During its Investor Day, Clean Harbors (NYSE: CLH) gave insight into its Vision 2027 long-term growth strategy.
The Massachusetts-based environmental services provider spoke about its focus on three key drivers: expanding its waste disposal capabilities; increasing its presence in the oil and gas market; and leveraging its technology and expertise to offer innovative solutions to customers.
“Vision 2027 is our plan for building on our track record of growth and sustainability through a continued focus on value creation across all areas of our business,” said co-CEO Eric Gerstenberg, in a statement. “Since our founding, our mission to create a safer, cleaner environment has expanded through the introduction of new products and services, as well as numerous strategic acquisitions."
Clean Harbors is the largest hazardous waste disposal provider in North America, with more than 100 facilities. It is the largest collector, recycler and re-refiner of used oil. The company's waste management services include transportation, treatment, recycling, and disposal of hazardous and non-hazardous waste streams, as well as emergency spill response and remediation.
The company's Vision 2027 plan considered an organic-growth-only model aimed at generating 2027 approximately $1.4 billion in adjusted EBITDA and adjusted free cash flow of nearly $600 million. Clean Harbors' model also included expected revenue growth that is 100-300 basis points above U.S. GDP, and expected adjusted EBITDA* growth that is 200-300 basis points above revenue growth.
"For the organic growth only model, the Company assumes no acquisitions completed over the five-year period resulting in a significant cash build," the company noted. "For the model that includes acquisitions, the Company assumes that over the five-year period it would invest in acquisitions using a mix of cash and debt that enables the Company to maintain a net debt leverage of ~2.0X."
The company noted barriers to entry are creating what it called a "substantial moat." Complex regulatory requirements continue to stifle growth, with Clean Harbors noting the more than 500 permits it currently owns. In addition, significant customer switching costs, unique assets and equipment, "substantial" capital costs and required safety standards also act as headwinds.
Clean Harbors' Environmental Services segment reached nearly $4.1 billion in revenue in 2022. According to the company, consumer demand for sustainable solutions is amplifying. The company stated that aside from increased sales, the financial benefits of investing in sustainable solutions include include cost savings, additional recycling services and improvement in ESG ratings.
Despite the drive for organic growth, acquisitions were noted as a key component in the plan. Clean Harbors stated that it is using a "consistent due diligence approach" and is evaluating up for five opportunities per week. The company completed 70 acquisitions to date since its founding in 1980.
“Driven by our commitment to achieving a superior return on invested capital, our five-year targets for Adjusted EBITDA and adjusted free cash flow are expected to build on our original mission,” commented co-CEO Mike Battles. “We believe that these new anticipated milestones within our Vision 2027 reflect the significant growth potential of our businesses and the long-term stability of our markets.
As part of a planned transition, the company recently announced Founder Alan McKim will no longer serve as president and CEO, but he will continue with the company as executive chairman and chief technology officer.