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

All right. Good morning, everybody. My name is Will Grippin, I'm an associate analyst on the Environmental Services and Alternative Energy Equity Research team for UBS. And I'm very pleased to have with us today Mike Battles, EVP and CFO; and Jim Buckley, SVP, Head of IR for Clean Harbors. So again, welcome, appreciate you taking the time today.

Yes. Well, thanks for having us, and thanks to your team, for UBS, for having us.

So maybe just to kick it off here. Might be just kind of give us sort of a lay of the land. How you see the business today coming out of the pandemic? And how are you kind of feeling as far as just positioning for kind of second half year?

Yes, Will. So my view on it is that we're really bullish on where we are here in Q2 and for the back half of the year. We've gotten a lot of questions from investors around recessionary pressures and seeing that in our end markets and in our verticals. We really haven't really seen that. And we really feel looking at our pipeline of both environmental services and on the SK business. We see a lot of positive momentum in the base business.

Would you say that as far as most of your service businesses go and your key segments, are they sort of now back to pre-pandemic levels of activity?

I actually go one step further and say it's actually better than that. I think that whether it be in industrial production or vehicle miles traveled or job reports, I mean, it seems like -- and I read the same newspapers that was reading around recessionary pressures, but I don't see that in our end market. I really see that chemical and manufacturing, and that could be as simple as the early days of reshowing, of where they're maybe not -- can't add another plant to their facilities tomorrow in the U.S., but they're adding shifts to their current facilities. I mean our customers are having great years, and we're also having great years. I think that's -- I don't really see any signs yet of any recessionary pressures even in our pipeline.

Got it. So you'd say customers still kind of moving forward with larger -- kicking off larger cleanup projects? I mean, to me, that seems to be always the 1 thing that can move around or get kind of kicked down the road. But customers seem pretty willing to start projects?

Yes. I think that's been a drag. In 2020 and 2021, with the pandemic, large kind of waste cleanup projects were on hold because it couldn't get permits and people didn't want to start their job and have to stop it because of COVID. We certainly saw that in Q1, where our landfill business is up 15% on volume, and we're going to -- we see that in Q2 and beyond. It's really has -- it really has opened up for us and other customers -- other competitors in our space.

As far as just the project pipeline, I mean, you have talked about it, building kind of for the past 18 months. I mean, are you seeing that start to open up? And do you expect here to have kind of a big project year?

Take that one, Jim?

Sure. Yes. No, I think. To build on what Mike said, we've really seen 2 years of delay sort of fill the pipe. But beyond that, you've got -- and I know you're going to ask some questions about it later, but you got the infrastructure spend. You've got some legacy cleanups that are finally moving forward with some companies because it's -- there's several things that drive that. There's a regulatory deadline in some of those projects, and that got delayed because of the pandemic. So things that had to be cleaned up by the end of 2020 or 2021 or 2022, those got pushed back or waived because of conditions. And then you've got funding. And there's a lot of companies that now is the time for them to write that $5 million or $10 million check before we go into a recession and get some of those liabilities off their balance sheet.

Got it. And maybe a topic here that's kind of been on everybody's mind, but inflation and pricing power. I mean how would you categorize your ability to raise pricing on your customers? How sticky has that been? And have you seen your competitors kind of following suit?

Yes. So -- we've always -- when you think about our business model and our end disposal would be landfill, incinerators, wastewater treatment plants, solvent cycling and so forth. In that environment, we've always had pricing power. And we've always -- and people who followed us for a while, 3% to 5% per year has always been the norm. And so as inflationary pressures have creeped up, we've been able to drive price in that area at a higher level than we have historically. There's nothing new there. In our services business, we're talking about people and trucks and doing services for our customers, we've been able to get some price there as well. It's a hard discussion. You don't go to a customer and say, "We're going to raise price 8%." They say, "Okay." It's always a back and forth that we have to negotiate, and it's how we got to prove to them that our costs have gone up, and we need it. They're not going to pay us for not going to pay us cost-plus, you're going to pay us what our costs are. We have to prove that to them and we do, and it's a battle, and we go through it. And we've been able to be successful in it. And we will continue to be successful in it. If you look at Q1 in the Environmental Services business, where margins have been under pressure, and you back out some government funding we got last year and some project work we did and take out HydroChem because that's new this year. Our margins were up 20 basis points, and that's unique versus our peer group. And so we've been able to kind of -- I think we've done a good job with price, but it's more than price. Price offsets cost. To expand margin, we -- price offsets inflation, excuse me, to really drive margin expansion, it's cost. And we've taken costs out, whether moving back office support to low-cost jurisdictions to consolidating sites, to internalizing more maintenance, and that's really where we can drive margin because I don't think that price alone is going to solve the inflationary problem. They'll offset it, but I don't think that -- again, they're not going to give us price -- the cost of inflation plus more profit. And they're going to be like those just get us old -- so to expand margins, you have to do price and cost controls. And I think customers are insisting upon that. If you just say, "Yes, yes, my prices -- my cost went up, so here you go," it doesn't work very well. You have to show them that, "Hey, we're doing everything out we can to manage these costs," and that includes driving a hard bargain with our vendors as well as taking costs out and continuing down that path, and we have been doing that.

