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

Good morning. We're going to -- first of all, welcome to the 28th Annual Needham Growth Conference. The next presentation is a fireside with Clean Harbors. Pleased to have with us today from the company, the Co-CEO, Mike Battles. And we also have in the front row, Jim Buckley, who is SVP, Investor Relations, Corporate Communications. My name is Jim Ricchiuti, Senior Analyst in the Equity Research Department at Needham, covering companies in the industrial technology space. I think most of the audience is familiar with Clean Harbors. So Jim, Mike, thanks for joining us at the Needham Growth Conference.

So why don't we start off by recapping what occurred through the first 9 months of '25. Probably fair to say that the year, and this is not always a surprise for companies, didn't go exactly as planned with full year adjusted EBITDA guidance narrowing as the year progressed. What were some -- Mike, what were some of the puts and takes that led to the tightening of that range towards the lower end?

Yes. So first of all, thanks, Jim, for having us. Thanks for the Needham Group to have us. It's really quite an honor to come here and present. And I really like this time of year, it forces me as the CEO of the company -- co-CEO of the company to reflect on the year and think about 2026. And so having this conference as a way to force you to kind of the forcing mechanism over the [ break ] to kind of reflect on these things is actually pretty healthy exercise. It helps us like the same slides at the same analysis I did preparing for this conference, which I shared with the Board last week and with the executive team just to make sure we're all aligned on goals. So it's actually a good exercise. Thanks for doing us. Thanks for having us. When you think about Clean Harbors and you think about 2025 as we finish out the year, I would really say it's kind of a tale of kind of 3 cities. So the first is let's talk about the people love talking about the oil business. The SK oil business, we pick up dirty motor oil -- pick up about 250 million gallons of dirty motor oil. We run it through our re-refineries and make a base oil of that. We sell that base oil kind of back to our customer back into the marketplace. So it's a commodity business. It's a spread business. And that business people who've covered us for a number of years has been struggling. They've been struggling for a number of years and really was 1 year when the Ukraine war broke out and inflation, it was a $300 million business, and now it's like $140 million business. So we kind of had a real challenge there as oil prices kept declining, kind of finding bottom in that business. And so what we did last -- about this time, maybe a couple of months ago last year is that we decided to say, forget it, we're not going to worry about collecting 250 million gallons. We're going to worry about collecting high-value used motor oil. We're going to drive that price up. And if we lose gallons and we have to close re-refineries, well, so be it. And we actually did have to close a couple of low-margin re-refineries. And so we did that. But really, what happened was terrific because we gave out guidance in February of last year of doing about $140 million of EBITDA in that business, and we were going to do about $140 million. So I think we've kind of stopped the nonsense of kind of it was 300 millions, and then it was 250 millions, then it was 225 millions and it was like -- and then I spent all my conference -- all my time at these wonderful conferences explaining it to you guys why that was okay and why it was going to go to here. So we just kind of fixed that. And so what we did was we changed the paradigm, and we drove -- we said we're going to let the pricing of the used motor oil drive the profitability of the business, and we're going to let the gallons come as they may. And the industry came with us because we are the 800-pound gorilla in this industry, the industry came with us and we started making a lot more money. I think the industry made a lot more money and I've had people come up to me at conferences and thank me for our leadership in this area to drive UMO pricing because it is a waste, you can't throw in the dumpster. You can't pour it down the drain. So we treat it like a waste like we do for everything else. It's not simple, and it takes a lot of collection network. It takes a huge amount of investment, so we need to get a return on that, and we have. So I'd say that's the oil business. And my goal, as I think about 2026, because I know it's one of your questions, is to make that business relatively boring, drive -- we did have price declines and oil price declines in 2025. We didn't talk about them. Why? Because we drove that UMO pricing up to offset that volatility, we kind of stopped talking about it, which is really kind of what we should be doing. So you think about the other -- so that's of the $6 billion business, a little over $6 billion this year, about $1 billion of that -- a little under $1 billion is the oil business, which I just spoke of. The other $5 billion is the Environmental Service business. I think most people in this room are in the stock or investing in the stock or should invest in the stock because of the Environmental Services business. And in there, it's not as simple as, okay, the Environmental Services business did well but it's really kind of a tale of 2 cities within that ES business. So you have, let's say, the disposal assets of the field service -- excuse me, the technical services business going to large scale, going to the Dows and DuPonts and picking up large quantity waste generation. So that business continued to do very well. That did 12% revenue growth in Q3. Over the first 9 months of the year, did 7% revenue growth, a lot of it on price, some of it on volume, kind of that train continued in the TS business, some PFAS work, I'm sure we'll talk about. I mean that business did very, very well, and that will continue to do well. I think as I reflect on 2026, there's nothing that would change in my view as far as the TS business continuing to get good price. I mean we never -- as we joke and Jim and I joke incineration never goes on sale. It's never a Black Friday and incineration is always going up. And so we'll raise that price up in 2026. For large quantity generation, annual contracts that come up for annual renewal, we do have good tools to manage our profitability, and we'll continue to do that. The second part of the business, that's about $1.7 billion of the $5 billion, about $1.3 billion of the $5 billion is the SK branch business, Safety-Kleen branch business, which is connected to the oil business, which I'm happy to get into but that's going out and getting small quantity generation. Still a lot of its hazardous waste, whether it be solvents, whether it be 55-gallon drums of dirty rags and Kevin's Auto Body shop will go pick up dirty rags or dirty -- stuff you can't throw into a dumpster that you have to -- we pick up. There's small quantity generation. It's all about route density. It's all about planning that route out, very similar to the solid waste business, and that business has been a great business. That business has also grown 7% through the first 9 months of the year and nothing to think that, that won't be high single digits. If you went and did the look back on that business, that's been growing high single digits for 5, 6 years now. Even take the pandemic out, it's like a heartbeat just keeps on keeping on. So that's a great business that I think those 2 businesses, that's about $3 billion of the $5 billion, if you will, maybe $2.7 billion of the $5 billion, that business is doing just fine. It's growing, and it's awesome, good margin expansion and good stuff like that. When you go to the Industrial Services business, about $1.3 billion business, that business has been struggling. And that business is separated into 2 different parts. You have kind of the base business, we call it the onsite work. That means like a bunch of 5 or 6 of us, maybe Kevin and Jim and I and Jim and others go out to the same site every day, managing all that waste and doing cleanups at that site. It's not a lot of hazardous waste but some of that comes out of that. But then also these large plants have turnarounds, annual turnarounds. So that's about 20% to 30% of the business. And those turnarounds have been slowed. They've been pushing out the amount of turnarounds they do in the scope of the turnarounds, the amount of turnarounds have all been slowed down, and that's resulted for the first 9 months of the year, negative revenue growth, negative 5% revenue growth. That's what's happened in this business. So the question really I think about 2026 is there going to be a turnaround there. Is there going to be more -- is that going to come back. I think as we've given -- as we thought about 2026, I'm not really that keen on calling that yet. We've had some problems in that business. I think it's -- hopefully, it stops going backwards. I'm hopeful that it stays flat, maybe goes up a little bit, and we made some leadership changes there if you've been following us. And so we think there's a better trajectory as we go into 2026. We certainly are budgeting a much higher number. But I think as I think about 2026 in the Industrial Services business, I'm hopeful we just stop going backwards. I do think you can't postpone these turnarounds forever, like you just can't do it, right? We own re-refinery, we own 10 re-refineries. We know they need industrial cleaning work. They know they need repair work. We know they need to happen. You can't run to failure. And if you run a failure, it's much more profitable for us if you do run failure, frankly. And I'm assuming -- we're not assuming that we have a big rebound year in 2026 but we're going to have a decent year there. And I'm hopeful just we stop going backwards. And I think the leadership change is going to be helpful on that.

