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

Good morning, everyone. Welcome to day 4 of Oppenheimer's 20th Annual Industrial Growth Conference. So we're starting off today with a great one, Clean Harbors. We're really delighted to have the management team back at our conference this year with Co-CEO, Co-President, Mike Battles; and SVP of IR, Jim Buckley. Gentlemen, welcome. Thanks so much for being here.

Noah, thanks for having us in the Oppenheimer team. It's always a pleasure to come talk to investors, and you do great, give us good coverage and appreciate it.

Well, thanks, Mike. listened to a lot of scripts over the years and realize you always start your earnings call off talking about safety. And so I want to do the same, actually start off here. You reported a record low TRIR in 1Q. I think other waste companies in the last several earnings have made the connection for investors between lower incident rates and margin benefits, they see it a lag. Can you talk about what the company is doing to achieve safety improvement and how we should think about that showing up as a margin benefit in the financials?

Yes. No, it's a great way to start. As you may know, Noah, we start every meeting with a safety moment, and that's when I was the CFO and finance or the operations or mean we start -- it's really important to talk about kind of our safety culture because it's just so important to kind of who we are. We want our #1 goal is to have every employee go home safely to their family every night, it's the #1 core value of our sticks core values. And it really is a big part of kind of what we do. And because we're managing such dangerous -- going to dangerous places, managing dangerous waste streams, safety serves multiple purposes. We don't normally talk a lot about what the safety culture does for our P&L because it's not the purpose of what we're doing. What we're doing, it to make sure that our people get home safely and that we don't have injuries on the job. But to your point, Noah, there is a connection, it's a lag, right? Because when someone doesn't get hurt, when someone doesn't -- hurt their hand or hurt their back, it takes a long time for that to show up in the financial statements because of the lag of a diagnosis and then a treatment plan, if it's serious, that can take 6 to months to years in some cases, if someone gets a car accident or something like that, but it does happen. The challenge we see in that part of the world is I think we're doing a great job of lowering the amount of incidents, but the cost associated per incident has been much higher, and that could be for health care costs and legal judgments against companies are higher than ever. And so those -- my view is that we need to be safe for a lot of good reasons and have an industry-leading safety record, multiple times better than the industry average. We do that because that's important to us. But it does help offset rising health care costs, which are rising at a rate probably faster than GDP. It does offset legal judgments of -- when there are injury cases when the Morgans & Morgans of the world kind of suing the heck out of us and getting judgments at a pretty high [ net ] rate and a pretty lucrative rate. And so those are the -- in my mind, we need to pedal faster from a financial statement standpoint on safety just to offset, let's say, a dramatic rise in health care costs over the past 5 years and legal settlements. So that's, in my mind, kind of why we do that. And also less accidents, less -- being safer on the road, trans compliance. We don't talk about trans compliance, but transportation compliance is really, really important because of car accidents and the cost of automobile repairs. That's also a very large cost for us. And so we have 15,000 pieces of trucks and trailers out there. And so that's -- with the 14th largest motor carrier in North America. So car accidents, truck accidents are hugely expensive. And so being safe is not just about making sure that people don't hurt themselves, but they also drive safe and they drive defensively. And so that's all part of the culture of the company. And so those are all, again, to offset rising automobile repair costs is really what we're thinking about here.

And the last point I'd add, Noah, is being safe helps with recruiting for people that are outside. It's like I want to come work there because they take care of their people, they care about their people, and it helps with turnover for people not...

Yes. I was in Vegas earlier this week, and we did go to a couple of our sites. And in one of the sites we saw a father and 2 sons. And that really does -- that makes me feel great because why would -- no father would put their son to come work for them if he didn't think it was a good company to work for. And so that really kind of -- was really kind of rewarding for me as a CEO to meet the dad who've been there for a number of years and the 2 children who are also working there because it's one thing for you to do it because you need a paycheck, the other thing to bring your kids there and the fact that they -- that happens all the time. And we travel a lot in different sites to see fathers and sons and nephews and nieces all the time.

