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

Hi, everyone. I'm Adam Bubes with Goldman Sachs. And today, I'm delighted to host Clean Harbors. Joining us from Clean Harbors is Eric Dugas, CFO of Clean Harbors; and Jim Buckley as well, SVP of Investor Relations.

Great to be here.

Eric, Jim, thanks for joining us.

Thanks for hosting.

To start the conversation, if you look at your Environmental Services business and the margin track record, I think since 2019, you've expanded margins by around 480 basis points. What's structurally changed this cycle to drive that inflection in performance?

Yes. It's a great question and something we like to highlight. I mean, to simplify it, Adam, we oftentimes talk about roughly 500 margin -- or excuse me, 500 basis points of margin over the last 5 years. And even if you go back further, about 800 over the last 8 years, so really truly a great story. I think a couple of things that I think about over that time frame that's really kind of driven those margins is when you think about our business, first off, a lot of great assets where we can handle a lot of different types of waste streams. And what we've seen over that period is we've been able to garner more volumes into our network, whether that be because of strategic things, like our arrangement with 3M, where we took over a lot of their waste streams a few years ago, whether that be growth in some of the underlying verticals that we serve. And certainly, pricing. I think pricing has been something that we've really focused on over that period, still delivering great value to our customers, still delivering great service, but really looking at during the high inflationary period that we had, making sure that we price accordingly. So those have all been great stories, but I would go back to really kind of getting more volumes into the network, serving more customers, growing with our customers. And as I look out into the future, I see a lot of tailwinds for our business where we can continue to do that. And our margins this year in Environmental Services will finish the year just over 26%. And longer term, we're looking to kind of stretch those to 30% and above.

And so let's talk about that bridge a little bit from 26% to 30%. What are the major drivers to get there -- price cost is clear? Any leverage beyond price cost?

Yes. Certainly, I mentioned volume a moment ago and continuing to bring volumes into the network. Certainly, no surprise, our largest vertical is chemical. We've seen chemical companies slow down a bit here over the last year or 2. But we've been able to drive more volumes into the network through relationships with some of our retail customers and other verticals that have helped that. So when I think about levers, volume and price will always be 2 of the important ones and making sure that we deliver great service to drive that price, which we'll continue to do. But then some of the tailwinds around reshoring, continued infrastructure build-out, PFAS opportunities that I'm sure we'll talk about, all those things are going to continue to grow the business. And we'll do -- we'll continue to do our normal cost cutting, looking to internalize, looking to do workforce management improvements that we've been really dedicated to, all those things that will continue to drive margins in the business.

And so there's a lot of businesses within Environmental Services to unpack that are part of your vertically integrated offering. Let's start with incineration. You just brought on the Kimball incinerator online. I think that plan is trending towards $10 million in EBITDA this year and on its way to a $40 million incremental EBITDA run rate. What are your latest thoughts on the timing of that ramp and upside or downside potential to that $40 million number? What would drive that?

Yes. I mean we're really proud of the new Kimball incinerator. I would -- I would remind folks that this is the second new incinerator that we've brought on in the last number of years. We introduced a new incinerator in Eldorado, Arkansas back in the 2017 time frame. And that was the first new incinerator since the early '90s that came aboard. The Kimball facility that we opened about a year ago this time, almost exactly a year ago this time was really kind of a carbon copy of that facility, but also with some new kind of bells and whistles and new capabilities just based upon where the market was going or where we saw the market. So really happy about that facility. We spent the last 12 months kind of in ramp-up mode. We're really happy with the throughput that we're seeing in that facility. That's probably exceeding our goals for the year. And we're kind of right on track for that $10 million of incremental EBITDA. As I think about 2026, the way our plans lay out for that is probably next year, maybe $25 million to $30 million of EBITDA, but we exit 2026 on that $40 million run rate, so that in '27, we're ready to deliver that. When I think about -- I think those are very fair, conservative kind of estimates. So I'm not sure there's a lot of downside to that other than complete kind of industrial recession meltdown type things, but certainly some upside. If you look at some of the tailwinds, getting more kind of high haz waste through that system, which that facility is capable of, that would deliver upside. And then I'd say the other piece of the upside of this new facility that it's not super easy to precisely calculate is having another facility in our network that can handle very hazardous waste streams has really helped our network move waste around, maybe unclog some bottlenecks that we have and kind of save on transportation costs and shipping costs. And that number, again, certainly a benefit to Clean Harbors, a little bit difficult to measure, but it's great having another like high-powered facility in the network.

