2020 First Quarter Business Review May 8, 2020
Today’s Hosts • Jeff Feeler Chairman & Chief Executive Officer • Eric Gerratt Executive Vice President & Chief Financial Officer 2
Safe Harbor and Non-GAAP Financial Measures Forward looking statements These slides contain (and the accompanying oral discussion will contain) “forward -looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements are only predictions and are not guarantees of performance. These statements are based on management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions include, among others, those regarding demand for the Company’s services, expansion of service offerings geographically or through new or expanded service lines, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward looking statement. Many of these factors are beyond our ability to control or predict. Such factors include developments related to the COVID-19 pandemic, fluctuations in commodity markets related to our business, the integration of NRC’s operations, the loss or failure to renew significant contracts, competition in our markets, adverse economic conditions, our compliance with applicable laws and regulations, potential liability in connection with providing oil spill response services and waste disposal services, the effect of existing or future laws and regulations related to greenhouse gases and climate change, the effect of our failure to comply with U.S. or foreign anti-bribery laws, the effect of compliance with laws and regulations, an accident at one of our facilities, incidents arising out of the handling of dangerous substances, our failure to maintain an acceptable safety record, our ability to perform under required contracts, limitations on our available cash flow as a result of our indebtedness, liabilities arising from our participation in multi-employer pension plans, the effect of changes in the method of determining the London Interbank Offered Rate (“LIBOR”) or the replacement thereto, risks associated with our international operations, the impact of changes to U.S. tariff and import and export regulations, a change in NRC’s classification as an Oil Spill Removal Organization, cyber security threats, unanticipated changes in tax rules and regulations, loss of key personnel, a deterioration in our labor relations or labor disputes, our reliance on third-party contractors to provide emergency response services, our access to insurance, surety bonds and other financial assurances, our litigation risk not covered by insurance, the replacement of non-recurring event projects, our ability to permit and contract for timely construction of new or expanded disposal space, renewals of our operating permits or lease agreements with regulatory bodies, our access to cost-effective transportation services, lawsuits, our implementation of new technologies, fluctuations in foreign currency markets and foreign affairs, our integration of acquired businesses, our ability to pay dividends or repurchase stock, anti-takeover regulations, stock market volatility, the failure of the warrants to be in the money or their expiration worthless and risks related to our compliance with maritime regulations (including the Jones Act). Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission (the “SEC”), we are under no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on our forward-looking statements. Although we believe that the expectations reflected in forward looking statements are reasonable, we cannot guarantee future results or performance. Such statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to differ materially from the results implied by such statements, including general economic and business conditions, conditions affecting the industries served by the Company and its subsidiaries, conditions affecting the Company’s customers, competitor responses to the Company’s products and services, the overall market acceptance of such products and services, the integration of acquisitions, and other factors disclosed in the Company’s periodic reports filed with the Securities and Exchange Commission (“SEC”) . We refer investors to review such factors in our 2019 Form 10-K filed with the SEC on March 2, 2020. Such statements may include, but are not limited to, statements about the Company’s business outlook and financial guidance and other statements that are not historical facts including any statements, expectations or impacts of the COVID-19 pandemic. Consequently such forward looking statements should be regarded as the Company’s current plans, estimates and beliefs. The Company does not undertake and specifically declines any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. 3
Our Response to COVID-19 Focus on Safety and Fundamentals
Staying Focused on Fundamentals During Crisis In These Unprecedented Times Upholding shared values and fundamentals has never been more important Our Mission To provide safe and compliant solutions to protect human health and the environment Shared Values Protecting the environment Safety and compliance Service excellence Doing the right thing, the right way Trusted partner Hungry, Humble, Smart Innovative solutions One team 5
Safety is #1 Priority For All Stakeholders Team Members Our First Priority COVID-19 Protocols Mobilized a COVID-19 Crisis Management Team Adapted and deployed safety protocols and training throughout the organization from our years of experience responding to Ebola, SARS, H1N1 Mobilized ~30% of our workforce to working from home Extended special COVID-19 time-off benefits to team members Services for Customers Essential services deemed by Homeland Security Implemented business continuity plans to remain operational Deployed field teams to decontaminate and provide preventative cleaning for other essential business 6
Q1-20 Highlights: TOTAL COMPANY COVID-19 had minimal impact to Q1 financial results – Supports underlying health of pre-COVID-19 market – Haz waste treatment and disposal, associated services very strong – Exception was the energy exposed markets Revenue of $240.7 million – Legacy NRC contributed $86.6 million of revenue Adjusted EBITDA (1) of $43.2 million – Legacy NRC contributed $12.2 million EBITDA Strong adjusted Free Cash Flow (1) of $15.9 million, up 32% 1 See definition and reconciliation of non-GAAP measures in slides 22-28 7
Q1-20 Highlights: LEGACY US ECOLOGY Environmental Services Segment Revenue grew 19% – Base Business growth of 5% – Event Business growth of 102% – EBITDA margin expansion to 38.5% Field and Industrial Service Revenue grew 14% – Remediation services activities up over prior year – SQG services up 32%, led by retail, lab pack and LTL – EBITDA margin expansion by 190 basis points to 8.5% Adjusted EBITDA (1) of $31 million, up 31% over Q1-19 1 See definition and reconciliation of non-GAAP measures in slides 22-28 8
Q1-20 Highlights: LEGACY NRC $86.6 million in revenue Domestic Environmental Services benefited from increased Emergency Response demand for COVID-19 decontamination services Standby retainage services had strong quarter; unimpacted by COVID-19 International operations challenged with more extensive COVID-19 shut down in U.K. and exposure to international energy services markets Energy services related businesses down over 30% from Q1-20 expectations – Demand cliff from COVID-19 compounded by production war created unprecedented global conditions • $300.3 million non-cash goodwill impairment recognized in Q1-20 associated with the upstream energy services $12.2 million of adjusted EBITDA 9
Proactive Planning Driving Course of Action Capital preservation enhancing already strong liquidity and balance sheet – Cut capital expenditures by ~$30 million – Cut quarterly dividend payment saving $18 million in cash – Deferring withholding taxes generating ~$8 million in cash – Drew $60 million cash from revolving credit facility; ~$76 million available capacity – Expect to be in compliance with debt covenants; proactive discussions Cost controls to generate up to $20 million in savings including: – Deferment of non-critical integration activity spending – Elimination of discretionary spending – Significant reduction in travel, non-revenue producing hiring, wage freezes – Reductions in variable compensation programs on lower financial performance Workforce is a priority – Minimizing impact to our talent; positioning for rebound – Furloughing and reducing hours in markets of softness – Reductions limited to more challenged market 10
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