I think that's a great anecdote, Mike, and illustrative. So I appreciate you sharing that. I just want to stick with the theme of margin improvement here. I mean, put in the context of some of the targets you put out at Investor Day, that sort of implied maybe a 22% margin by 2027, obviously, exiting 2024 at 19%. So do you see still the overall business getting close to that kind of 22% figure. Is that achievable in your view?

Yes. No, I think that the margin on the consolidated number is difficult to kind of put a finger on because of the movement in the SKSS business. So I'm of the view that we're going to get that right. We talked about that past [indiscernible]. I'm sure we'll talk about this morning. But that has been a challenge from a margin perspective. Certainly, that -- when we did those models back then, the margin profile for the SKSS business was much higher. On the Environmental Services side, as you know, Noah, we've done 12 straight quarters, 3 years of year-over-year margin expansion and Q1 was no exception to that. And so I'm of the view that, that's going to continue. We talked about Environmental Service margins going up a goal of getting to 30% margins like the solid waste guys. And I think there's a real possibility of doing that. I hate to kind of do projections on the oil business because that is -- I think we've turned the corner. I think we've changed the paradigm, but once is not a pattern. And so we need to start doing that over some time horizon before I come back to say, hey, look at kind of where we are on a consolidated basis. I'd say that Vision 2027 is on track. One business is doing much, much better than we expected and one business is not.

Mike, I guess we can maybe focus more on Environmental Services because it's more controllable margin story. It's also the vast majority of the EBITDA of the company. So...

91%. 91% in Q1...

So we're coming off 25% segment margin for 2024. I think the kind of implied guide here is modest margin expansion for '25. How should we be thinking about maybe sort of multiyear trajectory and the levers for margin expansion?

Yes. No, I think that 2025 will be -- with the new plant opening up, certainly, Q1 was probably a bit of a bad guide from a margin perspective. Maybe we get back to -- for the year, it's not a helper or a hurdle, but when you only -- we've committed to 28,000 tons if thing runs -- [indiscernible] a 70,000 ton incinerator. So it's not going to be running at full capacity by the end of the year. So that's probably a bit of a headwind bad guide there. We are seeing kind of good trajectory in pricing. We have been able to get -- we're always concerned about have we reached the limit on pricing. We absolutely have not reached a limit on pricing. We certainly have plenty of room to continue to price and drive margin expansion. Do we get to 30% margins by the next 3 or 4 years? I don't know. But I think it's going to go much faster than -- I [indiscernible] to continue on the good trajectory that we've seen for the past few years.

We'll dig into the different parts of ES in a little bit, but I just want to ask a couple of high-level questions before we do. I think just given the balance sheet strength and the improving free cash flow conversion, just help us understand how you're prioritizing the capital allocation over the next 12 to 24 months between organic growth, M&A and returning capital to shareholders. And maybe help us understand really the metrics driving those decisions.

Sure. So first of all, it's all about ROIC. We want to make sure that whether it's capital deployed in our plants, whether it's M&A, whether it's buybacks, we see -- whether it's leverage and debt, we're always trying to make sure that we're deploying capital in a way that returns the best returns to our shareholders and that we're thoughtful about that. And so whether it's -- we haven't done a lot -- we did $500 million of M&A last year, but we haven't done anything since Q1 of last year. And that's because the returns haven't been as good as we had thought. That doesn't mean we're not looking at things. That doesn't mean we can't get there. It's just that we try to be thoughtful with our capital deployment. And in the interim, we opened up this wonderful plant that's going to have -- for $200 million, it's going to have an enormous return. It's going to have enormous returns. And there are other types of capital investments out there, and we're looking at whether we can take some of the byproducts of the re-refining process and add some capabilities into one of our sites to drive more value out of that. But it's all based -- to your point, though, Noah, it's all based on ROIC. It's all based on returns. We ended the year with 2.1x levered on our balance sheet. If you -- with $600 million of cash, kind of roll that forward and we generate $500 million of free cash flow over the next 9 months or more than that, we're going to be in a great position to deploy capital in a lot of different ways. We think the stock is still very undervalued. We have over $430 million remaining under our pre-existing buyback program. And so we have plenty of opportunity, plenty of ways to do it. And we don't have any debt due in 2027. And so -- and we got upgraded by Moody's I know if you saw that the other day, we got upgraded now our consolidated 1 notch below investment grade and all our secured debt at investment grade. So I mean I think that it's -- we're in a really good space. A variety -- it depends on whatever happens. If the economy goes sideways, we'll come out stronger than ever. And if it doesn't, then we'll have a great balance sheet to deploy it intelligently and take your money and deploy it properly.

