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Edited Transcript of ECOL earnings conference call or presentation 4-May-18 2:00pm GMT

Q1 2018 US Ecology Inc Earnings Call

BOISE May 9, 2018 (Thomson StreetEvents) -- Edited Transcript of US Ecology Inc earnings conference call or presentation Friday, May 4, 2018 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Eric L. Gerratt

US Ecology, Inc. - Executive VP, CFO, Treasurer & Principal Accounting Officer

* Jeffrey R. Feeler

US Ecology, Inc. - Chairman of the Board, CEO & President

* Simon G. Bell

US Ecology, Inc. - Executive VP & COO

* Steven D. Welling

US Ecology, Inc. - EVP of Sales & Marketing

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Conference Call Participants

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* Charlie Wohlhuter

* Jeffrey Marc Silber

BMO Capital Markets Equity Research - MD & Senior Equity Analyst

* Jonathan DeCourcey

* Jonathan Mark Windham

UBS Investment Bank, Research Division - Executive Director & Equity Research Analyst of Utilities

* Michael Edward Hoffman

Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Group Head of Diversified Industrials Research

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Presentation

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Operator [1]

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Good morning, and welcome to the US Ecology First Quarter 2018 Earnings Conference Call. (Operator Instructions) Please note, today's event is being recorded.

I would now like to turn the conference over to Eric Gerratt, Executive Vice President and Chief Financial Officer. Please go ahead, sir.

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO, Treasurer & Principal Accounting Officer [2]

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Good morning, and thank you for joining us today. Joining me on the call this morning are Chairman and Chief Executive Officer, Jeff Feeler; Executive Vice President of Sales and Marketing, Steve Welling; and Executive Vice President and Chief Operating Officer, Simon Bell.

Before we begin, please note that certain statements contained in this conference call that do not describe historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Since forward-looking statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. Factors that could cause results to differ materially from those expressed include but are not limited to those discussed in the company's filings with the Securities and Exchange Commission.

Management cannot control or predict many factors that determine future results. Listeners should not place undue reliance on forward-looking statements, which reflect management's views only on the date such statements are made. We undertake 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.

For those joining by webcast, you can follow along with today's presentation. For those listening by phone, you can access today's presentation on our website at www.usecology.com.

Throughout yesterday's earnings release and our call and presentation today, we refer to adjusted EBITDA, pro forma adjusted EBITDA and adjusted earnings per share. These metrics are not determined in accordance with Generally Accepted Accounting Principles and are, therefore, susceptible to varying calculations. A definition, calculation and reconciliation to the financial statements of adjusted earnings per share, adjusted EBITDA and pro forma adjusted EBITDA can be found in Exhibit A of our earnings release. We believe these non-GAAP metrics are useful in evaluating our reported results and our 2018 guidance.

With that, I'd like to turn the call over to Jeff.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [3]

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Thank you, Eric, and good morning, everybody. I'll start this morning's call with a few summary comments on our first quarter results released yesterday before turning it back over to Eric for additional details on our financials. I'll then close out the call with an update on our 2018 business outlook before opening up the call to questions. For those that are following the webcast presentation, please direct your attention to Slide 5.

Yesterday, we reported solid first quarter 2018 financial results that were in line with our own expectations. Revenues were up about 90% (sic) [9%] to $120.1 million and adjusted EBITDA was $24.5 million, up 4% over the same quarter last year. Our adjusted earnings per share was $0.36 per share, up 57% from the same period last year, on an 11% increase in operating income, lower interest expense and lower taxes.

Environmental Services segment revenue grew 6% during the quarter on strong Event Business growth of 8% and continued Base Business growth of 2%. Base Business growth was in line with our expectations, particularly when compared to the strong first quarter last year and factoring in the stronger-than-expected fourth quarter of 2017.

As discussed in our year-end conference call, we saw a surge in volume in the fourth quarter of 2017, resulting from a typical year-end push, reporting a 2% growth in our first quarter of Base Business, on top of these recent trends, supports the ongoing momentum we're seeing in the business.

Event Business was particularly strong in the quarter in the Southwest and Eastern portions of the United States, which offset generally lower seasonal volumes flowing into our Canadian operation.

