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

Good morning, and welcome to the CJS Securities 22nd Annual New Ideas for the New Year Conference. I'm Larry Solow, a partner and research analyst here with CJS. We're pleased to have the management team from Clean Harbors with us today. As many of you know, Clean Harbors is a leader in hazardous waste management in North America. CJS has covered the company actually for just about 20 years. It goes back to May 2002 and on the [ EBITDA ] purchase of the Chemical Services division out of Safety-Kleen coming out of bankruptcy, which really got the ball rolling. Joining us today are Mike Battles, CFO; and Jim Buckley, Head of Investor Relations. Since we are early today, just give me 30 seconds to quickly review the format of our conference. We're going to start with a 10- to 15-minute overview from management. Then we'll move to a fireside chat, which I will be moderating. [Operator Instructions] With that said, it's my pleasure to introduce Mike Battles, CFO of Clean Harbors. Thanks. Go ahead, Mike.

Good morning, everyone, and thanks, Larry and the team from CJS for having us this morning to talk about Clean Harbors, something I'm really proud of. So I have some slides here. I'm happy to kind of go through and share with you. When I think about the company, and I think about the now 41 years in business, and think about why someone would invest in Clean Harbors. It really comes down to a couple of big things. The first of which is that the unique assets that we have that are very difficult to replicate, permanent facilities that are -- that have the ultimate [ NIMBY ] as far as whether it be a hazardous waste incinerator, hazardous landfill, transfer stations and the like, they're very hard to permit, very hard to keep. But from a valuation standpoint, that is a huge moat, and that is where the value of the company -- primarily where the value of the company resides. And that allows us in this time of inflationary pressures, it allows us to drive price and allows us to drive margin improvement even in a year of increasing inflation. The other thing I'd say is that about the companies that we have, we are the largest collector of used motor oil. So your car is going down the road today as you came into work or wherever you end up doing. It has that dirty motor oil, can't be put down a drain, can't be put into a landfill, a non-haz landfill, it needs to be disposed of. And so we take that dirty motor oil -- 240 million gallons of dirty motor oil and re-refine that. We have 6 re-refineries across the U.S. and North America actually, and we re-refine that to make motor oil again. It's a great, sustainable story, and it kind of speaks to our kind of our logo, 40 years of sustainability and action. It really is a great story. It's something that we, as employees are really proud of. We issued our first sustainability report early last year, early in 2021. And it kind of shows, take a moment to flip through that report, it really shows kind of how I kind of joke around. We've been doing sustainability before sustainability was cool as far as taking value out of network and recycling, what we can recycle including the motor oil and then ultimately disposing of it -- disposing of the waste that can't be recycled safely in accordance with laws and regulations. Again, it is -- we're, in many cases, the sustainability solution for our customers and something that we're really proud of as employees to Clean Harbors. I don't know, Jim, do you want to pick a couple of slides here. We do have a few slides that we can share with you. I gave it the kind of the elevator pitch, but this is it, right? And so we have a great resilient business. It's funny that Jim and I were looking at this the other day. If you look at the EBITDA chart for us for the past 4, 5 years, they might be 1 of the deck gear, it looks like kind of like nothing happened, like the pandemic kind of it was like a -- nothing really happened. It's got a very smooth growth in the business. And what that shows to an investor, I think, is that we have a business with a management team that is very resilient. And we can fight through kind of whatever problem exists. The business started as an emergency response business. And so that culture kind of still exists today, led by Alan McKim, who founded the company. He's still the CEO today, President and Founder, and owns [ 7% ] of the company. So your goals are aligned with his goals from a shareholder standpoint. But what I mean by that is that when the pandemic hit, what was really unique about Clean Harbors is we all just -- it was like another big event. It was an event on the market. And we sat together and as teams say, it's socially distancing with mass and everything else to make sure we're doing it smartly. But to make sure that we kind