So if we think about the M&A landscape, I mean, $30 billion plus environmental services industry, still fairly fragmented. Is there a way to think about -- I think back to your 2023 Investor Day, kind of the size of what's potentially acquirable revenue for Clean Harbors, kind of size the TAM within the TAM, if you will, maybe an update on the focus of the M&A pipeline today.

So Noah, when you think about some of the big areas of where we are today, when we own 10 of the 14 hazardous waste incinerators in North America, the likelihood of us being able to acquire another incinerator is probably incredibly low, incredibly low, even if they were for sale, incredibly low. And so in areas like landfills, again, also probably not going to be able to buy that given our dominant position in the marketplace. Other areas where we have 20% or 15%, there's opportunities there in areas even smaller. And so again, I think that private equity has had interest rates rising on them. They are under pressure. They've owned these assets for quite a period of time. The clock is ticking for there to get a return to their shareholders. They're worrying about a recession. They're worrying about a recession and high interest rates. So that's -- if I'm a PE guy, I'm going to be [indiscernible], we got to go, we got to go today. And I'm here to tell you, it's tough to prove a negative because we haven't done anything, but there's a lot of assets out there in a lot of different areas. And as you know, Noah, we take all waste short of hazardous -- short of nuclear, excuse me. And so we're open to any types of industrial waste, any type of industrial waste that's out there that we -- that, again, fits the screens of strategy and of financial rigor.

I want to move through some of the segments. I think starting with tech services. The company talked on the earnings call about active conversations with a number of captives. We've monitored this for years, of course, you remember the 3M announcement. But I think to level set, right, there's 41 different captives today, making up half the market. So how do you see that trending within the next 5 or 10 years? And how do you position yourself to capture the market share from captive shutting down?

The captive market is a source of growth for us. And for those on the call, there used to be over 120 captive incinerators. Now this is going back to the mid-90s. But that 120 has winnowed down to 41 today. So when you ask next 5 years, 10 years, there's going to be more closures. I can't tell you exactly when because it's a onetime decision for those operators. And so it's a major decision that can never get that permit back. And so -- but when you spread it out over that length of time, there will be some captive closures. And the other challenge in more recent years, 3M has given us a perfect playbook to bring to those folks, but it also really packed up the industry because 3M sent a lot of volume exclusively to us. And because of that, if there were some captives considering closing, they were probably waiting until we opened Kimball and our peers opening one later this year. So there's some new capacity coming in the market. So logic would tell you if that was the gate, that gate is open right now, and it may not be open for all that long. So I would say within the next 5 years, you'd certainly see some closures.

And I think speaking of Kimball, right, I mean the message from the call was very much on track with its ramp. I guess talk about the visibility you have into the demand or the pipeline for the 28,000 tons you're expecting to process this year.