And so that's a good point you make. I just want to pick on that. How much of the incremental volumes that are flowing to this new plant are from the existing network versus coming from maybe they were going to another provider previously? Can you just help us conceptualize that?

Yes. Certainly, some of it were -- there were volumes that were going somewhere else before, and we're taking that in. But I would say before this facility was opened, certainly, the entire industry, there was a backup. And we even had to tell customers on certain occasions, hey, we were going to be a little late picking up waste or things like that. And so there was a lot of waste streams that kind of got kicked out of the incinerator network. They perhaps went to a different technology. But those are coming back now, and those will help kind of fill the facility along with some of the some of the tailwinds that we see.

And so you just brought Kimball online. Veolia also brought an incinerator online, I believe. Just -- what are you seeing in the marketplace right now? Any incinerator developments that you're tracking? And how do you see those additions impacting overall supply/demand?

Yes. In terms of our new facility, that's one I know of, we brought that online, as we've talked about. The Veolia facility, certainly, they've been very public about that. I'm not sure when it will start up yet. I'm not sure the exact date. I think it's in 2026 at some point. But in terms of the overall market, I still think there's a lot of -- we're seeing continued good demand. And so we believe that we'll be able to fill our facility. I think if you listen to public comments, not from ourselves or other waste companies or even companies that have incinerated, I think the belief is that the market tailwinds and things like that we'll be able to fill both facilities.

And so I think historically, you've operated in a mid- to high 80% utilization rate at the incinerator. Is that the right way to think about it on a go-forward basis?

I think that's fair, Adam. If you look at our most recent quarter in Q3 here and you look at utilization, excluding the new facility that's kind of in the ramp-up mode, we are operating in the low 90%, in fact. And so I think mid- to high 80s is where we've lived for the last several years here. But I do think PFAS being a catalyst, we'll look to operate maybe a bit higher than that because of some of those waste streams coming in. But high 80s, 90%, that's kind of, I think, a good way to think about it once we're all ramped up.

And the theme that you've spoken about for a while now in incineration is the captive incinerator opportunity. I think there's 41 active captive incinerators out there. Are you seeing these captives starting to divert more waste to CLH? Is there an opportunity in the near term for something that looked looks like what happened with 3M a few years ago?