of work to kind of figure out good ideas to help -- to help have the business continue to thrive even in the -- hopefully the worst pandemic in our lifetime, and whether that be the decontamination work or applying for government funding or taking out costs or other things like that. I mean we were on it because we're an emergency response business in our culture, and that's kind of how we operate, and so it really was. Someone who came in from the outside. I started here 8 years ago, I still feel like a pretty new person here. I feel like it's really interesting to see. It was like an emergency response on ourselves. So again another, I think -- if your reason to invest, I think, that's kind of a good story. I won't read all these things. We have -- we're the largest hazardous waste disposal company in North America. We're the largest collector of motor oil. We have the permits, as I just mentioned, [ 33,00,000 ] customers, 19,000 employees, really a great business ball. It's going to be -- it will end the year in the mid-3s from a revenue standpoint. The -- so here's a little bit about 1 segment. This is the Environmental Services segment. This is where the landfills, the incinerators, wastewater treatment facilities exist. And really, it is kind of emergency response. It is turnarounds of chemical plants and refineries. We bring our teams in. What I mean by turnaround is once or twice a year, a large chemical plant needs to be shut down and all the pipes need to be cleaned out and need to be kind of reset. Well, they bring in specialty equipment and specially training people to do that. And that's what we do in spite of our Industrial Services business. We also do a field service business, which is a lot of emergency response of working with utilities. So a little bit of a HydroChem. HydroChem is an Industrial Services business. We did buy this company late last year -- early -- actually, early October. So we've had it for about a quarter now. I'm really pleased with the acquisition. I think that it was really a well-run asset. I always am a little worried about buying something from private equity, but I think that it was really turned out to be kind of well run with some good leaders that kind of became leaders of the consolidated Industrial Services business. We do have a -- it's about $700 million, $800 million of revenue. We do have our own $400 million, $450 million of revenue, industrial services. That's a very similar thing. So that is -- it's a nice fit. They kind of -- we kind of understand what their challenges are and they understand our challenges. So far, so good. I think that there's been a lot of good work on synergies, on system consolidation, back-office consolidation. I think it's -- as I say in the notes here, strong cultural fit. So this is the other segment that we report on. It's called the Safety-Kleen, Sustainability Solutions segment. This is the oil recollection -- dirty motor oil collection and re-refining and selling that oil out into the marketplace. And so one of the things we've been working on for quite a while and Larry will know this is our direct lube business, where we'll go pick up dirty motor oil from our customers take it to our plants and re-refine, and ship it back clean motor oil, kind of in like a closed loop. And that's actually taking off pretty good. It hasn't gone as far as fast as we'd like it to go, but we think the market is coming to us. As people look for more sustainable solutions, and trying to improve their own ESG scores as they move their way to electric or whatever the future holds. Re-refined motor oil is a great supplement and it does provide them some carbon credits along that in. So this is a sustainability point. Again something I'm really proud that my team worked on in 2020, and issued in early 2021. We're going to issue another one in -- at the end of 2022. And what I say in the last point here, kind of meaningful improvement in ESG ratings, I mean that we doubled the ratings as we got into this. And now we're an industry leader versus our peers as far as when we use ISS, there's [ MSCI ], there's are many other rating agencies, but we're actually doing really well as far as improving our ratings. And I think that's -- as you're looking for investments that are green in nature, I know that if you've been to an incinerator or a hazardous waste landfill, they don't feel too green. But let me tell you, that's the greenest solution you're going to get for what we're talking about here. So just think about that. I know that's kind of a hard thing to conceptualize, but it's certainly the case. A little bit about the numbers, this is the EBITDA number that we just talked about. I kind of find it funny. Well, the midpoint of our guidance is what, Jim, $670 million, is that about right? Am I that right?

Yes, yes, $665 million.