Where would you say you're sort of getting hardest hit on cost, maybe what parts of your business? And how do you think about your ability to take costs out but still not cut into things that maybe would impact your ability to retain talent?

Yes, sure. So the biggest cost we all see is diesel, diesel and we have a fuel surcharge that we've had for 20 years that we have in place with all our large contracts, and that's continued on. Now what we have done is we've updated -- you need to update that once a month, and now we update it every 2 weeks because it's so volatile. And that's good when it's going up, but it'll be a back goes coming down. That offsets the cost of diesel fuel. And so that's not really a challenge. We have had -- labor costs have gone up, and we have 40,000 employees. And so it is a real cost for us. Normally, that's been 2% or 3% wage inflation. Now it's close to 4% and 5%, but it's more than that. It's things we've been doing for a long time, adding health care benefits, investing in 401(k), investing in recruiting new people into the organization. All that's come into play. And I think we're seeing that start. We hope to start seeing that starting to level off. And some of the turnout we faced back in Q3 and Q4, the year of resignation, we were not immune to that, but hopefully, we're on the backside of that.

Got it. So I touched on pricing costs. I wanted to talk a little bit about volume and kind of what you're seeing in your incineration network. How full are those incinerators?

Incineration network is as you can see on our financials, the deferred revenue is at the highest level in our company's history, and that's really the result of all of the waste that we've accepted that we haven't been able to process yet. And so we joke that we're sort of up to our eyeballs in waste. That's a good problem to have. But beyond that, we've had a lot of customers. Some of the customers waste is very time-sensitive, like the Dows and the DuPonts and the more toxic materials. Then we need to think of the smaller quantity generators, the 1 or 2 drums, for those folks, we've actually told them we can't pick up your waste yet. So we actually really have a deferred behind the deferred. So as far as people talk about recessions and all of that, I think our plants would glide right through that because we have so much waste available to us right now that any sort of an economic hiccup, we would ride out really well in our network. So it's -- when you say it's full, we're always trying to upgrade our mix. And so with the direct burn streams and the really valuable waste streams, we're taking on as much of that as we possibly can right now.

Yes. I mean you sort of got into that, but I did want to ask how you're sort of thinking about prioritizing volumes based on price and how you're making sure that the plant operators are executing on that?

Absolutely. Our mix shift, 10 of the last 15 quarters, we've been up double-digit pricing in average pricing in our incinerators. That's really been a mix shift to your point, Will. Because Mike mentioned earlier, we're always looking for that 3% to 5% and so double-digit is not sustainable, but we've seen so much of it in the last 15 quarters because we've been doing exactly that. You try to replace a $0.20 waste team with a $1 waste stream. That's better than you could ever do by actually raising price.

Would you say that on the volume side, you're more limited by the permitted capacity or the physical limitations of the incineration plans?

Well, it's a mix of both. So we have -- Mike and I chosenly call it a Master Chef, at every single one of our incinerators that at every moment of the day is watching all of the inputs, making sure there's not a big chemical reaction, not -- making sure there's not a temperature spike, and if there is, there's different feeds that have to go in. We also look at what are our emissions. So if you were to visit and tour our Deer Park , Texas facility, the person who leads the tour since I've done it several times, will say, "We shoot to burn 1 million pounds a day here at this location." But as far as Mercury, our limits are 28 grams, like it's a couple of teaspoons of mercury in that 1 million pounds. So you're looking for these different metals and things. So that gates kind of your mix by facility as well.