Yes. So maybe just to level set, I see a lot of faces in the room and maybe just to give a little bit of background around the captives because I think sometimes in our -- in our meeting rooms, some people are more familiar to this topic. And I think it's an important one. But Adam, you mentioned today, there's 41 captive incinerators out in the marketplace. And for those that aren't familiar with the topic, when you think about the entire hazardous waste market that goes to incineration, about half of it is -- goes to commercial incinerators like ours, where we're the leader. We have about a 70% market share there with 10 of the 14 commercially licensed incinerators. So that's about 50% of the market, maybe 55%. And then the remaining hazardous waste that goes to an incinerator is done at these captive incinerators that are owned by companies that produce the waste. The key difference is in those captive incinerators, those companies that operate them, they can only burn their waste. They're not licensed to take third-party waste. And so a few years ago, Adam alluded to our arrangement with 3M. 3M, I believe it was the largest captive incinerator in North America. And for a variety of reasons, they made the election to shut that plant down and move all of their waste streams to Clean Harbors. So a great arrangement for Clean Harbors. I think, a great arrangement for 3M as well. It allowed them to be able to close that facility and really focus on their core operations. So the whole captive story, I think it's one of the many tailwinds we have. But when you look at, again, 41 captives being out there today, 20 years ago, there were maybe 100. So there's been a trend for these captive markets and these captive units to close down and move volumes into the commercial space. They do it to cut costs. They do it because they are incinerators, they can't handle maybe some of the waste streams that are being produced. And so we believe that will continue. A lot of those companies that operate these 41 captive incinerators are customers of ours today, and we keep close contact with them. And hey, just like we did with 3M, we talk to them about how we can save money, how we can handle their waste streams that maybe they can't. We can help them prevent them from having to pay additional capital on things to reinvest in those facilities as regulatory rules around emissions, in particular, become more stringent. And so really, it's a win-win for everybody. So I believe, and I think we believe at Clean Harbors that, that trend will continue. Having 3M as an example of how that can be beneficial is great. But we believe that will continue. The timing of such because there is a lot that these companies need to consider before they close, the timing of which we'll see, but certainly a nice tailwind for us.

And let's just say in a scenario where you saw a wave of captive incinerators close, what does that look like for Clean Harbors? Does that mean you're more selective on the streams of waste that come in your existing facility? Does that mean there's potential for greenfield opportunity at for incinerators in years to come?

Yes, a couple of things. I think it looks -- it would look a lot like -- when 3M came aboard and we received those incremental volumes, we didn't have Kimball open yet. And certainly, there were some other lower value waste streams that could be handled elsewhere that no longer came into incineration. And it caused kind of the value of the waste streams that were coming into our incinerators to increase, and that was one of the drivers of the margin increase that we talked about at the beginning of the conversation. So again, I think it would depend on the waste streams coming in through those captives. I'd like to think it would certainly upgrade the value of the waste streams coming into our network. I think it would also be -- and we have plans long term for this already, but it would be a catalyst for us to do some internal capital projects that can increase the throughput through some existing facilities of ours. And then ultimately, is there another site where we could do another new incinerator if the demand and the market support it? Absolutely.

And to wrap up the incinerator part of the discussion, I don't think we've talked about pricing directly, but it sounds like supply/demand remains tight, expecting incremental volumes. How are you thinking about pricing over the next 3 to 5 years?

Yes. I mean, I think pricing will continue to be a good story for us. We deliver great service to our customer. And ultimately, that's what they pay for, that in our capabilities. So when you think about our pricing strategies, it's predicated on that. But certainly, we look at inflation. We try to price above inflation to cover those costs, and we'll continue to do that. But incorporated in our price increases will be customer service and looking to deliver as much value as we can across our more than 50 lines of business to that customer so that they see that, too.

So let's shift gears, talk about another large piece of your Environmental Services business, which is Industrial Services, where you're providing cleaning, maintenance and turnaround services. So I think roughly maybe 50% is recurring maintenance and a large balance turnarounds. But help us understand the mix there. And then I think recently, you've seen some turnaround work slow as refiners have deferred shutdowns. Just talk about the dynamics going forward.

Yes. Yes. So our Industrial Services business is about $1.3 billion. Many of the large customers that we provide these services to on the Industrial Services side of the business, we also handle their hazardous waste on the technical services side of the business that we just talked about. But when you break down the nature of those services, Adam, I'd say -- above 20% is probably turnaround-related services. So that's when those sites are in turnaround, they're doing their maintenance, which is typically at least once for many factories or many plants twice a year. Those are those turnaround services that we're doing there. About 30% of the revenues are what we call specialty services. So those are maintenance services, but of a higher degree, could be done during a turnaround, but maybe not. And then about 50% of the business is day-to-day maintenance that these facilities have to do that we can help them with. One of the unique things about Clean Harbors is much of that revenue is supported by insight teams. And so what that means is these are Clean Harbors employees that are out at these locations each and every day. They share a lunchroom. They get to know the employees of the customer, and we're helping them kind of manage their day-to-day maintenance of the facilities. When waste comes out of that process on a daily basis, they'll handle that and will turn it over to our tech services group. But these insight services, I'd like to emphasize that these are important because they're the eyes and the ears of Clean Harbors on site every day looking for opportunities here. So a little bit slower this year in that business, largely due to the turnarounds and the scopes of turnarounds that we're seeing at some of the re-refinery customers and a little bit of the chemical customers because of the price pressures or cost pressures, I should say, that they're feeling. But certainly, a business that ultimately, these turnarounds, these customers need to do them to keep these multimillion dollar plants safe and operating effectively, and we expect to see that turn here in the future.