Our Field and Industrial Services business saw strong revenue growth, up 16% over the same quarter last year, led by increased business in our total waste management and small quantity generation services, which helped drive a 20% gain on our Field Services side. This growth was partially offset by lower remediation revenues, which is typical for winter conditions.

Our Industrial Services business continues to be softer than our expectations coming into the year. Further, revenue quality suffered in the quarter as business opportunities were at lower margins.

Overall, the first quarter was on track. I'm very pleased with the progress we continue to make. We continued to see strengthening indicators of business activity that should support our growth expectations for the year.

With that, I'll turn it back to Eric.

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO, Treasurer & Principal Accounting Officer [4]

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Thanks, Jeff. As shown on Slide 7, revenue for the first quarter of 2018 was $120.1 million, up 9% from $110.2 million in the first quarter of 2017. Revenue for the Environmental Services segment for the first quarter was $86.5 million compared to $81.3 million in the first quarter of last year. This increase was driven by a 5% increase in treatment and disposal revenue and a 12% increase in transportation service revenue. Base Business for the Environmental Services segment was up 2% compared to the first quarter last year and represented 83% of treatment and disposal revenue. Event Business for the Environmental Services segment increased 8% from the first quarter last year and represented 17% of treatment and disposal revenue.

The Field and Industrial Services segment delivered revenue of $33.6 million in the first quarter of 2018, up 16% from $28.9 million in the first quarter of 2017.

Slide 8 breaks down our Environmental Services treatment and disposal revenue for both Base and Event Business by industry vertical. Base Business increased primarily in the chemical manufacturing, other and general manufacturing verticals. These increases were partially offset by decreases in the refining, broker/TSDF and metals manufacturing verticals during the quarter.

The increase in Event Business was primarily driven by increases in the other and waste management and remediation verticals, partially offset by decreases in the general manufacturing and refining verticals.

Turning to Slide 9. Gross profit was $35.7 million in the first quarter of 2018, up 12% from $31.9 million in the same quarter last year. Our Environmental Services segment contributed gross profit of $32.5 million in the first quarter compared to $28.7 million in the first quarter last year. Treatment and disposal margins were 40% in the first quarter of 2018 compared to 38% in the first quarter of 2017. This increase is due primarily to higher landfill volumes and a more favorable service mix.

Gross profit for the Field and Industrial Services segment was $3.2 million, up slightly from the first quarter of 2017. Gross margin was 10% in the first quarter, down from 11% in the first quarter last year. Field service margins improved slightly over the first quarter of 2017 on higher revenues. However, we still face some headwinds on new investments as we roll out new retail contracts in the west and recent total waste management contract wins. Gross margin for our Industrial Services business declined in the quarter, primarily due to lower quality revenue and harsh winter conditions during the quarter.

Selling, general and administrative spending, or SG&A, was $22.2 million in the first quarter of 2018. This was up 13% from $19.7 million in the first quarter last year. The increase was primarily due to higher labor and incentive compensation, higher professional and consulting services and higher property taxes.

Operating income was $13.4 million in the first quarter of 2018, up 10% from operating income of $12.2 million in the same quarter last year.

Net interest expense for the first quarter decreased to $2.8 million compared to $4.1 million in the same quarter last year. The decrease is primarily the result of a lower interest rate on a credit facility in the first quarter this year versus the first quarter last year.

The company's effective income tax rate for the first quarter was 27.6%, down from 37.3% in the first quarter last year. The decrease was primarily due to tax reform passed in the fourth quarter of 2017, which reduced the U.S. corporate tax rate from 35% to 21%.

We reported net income of $9.2 million and diluted earnings per share of $0.42 in the first quarter of 2018 compared to net income of $5.2 million and diluted earnings per share of $0.24 in the first quarter last year.

Adjusted earnings per share was $0.36 in the first quarter of 2007 -- 2018 compared to $0.23 in the first quarter of 2017. Adjusted earnings per share excludes the $2 million or $0.07 per diluted share gain related to the issuance of a property easement on a portion of unutilized land at one of our operating facilities.

Adjusted EBITDA for the first quarter was $24.5 million, up 4% from $23.5 million in the first quarter last year.