Got it. Any opportunities, I guess, to sort of drive some efficiencies there, potentially increase permanent capacity, things like that? Just sort of ahead of the new incinerator coming online here.

Yes. We've invested a lot. People focus on the incinerator itself, but we've actually invested a lot of -- in our TSDFs, which is sort of the front end of the assembly line that stands for a Treatment Storage Disposal Facilities. So when we talk about our network, we talk about how we have 100 permitted facilities. There's a 27, I believe 26, 27 TSDFs. They are a really critical part of that because what those allows us to do is to aggregate up the waste and open up some of the drums and make it easier for the center itself to process that waste and get more volumes through. And that's probably in the last year where we've seen some of the biggest investment of our resources to try to push more through the plants.

What we're trying to do is we're trying to get over the next 3 to 5 years, 20,000 additional tons into the waste. That could be for what Jim said is kind of bundling up waste of TSDFs, adding services there or getting permit modification to take a little more through the pipe. I mean, all those things are out there. It's small, but that's how you kind of grow. And the team is very focused on doing everything they can and to try to add more waste into the network.

Sort of its own form of route optimization in a way.

Absolutely. It's exactly -- it includes that. Includes like moving waste around to different locations, how to minimize that because every time it gets picked up and put dow,n, its cost money.

So I guess on the topic of incineration, I wanted to touch on the 3M contract. How is that going? Do you see the opportunity here for more captive capacity to be closing? And how do you think about Clean Harbor is capitalizing on that?

I mean 3M, we talked about that last year. That -- they closed their Cottage Grove, Minnesota incinerator. And that waste now comes to us, and that's officially been closed as of year-end. So we've been taking all that waste. And it's more than just that, more than just the actual waste that's coming into Cottage Grove. We put resources out at the 90 3M locations, and we manage that waste forward them at their sites, and that includes logistics and shipping and so forth. That's been a big contract for us. That doesn't include if there was a spill there, this is an incineration contract. If there's a spill, if they need industrial turnaround, we're there. We should be able to do a lot of value add if that were to come as we kind of work with 3M over the next few years. But that's been a great win so far, Will. It's been -- it's really been driving. When you think about Q1 results, and we raised guidance both on the oil side and on the ES, Environmental Services side of the business, that's part of that. Is that -- I think that contract will be better than what we expected.

And then just lastly, on the Kimball incinerator build-out. Just could you give us an update on how that's progressing?

As far as the buildout itself, it's going extremely well. For those that may be less familiar, we're adding -- we own 9 of the 13 commercial hazardous waste incinerators. And at one of our locations, we're adding an additional kiln and this is a lengthy process. There's a lot of environmental impact studies you need to do. It's the build-out itself. You've got to meet a lot of regulatory milestones along the way. And so it's going to take us until first half of 2025 before actually burning hazardous waste in this new plant. And we modeled the plan exactly after the highly successful plant we opened. So we used to have 8 of the 12 and then we opened another one in El Dorado, Arkansas at that site. So we're going to model the new plan exactly after that because we know how successful that plant has been. So in terms of timetable, we're right on schedule for that, whether it's January 1, hopefully or June 30. It will -- first half of 2025, that will be taking in hazard waste. It will get turned on during 2024, but again, from emissions and other things you have to burn on as initially.

And so that's about $180 million spend over the next 4 or 5 years. We have about $40 million to $45 million in our number -- in our guide. It generates no EBITDA today, but that's part of the guide when we talk about free cash flow, I think we'll start asking about in a minute. That's in that number is the $40 million to $45 million of El Do -- Kimball build-out.

Obviously, a long time line to get this plant up and running.

But a great return. I mean it's a -- it doesn't take a lot of math to figure out at $0.60, $0.70 a pound, and that starts getting really -- the payback is a very short period of time.

Sure. But I wanted to ask about issues getting the equipment there that you need. I know you're probably still very early in actually putting this thing together. But any sort of headwinds there? Do you have the equipment locked in?

We made some -- we recognize the fact that this is going to take time. These have a long lead time. We put POs in place to try to get that stuff faster. When we gave the $180 million kind of quote, we did have some inflationary numbers in there so that we can make sure we hit that number. Will it be a little higher? Maybe, but nothing yet. I think we're actually in pretty good shape because we did kind of assume that there was going to be some inflation as we move down the path and get closer to petition.