And how are you thinking about the timing of that cadence of deferred large maintenance projects returning? What are you hearing from customers?

Yes. I mean, I think things will improve in 2026. I'm cautious to say that, hey, they're going to be going through the full spectrum of the turnaround services that are required. But I would analogize to past cycles that we've seen where from time to time, turnaround services and the scope of those turnaround services are delayed. But ultimately, as I mentioned a moment ago, they have to be done. So is that in 2026, we're hopeful. But if past cycles and past patterns prevail, which we believe they will, we'll see that business return.

And so it sounds like in the meantime, you've done some nice things on labor management, reducing labor as a percent of revenue over time, it sounds like it's coming down. So can you just talk about some of those initiatives? And to what extent can this business emerge with higher mid-cycle margins?

Yes. I describe them as a lot of self-help type things. So certainly, in Q3 here, we focused on -- or we discussed some of the labor management and internalization of work and equipment rentals and things like that, that we've done across Industrial Services, but also really across the entire business, but focused on Industrial Services in some ways. So when this business returns, like we saw in fiscal '22 and '23 when this business had great years because the scope of turnarounds increased, I think we'll be in that much better position to continue to drive margins in that business because of these self-help activities.

And then just to round out the discussion here, the industry has done a really good job of pricing in Industrial Services to achieve an acceptable return in recent years. But historically, we had talked about this thing as maybe a more competitive part of the business. So has that dynamic changed? Are you starting to see any pockets where you're hitting price elasticity? Or do you expect pricing to outpace inflation here on a sustainable basis?

I mean, certainly, when you're talking about the types of services we provide here, kind of more labor and equipment, the pricing power is probably not as great as tech services. But certainly, as long as we continue to deliver good service, the pricing will be there above inflation. And again, these are customers that we provide a wide variety of business to, including some of the disposal services we talked about earlier, and we can leverage some of the pricing and the full suite of services we deliver to them in regards to that.

So I want to talk about the PFAS opportunity. You alluded to it earlier. You have sort of a total PFAS solution, which I'd love to hear more about. And I think PFAS revenues are around $100 million today, growing 20%. So as a starting point, what does that look like? How much is disposal of revenues versus cleanup versus water treatment?

Yes. I'm going to turn it over to Jim. He -- this is a hot topic for Clean Harbors. I'm sure we're all interested and Jim talks to many of you and hundreds of people a week. So...