Well, historically -- yes, historically what -- how long can they differ turnarounds?

Yes. I mean the question is like -- and we've seen a few failures. If you've been reading the news, there's been -- Jim can round them off the top of head, there's been 5 or 6 run to failure type of thing fires that happen in plants. Those, I think, are more unplanned downtime, which I think you're running to failure. So look at, is it -- I don't know what the cycle is. I don't want to call bottom but I think that I'm hopeful with the new leadership team, a new revitalized sales force, better tools, better analysis, I'm hopeful that we're going to have -- we'll have some growth there, even modest growth. And the last piece, which I love this piece is the Field Service business. In the Field Service business, we support the utilities. Q3 was -- we didn't have a lot of midsized work, no large-sized projects, no midsize, which is kind of rare. And we're a public company. If you look over the longer horizon, you can see in our financial statements, we've had good low to mid-single-digit growth in that business. We just didn't have that in Q3, and that was part of the surprise that happened. I think that that's -- if I look at Q4 and I look at 2026, I think that problem is solving itself. It's just over a 90-day window, it wasn't that bad. And so us and others in the space, you heard from a colleague, they actually spoke of it and the Republic guy spoke of it, there wasn't a lot of events in the quarter. So that's just a lumpy thing. And so I'm of the view that we do 6,000 emergency responses a year. There's plenty of them out there. There will still be plenty in 2026. And I even see it kind of like as soon as we issued the quarter, there were some events that came up that we're going to be part of that's going to be a good growth engine for us.