Yes. No. So it's 28,000 tons. We're on track. And opening up a new plant is a challenge. We opened up late last year right before Christmas. And that -- the winter that we experienced in the Midwest and the South, it was -- it slowed us down, and we were concerned. But the team is a great team. I mean, as investors, you should feel proud of the team. I -- I've been out there a couple of times in the past few months, and they really -- they run that plant as if they own it and they take care about -- take care of it and they want to maximize its value and maximize the returns. So they're really -- like many places around Clean Harbors, they're terrific operators, terrific. I'm of the view that the pipeline is strong. I don't -- I didn't -- I mean we -- I listen to other solid waste guys that kind of have the same answer that they see like a reshoring phenomenon that continues and there's plenty of waste streams. As you know, 16% of our revenue comes from the chemical vertical, but that's only 16%. You take the top 10 verticals, it's only like 45%. And so we get waste from whether it's pharma, it's amazing. What I find amazing is that no matter what industry you're talking about, government, hospitals, universities, I mean they generate hazardous waste. And so that generates a waste stream that comes into our network that I think that regardless of what happens, we're going to be in a great spot.

I thought [ Dow ] was going to eliminate that, though.

Say again?

I thought [ Dow ] was going to eliminate that. So -- just a follow-up on Kimball. I mean, do you think that it becomes kind of mix neutral or mix positive within incineration once it's at full ramp? Is there anything kind of structural about the waste streams going there, the asset location? Or is it kind of...

No. I mean, as you know, it's on an existing site. And so they already have an incinerator there. This is the second incinerator they put on the site. So it's sharing, it's logistics and so forth. We add a warehouse and a couple of other things to make it kind of operate effectively. But it's -- I don't see the pipeline even slowing down a bit. April -- March was one of our best months for drum volumes. Drum volumes is one type of waste stream. We take all kinds of waste stream, but drum volumes is a good -- kind of good KPI. And March was one of the best months we've had in the company's history and April will beat it. And so that's -- I'm of the view that the waste volumes are going to continue to fill that plant up. People ask me about the capacity coming online this year and the one of our competitors' capacity coming online this year and what does that mean for pricing? I mean we own 10 of the 14 and when they come online, we are 10 out of 15, they own 3 and we own 10. And why would we want to lower price on that? Who is that? Who does that help? And so I don't see us kind of racing to the bottom kind of anytime soon.

I think you've spoken on the call -- length call about the testing with the EPA and DoD for PFAS incineration, kind of looking for those results to come out in 2Q. So I guess just broadly, what are you helping the study determines and kind of tie that to how it might support growth in the PFAS project pipeline?

Yes, I can start on this one. PFAS is one of my favorite topics. This is -- for those just background, we completed a test with the EPA and DoD, as Noah mentioned, back in November at our Utah facility. It's our third incineration of PFAS test. And each time we've tested to the highest standard available. So the EPA has gotten more comfortable around incineration. They participated in our study last time, whereas the first 2, we'd sort of been on our own using third-party designs and outside experts to evaluate the data. But the EPA wasn't involved, and they've tried to create new, more rigorous standards to get themselves and everyone, the market comfortable with it. So they have an OTM-50 is the name of the new highest standard. And assuming they don't move the goalpost again, we think this will be hopefully a big unlock for us. And we sort of know the answer to the test because we've seen the preliminary data, but we'll have to wait and get the study officially published, which we're hoping will be in June. Maybe it slips to July with everything seems to be going a little slower with a little doge impact all over the place, it seems. But with 6/9s of destruction, we feel like that's very achievable. That's sort of the gold standard in its iteration, and that's what we achieved the first 2 times with the first 2 tests, and that's what we think is going to be the outcome here. The question of sort of what does this do for us? Very importantly, the DoD was involved. PFAS is a problem at military installations depending on who you read, there's 400 of them out there. There's 700 of them out there that are contaminated. There are several hundred highly contaminated military installations. And we know in discussions with the different parts of the military that within the DoD that they want a short destruction and that option is just not out there right now. The work that we've done so far in military bases has all gone to landfill. And we think that's a wrong answer, particularly for stockpiles of AFFF and things that are very highly concentrated PFAS. You just really shouldn't be putting those in the ground. And so having this study could unlock the DoD opportunity for us. And I always tell investors, that's our shortest hallway, right? Because we know who did the contamination, and we know who's writing the check and they have a pretty big deep pockets. And so there's going to be opportunity on the private side. There's a lot of rivers and waterways and locations that are contaminated, but there gets to be a lot of litigation and fighting about who actually put it in the Ohio River. When you're talking about military bases, it's a really good opportunity for us. So the unlock could be that today, there's a moratorium on incinerating PFAS of DoD waste, and we want to get that lifted and we're hoping that study will do that.