Yes. PFAS is a hot topic, one of my favorite topics. It's been years in the making. So it's actually great to see us. It's 2% of our revenue. So still a small part of the story, but a real growing part of the story, up 20%, 25%, as you were saying. And it's hard to give an exact number because we do a lot of jobs that might have PFAS as a component of something we're cleaning up. So we tend to give a range, $100 million to $120 million this year. In terms of the breakdown of it, maybe 1/3 of that is kind of water filtration and maybe 1/3 of that is going out in our field service teams doing AFFF change-outs in fire suppression systems or responding to fires that have happened or other kinds of cleanups or again, doing spill response where PFAS may be part of something that came from a ruptured tank. And then there's a disposal element to it and really probably a small component of that is some of the sampling and analytics work that we're doing as part of a total solution because basically, we're going to customers, many of whom really don't know what to do yet with PFAS and saying, hey, we can sample your soil and water. We can filter that water for you. We just announced a contract this week, which maybe you're going to ask about, Adam. But one of our largest installations to date has been out in Pearl Harbor at the naval base, and that was something that we kind of fell into through a jet fuel spill that then turned into, hey, this water is really heavily contaminated with PFAS. And so we grew our system there, and they love the installation they have. They love the system we had. So we're doubling the size of that. And that was part of the announcement that we announced this week. We're going to be there for at least the next 3 years, generating over that time period, $110 million of revenue on the water side. And I think that's an emerging opportunity for us. I think if we were sitting up here 5 years ago, we would have said drinking water, not really historically something Clean Harbors has played in. But we've done such a terrific job with this initial installation that the military actually has taken us to other bases and other locations. And then that's grown into some municipal water wins. So we're never going to be probably #1 in that space. There's been folks that have been doing that for decades, but we're getting a piece of that market, and it's that part of the PFAS ecosystem is a multibillion-dollar opportunity. And then obviously, the holy grail for us is going to be destruction. And we would need some EPA standards around that because the current EPA has really only gotten to a drinking water standard, which is a very restrictive standard. So we're still waiting on the other side. There are a couple of anecdotes around that, that I think are worth mentioning is one, both our co-CEOs hosted Lee Zeldin, Commissioner Lee Zeldin -- Administrator Lee Zeldin down at our Deer Park incinerator. He spent a day with them there. It was a really great opportunity for us to talk about all the things that Clean Harbors does, but have him tour that facility and really talk about PFAS destruction. And the study that we had done with the EPA, which was to prove out that we can safely destroy PFAS has sort of been held up in their public affairs department and maybe some of that was the [indiscernible] of people or changing of jobs. But probably not a coincidence that the week after that Lee Zeldin visit, that study hit the tape and the EPA put that out, and that's generated a lot of customer interest. And then more recently, Eric Gerstenberg appeared before the U.S. Senate 2 weeks ago as kind of the expert on PFAS disposal as -- and a couple of other folks on that panel. And it was a really interesting kind of 1.5 hours. And I think if you watch the whole thing, the key takeaway is that thresholds are needing, regulatory framework is needed, and I think that was echoed by a number of the senators. So great opportunity, good visibility for us. And the next catalyst would be just worth mentioning is the current National Defense Authorization Act, which is currently in committee with the House and Senate version getting married before it goes to President Trump's desk. That has an amendment that will lift a moratorium that's been in place for the last 3 years for incinerating DoD way. So that's not going to change our fortunes overnight, but that's going to open a huge sales channel for us if we can go and go to those 600 or 700 contaminated military locations and say, we can take that from you and we can safely destroy it.

Terrific. I think you answered all my questions on PFAS, Jim.

Well, that's the advantage of you being nice enough to send them long in advance. I just tackle them all at once.

I think it's just a great long-term opportunity for Clean Harbors. And I don't think there's any company that's better situated to help solve this problem.

Super. So I want to shift the discussion to M&A and capital allocation. I think over the past 5 years, you've allocated almost $2 billion toward M&A and at 9 to 11x type multiples on an EBITDA basis and then you take post synergy maybe 2 to 4 turns off that. Talk to us about the leverage that you're able to pull from a synergy, what's sort of your value-add algorithm on M&A?

