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Edited Transcript of ECOL earnings conference call or presentation 3-May-19 2:00pm GMT

Q1 2019 US Ecology Inc Earnings Call

BOISE May 9, 2019 (Thomson StreetEvents) -- Edited Transcript of US Ecology Inc earnings conference call or presentation Friday, May 3, 2019 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

* Jeffrey R. Feeler

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

* Simon G. Bell

US Ecology, Inc. - Executive VP & COO

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Conference Call Participants

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* Brian Joseph Butler

Stifel, Nicolaus & Company, Incorporated, Research Division - Research Analyst

* Jeffrey Marc Silber

BMO Capital Markets Equity Research - MD & Senior Equity Analyst

* Michael Edward Hoffman

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

* Patrick Tyler Brown

Raymond James & Associates, Inc., Research Division - MD

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Presentation

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Operator [1]

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Good day, and welcome to the First Quarter 2019 US Ecology Inc. Earnings Conference Call. Today's conference is being recorded. (Operator Instructions) I would now like to turn the conference over to Mr. Eric Gerratt, Executive President and Chief Financial Officer. Please go ahead.

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [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 and Chief Operating Officer, Simon Bell; and Executive Vice President of Sales and Marketing, Steve Welling.

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.

During 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 therefore are susceptible to varying calculation. A definition, calculation or 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 2019 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, everyone. I'll start this morning's call with a few summary comments on our first quarter results released yesterday, before turning it back to Eric for some additional details on the financial results.

I will then close up the call with an update on our outlook for the remainder of 2019, before opening up the call for questions and comments.

Yesterday, we reported first quarter results that delivered $131 million in revenue, up 9% over the first quarter last year. This growth was driven by a 7% growth in our Environmental Services segment and a 15% growth in our Field and Industrial Services segment.

The increase in our Environmental Services segment resulted from strong Base Business revenue growth of 8%, partially offset by a 1% decline in our Event Business.

The Event Business decline was a result of project timing, weather conditions affecting schedules and our Idaho facilities limited operations in the first quarter. We continue to see positive developments in our Event Business and expect strong growth for the full year.

Our Field and Industrial Services business continue to exhibit momentum from a combination of organic growth and recently acquired operations.

Organic growth in the quarter was 3%, primarily as a result of growth in our industrial services, transportational logistics and emergency response service lines.

Despite the strong revenue growth, our adjusted EBITDA for the first quarter declined 4% to $23.6 million. Our Idaho facility was still not operating at its full capacity in the quarter, and we have yet to recognize any business interruption proceeds. Excluding the Idaho facility, adjusted EBITDA would have been up in the first quarter in line with revenue growth.

Overall, I'm pleased with the execution of our team. While our first quarter is typically the softest of the year, this year's seasonality was exacerbated by the limited operations of our Idaho facility. Results are anticipated to build throughout the remaining 3 quarters, and we also anticipate receiving business interruption proceeds starting in the second quarter of 2019. Our Idaho facility remains on track to resume large -- a large portion of its capabilities by the start of the third quarter of the year.

Our underlying business remains really healthy with Base Business outpacing expectations. And while our Event Business had a slower start than anticipated for the year, it's still expected to deliver double-digit growth on a very strong pipeline.

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

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

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Thanks, Jeff. As shown on Slide 7, revenue for the first quarter of 2019 was $131 million, up 9% from $120.1 million in the first quarter of 2018. Revenues for the Environmental Services segment for the first quarter was $92.3 million compared to $86.5 million in the first quarter last year. This increase was driven by a 7% increase in treatment and disposal revenue and a 6% increase in Transportation service revenue.

As Jeff mentioned, Base Business for the Environmental Services segment was up 8% compared to the first quarter last year and represented 84% of treatment and disposal revenue.

Event Business for the Environmental Services segment decreased 1% from the first quarter last year and represented 16% of treatment and disposal revenue. Excluding our Idaho facility, Base Business increased approximately 13% and event business was up approximately 8% in the first quarter of 2019 compared to the first quarter of 2018.

The Field and Industrial Services segment delivered revenue of $38.7 million in the first quarter, up 15% from $33.6 million in the first quarter of 2018. This increase reflects our recently acquired Field and Industrial Services Group based out of Dallas in Midland Texas.