Turning to Slide 10. We generated $28.8 million of cash from operations in the first quarter 2018. We also invested $7.6 million in capital projects and paid out $3.9 million in dividends to our stockholders.

Our balance sheet continues to improve with net borrowings of $232.7 million at March 31, 2018.

Additionally, we recently reached a milestone on our multiyear upgrade to our information systems. In April, we launched our new financial system, Microsoft AX. This is an exciting milestone and the first step in our multiyear systems investment. The next phase of our -- phase of our systems transformation will be focused on our new production system, which will commence rolling out in phases in late 2019.

With that, I'll turn the call back to Jeff.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [5]

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Thank you, Eric. As we look to the balance of 2018, we remain confident in our ability to deliver growth over 2017 results. We continue to see positive trends in the industrial sector that should benefit our various business lines. We continue to expect our Base Business to grow 3% to 5% for the full year.

In addition, our Event Business pipeline remains strong, and we have already seen improved activity in regions that were soft last year, leading to our expectations for single-digit growth in our Event Business for 2018.

Field Services should continue to show strong grow -- strong revenue growth, driven by our small quantity generation services as well as our total waste management services. We expect our Industrial Services businesses to begin seeing improvement in the second quarter, continuing throughout 2018.

Turning to Slide 12. Taking into account our first quarter results and current conditions, we are reaffirming our guidance issued this past February. We still expect our adjusted EBITDA will range from $122 million to $128 million for 2018. We are also reaffirming our adjusted earnings per share guidance of $2.15 to $2.34 per share. As well, our capital expenditures are on track, and we still expect them to range between $39 million to $42 million.

Finally, we still anticipate normal seasonality in our business, with sequential improvement in revenues and EBITDA from the first quarter through the third quarter of this year, with the third quarter likely being the strongest of the year.

With that, operator, would you please open up the call for questions and comments?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Today's first question comes from Michael Hoffman at Stifel.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Group Head of Diversified Industrials Research [2]

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Free cash flow outlook. How do you come out on that in reaffirming the guidance where -- given the first quarter?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO, Treasurer & Principal Accounting Officer [3]

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Yes, Michael, we're -- we still think we're going to be in that $55 million, $56 million to $60 million range. So no change at this point.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Group Head of Diversified Industrials Research [4]

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Okay. And then, on G&A. Help us with what you think that -- either absolute dollars or the percent of EBITDA -- revenues are going to be for the year, given the -- that we had this pretty healthy lift relative to sales in the first quarter?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO, Treasurer & Principal Accounting Officer [5]

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Yes. I think in terms of absolute dollars, we still think we're going to be in that $90 million, $91 million range for the full year, which I think puts us in that 16.5% to 17% range of revenue.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Group Head of Diversified Industrials Research [6]

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Okay. And then, within the context of business, if I take all the data that was in the PowerPoint, your comments today, it feels like you're at the current pace of activity. The mix that's been, sort of, 70-30 Base to Event seems to be shifting more, kind of, 75-80 Base to Event versus it -- Event ramping up, so how do I think about the operating leverage through the model at this point? What are you doing differently to still extract that kind of leverages? Volume comes in, but it's coming in more concentrated in Base versus Event on a mix basis.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [7]

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I think, overall, Michael, the first quarter typically tends to be a lower Event business season. So it tends to have lower volumes. We just saw a good year-over-year. We've always been focused on trying to drive those recurring revenue streams, and that's really been the core focus of our overall strategy. As far as leverage goes, we would expect to continue to see leverage as we see volume improvement on the ES side. And as we continue to execute on our services side of the business, we continue to see some operating leverage in that business going forward throughout the balance of the year.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Group Head of Diversified Industrials Research [8]

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So is it reasonable to expect low double-digit margins in the aggregate for Field and Industrial Services?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [9]

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I think, overall, we're going to be at that low double-digit range. First quarter is always a tough quarter on that. And if you really look at those margins, and I'm referring to EBITDA margins, on our Field and Industrial Services side, we did see some margin enhancement year-over-year. But, yes, it's in the single digits. And it's consistent with what we saw a year ago but with a slight improvement. We did have some headwinds in that segment during the quarter as we rolled out some new contracts. Our IS business had some revenue quality issues as well some weather issues that hurt their margin profile there. So if you, kind of, strip those out, we probably be closer to that double-digit range already, and so as we continue to see that improve throughout the balance of the year, I would expect to get closer to that, at least, 10% range.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Group Head of Diversified Industrials Research [10]

