US Ecology, Inc. Q2 2015 Earnings Conference Call August 6, 2015 1
Today’s Hosts Jeff Feeler President & Chief Executive Officer Eric Gerratt Executive Vice President & Chief Financial Officer Steve Welling Executive Vice President of Sales and Marketing Simon Bell Executive Vice President of Operations – Environmental Services Mario Romero Executive Vice President of Operations – Field and Industrial Services 2 2
Safe Harbor During the course of this presentation the Company will be making forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) that are based on our current expectations, beliefs and assumptions about the industry and markets in which US Ecology, Inc. and its subsidiaries operate. Such statements may include, but are not limited to, statements about the Company's ability to integrate its acquisition of EQ — The Environmental Quality Company (EQ), expected synergies from the transaction, projections of the financial results of the combined company and other statements that are not historical facts. 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 expressed or implied by such statements, including general economic and business conditions, conditions affecting the industries served by US Ecology, EQ and their respective subsidiaries, conditions affecting our customers and suppliers, competitor responses to our products and services, the overall market acceptance of such products and services, the integration and performance of acquisitions (including the acquisition of EQ) and other factors disclosed in the Company's periodic reports filed with the Securities and Exchange Commission. For information on other factors that could cause actual results to differ materially from expectations, please refer to US Ecology, Inc.'s December 31, 2014 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission. Many of the factors that will determine the Company's future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date such statements are made. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. Important assumptions and other important factors that could cause actual results to differ materially from those set forth in the forward-looking information include the replacement of non-recurring event clean-up projects, a loss of a major customer, our ability to permit and contract for timely construction of new or expanded disposal cells, our ability to renew our operating permits or lease agreements with regulatory bodies, loss of key personnel, compliance with and changes to applicable laws, rules, or regulations, access to insurance, surety bonds and other financial assurances, a deterioration in our labor relations or labor disputes, our ability to perform under required contracts, failure to realize anticipated benefits and operational performance from acquired operations, including our acquisition of EQ Holdings, Inc. in June 2014, adverse economic or market conditions, government funding or competitive pressures, incidents or adverse weather conditions that could limit or suspend specific operations, access to cost effective transportation services, fluctuations in foreign currency markets, lawsuits, our willingness or ability to pay dividends, implementation of new technologies, limitations on our available cash flow as a result of our indebtedness and our ability to effectively execute our acquisition strategy and integrate future acquisitions. 3 3
Agenda Allstate Divestiture Highlights Q2 2015 • Financial Review Q2 2015 • Year-do-Date 2015 • Financial Position, Cash Flow & Return Metrics • 2015 Business Outlook Questions & Comments Appendix: Reconciliations 4 4
Allstate Power Vac. Overview New Jersey based industrial service provider • Originally acquired by EQ in July 2013 • Represents the majority of our “stand - alone” industrial services • business Primarily services the Northeastern markets • Services provided: • − Industrial cleaning including tank cleaning, centrifuge and temporary storage − Infrastructure support including hydro-excavation, sewer cleaning, sewer line inspection, sewer rehabilitation 5 5
Business Mix • Allstate represented ~11% of total YTD revenue • Low margin business, represented just 3% of YTD Adjusted EBITDA 1 • People-intensive operations, representing ~330 employees (~18% of our total) 1 Adjusted EBITDA presented on this slide excludes Corporate segment EBITDA 6 6
Services Retained Remaining industrial services include: • − Greater Michigan area industrial services business − On-site terminal services All field services were retained: • − Collection and transportation − Transfer and processing including retail services, small quantity/less-than-truck load (LTL) − On-site managed services − Remediation − Terminal services Retained field services characteristics: • − High waste infeed to treatment and disposal network − Value added service to our customers − Complements our environmental services assets 7 7
Allstate Divestiture Overview Agreement with private investor group to sell Allstate Power Vac., Inc. • (“Allstate”) acquired as part of EQ Cash consideration of approximately $58.0 million • (before adjustments for working capital and capital expenditures) Expect to use cash proceeds to pay down indebtedness • Closing subject to regulatory approval and permit transfer • Sale expected to close in the fourth quarter of 2015 • 8 8
Rationale for Exit • Limited opportunity for bundling services and waste in-feed • Little crossover in our core customer base and the sale into our customers often occurs in different departments • Lower margin business, employee and capital intensive • Competitive market with few barriers to entry • Growth areas required significant capital investment in equipment and people • Deal provides the opportunity to partner with Allstate and other providers and provide full service options when it is beneficial to us • This transaction gives Allstate the independence to invest and compete in the industrial services market 9 9
Financial Impact Expect divestiture to be accretive to full year and fourth quarter results • − Assumes proceeds use to repay indebtedness − Improves free cash flow − Excludes transaction costs and impairment charges Recorded $6.7 million non-cash goodwill impairment charge • − Consistent with underperformance of business − No impact to cash or cash flow − Not tax deductible − Represents approximately $0.31 per diluted share 10 10
Q2‘15 Highlights Quarterly revenue increased to $139.7 million • Generated operating income of $12.1 million • − $18.8 excluding $6.7 million impairment charge Reported Adjusted EBITDA 1 of $31.4 million • Net income was $2.1 million - $8.8 million excluding • impairment charge Adjusted EPS 1 was $0.40 per share • 1 See definition and reconciliation of adjusted EBITDA and adjusted earnings per share on pages 23 – 30 of this presentation or attached as Exhibit A to our earnings release filed with the SEC on Form 8-K 11 11
Q2‘15 Highlights Environmental Service (“ES”) Segment revenue of $91.2 • million − Strong landfill and treatment volume Idaho and Michigan − Gulf Coast benefited from 92% growth in thermal recycling volumes over Q2’14 − Texas facility experienced lower receipts and increased costs due to severe rain and flooding Field and Industrial Services (“FIS”) Segment showed strong • growth over pre-ownership Q2’14 however behind expectations − Continued focus on revenue quality and optimization 12 12
Q2’15 Highlights Legacy US Ecology adjusted EBITDA 1 grew 13% over Q2 ’14 • ― Lower business development expense in Q2 ‘15 ― Excluding business development, Q2 ‘15 adjusted EBITDA 1 was down 16% Legacy EQ saw significant growth over the pre-ownership • period ― 96% adjusted EBITDA 1 improvement over pro forma 2 pre- ownership Q2 ‘14 ― EPS of $0.06 (excl. impairment charge), as compared to pro forma 2 Q2 ‘14 dilution of $0.082 per share 1 See definition and reconciliation of adjusted EBITDA and adjusted earnings per share on pages 23 – 30 of this presentation or attached as Exhibit A to our earnings release filed with the SEC on Form 8-K 2 See reconciliation of pro forma revenue, eps and adjusted EBITDA on pages 31-33 of this presentation 13 13
Financial Review 14
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