Despite all that, the challenges in the IS, I mean, you guys showed pretty healthy margins.

Absolutely.

And maybe you could talk...

14 is great quarter. Just thanks for bringing that up.

Worth noting talk about what's been driving that and some of it is price.

That's right. So I think there's 4 or 5 large engines. So the first of all is price. And as I just talked about, when we talk about pricing, we're very disciplined on price, like the solid waste guys are, and we'll continue be disciplined there. We're not going to -- especially when it comes to disposal assets, they're scarce assets, they're impossible to replicate. So we're going to continue to drive price on that. I think that Kimball opening and having a good year in Kimball. I think the Kimball plant for people who don't know the story, we opened up a new incinerator very late in 2024. We had about -- I'd say, about $8 million to $10 million of incremental EBITDA in 2025. I think that goes to $20 million to $30 million in 2026 as that plant rolls -- goes through all the shakedown process but there's going to be a fair amount of tons coming into the network and coming into Kimball coming in there. I think that PFAS continues to grow. We'll talk more about PFAS. You have as a later question but that's up 20% this year. And I do think that we end up getting some good volume wins. And I think we're getting some of that as well. So all those things have led to 14 straight quarters of year-over-year margin growth in Environmental Services. I'd also say, Jim, that if you think about our incentive comp and incentive comp, we can't ignore it. Every single person from me and Eric down to a branch manager is incentivized on margin. And so it's not 100% of your bonus but it is a very material part of your incentive comp. I think that really helped both the short-term targets and the long-term targets are both tied to margin improvement. And I don't think that's an accident that we've had 14 straight quarters. I think that's part of the story, incentives drive behavior, and I think that's been a good story for us. And I think that's -- obviously, that incremental margin drives incremental cash flows that kind of helps DCF models and multiples, it's kind of all good all around. I think.

Yes. And you brought it up. Let's go to maybe pivot to PFAS, and then we'll talk about Kimball. So is there a way to think about -- I feel like PFAS covers some ground within that ES business. But is there -- what -- how big a driver is it to the Technical Services part of the business? Is it, Mike?

I'd say most of the -- so just to frame PFAS. PFAS is probably fluorinated, I can't pronounce it. It causes [indiscernible] defects, it causes cancer. It's in everything. It's in Teflon. It's usually kind of a DuPont 3M type of thing. But the -- but that business went from like I say, $100 million to $120 million this year. So it's growing. And the way I think about it over the long term, I think you just put a 20% growth engine on that. No matter what happens to industrial production, I think you put a 20% growth engine in your models kind of running out for as long as you want because I do think that's the type of growth. And whether we're hitting an inflection point where it's going to go faster than that, it's kind of an open question. I'm not forecasting that but certainly, it's been growing pretty well. We won a project in Hawaii, which I'm sure we're going to talk about. But I'd say what's happened in the past, since we last talked, Jim, kind of 3 things have happened that gets a lot more eyes on it. The first of which is that -- we met with Administrator Zeldin in Deer Park. He's obviously been an advocate for PFAS remediation when he was at Congressman in the state of New York. He's been very vocal on that. He's going to come out publicly and talk about having a PFAS-R. He's doing that. And that was a great opportunity to spend some time with Administrator Zeldin in our Deer Park incinerator. It was a great opportunity to meet him. We issued -- the EPA report got issued soon after that, which is -- which validates the fact we are the only large-scale incinerator disposal at scale that can do it today, which has been EPA and DoD tested and proved at high temperature RCRA incineration, the only way to actually destroy it at scale. And the third thing is my Co, Eric Gerstenberg got to present in Washington at a hearing that talked about as an expert witness on PFAS remediation. So this is getting a lot of eyes on this as an expert in the industry. We've issued out preliminary guidance what we think should be the standard. We're using that with our customers today. It's part of the minutes of the meeting. And so I think all that's getting a lot of good eyes on that and a lot of good support on that, and we're getting a lot of traction and momentum on it. And just so we're on the same page, PFAS incineration, is that safe? Is it not safe? We've proven through our technology, it is through a 2 to 8x better than any state emissions -- air emission standard. So we know it's safe. We know it's a great way to do it. We think the world is coming to us, and we're in a great spot to take advantage of it.