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And we had unusually cold winter in Canada. Did that more adversely compress some of the margin that came out of there? And as that's passed, we -- you'll see the degree of that bounce back?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [11]

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Yes, I think that as we see spring conditions arrive, which I'm not entirely sure that they fully arrived yet up in Canada and on the East yet, but, yes, we would see margins improve there. The team did a great job up in Canada controlling costs, given the volumes and things that came through in the first quarter.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Group Head of Diversified Industrials Research [12]

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And in February, when you gave guidance, you had given a range on both ES and Field and Industrial, $385 million to $393 million on the ES and then $145 million to $160 million. Are those still stand? Or are you shifting the mix around a little bit?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [13]

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No, I think -- I mean, it's early, but I think, at this point, Michael, we're still reaffirming that as well. We'll see as we get through Q2 if we need to adjust that. But right now, we think that's still our best estimate.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Group Head of Diversified Industrials Research [14]

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All right. One last one. If the economy and the industrial economy is so good, why do you think the Industrial Services piece is lagging? Is this a secular shift and all of these companies are just trying to find ways to do this slower and longer cycles?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [15]

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Yes, I think it's a combination. I think there's definitely pockets of U.S. that you probably are seeing better industrial service business activity where we're at in Michigan right now and where our core IS business is at. We just -- I mean, we went through, like you said, the harsh winter conditions. We haven't seen a lot of the same bidding opportunities, and it's just been softer. Now it's already in the second quarter trending more positive and seemed busier. And weather conditions have changed there a little bit. I don't want to pull it all onto weather, but we're being cautious as we look at that business segment because we really haven't seen it turn fully yet.

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Operator [16]

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And our next question comes from Charlie Wohlhuter of Raymond James.

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Charlie Wohlhuter, [17]

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Jeff and Eric, so I have a few questions here on the SG&A side. So first, digging in a bit on the labor line. I think you employed a decent base of truck drivers. Can you kind of talk about the craft labor pool? Kind of specifically, are you seeing any significant pressures there?

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Simon G. Bell, US Ecology, Inc. - Executive VP & COO [18]

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Yes, Charlie, this is Simon speaking here. I'll address that. Yes, this remains a big challenge, and I think a major challenge for everybody in the trucking industry and our competition. We're doing a lot of things to make sure we improve our retention of employees, getting very aggressive in our hiring, and we are starting to see a bit of rate -- rising cost to address some of those challenges. So certainly, something we're concerned about, something we're tracking and trying to get ahead of. And we do believe that being proactive in trying to retain and keep some of that good skilled labor is going to be a key factor moving forward.

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Charlie Wohlhuter, [19]

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And then actually, on that, kind of, same thought there, Simon. Last quarter, I believe, a question came up about rail transportation and cycle times. And if I recall correctly, at that moment in time, you'd mentioned that you weren't seeing any sort of adverse effects from the rail service issues. Is that still the case? Or has anything changed there?

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Simon G. Bell, US Ecology, Inc. - Executive VP & COO [20]

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That is still the case. Our corridors -- I've heard about some larger national issues, but the corridors we're using, we have not seen any constraints on our site to date.

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Charlie Wohlhuter, [21]

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Okay. And then kind of looking at it holistically speaking, are you able to, kind of, quantify? Or what's kind of been the budget in terms of your transportation costs for this year versus last?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [22]

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Are you talking, like, apples to apples, Charlie, as far as trying to get a percent increase or...?

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Charlie Wohlhuter, [23]

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Well, yes. If that's possible.