Got it. So maybe I'll pause there, see if we have any questions in the room. And also, feel free to submit if you scan the QR code, you can send your questions that way, and they'll pop up to me here. So I guess just pivoting to the Safety-Kleen segment, you've been benefiting quite a bit recently from this sort of historically wide spread in that business. I mean, could you give us an update on sort of the latest where we stand on base oil pricing? Is the spread still hanging in there above historical levels? And how sustainable do you think that could really be here?

Yes. I'll take a start at that, Mike. And there's a lot of goodness right now in our spread that in terms of where we were when we gave our guidance in Q1, there's been a $0.70 per gallon increase, which is the largest increase since we've owned Safety-Kleen. That's happened since then. Now that's a function of the refiners are making so much money, making diesel, making jet fuel that they're limiting their base oil production to the point where base oil pricing is going up due to scarcity. So that's something that over the long term is probably not as sustainable, but none of that is in our current guide nor was it contemplated because it hasn't happened yet. But prior to that, there was a $0.50 increase in April and a $0.20 increase in March. So base oil itself has been on a good March. And we get asked a lot about it. It's 20% of our EBITDA, but it sometimes could be 60% of the conversation. And the thing about that business is it's an incredibly stable business at its core, where we're managing a spread where we control the costs on the input side, and then we have a base oil price on the backside. What's happened more recently to me is just kind of a fluctuation that is a bonus to us. But as that price comes back down, we've got a core earnings there that is good, but on top of that, we've got a lot of initiatives underway to add value to that business in the coming years. And not sure how many people in the room saw it. But on Friday, we announced KLEEN+, which is a first time we've ever branded our base oil. And I think it's an important milestone for the company. It's not just a marketing gimmick, but it's really -- our teams are taking to the market that our base oil should be recognized for its quality, for its sustainability because its carbon footprint is almost 80% less than, if you made base oil from traditional crude. Everyone is looking to improve their ESG scores and an easy box to check would be make sure base oils in our base oils in your motor oil. And then reliability because we're -- none of our plants are in the hurricane zone and we feel like our plants are going to run full out. And so if you're a customer, those are 3 really important things that we're selling and we're looking to get that value aka higher pricing for our base oil. When we first bought the Safety-Kleen business, a lot of people saw our re-recycled, our re-refined base oil as a recycled product that was sort of less than. And we really know from the performance characteristics and how the oil -- base oil works inside of lubricants, it's a more than. And so we've -- over the last 7 or 8 years since we've owned Safety-Kleen, we've really gotten it on par with base oil, but this KLEEN+ launch and rollout is really kind of the next stage where we should get the premium that we deserve for this product.

Well, gets into maybe another topic I want to touch on here. How do you think about that marketing and the base oil now as sort of its own product versus pursuing the closed-loop, sort of finished motor oil strategy that you've been working on maybe the last 5, 6, 7 years? Are those competing priorities?

No, I think it's recognition for, if you're a pick your major brand, Valvoline, Pennzoil, Quaker State, Mobil 1, whatever it is, 3/4 of your oil is made from base oil. And so what base oil you put in matters, from both a quality and a sustainability perspective. So our thought initially was we sell a fully blended product, and we'll take customers' waste oil and we'll run it through our facilities, and we'll sell it back to them as a green fully finished product. And so we started probably 5 years ago talking about the closed loop and had some pretty high expectations for that. Over the 5 years, besides the pandemic sort of throwing things us under we sold to 30,000 unique customers, but we weren't seeing a lot of traction was some of the larger fleets and some of the bigger customers, and we kept waiting for that win. That was around the corner. I think what the team has said is, "Hey, there's a lot of value to be had in putting our great green oil inside of these other brands." And so if we can talk to a large fleet or we can talk to others and they say, that it should be our base oil inside of the lubricants they use, it doesn't necessarily have to be our lubricant fully finished product. So we're kind of going on too passive. We're still going to pursue selling our performance plus our blended lubricants. But we want to extract value for our high-quality base oil that we weren't getting.

Got it. And I know I'm jumping around a little bit here, but going back to the spread and the piece of that, that you do control the pay for oil, picking up the used motor oil. Have you been getting any pushback from your customers on maybe recognizing that the spread is historically wide and saying, "You need to pay me more for this waste oil."