What kind of interest are you seeing from customers following the publication of that backlog in September?

Yes, September, I think. September. Yes. So I'd say -- so we do 8 different -- we're a total PFAS solution. We're a total PFAS solution. So we talk about 8 different things that we do as far as anything from sampling to testing to drinking water quality, to industrial water quality, AFFF firefighting foam to remediation to disposal and incineration. So we do all those things. And I think the 3 areas we're getting some good traction on is water -- drinking water remediation and the AFFF and the incineration. Those 3 areas we've been growing but we do a lot of different things, and we have an army of people kind of working and hard and selling all different 8 legs of our wheel, if you will.

Yes. You touched on that announcement in Hawaii, Pearl Harbor announcement, which we don't normally see announcements like that from you guys but maybe let's just elaborate on that a little bit.

So first of all, most customers don't want to talk about the fact they deal with Clean Harbors. So let's start right there. Like most customers don't even want [indiscernible] we go through the back door and not through the front door. It's not something that people want to talk about. No one wants to say that we use Clean Harbors but they do, almost all the Fortune 500 do but okay. The Department of Defense allowed us to use their name because we're remediating wanted to use them as a reference, and it was a great opportunity for us to talk about the fact that we do a lot of different things, including water remediation and at Pearl Harbor, we're quite proud of, and that's going to be a good growth engine. It's not -- we're going from maybe $15 million to $30 million of revenue on that. So it's not going to be life-changing amount of money but it's going to be good growth, and that's going to be on top of any normal growth we're going to get in that business, and that's going to go on for the next 5 years. So we're really excited about that opportunity to partner with the Department of Defense to remediate the state of Hawaii's drinking water, which is critically important.

Kimball. What's the latest on Kimball that you could talk to us about how that's scaling. And you've talked about other opportunities as having Kimball now being able to drive more network efficiencies with the addition of this new incinerator. So maybe just talk to Kimball.

Sure. So I went out to Kimball in December to meet with the team. And I will tell you, as a shareholder, you want this leadership team to be managing. I mean just walking around the site with the branch manager and the plant and the project leader and kind of how they describe how they're managing the waste that comes into their site and some site goes in the older incinerator, some goes in new and how they're mixing and matching those waste streams to maximize the volume throughput through that site because they're measured on revenue and EBITDA and EBITDA margin. I mean it's just awesome. It's awesome to see. And as a shareholder -- as a steward of your capital, you should be proud of what they're doing to manage that efficiently as possible. It's a big spend. It's a $200-plus million spend, and they're doing that. And they understand that, and they're measuring that very well, and they're really getting good volume out of it. So we're going to end the year, I'd say, $8 million to $10 million in the good. We said publicly about 28 million -- 28,000 tons of waste. We're going to beat that. They were 25 million for the first 9 months of the year so we're going to beat that number for the year. We're going to -- I think that -- so let's say the $8 million to $10 million of EBITDA in 2025. We said publicly that goes to $20 million to $30 million in 2026 as that things start to ramp itself up, doing all its proper shakedowns. Nothing that would change my view today as I went -- met with the team earlier in December or even when I discussed it with the Board as part of a budget process for 2026, I think that we're right on line. I think the team is doing a great job. Remind everybody, it's on time, on budget, and it's a great opportunity for us. And so what's next for us? What's next? And so we did an incinerator in El Dorado, Arkansas back in late 2019, 2020. We built one in Kimball, Nebraska. There's an opportunity to do one in Naga in Utah outside of Salt Lake. Could we do that? Sure. I think the goal right now is to get the Kimball, the plant up and running well and then go from there. And we want to be late to that party versus early because we don't want to create too much capacity in the network.

And if you're confident about that scaling in 2026, you've also given some targets even looking out to '27, what could contribute....

That's right. That's right. And is that I think on a full run rate, absolutely, $40 million, I think that's very fair. When it's up fully operational, getting that high 80, low 90 utilization like the rest of the plant network does, there's no reason to think that we couldn't do that. I think it's a function of getting the plant up and running, taking the tonnage and getting the price points up.

Okay. I wanted to also pivot to something that you guys have talked about even going back to the Investor Day that you did a few years ago. But -- and that's the opportunity to go after some of the captive business. Some of this is also potentially driven by having Kimball. But just in general, how are you thinking about the captive opportunity? And maybe remind us how many of these captive incinerators there are out there. I think there are 40 but I...