$665 million, $670 million. So you'll see here we end up doing that, it will be a nice even curve and you kind of wonder -- kind of what pandemic? But that really speaks to our ability to drive the business forward even in kind of worst of the times. Balance sheet remains pretty strong. And this is before we closed on the HydroChem transaction. So we did fund that with about $1 billion worth of debt, and we used the rest of it with cash, about $250 million in cash. So that cash balance has come down a little bit, and we have about $2.5 billion in debt now versus the $1.5 billion. But our leverage right now is a little high, but we'll get it back down in 2022 as we continue to generate EBITDA this -- at year-end, we got the debt, but we don't have a lot of EBITDA from HydroChem, so the number looks a little weird. But on a pro forma basis, it's in the low 2s this time back in the year. Cash flow has been really, really good. As you can imagine, as the business continues to grow, well, we're generating more free cash flow. And as you can see here, we've done a pretty good job of generating that free cash flow. It's funny that earlier in the year, I gave some long-term targets for margin expansion or different things like that. And I also talked about free cash flow. And I'd say, over the next 2 or 3 years, we're going to get to $300 million in free cash flow. Well, I may not be sure it's 2 or 3 months, but [ we aren't ] having a great year here in 2021, and we're going to generate kind of north of $300 million as we get to the end of the year. And that's it, guys. That's my elevator pitch, my long-term elevator pitch. Happy to answer any questions people have or Larry have.

Absolutely. Thanks, Mike. And again, I'll moderate. I have a few questions. [Operator Instructions] I guess first question for you, Mike, you got the nice margin improvement over the last few years and sort of went right into the beginning of COVID, and you got a little bit of a benefit from government funds, but your margins actually have continue to expand. So maybe you could just give us sort of a couple of minutes on the 3 or 4 factors that have really driven this margin expansion, it's particularly in the Environmental Services segment. And I'd love to hear your thoughts on that. And if it's sustainable, we can continue to march forward and upwards.

Yes, sure, Larry. So that was for people who've been following us, Q3, our margins on a comparative basis were down quite a bit in the ES business kind of year-over-year, which did, obviously, put pressure on the stock and people ask a lot of questions about that. And that's a function of the cost structure and inflationary pressure that we felt kind of the inflation comes immediate, we have to go back and fight for the pricing, and what we're doing that right now. And you got to -- it gets tricky because in 2020 and in 2021, we did a fair amount of this decontamination work, where we bring guys out kind of after hours that would go into a warehouse or a retail location, where Larry was there, and he wasn't feeling good, and people are worried about him coughing all over the register, yet we got to open tomorrow morning at 9. Well, we come in kind of after hours with our cleaning equipment and do a deep clean to get it ready to kind of open back up again. And that business turned out to be about $120 million in 2020, and then another $40-plus million in 2021. And that's a high margin because there isn't a lot of -- we kind of -- we charge emergency response rates because it is an emergency response. We're going in at 10:00 at midnight to go do this work, I mean great for our employees to get some good overtime. But at the end of the day, it turned out to be a pretty good margin in kind of a much higher-than-average margin work, which then helped kind of -- helped our margin. So from a comparative basis, when you look at 2021 versus 2020, Q3, it would look like a big bad guy. And then also in 2020, we end up getting a lot of government money, we applied for the CARES Act in the United States, but the bigger piece was the Canadian wage subsidy in Canada. We have about 15% of our businesses in Canada, and they had a very generous program that we and many other companies who are in Canada took advantage of. And that turned out to be a huge winner in Q3 of 2020, not much of a good guy in 2020 -- Q3 2021. So that impacted our margins. But you strip that out, the margins are still flattish to down a bit. And the underlying issue there is that the cost came up kind of faster than we can go with price, we're going to get after the price. But in the March -- the question you asked also, there is like, what was the march up and markets over the past few years. That really is a focus on high-margin waste streams, more of those types of waste teams in the marketplace, driving that type of investment in the plants to take those types of waste streams and to dispose of those properly, our focus on those versus on lower-margin waste streams and a such that really drove -- I mean, the plants are going to run as the plants run. And so the higher margin wastage we get into those plants, the better off we all are. And so as such, that really helped over the past couple of years with those margins. And things, Larry, like the 3M contract, which I'm happy to talk about, really also helps because those are kind of very high-margin waste streams. And even before we signed this long-term deal here in 2021, we were taking waste from companies like 3M, and we've increased the piece of their pie as far as how much waste they give us. And now with the closure of their Cottage Grove, Minnesota, incinerator, that's going to even be more still in 2022, and beyond. So again, a lot of data there, but I'm of the view that we've had a nice one on margins. We've talked about 30 to 50 basis points of margin expansion per year. I don't think that's going to change. I think we can leverage this high fixed cost business, and we have, and that will continue. Is it going to be a straight line up? No, it's not, right? Because of things like the decon work or the government funding or other things that happen. But I mean, if you look at the long-term trends, it's kind of tell us the story that is exactly what I've said publicly about our good focus on margin expansion, which then drives cash flow, which then drives kind of shareholder return. So there you go.