So 30% of our customers are tied to an index, they would move up as base oil moves up. So that's 30% are kind of out and they're up. But to be fair, I mean, what we think is happening is that new regulation can put in place, IMO 2020, the maritime regulation. We always thought there was 1 billion gallons of used motor oil produced in the United States every year. We always thought about 20% went to the bunker fuel month and maritime into ships. It's more than that. It has to be because there is a glut of used motor oil without the marketplace, and it's allowing us to keep our pricing pretty low as we go out -- and so we need to -- we put will we put better systems and process with people. Remember, we broke that business out of the Safety-Kleen branch business, and it's its own separate segment with the idea of being going to have focus on pricing and collection quality from our customers. And by doing so, I think we've been able to manage the front of the spread much better. That, along with regulation, has allowed us to keep our pricing pretty low. And as Jim just said, the pricing of the finished product, the base oil has gotten higher and higher, which is great. That input cost is also -- I think when prices start coming down and they may soon, that we'll be managing the finance very well.

Got it. A question we get a lot from investors on the SKSS business, just trying to sort of understand the future of that business and what happens in a high EV penetration world. One of the things we tend to push back on is that perhaps there's less need for oil changes, but this creates another opportunity of a massive potential cleanup opportunities. Curious just sort of how you're thinking about that, how you'd articulate, how you see the future of that business?

So I think that -- I think you can debate the timing. I get it. They're coming. I think they're a long way away. I mean, remember, a passenger car created is, it's 13-year life so 3% or 4% of all passenger cars created today are electric. Well, that's 3% or 4% of 1/3 [indiscernible] of all the cars that are out there. So it's probably longer than people kind of see. They get a lot of headlines and some CEOs get a lot of press for this. I get it and they're great cars, I get that, too. But I think it's longer than people think. And certainly, when you think about trucks and garbage trucks and 18-wheelers, I mean they -- the electrification is a long way away for those guys. So I think that I think that's there. But let's say let's play it out. Let's say that EVs are here and we don't need motor oil changes anymore and all that is a challenge for us. I mean, all those tanks and pipelines are on the same permits that we have. And what I mean by that is that if you were to say, "I'm going to close this gas station. I'm going to close this pipeline." Well, the owner of that has a responsibility to clean that up and remediate the pipeline and clean up all the spills around it and soil remediate and soil around it. Well, that's our field service business in a nutshell, and that's a $500 million business that we would love to have. If the answer was, we're going to clean up all the pipelines across North America and we're all not going to use gasoline anymore, I mean that's a huge win for us from a long-term standpoint. So let's say that the SK business, the oil business tails out, I don't think so. I totally disagree with people who think that. But let's say that you're right and there's some terminal value challenge there, bring it on because that means that all these pipelines and all these tanks need to be cleaned, and that's what we do. And so that will be a huge win for us over a long period.

Just to throw a couple of more numbers at that. The U.S. lubricants market is about 2 billion gallons annually, about 400 million to 500 million gallons go into passenger cars. So even if you converted every -- and Mike's right, it's going to take decades at the pace, even if the pace picks up because of that 113th kind of formula. But if it was all golf carts tomorrow on the highways, it's still -- the lubricants market is only going to shrink by 25%. So it's not as though our re-refined oil just has no outlets.

And we're the greenest oil out there. So as you're working to -- as Jim said earlier, as you're working towards sustainability and ESG metrics, I mean, as refiners get smaller and smaller in North America, well, our re-refined motor oil, we'll get more and more value.

And since I know you guys love numbers, just to throw one more at you. The gas stations, as Mike was talking about the pipelines, everything that gets ripped out. There's 168,000 gas stations in the U.S., there's 12,000 in Canada. So that's 180,000 locations that become irrelevant when you take it to the extreme of no one's driving combustion engine anymore. And all of those will need to be remediated back to what they were before the gas tank when in the ground or the oil tank went in the ground.

And there are about $150,000 to $180,000 each to pull out [ at Clean ].

So you can get to tens of billions of number just from gas stations alone?

Right. We're getting the pipelines, we're getting all the refineries...

Tank farms.

Tank farms. We're getting -- if you've ever been to Houston, you'll see what I mean.