Yes, there's 40. That's still, Jim. And so we still have regular -- so just to people who aren't familiar with the story. So we have 10 of the 14 hazardous waste incinerators. That takes about -- that's 250,000 tons. There's almost an equal amount of captive incineration out there in the network. Maybe in total, there' 400, we take about half of it, so 250. And there's another -- there's captive incinerators out there. So there's about 40 of them. And we have consistent conversations with our customers around closing those captives and giving that waste to us. The challenge with that is that -- and the chemical industry, as you know, and most of them in the chemical space. The chemical industry is under incredible price pressures. You read the news about misses and earnings challenges that they have. So they're under pressure to kind of find cost savings, and we can provide those cost savings, and we have a great reference point with 3M. We did that a few years ago. The challenge with a captive closure is that there's kind of no going back. And you are -- and once you close a captive and lose that permit, starting that up is almost impossible. And so you really are committed to closing that kind of forever. And there is a remediation cost. When you close the site and abandon the permit, well, then that -- you need to rem clean up the site. And we can help them with that, but that's not a free -- that's not free from cost either. And so it's a big decision that people don't make lightly. We have regular conversations with their captives. We have -- we talk about captives all the time. There will be some closures. Certainly, as we've opened up our plant in Nebraska and one of our competitors is going to open up one in Arkansas later this year, I think there'll be more opportunity for them to take advantage of that and a captive closure whether it comes to us or come to our competitors is a good thing for the industry. It creates more waste into the network.

But it sounds like it is -- this is a slow transition, as you said, these are decisions not made by...

It wouldn't be part of any guide. We would not be speaking -- we were not going to talk about until it actually happens.

And there's not a whole lot, I guess, Mike, that you guys can do to accelerate this. This is...

I think the answer is that we have -- we understand those customers because they do turnarounds, they do shutdowns and we take their waste while they're off and nothing changes that. But I think that we're going to continue to take advantage of that.

Okay. You touched on pricing, and that's something we've heard more from you guys, I'd say, in maybe fair to say, the last 2 years. How are you thinking about pricing? And remind us again, typically, you have these conversations in the early part of the year, is it varies?

So Jim, contracts go all through the year, right? So these are annual contracts and normally, they happen when the contract is up for renewal. So it's a long-term agreement with annual price discussions, annual term discussions, and we do that once a year. But it's not like a January, everyone gets a price increase. It's more like when these contracts come due. So it happened throughout the entire year. So we'll have a rollover what we did in the back half of 2025.

Was it a little easier to pass through some of these increases when the inflation rate was a little higher. We're seeing some signs that maybe that's -- what's the pricing environment?

It's never easy. I'd tell you, it's a hand-to-hand combat. It's -- I think that we've been able to get price but it's never an easy conversation. There's a lot of negotiations. I do think we have armed the sales force with better data, better analysis around our inflationary pressures that we're feeling. And so it gives them more ammo to have these more thoughtful conversations but I feel like it's mid-single digits, and it's been that way for a long time and will continue but it's not -- certainly not easy. I don't -- when I've been part of some of these conversations, it's a painful conversation.

Let's talk about M&A. Historically, Clean Harbors has had a pretty strong record for doing accretive M&A. Your net leverage exiting '25, probably less than 2x. So certainly have the wherewithal to do deals. But I'm wondering to what extent is just pulling the trigger harder just given some of the higher multiples we're seeing out there?

Yes, it's fair, Jim. I think that we've looked at a lot of deals. We haven't executed on a lot of deals. That's a fact, right? But we're going to end the -- we're going to end the year with $1 billion in cash. We're going to end the year with leverage kind of under 2x. And you're going to find out when we report numbers that we're going to have the best -- the highest buybacks in the company's history. So we have been reinvesting it, doing more buybacks, and we'll continue to do that. I feel like I'm in the -- I'm not in the Empire business, I'm in the shareholder value business. And so if it means that we -- it takes longer to realize Vision 2027, that wasn't -- that's a vision, not a mandate. And so I feel like it's more of the fact that we're going to make sure that we get good returns on our investments, and we're going to be disciplined about it. And if people want to pay some very high prices, we can't get ourselves to, well, that's fine by me because what that does is it's put pressure on them to raise price. When you think about, for example, and I'm just -- this is me speculating, per speculation. So please take it for whatever it is. But when Veolia spends $3 billion, $3-plus billion and pays 19x for the Clean Earth assets and then the CEO talks about increasing that business by 10% EBITDA growth per year. We, you only do that and you only get that type of return when you raise price. right? So that's -- so in my mind, that's a good thing, not a bad thing. Would I like to have had it? Sure, sure, I would have. But the fact that they're going to go in, they're going to try to grow that business through volume, they maybe win or lose some of those I get, they will horse trade back and forth, we'll create some paint. But then also they're going to get through price. No other way to do it. And so that's actually -- to get that type of return, they're going to have to, I think. And so that's going to be a good thing for us. Good thing for the industry, frankly.