Yes. I mean, certainly, any time we evaluate a potential acquisition, synergies is obviously a huge piece of that. When you look at the value that we've been able to bring to some of these targets and synergize that number down, obviously, there's always kind of the back-office support and things like that as a large public company, we have those types of things in place. But some of the other larger buckets -- our large labor force when I think about the HEPACO deal, we've been able to internalize a ton of that field services work where they used a lot of subcontractors. We've been able to internalize that, do a lot of things for our employees that retained them and really saved a lot of money there in terms of synergies and drive margins. Transportation side of things, again, a very large transportation network that we can bring a lot of value to. Obviously, waste disposal. To the extent that any of these acquisitions, we're spending money on waste and hazardous waste disposal, we can help there as well. So I guess the last one I'd mention, and it's an important one is just from a technology perspective, a lot of these companies that we bought in history, they may have multiple underlying operating systems that they utilize to get them information and to operate their business. And when they come into the -- into Clean Harbors, we apply our proprietary operating systems onto these targets. It has many, many benefits, but the benefit of being on one common platform for information, both from an operating perspective as well as a financial perspective, really brings a lot of value. And again, our operating system kind of homegrown, proprietary, built over the course of the last 40 years, we feel like we've solved all of our operating problems or many of them through the use of this technology. And so that brings a lot of value to the targets that we acquire.

And so it's been several quarters since you the allocated capital toward M&A and the recent focus has been on high-return organic investments while you maintain a disciplined approach towards M&A. But just talk about that dynamic a little bit. Does that reflect maybe higher valuations for prospective M&A or simply more attractive internal opportunities?

Yes. It's a combination of both. Certainly, kind of valuations here in our space have gone higher. That doesn't mean that we've been boxed out of -- out of deals, but we have seen some deals go to levels where from a financial perspective, when you weigh the opportunities and probably more importantly, the risks associated with the deal, it's gotten to the point where we've not won or we've decided to step back, right? And we are always going to remain in -- financially disciplined. I think that's a core tenet at Clean Harbors. We don't want to do acquisitions that take on risks either operationally or financially that we don't find acceptable. So in the meantime, since we did HEPACO and Noble a few years ago, certainly, we've allocated capital internally with some nice accretive projects, finishing up Kimball, which we spent a long time talking about a few moments ago, developing some regional hubs. And these are $20 million capital ideas, but they're bringing all of our business units and all of our lines of business together within a region, sharing assets, sharing labor, bringing on some more kind of waste transportation type activities that are advantageous. So allocating capital internally. And then lastly, continuing to deliver value to our shareholders through share buybacks. That's been something we've done. The level of share buybacks here in 2025 is a little bit more than we've done in the past because we remain financially disciplined on acquisitions while still allocating money internally on capital projects, but generating a lot of cash flow and looking for opportunities to best deploy that and turning -- including kind of returning value to shareholders through buybacks.

And on your latest earnings call, I think you talked about a path to potentially investing over $500 million in internal organic investment initiatives and that includes a $200 million plus investment in a processing plant that you can speak more to. But what would the rest of that investment look like?

Yes. We talked about $500 million. We talked about the $200 million that is a required investment kind of an SKSS side of the house. But the remaining investments are all kind of on the Environmental Services segment focused. They range from some of the things we're doing around the regional hubs that I just mentioned about. There's a couple of opportunities remaining there. They're also increasing throughput. I mentioned through some of our existing incinerators, there's some opportunities, we believe, to increase throughput and capability at some of our existing sites. And so those are very accretive ideas. And then there's things that we can do with some of our equipment and rolling stock to continue to kind of build internally. We have a number of refurbishment shops where we're actually building our own vehicles that avoid supply chain hangups, but also allow us to build things customized to our needs. So looking to continue to do some more of that to reduce outside rentals and operating leases and things like that. But we're always looking for things to continue to smooth out the movement of waste, give us more capabilities, allow us to reduce our handling and transportation costs, and we'll do all things like that. But most of that incremental investment or virtually all of it aside from what we talked about relative to SKSS was on the ES side of the house.

And while we're on the topic of M&A, there's been continued consolidation in the industry, recently some larger consolidation. How do you see just the competitive landscape broadly shaping up as consolidation continues to take hold?