Super clear. I want to shift to Industrial Services. You talked on the call last week about customers in IS deferring maintenance and turnaround work to the back half of the year. So maybe just thinking about the context of prior industrial downturns, periods of uncertainty, how long do these pushouts typically last? And do you actually get more spending at the back end because delays create additional problems? Just give us the context of where we are at.

Yes. So if you think about a great example of that, Noah, be COVID, where the plants shutdown, they slowed down. And that was in 2020. 2021, especially part of 2021 and 2022 was a great year for us. I mean it was a great year as far as the amount of industrial work that we got and the margin growth we saw in that business. And that was -- it kind of depends, Noah, on when you get on site and you open up the vessel and you see how much damage is there. It's tough to say today that the back half of 2025 or the first half of 2026 will be awesome. I mean -- but I do think that you can't defer these forever. This type of maintenance needs to happen. The plants are still running at full capacity. And so there are creating opportunities there. Obviously, an unplanned shutdown is actually the best thing that could happen for us because we'll get kind of emergency response rates. And so you kind of like they're playing a game of chicken right now. slowing down some of their turnaround work or limiting the amount of work they're doing during a turnaround in effort to kind of lower cost and kind of get back at it. We did see some in Q1, some timing issues. I mean, people just say, look, come back in a month type of thing. So I'm hopeful Q2 is good. Now if you know Noah, you know this, maybe some of our people on the call also know is that we had a bad Q3 last year with lower oil prices and some push out of some very large amount of project work. And so we'll have a good [indiscernible] in Q3 in Industrial Services. For the full year, there's going to be modest growth in Industrial Services. So even though Q1 was negative 10% on the revenue side, I think we'll still have a pretty good year. It's tough to come back from that tough start, but we're hopeful that we're modestly profitable for the year if you're doing some form of waterfall.

I want to ask about how you are evolving the capabilities of industrial services. There's been some notable acquisitions where you've talked about that like HPC. You also highlighted a pretty tight labor market and automation and technology becoming a priority as trends. So maybe help us understand what have you done since that Investor Day to improve technology usage? And what are the areas of technology advancements within [ IS ] going forward?

Yes, I'll start on that one. I mean when we bought HPC, they came with an R&D center. So something far beyond anything that we had as legacy Clean Harbors Industrial. And the real focus has been in a couple of areas. We do a lot of high-pressure washing and cleaning. And this is not your father's pressure washer that you clean the siding or anything with this is the type that will take a limb off if you're not careful. And so one of the things has been to move a lot of that water jetting to where the operator is behind a joystick as opposed to actually holding the device or risking getting in that line of fire. So there's that level of it. There's also a lot of risk with confined space entry, which we do quite a bit of. And so there's been a push internally to get the robots in there and have them do some of that confined space, at least the inspection side of it. You could do some of that with flying drones inside the vessels. We've got really sophisticated drone technology that we've been advancing over the last several years. And it really goes back to the whole comment discussion with Mike earlier about safety is the challenge with us is that some of our injuries can be very catastrophic, particularly in the industrial services world because you're in an area where you might be under a nitrogen blanket on a respirator or you're in an area where you've got a PSI want spraying on 1,000, per square inch that can do some severe damage. So this isn't [indiscernible] ankles and pinch fingers. This is severe. So the movement within has been guided quite a bit by how do we make our people safer. It's not so much about, hey, you have a 3-man crew. Can you get that down to 2. There's a little bit of that, but it's really more about keeping our people safe. And the customers, that's what they want. And a lot of those folks, whether that's the shells or others of the world, their whole thing is safety. And so it creates a competitive advantage. That's another thing that comes out of our TRIR is that it gives us a leg up on some other folks that don't have the track record we do.