Slide 9 breaks down our Environmental Services treatments revenue for both Base and Event Business by industry vertical. Base Business increase primarily in the metals manufacturing and broker/TSDF industry verticals. The decrease in Event Business was primarily driven by decreases in the other industry verticals, due to the completion of large projects that we're shipping in the first quarter 2018. This decrease was partially offset by increases in the chemical manufacturing and government verticals.

Turning to Slide 10. Gross profit was $35.2 million in the first quarter of 2019, down 1% from $35.7 million in the same quarter last year.

Our Environmental Services segment contributed gross profit of $31.6 million in the quarter compared to $32.5 million in the first quarter last year. Treatment and disposal margins were 39% for both the first quarter of 2019 and 2018. Excluding the Idaho facility, treatment and disposal margins were 40% in the first quarter of 2019 compared to 39% in the first quarter last year.

Gross profit for the Field and Industrial Services segment was $3.7 million, up from $3.2 million in the first quarter of 2018. Gross margin was 10% for both the first quarter of 2019 and 2018.

Excluding investments in our new Houston and Jakoma business, and our Dallas and Midland acquisition, FIS gross margin was 11% in the first quarter of 2019, compared to 10% in the first quarter of 2018.

Selling, general and administrative spending, or SG&A was $20.3 million in the first quarter of 2019, compared to $22.2 million in the first quarter last year. The decrease was due to property insurance recoveries of approximately $4.7 million received in the first quarter of 2019, related to the accident in our Idaho facility. Excluding this property insurance recovery, our SG&A was up by $2.7 million on higher labor cost as well as higher intangible asset amortization.

Operating income was $14.9 million, which included the $4.7 million in property insurance recoveries in the first quarter compared to $13.4 million in the first quarter last year.

Net interest expense for the quarter was $3.8 million compared to $2.8 million in the same quarter last year. The increase was the result of higher outstanding debt levels in the first quarter of 2019, due primarily to the acquisition of US Ecology Winnie in November 2018, as well as higher interest rates on the variable portion of our outstanding debt.

The company's effective income tax rate for the first quarter was 27.4%, down slightly from 27.6% in the first quarter of 2018. We reported net income of $8 million and diluted earnings per share of $0.36 in the first quarter of 2018, compared to $9.2 million and diluted earnings per share of $0.42 in the first quarter last year.

Adjusted earnings per share was $0.22 in the first quarter of 2019, compared to $0.35 in the first quarter of 2018. Pro forma adjusted EBITDA, which excludes business development expense for the first quarter was $23.7 million, down 3% from $24.5 million in the first quarter last year.

Our free cash flow was $16.3 million including the property insurance recoveries received in the first quarter. Our balance sheet remains strong with net borrowings of $320 million at March 31, 2019, and a leverage ratio of approximately 2.4x based on the low end of our 2019 EBITDA range.

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 remainder of 2019, we continue to see momentum in our underlying business. As you can see on Slide 12, we are reaffirming our previously issued guidance initiated this past February. Driving our continued optimism is the underlying health of our business and the industrial sector in which we operate.

Total revenue is anticipated to range between $583 million to $627 million. Base Business revenue growth outpaced our expectations in the first quarter, pushing our guidance for the full year growth to the upper end of our 3% to 5% range.

Our Event Business softness in the first quarter was primarily attributable to timing of shipments and limited operations at our Idaho facility. Timing should positively benefit the remaining quarters of the year and combined with a very strong pipeline, supports our expectations at double-digit growth in 2019. Our Idaho facility is on track to resume a large portion of its operating capabilities by the third quarter, slightly ahead of schedule.

Further, we expect to commence the recognition of business interruption insurance recoveries in the second quarter and each subsequent quarter until our Idaho business is back to normal operations. Our Field and Industrial Services business continues its growth momentum, as we bid on new opportunities while implementing contract wins from 2018. Our adjusted EBITDA guidance remains at $135 million to $145 million, and our adjusted EPS is expected to range from $2.09 to $2.41 per share.

Shifting to capital expenditures. We still expect our capital expenditures to range from $55 million to $60 million for 2019. This estimated range includes $15 million of growth capital deployment and approximately $25 million of Seinfeld spend in 2019, which is higher than our normal spending due to the timing of landfill construction. For those of you that are building the publishing models, we have highlighted some key modeling assumptions when they be useful.