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Simon G. Bell, US Ecology, Inc. - Executive VP & COO [24]

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I don't have that data. Certainly, we're seeing some pressures on the wages side. But I wouldn't say, at this point, I can point to anything that I could quantify where costs have -- if you think about the cost of running a truck, there's a lot involved, everything from the fuel, the equipment. And labor is certainly an important component. But at this point, I don't think it's had a major impact. But certainly, something we'll be looking at moving forward.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [25]

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And I'll just add, Charlie, to that. For larger jobs where we're bundling or we're managing, whether it's truck or rail transportation, normally we bid that in and it tends to be passed through to the customer. So we're somewhat protected. Longer-term projects, we got to manage, and we got to work through on that. But we do have some protections in our contracts. And it normally comes through surcharges and things that get passed on to us from transporters. And so, it's more the internal transport, which is smaller dollars but more meaningful. And I think your question's spot on is for truck drivers and things like that, that we're having. I mean, this is a national issue right now. There's a shortage countrywide. And that's an area that we're constantly focused on to attract and retain the best talent there and -- while being competitive with market wages as well as benefits. And I think that, that's going to be an ongoing initiative for the entire group to make sure that we can do that.

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Simon G. Bell, US Ecology, Inc. - Executive VP & COO [26]

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If I could add, Jeff, the -- well, I'll just add -- well said, [that looks fine].

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Charlie Wohlhuter, [27]

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Okay. And then, as you kind of mentioned just increasing kind of the -- focusing or promoting on the employee engagement outside of those craft labor pools. Are you making any, sort of, investments or incentives or changes on, kind of, the sales force or just, kind of, anything like that?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [28]

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We're constantly relooking at our incentive plans and employee benefit plans. And we've been doing that not just recently. We've been doing that over the last, probably, 2 to 3 years. And have made many millions of dollars of investments in there. And again, coming into having a very low unemployment environment that we've been operating in for some time now, we want to get our retention levels down. We want to attract and retain the best employees, whether it's in operations, whether it's in sales, whether it's in support, throughout the organization. And that's been a core focus of ours. And I think that we're making good traction there.

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Charlie Wohlhuter, [29]

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Okay. And then shifting over to the balance sheet. I noticed the cash balance kind of picked up here quarter-end. It seems a bit higher than usual, specifically here in the first quarter. You're down to about 2x leverage level. Has anything changed among your hierarchy of kind of capital uses or anything strategically speaking there?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO, Treasurer & Principal Accounting Officer [30]

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Yes. Charlie, no, there hasn't been. So our first priority of capital is going to continue to be investing in capital projects that we can reinforce our great infrastructure we have and expand upon that and look at organic opportunities. We do -- we're going to constant -- continue to look at acquisition opportunities out there. And we're committed to the dividend level where we're at right now. So we're going to continue to look longer term as to what may be potential acquisitions are out there in a 3- to 5-year period and make sure our capital structure is appropriate to be able to be in a well-positioned -- well positioned to be able to take advantage of that.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [31]

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And Charlie, I'll just add. We have built some cash. I would expect that we'll continue to do that for the foreseeable future. Our credit facility has very favorable terms, and so we'll just continue to watch and look at the pipeline, look at our internal organic opportunities, and my prediction is, we'll continue to build some cash for the next quarter or 2.

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Operator [32]

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And our next question today comes from Bobby Burleson of Canaccord.

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Jonathan DeCourcey, [33]

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This is Jon DeCourcey on for Bobby. Just want to follow up on some of the Event Business-anticipated strength this year and good results in the first quarter. Kind of where is that coming from? Are you seeing that from customers utilizing tax savings? Or is it kind of a -- finally the pushed-off event work coming to fruition?

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Steven D. Welling, US Ecology, Inc. - EVP of Sales & Marketing [34]

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This is Steve Welling. It's a combination like it's always been. We have court-ordered cleanups. We have real estate development where company needs to clean up the property before they sell it to -- to convert to condos or other more valuable real estate. And -- but I don't think we can point to extra cash and voluntary cleanup. That's not a normal thing that we see.

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Jonathan DeCourcey, [35]

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Okay. And then, on the Industrial Services side, what could we see as signs for, kind of, improvement to those softening conditions? Is just a lag on more industrial manufacturing, or is there anything else that we could kind of see there?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [36]

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Yes. So I just want to make sure that this is clarified, is when I talk about softening conditions in Industrial Services, it's our business on industrial cleaning at factories and other things. It's not macro conditions. We're continuing to see very strong indicators on all of those. We're -- honestly, where we are located up in Michigan, they had a harsh winter condition, and so we're starting to see those improving trends already. And we anticipate that it will start recovering here for the balance of the year.