Just unpack that for a little bit more, Jim. It sounds like you're saying the way that you're using some of that technology, not really a change in like labor hours, labor utilization. They're just using the same tools in kind of -- using the tools in a more safe way. Are there material opportunities to like reduce time on site, reduce labor intensity and get those people out to more jobs through some of these technology innovations. Is that like a feasible opportunity for the company?

Sure. We've introduced last year, just to get into an example, a total exchange management where we actually take bundles from the customer site and actually bring them off-site or on-site and dump them in a tank that using Sonic technology and other things will actually clean and you put something in that waste, for example, they gave us 12,000 tons and then you pull it out and it's 10,000 tons or 8,000 tons, all that contamination came off. It's a safer, better way to do it. In the waterjet world, it's the example the team is it's not necessarily more efficient, but you get better outcomes. And so if you were to take a heat exchanger, which for those that don't know, has just got thousands of tubes running through it and you're trying to do that manually as historically it was done, the industrial guys would tell you, the way of doing it before was kind of 1, 2 skip a few, whereas if you mapped the whole set of pipes inside the heat exchanger on a CAD/CAM type design and then punch it into the compute -- to the robotic arm there, it's never going to miss a single one. And so you get a better outcome for the customer, you get a safer outcome for us. And so we're looking for both of those kinds of things as we use our R&D center to advance with new offerings.

That's helpful. One field services, HEPACO, that was clearly a win for field services. And it looks like you're now investing even more in the business, opening up new locations. Just talk a little bit about the impetus behind that investment. What's going on what you're trying to do strategically in growth?

I mean, Noah, that's a great example of an area that's still pretty fragmented. I mean whether it's -- whether we can go out and buy another incinerator is a debatable topic. But I think that field service, as you know, from our Investor Day deck, is still a highly fragmented industry. And so our ability to go do M&A is still very relevant. But we felt there was a great opportunity given our large footprint. We're in over 700 locations. We can add new field service branches based on the market need for that area into an existing site. And so an acquisition like HEPACO said, hey, HEPACO is using a third-party resources there, and we should just open up a branch and compete with them. So that really is the impetus. Normally, we open up 5 to 10 new field service branches a year. This is -- we're closer to 30 this year. We did 10 in Q1. And these are small -- it's a branch manager and a few drivers with a laydown yard in a location that already has -- already existing Clean Harbors sites. It's low cost. And that's helping us defray some of the cost of travel to those locations and then you grow it from there. And what we've seen is that you give them a chance, you give them a target, you go say, go find it and they go find it in that local jurisdiction. So I think that's been a win for us. It is a bit of a -- the day-to-day work is good margins, high teens, low 20s. It's when we have an event. And an event, then it -- and so having more locations and being first on the scene usually wins the work. And so that really is having that larger footprint allows us to have the larger events that we have seen in the past year or so and going from there.

Yes. I'm not going to try to do math on this call, but adding 30 locations on top of 700, that's a good sign of what you think the growth may do in build services on an organic basis...

You just want to be smart about it because it is a cost to put people there and it's not free. You want to make sure that you see -- you're doing a market analysis to ensure that when we get there, there's enough work for us to be competitive. And that's why HEPACO is such a great acquisition for us because they were using third parties in that region. So we know that there's work there for us to do.

On SKES, record containerized waste services in the first quarter. Any industries you'd highlight as kind of driving that demand growth? I mean I think it kind of goes to your point earlier about the macro headlines versus what you're seeing in the business.

