our investors and for our customers and our employees. So although there's a lot of stuff going on, there's -- I was just [indiscernible]. Yes, I would say that the issue has -- is that if there are assets out there that are permanent facilities that make a lot of sense. They come on the market once a decade. And so you really have to be ready for that type of opportunity if it were to manifest itself. Are we going out and calling and dialing say, "Hey, we want to do this. We want to do this? Probably less so than normal because we do have a lot of food to chew right now?" But certainly, we have a team of people who are out there looking and if those assets come for sale that are permanent that make a lot of sense that we would be aggressive. And well, how we do it is -- that is still super cheap. And so I think that we can use that to do that again. We have to have a good payback. But it all makes sense. I work for an entrepreneur, Jim, he's not going to stop just because we got last up corner.

You touched on ESG a while back in our conversation. And I'm wondering, are you guys getting some traction, do you think with customers who themselves are much more focused on ESG? And here you guys are the largest recycler of waste oil. Is that -- are we beginning to see some signs that, hey, there's some recognition out there. This is an easy way for us to perhaps check one of the boxes?

Yes. I mean, I think that the -- putting out an ESG report in accordance with the SASB standards kind of working on improving our scores, which we improved them. Over the past 2 years, we improved them, cut them into half. I mean, twice as good, right? So I think it's -- as we talked to investors, customers and employees, they come up all the time. We're really proud of as far as an employee, myself, and Jim feels the same way, working for a company that is a sustainability solution for many of our customers. This is something we're really proud of. The waste we handle, we do it safely in according to laws and regulations. It is something that we didn't create, but we're disposing it properly. And I feel like the market is kind of coming to us when it comes to things like re-refine motor oil that people are going to realize that it's better than commercial motor oil, and it's obviously a green angle. So again, I think we're in a great spot. And certainly, as I do interviews for people or talk to customers and talk to investors, it used to be kind of a sidebar conversation, now it is the conversation. Again, I think it's a great story and something we're really proud of. We were doing sustainability for sustainability with school and some we're really proud of.

All right. I think we're going to leave it there. Guys, Mike, Jim, thanks. Thanks a lot. Appreciate it.

Thanks for having us and team at Needham for having us today. We'll talk to you soon.