Okay. You mentioned, obviously, as you said, you mentioned a lot of down -- a lot of things in that answer, which is great. It gives me a lot of questions. And clearly, there was some -- certainly some onetime or some temporary benefits from the government spending, like you said, and then decon -- decontamination work better mix. But like you said, you're getting a lot better mix from the El Dorado facility and whatnot. And you've also been able to raise price. It brings us to the issue of, obviously, inflation now becomes a sort of new negative variable on you guys, and rising costs. Do you feel that after -- are you raising price more to over sort of overcome these inflationary issues. How do you look at pricing going forward after some pretty good price raises over the last couple of years from the environmental side?

Yes. No, that's certainly a good question, Larry. And it's been tough to answer, right? Because what is the right price increase. You'd hate to go to, Larry, and say, "hey, Larry, we got to raise your prices 8%". And he says, after we go back and forth and kind of cringe and kind of go back and fight and debate and say, "okay, 8% it is." I hate to come back 3 months later and say, "just kidding, it needs to be 15%, right?" And so we are trying to think about what the right number is so that we can cover off on this inflationary challenge. And if we need to go back, we'll go back. But we are -- it's easier said than done to figure out because the question you're asking is that are we pricing faster inflation? Since inflation is kind of moving as we speak, I'm going really high on price with a hope that it covers off an inflation. I think it will, I think we thought through it. We're trying to cover off on these inflationary costs. We looked at our cost structure by large contracts and trying to separate out like what the new cost structure looks like. So that when we go and have that debate with Larry, about what the new price is, we can show them like here is what happens to our cost structure that translates into higher pricing for you guys, but kind of easier said than done, to be fair.

Right. And Mike, you mentioned the closure of 3M incinerator, and that obviously brings us into a sort of another subject by itself. Just closing in captive closures and benefit the Clean Harbors, I think that's historically been a favorable macro trend for you guys for the last -- since we covered the company, so 15, 20 years plus. Maybe you can give us a brief -- just on 3M and up, too specifically, what kind of the benefit that has driven the Clean Harbors, I think that happened early in 2020? And sort of your outlook just on additional potential captive closures as we go forward.

Yes. So what Larry is talking about for people who aren't familiar, we generate -- we dispose of -- we think the commercial market's worth 540 million -- 700 million tonnes of waste per year.

We are at 562 of a market that's probably low 800s.

Low 800s.

With that low 800s.