Yes. I would say that, that business continues to perform very, very well, Noah. I mean that business, whether it be back services, containerized waste, parts washers, I mean that business continues to go at a pretty good clip. If you look at the quarterly revenue numbers that we publish and you do some form of trending, you can see a really consistent steady growth rate. Some of that's price, some of that's volume. And really what comes down to is that, especially with containerized waste and back services is route density. Can we get the route density that we need to drive that because me going to Noah's auto body shop and then going to Jim's auto body shop next door. I mean that incremental stop cost is nothing, because on the same route. And so that incentivizing the team to go get that waste and go knock on those doors has been a good unlock. And that not only are we driving incremental price because these -- drum is $500 now it costs $525 is not a big deal, but it's really getting that -- getting the team to be more entrepreneurial and do the work and get the data to do the stocks and drive density.

And I think maybe bridging to SKSS, you touched on during the earnings call, just how effectively do you cross-sell between SKES and SKSS? Can you talk about some of the efficiencies that are sort of on the operating and service side of the crossover?

Sure. I can start with that. We actually saw that when we were out in Las Vegas visiting local branches, and they talked about what's the term like these guys are very coin operated, right, the drivers. And I think the key to this, Noah, is that you and others looking at our reporting statements see them as 2 separate entities. To the customer, there's just one Safety-Kleen. There's no Safety-Kleen oil. There's no Safety-Kleen Environmental. And there may be 2 different drivers. Mike may be the oil driver and I'm the environmental driver, but there's no greater cross-sell than I show up and they say, "hey, my oil tank is almost full, and I'll send Mike out. And so for them, it's just one engagement with Safety-Kleen and whether it's selling VAC services or picking up containerized waste or picking up waste antifreeze or my oil filter beds almost full or I've got some spill I need responded to. It's really just one engagement. And we talked to the team about how they're working together and how the incentive programs could be tweaked to be better to make the symbiotic relationship between the 2 really good. And so for us, it's all one entity on an internal at the actual level, customer engagement level, where I had a reporting financial level, it looks very distinct...

And the management -- 2 different management teams with priority, they're trying to maximize, the oil guys are trying to maximize the charge for oil and they're trying to sell -- the branch guys are trying to sell parts washers.

Helpful. I guess just ending on SKSS, switching to charge-for-oil position in November and then you doubled, I think, CFO per gallon from end December to end March. So with base oil prices kind of, I guess, flattish or maybe even softening, does charge for oil have to keep moving higher throughout the year to support spreads? Can you just help us what's embedded in your reiterating the $140 million EBITDA target for the full year?

Yes. No. So when we put together the guide, as you may know, we had a decent beat in Q1 in SKSS. We beat by $5 million to $8 million of EBITDA. And so we didn't raise the guide on that because once is not a pattern, once is an accident. So let's think about pricing. But what we did do when we thought about base oil prices, normally, summer driving season, base oil prices normally climb a little bit and then they fall toward the back half of the year. And that's how we normally model. We normally model that we have a small increase in April, May, June and then in the fall, October, November, it starts going down a little bit. This year, we just said, look, given the pressure on crude pricing and the pressure on the business, let's model flat to down over the course of the year and not model a bit of an uptick. And that hopefully covers for some of the softness we see in the crude market and maybe some softness in base oil as well. But -- so that's really a switch this time. That's really a change because we just -- we felt that we need to hit that $140. We need to start growing from that. We need to change the paradigm and start charging our customers for the waste services that we're doing. And the good news is we are the 800-pound gorilla in this space by a factor -- we're the largest collected by a factor of 6 or 7. And really, that is something we should act like that. And that's exactly what happened. And so I'm of the view that the new paradigm is that we're going to be able to charge for oil. And even as oil prices start to recover, we'll be still in a good spot.

We seeing that play out. Great conversation, wide-ranging. Mike, Jim, thank you both for the time. I hope everyone has a great day at the conference. You can follow up with us, of course, if you have any follow-up questions or directly to the company. Thanks, and have a great day.

Thanks, everybody.

Thanks, Noah.