Have the priorities in terms of where areas of the market you might look at changed at all just with the current environment?

What I encourage investors to do, it's a good point. Go look at the 2023 Investor Day and look at the pie charts where we kind of break out our piece of where Clean Harbors is in connection with the whole total addressable market for different size, whatever it be SK branch or TS, they're mostly in environmental services, to be fair. There's a big chunk of other in there. There's usually 40%, 50% is like private company-owned businesses that are small that probably no one in this room would even know they even exist. They're regional players or smaller players. Well, there's plenty of things to do there. There's still plenty of assets to go acquire. They're just the bigger names, the Clean Earth names, they're off the table. And that's not -- I don't care, fine by me. I don't -- I would -- personally, I would rather do a bunch of smaller deals and roll it up that way than go do a game changer and have it not be successful. You only need 1 or 2 of those. If you're doing 4 or 5, 1 or 2 of those do well and you're kind of okay. You see what I'm saying. So there's a big pile of other assets that are out there, privately owned, some are family owned, some are private equity that are available for it. We have a lot of lines in the water. We're going to do deals. I'm not -- people ask me, am I concerned about it? I'm totally not concerned about it. I think that we're doing a buyback strategy. That's fine by me. I think our leverage is in a great spot. We're going to have a great opportunity to leverage on it. And there's plenty of things out there. If interest rates come down, maybe there'd be more opportunities out there.

And there's also, I think, fair to say, more internal opportunities that you guys have embarked on, including even in SKSS.

That's right. So for people who have been following us, we're going to build a new add-on to an existing re-refinery. And really, the way I think about that is that, first of all, it's got great returns. It's got really good returns. But I know that people don't get into the stock because of the SKSS business. So maybe people don't love the fact that we're putting another $180 million of their money to work and building more capacity there. But really, what we're doing there is solving a problem because without getting too technical is that when you re-refine used motor oil, there's a byproduct that comes out of this, right? It's called VTAE. I don't ask me to pronounce vacuum tower asphalt extender, I think it's what it's called. And then -- so that is a byproduct we use -- we sell it sometimes for a little bit of money in roofing and in paving. Well, in paving, less and less states are allowing us to use that VTAE as a product used in paving. So as such, we need to find a home for that stuff. So it was actually solving a future problem as well as having a decent type of return. That said, this will probably be it for the SKSS business as far as investments go, but it's going to be a great plant. It's going to have great returns. It's going to return a good return to our shareholders, incinerator type returns but that's out there. 2028 is the...

And obviously, we all focus on Kimball but in the ES side of the business, you've made some internal investments as well.

Absolutely.

And are there some other opportunities there?

Absolutely. And so when you -- we talked about in the earnings call about $500 million, that doesn't include a new incinerator in Aragonite or anywhere else. But that does include these things on Megahubs, which are -- we have in Baltimore. We have one in Phoenix. We're going to open one up in Illinois as well that add more -- kind of do all the things we want to do in a network at one location. And so those types of investments to buy the property to move things around cost a little money. And so that's part of the growth opportunity there. There's also more capacity. We add more capacity into our incinerator network as far as adding more drum incineration capacity into the network, and we'll be doing some of that as well.

So Mike, these Megahubs mainly offer afford you guys the opportunity to drive better margin improvement? Or is there -- it sounds like there's also some top line opportunity as well.

Sure, absolutely. What that does is it allows us to kind of -- I think it's more of a margin play, Jim, because it allows us to all work together, share resources better, leverage the assets that's there, whether it's got a permanent facility, permanent foot -- it's not usually on a permanent footprint to drive more cross-selling and sharing of costs.

Okay. Well, we're winding down to the end, if you don't mind, can we ask any questions from the audience?

Sure.

Okay. I guess we may have covered it all. Mike, thank you.

Great. Thanks, Jim. Thanks, everybody.