Right, right, right. And so yes, we think that there's a captive market out there of small incinerators, like the Cottage Grove, 3M incinerator, that dispose their own waste on-site. And what I mean by a captive is that we're a commercial incinerator. We take waste from other -- we don't make our own waste on site. We take waste from other locations, bring it into our incinerators and burn it at 1,800 degrees. But many chemical companies or other types of manufacturing companies have their own incinerator on-site that they manage. So that -- but they can only take waste that's in that site. And so in that situation, that's called a captive incinerator. Now those captive incinerators need to be maintained. They have the same compliance regulations that we have. They need to have -- the EPA goes after those guys when they go after us. And as such, they are harder and harder to maintain and run efficiently. And so the closure of the 3M contract and the closure of the Cottage Grove incinerator was kind of a win for us and for 3M. Because what was happening was, although the nameplate capacity on the incinerator was 70,000 tonnes, they were only using it for like 40,000 or 50,000 tonnes. Yet -- so it costs them a lot of money to run it. And we can take that waste to mix it with our own types of -- different types of waste streams and run it more efficiently. So it turned out to be actually a savings for 3M for them to come to us. And then we're getting all times of pressure from that department, we've provided them by the protection from Minnesota and from the Feds around that, they were not getting fined. There [ were not ] money as well. And so they're having all kinds of challenges. In anyway, there are new and new challenges as well. So that turned out to be a big win for us and for 3M and really a testament to our business model that a big company like 3M is willing to shut down their incinerator and give us their waste stream. Because a very important point is that once you decide to not sustain that incinerator permit, that permit is gone forever. You'll have to reapply for that permit, which has never really happened in the last 40 years. So that is like a no gives you back type of thing for 3M. They're actually going to take their plant down to the studs, ramped down to the ground. They're going to [ remediate the soil ] and will down it forever. But that's an important point to mention that once a captive closes, it can't turn back on again and that waste comes to us forever. And so that was -- in fact, they worked with us over the past summer time going in the fall, it got closed at the end of Q3 and signed. It was a big deal for us and really a testament to our business model, something we're really proud of. And so from an incremental dollar standpoint, that's going to be your next question, Larry. It goes, how much more of this is worth in 2020? How much I model this? I get that. We were getting a lot of the waste anyway. They were slowly ramping down their plant as they're getting ready for this closure. And so we were getting back in 2020, we were getting that waste. We got it all through 2021, and we get more. The big difference in 2022 is that we are taking the 80, 90 sites that make up 3M, we are going to put our teams out there every day, managing their incinerables every day on site, insight programs across their network put our ERP system win into this -- into their -- into those locations and manage that waste, shift that waste ourselves and take all that. Because at this point, it was just -- we would take it from Cottage Grove and ship it to where we need to ship it to one of our incinerators, where now we're going to get it kind of on site. And so there's incremental dollars there from our teams on site as well as the transportation costs. It's not as lucrative as the actual incinerator work itself, but certainly very profitable and a big growth item as we put together our budgets for 2022, we put a number in there, we'll get into that. But there's a good guidance. Not as big as you think about 40,000 tonnes of waste, we're getting most of that anyway, but there is an incremental good guide there.

Right. Right. No, I appreciate that color. And Mike, you mentioned HydroChemPSC, which was a $1.25 billion acquisition you guys completed, done early in the fourth quarter. And you've talked about sort of the targets in terms of EBITDA and synergies. How about -- what is there sort of -- if you had to pick the best attribute or their secret sauce? I mean they're industrial services cleaner like you guys, but what is sort of -- what sets them apart from the competition? And what do they bring to Clean Harbors that perhaps you didn't have beforehand?

Yes. No, Larry, it's a good point. I forgot to mention that in my early comment -- earlier comments on HydroChem, is they haven't raised automation. And what I mean by that, when we think about doing a turnaround and you think about a heat exchanger, where there's a big pipe or a lot of little pipes in it. I mean each one of those pipes need to be clean, they're filled with [ residue and dunk ], that's a technical term. The -- and so they need to be cleaned individually. And so using automation to clean those, get them a lot cleaner and get them a lot -- and does it a lot safer because these power washers are not like get cleaning your house. These are high industrial crane power washers that would cut your foot off if you cut it the wrong way. So they really are important to do that safely. And so -- and also, they bring that type of technology to our business, which we haven't invested as much in. And so that's a big margin led. So their margins were actually much better than our margins on an apples-to-apples basis because they were using automation. And not only that, but we have a pretty large business, Industrial Services business in Canada and [ hydrogen ] was not in Canada. So there's going to be a great demand there for our -- for that type of automation work to be used both in the U.S. in our sites that we don't use in, as well as in Canada, which we don't really have much of a presence at all as from an automation standpoint. So that's really the difference. The difference is their margins tend to be a little better than ours because of their focus on automation. And I'm hopeful that we can take kind of their good ideas and their processes and apply it to us.

Okay. Great. Why don't we switch gears for a couple of minutes and just shift over to the Safety-Kleen sustainable solutions. And I guess first question, probably a -- kind of, a loaded question, but the spread management and your profitability, I'd say [ it climbed ], obviously, dramatically improved the last couple of years and a lot of moving parts here. But what do you think of the 2 or 3 reasons that's really driven this improvement in spread management and the sustainability of that?