We expect that our full year depreciation and amortization including amortization of intangibles to approximate $47 million. We expect that our interest expense will be approximately $16 million for the full year, higher than 2018, resulting from the acquisition we completed in late 2019 and with higher interest on a variable portion of our outstanding debt. Our full year tax rate is expected to approximate 27%. Overall, as previously reported, our free cash flow is expected to range from $45 million to $50 million despite the disappointment of growth capital and the additional spending in our landfill in 2019. With that, operator, I'd like to 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) At this time we'll take our first question from Tyler Brown with Raymond James.

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Patrick Tyler Brown, Raymond James & Associates, Inc., Research Division - MD [2]

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Eric, so just a little clarification but to be clear, the $5 million of insurance recovery that's not included in your adjusted EBITDA, correct?

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

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That is correct. And that $5 million relates, specifically to property. So the damage to property and equipment, it doesn't -- we have yet to have any insurance recoveries related to the loss profit portion of the policy or the business interruption.

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Patrick Tyler Brown, Raymond James & Associates, Inc., Research Division - MD [4]

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Right. So at this point, you have not picked up any business interruption. But is there some of that, that's embedded in the EBITDA guide? And if so, can you kind of quantify?

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

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Yes. We do have some embedded in there based on kind of what we think today. I would tell you there's probably -- it's probably about $2 million to $2.5 million that we're expecting to date. Now again, it's going to depend on how soon we're back up and operational, and how fast we ramp back up, for the pieces that aren't operational yet to get us back to normal. So there's still some gray in there on how long this is going to take. And then as a result of that, business interruption insurance will -- is there to recover the lost profits.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [6]

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And Tyler, I'll just emphasize that, that is included in our guidance.

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Patrick Tyler Brown, Raymond James & Associates, Inc., Research Division - MD [7]

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Yes. Okay. I just wanted to be clear on that. Okay. I appreciate the organic growth number for FIS. But what was it for ES? I'm assuming some of the Dallas Ecoserv acquisitions were in ES, maybe that's not right? Or was -- excuse me, were they a part of the 8% increase in base?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [8]

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No. So the Dallas and Midland business is included in FIS. The Ecoserv or are the US Ecology Winnie location is included in ES. So for ES, organic growth in terms of revenue was about 4%, so excluding the Ecoserv acquisition. And when we do Base and Event comparisons, that excludes any acquisitions until we cycle those for a year.

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Patrick Tyler Brown, Raymond James & Associates, Inc., Research Division - MD [9]

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Okay. So more of the same-store sale. Okay, that's helpful. And I really appreciate Slide 8 in the deck. I appreciate you breaking out all the components of FIS, just kind of in the deck. But emergency response was up a lot in the quarter, was that a onetime project or was that the Dallas acquisition? And is this kind of a good to-go-forward number on that piece?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [10]

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Yes. That growth was mostly the Dallas Midland acquisition. And I think that's a pretty good number going forward, but we think there's growth opportunities there.

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Patrick Tyler Brown, Raymond James & Associates, Inc., Research Division - MD [11]

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Okay. And then when you look at that stack and some of those subcomponents, what are the pieces in there that are a little bit more sticky or recurring in nature versus which ones are more event in nature?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [12]

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Most of the small quantity generation, Tyler, is going to be more sticky. Total -- our total waste management group is going to be, also more sticky. Now in all essence, it's going to have some variability with project Based Business that's embedded in that. But those are going to be the big ones from a more, I'll call it, project in nature type, it's going to be a remediation. The emergency response to a certain degree but there's a lot of smaller still ups that we really are focused on, and those have been very routinely and frequently in the markets that we serve. And then on transportational logistic, it's a hybrid. So it's going to be some that's projects-based but that's going to also include us just providing those services.

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Patrick Tyler Brown, Raymond James & Associates, Inc., Research Division - MD [13]

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Okay. And then when I look at transportation in that piece, is that also kind of the pass-through or 0-margin business like it is in the ES?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [14]

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No. No. Tyler, typically in that type of business in FIS, we're doing that at a decent margin.

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Patrick Tyler Brown, Raymond James & Associates, Inc., Research Division - MD [15]

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Okay. That's helpful. And maybe this one's for Simon, and you guys, kind of, called out weather but not really -- but there's no doubt that weather had a big impact on the railroads this quarter. I'm just curious if you could talk about your cycle times, did that have a big impact on the Event Business? Or just any additional color there would be helpful.

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Simon G. Bell, US Ecology, Inc. - Executive VP & COO [16]

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Yes. This is Simon. No, I would say there was no large impact. We had some delays but nothing that I would call out. I think it was more just some specific projects that were delayed because of weather delays on the generator side. In other words, they didn't necessarily get the project started because of weather. It wasn't because of limitations that we had, be it rail or anything else.