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Simon G. Bell, US Ecology, Inc. - Executive VP & COO [37]

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It's a very localized market, our IS business, Industrial Services business in Michigan.

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Operator [38]

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(Operator Instructions) Today's next question comes from Jeff Silber of BMO Capital Markets.

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Jeffrey Marc Silber, BMO Capital Markets Equity Research - MD & Senior Equity Analyst [39]

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In your prepared remarks, you talked about the new Microsoft financial system that, I guess, went live last month. I know it's early, but what kind of benefits are you seeing or you think you might be seeing from the system? And how would that impact your financial performance?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO, Treasurer & Principal Accounting Officer [40]

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Yes, Jeff, this is Eric. So it's pretty early. We're just about to start our first month and close on the new system as we speak. But I really think, on the financial system -- and this is just purely the financial system that we've gone live with last month, where we're going to see some benefits is likely to be more on the cost side as we're now on one common procurement and purchasing platform. So we're able to -- we will be able to better leverage kind of our North American presence. And hopefully, that will result, or we expect that to result in some savings and some better pricing and purchasing power and decisions on that front. I think we'll see some things there, but it will be around the edges in 2018. Where I think we'll see the longer-term, bigger benefits is as we roll out our new operating system, which, as I mentioned, we'll start rolling that out in phases in 2019. That's a massive undertaking that we're a couple of years into already. What that's going to do for us is that's going to really -- we'll be on one common operating system that runs our sites and our facilities and our trucks across the whole company. So that's going to allow us to do a much better job at leveraging our network and our infrastructure, leveraging where the waste goes, to make sure that it goes to the most-efficient, best location. So I think that's where we'll really see a larger benefit as we roll out that new system on the operating side, starting in late 2019.

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Jeffrey Marc Silber, BMO Capital Markets Equity Research - MD & Senior Equity Analyst [41]

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Great. And that was actually going to be my next question. Are there any financial targets that you've built in for those benefits over the long term?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO, Treasurer & Principal Accounting Officer [42]

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There are some that we've talked about internally. None that we've talked about externally. And I will tell you, they're hard to quantify. But there is some loosely that we're looking at and targeting internally, but nothing we're prepared to talk about externally.

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Jeffrey Marc Silber, BMO Capital Markets Equity Research - MD & Senior Equity Analyst [43]

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Okay, great. And then, on the cash flow guidance for the year. I know you've maintained that. But you had a pretty strong start to the first quarter. Was there anything specific that was going on in the first quarter, from that perspective, that may not continue for the rest of the year?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO, Treasurer & Principal Accounting Officer [44]

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Yes. But probably, just on the working capital side, that I think that will kind of normalize out a little bit as we go into the second and third quarter. So I think we did have a pretty strong quarter, but I think we'll level that out and still be in that mid-$50 million to $60 million range from a free cash flow perspective.

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Operator [45]

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And our next question today comes from Jon Windham of UBS.

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Jonathan Mark Windham, UBS Investment Bank, Research Division - Executive Director & Equity Research Analyst of Utilities [46]

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Maybe just to follow up a little bit on the last question. Some of the increased professional services fees that you incurred in the first quarter. How should we think about those going forward for the rest of the year? Just sort of a new level for SG&A? Or should we think about it stepping down?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO, Treasurer & Principal Accounting Officer [47]

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I think -- Jon, I think from just an overall SG&A level, we were at about $22.5 million for the quarter. I think that's probably a pretty good proxy for what we -- about where we think we'll be for the rest of the year, which puts us right at that $90 million to $91 million range for the year. The professional services, it kind of ebbs and flows, depending on what's going on. It could be everything from tax and accounting fees, which we've seen a lot of with tax reform and some of those things in the last 6 months, to some consulting and engineering help at one of our facilities. So it varies, but I still think that range -- that level you saw in the first quarter is about the level we're expecting for each quarter the rest of the year.

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Operator [48]

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(Operator Instructions) This concludes our question-and-answer session. I'd like to turn the conference back over to Jeff Feeler for any closing remarks.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [49]

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I want to thank those that are participating in today's call, and we look forward to updating you our -- on our Q2 results early August of this year. Thank you.

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Operator [50]

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And thank you, sir. Today's conference has now concluded, and we thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.