Yes. Yes. It's funny, Larry, that we've had, by far, the best year from an SKSS oil spread management positioning in the history because we bought -- since you bought the Safety-Kleen business back in 2012. Yet we're kind of getting ding by it. I find that kind of humorous in my black humor -- black comedy humor. But the -- so the margins are normally -- in a normal year, we'll do $120 million -- $130 million of EBITDA in that business. And this year, we're going to do north of $200 million. So that tells you like the question you're asking kind of why is that? Why are you doing so much better $80 million, $90 million better year-over-year kind of pre-pandemic to where we are today. And it really is kind of -- to your point, Larry, it's kind of 3 factors. The first and probably the most obvious is that the regulations have changed around shipping and the ability for ships or the desire of ships to use dirty motor oil as a fuel supplement when they are doing shipping in international waters. So regulation came out of IMO 2020, which kind of came out in January 2020, which kind of put the kibosh on using dirty motor oil as a fuel supplement in chips going back and forth across the world. And so what that did, guys, is that, that eliminated a very large competitor to that dirty [ motor oil ]. When I'm -- if I'm Larry's auto body shop, I need to find a home for that dirty motor oil. I can't pour it down to drain. So I had to get rid of it somehow. And we had -- we could take it and we refine it. Others in our industry can take it and we refine it or other companies would take it, and they would use it as a fuel supplement. And they still do, right? You can still use it in paper mills and cement kilns as a fuel supplement with clean diesel and to keep your emissions right. But as one big competitor that was kind of taken off the map very quickly. We didn't really see it in 2020 because of the pandemic. I mean we had to close 5 or 6 re-refineries, the whole world kind of collapsed around shipping, airplane travel, and other things. So that really hurt us in that regard. But we see it now, certainly in 2021, the CEO of Heritage-Crystal Clean, Brian Recatto, who's a competitor of ours, kind of got asked in the live call, what he thought the impact was on a per gallon basis of IMO 2020, he kind of blurred it out $0.10 to $0.15 a gallon. I'd say it's at least that. And if you take our 240 million gallons of oil -- dirty motor oil we collect a year, add $0.15, you get a pretty big number pretty quickly. And so I think that -- so the question you can ask me is, okay, even from 120 to 200 plus, like -- what's that?

130.

130 to 200 plus , excuse me. What is normal look like? What is -- and some of that -- so the other 2 reasons are -- is that there were a bunch -- the market did kind of smile upon us, right? With the Texas freeze out and a whole bunch of different challenges at the refinery market, there was a demand for base oil. And so the base oil price kind of rose quite a bit over the past year. And so that helps the back end of the spread. We're selling base oil in the marketplace, and we're a price taker. We're a small piece of the puzzle. And so as such, that was a big winner for us as far as driving the output cost and helped our revenue quite a bit year-over-year. And so what happens with base oil in 2022, I don't know. I'm not -- there are people who spend their whole careers, managing crude prices and other types of commodities like that. I do think that price has gone up, or It took 6 to 9 months to get that price up to the $4.20 we're looking at about today. It's going to take 6 to 9 months, even if it started tomorrow, great to get back down to what normal was pre-pandemic, which is about [ 200, 250 ], right? Am I right about that?

Yes.

The -- so my point being is that, that back end in the spreads -- that back end is going to stay pretty high. It is -- we check it every day. It seems pretty high. It stays pretty high. The last thing we did, which is more of an internal thing, and we can measure the impact of this is the fact we did change the business in 2020 with the pandemic, we pulled out of the SK branch business, the collection side of the business. And why is that relevant? Well, when you think about our SK branch business, they do parts washer services, they pick up containerized waste of brakes and they do back services, but they also had to pick up dirty motor oil. And it really wasn't a priority for the team to manage the price as well as they could -- they made more money on the other parts of their business. And so as such, they were incentivized to do more of that and less well pick up the dirty motor oil, sure we'll do that too, since we're here anyway, but we're not going to focus on it. So by pulling out that business and organizing it around the collection -- oil collection business and putting some resources and some eyes on it, that's really helped us keep the price -- the PFO price -- the pay for oil, how much we have to pay for that dirty motor oil, down to a minimum. And as such, that's really helped on the front end of the spread, really help keep that pay for oil price low while the back end of the spread continue to go up with the market as we've talked about. So those are the 3 things. The new regulation, which helps us quite better. We organized the internal business, which we can debate how much that's worth. And the price of base oil went up like a rocket ship, all those 3 things have contributed to this awesome answer. What 2022 looks like? Well, we're still going to manage the business that how we manage the business. And IMO is still [indiscernible], it's not going anywhere. So eventually, I'm assuming demand -- the production comes come back and the prices start to come down a bit, but there's no guarantee on that. Just so you're aware, Larry, and I'm sure everyone else is aware. I would be very surprised if there's another refinery being put -- being built in the United States ever. And so as such, as demand may creep back up again, the refinery capacity is limited. So I think base oil prices are going to stay pretty high for the foreseeable future. I mean educated guess, I guess. But I'm of the view that where this is -- we're here for the long haul and those prices stay high for a definite period of time, which is good for us and good for the industry.