So last one here, maybe on the SK segment. But I think that, that was the performance there, the spread being wider was sort of key to enabling you to raise guidance on the first quarter call. You had an pretty...

Just to correct you, both sides of the business did well as we raised guidance on both business. It's not just an oil [indiscernible] and then we expected that type of store. That's part of it.

Sure.

I get it. But also that ES business, the core ES business did much better than we expected because of the contracts like 3M and others, and waste projects that have been doing well. So both businesses went up about an equal amount.

You raised the EBITDA guidance, kept free cash flow the same. What are you kind of waiting to see here in the second quarter or in the second half of that would maybe give you comfort in potentially taking free cash flow guidance up or raising guidance again.

I mean we raised dividend, kept cash flows the same because it was negative, more than what we expected it to be negative. Free cash flow was a negative $170 million -- $107 million, excuse me. We assume it'll be $90 million kind of all-in. It's a little higher than we thought. Some of that was just timing when you do a large acquisition that did create some receivables. We're going to collect that. I'm not worried about that. But certainly, that was a bit of a cash flow bad guy here in Q1, probably a little worse than we thought. So I wanted to make sure before I started raising guidance because I want to give guidance to people in this room that I meet, exceed every time that we went a little lighter. I'm comfortable where we are through April and May now where cash flows are. We feel pretty good about it.

Got it. Moving on here to capital allocation. You've got leverage right around 3x. I think it had been lower than that prior to closing some acquisitions. Curious, how do you think about capital allocation in light of the 3x leverage? And do you expect that to evolve as leverage continues to tick down here?

Yes. I think that historically, we've tried to keep our leverage in the low 2s. I think that's a good place to be. Obviously, we did a large transaction like for HydroChem for example. It was up to 3, 3 or whatever the number is now, maybe a little over 3. But I'm of the view that low 2s is a good spot to be in, and we'll manage accordingly. I think that if you look at kind of where we are this time next year, even by year-end, we'll be at 2, 2 based on our guidance and level of leverage we have today. So I think it's a good spot to be. At the end of the day, I feel like we'll manage accordingly. Whether that be -- if we -- if the leverage gets lower, we look at M&A all the time. It's all on an ROIC basis, and we'll run that accordingly.

So you classify M&A as kind of being #1 ahead of raising share buybacks or dividends, something like that?

We still have $140 million remaining on our buyback program. We're still active in the marketplace buying back stock. I think we can do both M&A and buybacks.

Yes. What are you seeing on the M&A front right now? I mean any interesting opportunities out there? Like what areas do you think you would -- we'll be looking at?

Yes. I mean, M&A probably more tuck-ins will this year, given the fact we just did a large acquisition last October. So we got to digest that and bring that in and integrate that. And that's always fun with spreadsheets until you actually have to start doing it and bringing people together and closing sites. That's a lot of heavy lifting and system integration work that we're doing right now. So we're probably going to take a pause on larger deals. But on smaller deals, we see opportunity on both sides of our business. We love our children equally. We think they both have a good return. We don't pay the same multiples for the SK business as we would for the ES business, but we think there's opportunities in both areas.

So with the time we have left here, I did want to touch on PFAS and just kind of where we stand on that. And I know this is going to be a Jim question. But yes, I mean, where do we stand on the EPA establishing contamination criteria? And is that still kind of the trigger point for really kicking off a massive cleanup effort?