Yes. Certainly, it's a competitive market. We are able to hold kind of the #1 position in many of the lines of business that we operate in. So that's certainly good for us. But I think with consolidation, it forces us to get better, which has been a great thing. It also supports pricing initiatives and things like that, that can be helpful. But in terms of competition, certainly, competition has always been there and increases. But I think from our perspective, we continue to get better. We continue to provide high levels of service to our customers, and we welcome the competition and believe it makes us better, too.

And so I want to sort of circle back to the Environmental Services business because there was one piece that we didn't -- well, there's a couple of pieces we didn't cover, but one notable piece is the Safety-Kleen Environmental segment, and that's been sort of, I think, an underappreciated part of the business. It's growing high single to low double digits since you consolidated into that segment. What's changed there? And how should we think about that algorithm going forward?

Yes. Maybe I'll start on that one. Our Safety-Kleen branch business, I always -- when people have the first call with me and they say, what's one thing people don't understand about Clean Harbors? And I always say the value of our Safety-Kleen branch business is wildly underappreciated because it feeds all of our facilities. And so yes, those permitted assets are great. They're scarce. They have great pricing power. But the secret sauce with Clean Harbors, and we've seen it in this last year or 2 or 3, even when chemicals and some of our large producers of hazardous waste have been in the doldrums, and you've seen ISM has been negative most of the last 3 years. One of the ways we've still grown as a company has been through our Safety-Kleen branch business because it's the one area where we really do look like solid waste. We go into these local markets, these box trucks go out. It's an awesome business model. It's usually on a subscription basis, and we're going out there every 8 or 10 or 12 weeks. And we're forcing those drivers to allot a certain amount of their time to go prospecting, and we've been densifying those routes and making them more efficient and really just creating an incredible amount of shareholder value. And so you look back in our disaggregation table, since we split that business out as a separate item, you could see for the last 5 years, I think the lowest growth quarter has been 5% or 6%, and there's been a lot of 7s and 8s and 9s and 10s in there. And we've just really continued to do that because it's such a terrific model. And only 30% of the waste that gets picked up by that business goes to incineration. So everyone thinks of its linkage to that, but it really -- 70% of it is going to fuels blending and landfills and solvent recycling and all the cool and neat things we do with recycling and disposing of waste. So it's really been kind of a differentiator for us. It's a stabilizing force for us, and it's a real growth machine for us.

Okay. I'm seeing that we have just over a minute left to fit in 1 or 2 Safety-Kleen segment questions. You've been contending with a softer base oil environment, but you've continued to execute levers in your control, namely increasing charge-for-oil collection pricing. So just talk about where base oil sit today. Are there further charge-for-oil actions that you can take for customers? Or should we expect the current spread to hold? And then how do you just think about this segment over the next cycle as you continue to pull on those levers, whether it's the Group III initiative, et cetera?

Yes. So I'll take this one. You mentioned kind of the spread a moment ago, Adam, and that's the key to this business. And we've done a great job in the last year in an environment where base oil pricing continues to weaken to change the upfront costs and how we acquire the used motor oil feedstock that we use and re-refine into that base oil product. We have -- we're well into a charge-for-oil position now with some of our -- or virtually all of our customers. And it really truly is a service. And I'll go back to some comments that I mentioned a moment ago where we've continued to deliver high levels of service to those customers that has allowed us to change to a truck oil phenomenon, and we've had to do it to offset base oil pricing. So we'll continue to pull that lever. That's the strongest and biggest lever that we have, but we'll also see growth opportunities in the business. So you mentioned kind of more Group III opportunities. We'll strive to do that. There's other strategic arrangements we've gotten into with folks to partner with them and look to drive continued sales on the blended side, and we'll look to continue to distribute and sell our blended products internally to many of the SK branch customers that Jim and you spoke about a moment ago. So really proud of what we've done in that business, really look to stabilize it and have done so this year. But the environmental service side of the business is where there's a greater growth algorithm.

Terrific. Well, Eric, Jim, thanks so much for joining us. Appreciate the discussion.

Great. Thank you.

Thank you.