Right. And then speaking of a long term, a question from the audience, and this might be sort of a really long-term type question. But with the onset of electronic vehicles, do you see that impacting sort of the longer-term outlook for motor oil recycling at all...

What's your question again, Larry? Is it long-term view of motor oil recycling? Is that...

Of -- yes, versus of -- just -- throughout the booming, the electronic vehicles -- the rising electronic vehicles, does that impact the long-term outlook for you? do you feel like [ packing ]...

Yes. No, that's a fair question. So let's start by grounding everyone on what the EVs get a lot of ink and Elon Musk is awesome in his own way. But -- so the 4% of cars were sold that were electric today, right? So just think about that for a second, which sounds like a lot, like they are all [indiscernible], that meant a lot of cars. But every car...

Still time, yes.

Hang on. Every car last 13 years. So they sold 4% of 1/13. So just as the amount of cars on the road, it's a pretty small number. And maybe that becomes a bigger number over time. But because each car built today, each combustion engine car built today, last 13 years, plus or minus, well, it's going to take a while for that to kind of become a meaningful number that we all need to be concerned about. The 2 or 3 things I'll say, too, along that line because let's say, EVs are coming in. Maybe they go slow, they go fast, but they're coming. I get it. First of all, we're in the hazardous waste disposal business. And we don't dispose of lithium batteries today. We do. We outsource that. But as the market turns and as lithium batteries become more and more a need for this proper disposal, I mean, lithium is a very unstable element, by the way. I do think that there's opportunities for us to get into that business. And secondly, and more importantly, if gasoline stations or refineries and all those things are not necessary anymore. Well, all those gas tanks, they need to be disposed of, just like their permitted assets, just like we are. And so these tanks need to be remediated and that's what we do. So anyway, I don't want to -- I could talk for a long time on it, but I think it's a long-term winner there for us in this business.

Right. Okay. Got about minute left, Mike. I'm going to quick -- just a quick answer on something we'd really like to highlight a lot. Your improvement in capital deployment, and the free cash flow is really accelerated above the year income growth over the last few years. Just discuss specific changes, what have you done differently in the last 3 to 5 years to sort of improve this -- your free cash flow and your capital deployment?

I mean we made it part of incentive programs, and I hate to say that, but that's the truth. I think that was really -- we made kind of ROIC and capital, and days sales outstanding as part of that. And it really comes down to margin improvement, Larry, I mean, as margin improve, cash flows are going to improve. So I know that we're running low on time, but that's the quick 30-second answer.

Right. Okay. Fair enough. And I think as you said, we're pretty much out of time, but any closing remarks for you guys? Anything? And what's the key takeaway? You'd like to feed investors today.

First of all, thanks, Larry, for having us and for CJS for hosting it. It's always good to talk to investors. And I'm of the view that 2022 is going to be a great year for us. And I think that I think demand has never been stronger. And we're really bullish on the future of Clean Harbors.

Awesome. Thank you guys so much. Thank you, Mike. Thank you, Jim. Thank you, everybody, for joining this morning, and have -- everybody has a productive rest of the day.

All right. Thanks, Larry. Talk to you soon.

Thanks, Larry.