It is. But -- and I'm not sure how familiar everyone in the audience is with PFAS. It's become a pretty common theme. But it's a set of 2,000 compounds that are known as forever chemicals, the common things you would think of them as is Teflon pans or stain-resistant carpeting or Scotchgard spray or even when we were kids like the white sheet in the pizza box and a lot of food packaging, and 98% of the U.S.S. population has PFAS in their bloodstream. We've been exposed to it so much. So it's been recognized in recent years that that's a very toxic set of chemicals, some worse than others and creates cancer and birth defects and all these horrible things in early death. So -- but under U.S. laws and regulations, it's still technically nonhazardous. So -- but the science data is kind of driving where there's going to be some legislation coming. It's been very difficult to get that because it's going to be a big trough of class action lawsuits. And so there's been a lot of -- as often in Washington disagreement between Democrats and Republicans on how to handle this issue. But I think what's actually driven it is on the Defense Authorization Act, which has to get past every year. In the most recent one, there's been money set aside to start drinking water at military basis. And 1 of the uses of PFAS has been a firefighting foam. It's been kind of a gold standard in firefighting foam for 50 years. So military bases do a lot of firefighting drills, airports, those types of places are highly contaminated. And in military base case, it's leached into the drinking water at a lot of military bases. So you've got to our service men and women kind of consuming PFAS-contaminated drinking water. So they put $10 billion, I think, in the last Defense Authorization Act. On top of that, the Infrastructure Bill also had $10 billion set aside for PFAS drinking water remediation. Now we don't play in drinking water as a company. But if you're going to clean up the drinking water, you got to clean up the source. And so for contaminated soils and left over kind of AFFF firefighting foam and other piles and stockpiles of these chemicals. That's where our disposal should come into play. But as far as a time line, we've said it's going to be a while because you got to get the legislation, you got to get the -- what are called the MCLs, the maximum contaminant levels in drinking water and industrial waters in soil. And then -- because if we own a site that was contaminated, we can't clean it up until we know as my collects to say, how clean is clean, right? Because you're not going to take it down to 3 parts per million and find out later, it should have been 2 parts per million. So they need that sort of regulatory oversight in order to drive it. So we're probably still a few years away. We don't have any assumed in our guidance. We'll probably do a few tens of millions of PFAS-related revenue this year. So it's really kind of a rounding error. But there's a lot of inbound customer requests at this point because they sort of see what's coming.

Got it. Wanted to also ask about just people staffing. Where do you feel like you're short within your business? And what sort of initiatives do you have in place to try to attract, retain talent?

Yes. So we're always sort [indiscernible] to 40 years short, you can always use more kind of it's hard work, not so much in back office. We're pretty -- we're well-staffed in the back office. I think we do -- we turn over pretty low frankly. But in the direct labor force, it's always been a challenge. I think recently, though, we made some investments in both recruiting and in retention, whether that be increases in salaries, health care benefits, 401(k) match, other types of referral bonuses kind of pulling everything you've probably heard of in the past couple of days around trying to retain people and bring on quality people. It's hard work. It's hard work to do it. We made some investments in HR around recruiting to help drive that. It's -- I do think that Q3 and Q4 last year, the year of resignation, we were not immune to that. Our turnover went way up and see it start leveling off here in Q1.

Got it. And just lastly, with the time we have, I did want to touch on ESG. I mean I think as a waste company, you probably have one of -- you're best positioned to I think, have a legitimate ESG focus and strategy there. Just curious how you articulate that to investors? And what sort of initiatives are underway there to maybe improve your ESG criteria?

Sure. So when you think about our incinerators or our hazardous landfills, you don't think of green. Like you don't think like "Hey, this is a hazardous waste incinerator or a hazardous landfill." It's not like it's a green answer. But actually, it's the greenest answer you can have for what we're being produced. We're not a rubbish company. We're not -- you can't like sort this stuff to zero sort. This stuff is dangerous. This stuff needs to be put in this is the greenest [indiscernible] the greenest company you've never heard of. We are the sustainable solution for our customers. We didn't create this waste. We are just solving their problem, disposing of it, in accordance with laws regulations. I just prefer to think about what would a world be without Clean Harbors. I mean that stuff is still being manufactured. I mean the manufacturer of car paint by-product is benzene. Well, benzene is a known carcinogen. What are you going to do about that? You got to put somewhere, you couldn't just put it in a landfill and leach out. We have to be that solution. We have to do that. And so -- and we have long-term relationships with our customers. They audit our facilities. They have cradle-to-grave responsibilities. We are their solution and we value that partnership.

Right. So yes, you focused on the E there primarily, but I think there's also a massive S component here.

I mean I think that when you think about safety, for example, safety is by the S world, every single manager, including Harbor's has safety as part of their incentive compensation plan and has been for 10 years. And so we have an industry-leading safety record. That's not directly correlated, but has something to do with it. I think that we've done a great job of putting out sustainability goals through our sustainability report we issued last year. We're measuring against those, making really good progress on both the E, S and the G. And I think that we're going to have another one out later this year that will report out on how we're doing.

Great. Just one last check here. Any questions in the room before we wrap up? All right. It's probably a good place to stop.

All right, thanks, Will.

Mike and Jim, appreciate it.

Thanks, Will.

Thanks, everybody.

Thanks, UBS.