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Patrick Tyler Brown, Raymond James & Associates, Inc., Research Division - MD [17]

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Okay. Okay. That's helpful. And then my last one. So Eric, I think you have a big It initiative underway, if I'm not mistaken. Just curious, we get update there? Is there any burden to the P&L, or is that a CapEx side? Or is that IT initiative really not material?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [18]

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It's -- I would say, it's definitely material for sure to us. But yes, so we did go live with our new financial system last April, so we're a year into that. We're still doing some refinements and things there, that's gone pretty well. That has mostly gone through CapEx. There's still some additional work in upgrades that we're going to do this year on that, that will also go through CapEx. The bigger piece of what we're doing is more on the operational system and that's been going on for a couple years, and we'll go on frankly for a couple more. And a lot of it's internal work -- internal development that will be capitalized as we go.

It will start rolling in phases late this year, early next year in modules. So think of it, receiving and billing, waste tracking, different modules like that. So the bulk of that work is going to flow through CapEx as we place things into service, like we did with our financial system in the second quarter last year. You'll have additional depreciation and amortization that will start hitting. So that's really going to be the P&L impact.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [19]

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And Tyler, I'll just add a little bit more holistically those are projects that we're dealing with on an IT front. But as with most businesses, we see our fundamental business shifting more and more to being IT dependent. So we even look at where we're making headcount increases to support the facilities and the operations. We're investing a lot into talent, and people, and equipment, and software services and things like that that's going to help drive efficiencies going forward and keep our people more productive. And so that's part of the SG&A increases we've seen over the last few years. I suspect we're going to continue to see some of that because we're -- everyone of us are becoming more and more dependent on technology.

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Operator [20]

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And we'll take our next question from Brian Butler with Stifel.

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Brian Joseph Butler, Stifel, Nicolaus & Company, Incorporated, Research Division - Research Analyst [21]

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Just first on the base growth of that 8%. Can you give a little color on how that broke down between price and volume and kind of what you're seeing trend-wise for those into the second quarter and maybe for '19?

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

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Yes. Brian, I'll take that. This is Jeff. So from a pricing standpoint, we did pass along pricing increases in the first quarter of this year. And it does really impact predominantly on the ES side, the Base Business that we have. And that was around 3%, but the reality is that not all customers would get the same pricing, so it's not necessarily across the board on that.

The other thing on the volumes, we are seeing volumes trending up for -- overall, volumes going into our treatment facilities. But the other thing is mix, we're seeing more and more containers being brought to our -- into our network, which tends to have a higher price point than large bulk jobs. And that's really what you're seeing on that front that's helping drive that growth.

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [23]

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Yes. Brian, it's Eric. Just -- I would see it more as pricing and mix. Volumes are up a bit but not a whole lot if you compare Q1 to Q1.

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Brian Joseph Butler, Stifel, Nicolaus & Company, Incorporated, Research Division - Research Analyst [24]

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Okay. Good. And then looking up the gross profit and the margins came in. Was that really all a function of Grand View or can you help us kind of bridge the difference between the margins in first quarter '19 versus the first quarter '18?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [25]

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Yes. It's -- As I kind of mention in the prepared remarks, if you -- Grand View is a big impact, if you're talking gross margin. If you strip Grand View out of ES gross margins, we are actually up about 120 basis points over Q1 last year.

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Brian Joseph Butler, Stifel, Nicolaus & Company, Incorporated, Research Division - Research Analyst [26]

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For total gross margins?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [27]

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For ES gross margins.

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Brian Joseph Butler, Stifel, Nicolaus & Company, Incorporated, Research Division - Research Analyst [28]

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Okay. ES gross margins. Okay. And then looking at, kind of, the acquisition you did in 2018. Can you just give some color and thoughts on how they've performed to date? And below -- behind or ahead of, kind of, expectations? And what, kind of, opportunities do you still see there on the acquisition front?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [29]

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Yes. Brian, this is Jeff. So the acquisitions we did last year, we continue to be very, very pleased with the results that we're seeing there. We're continuing to integrate those business in the broader Texas marketplace. And honestly, we can't be more happy to have that part of the overall networks that we have down there. There's some seasonality challenges for some of the services business just like what we have everywhere, there's more activity as summertime rolls around and production levels increase. And so it was seasonally lower for some of the service Base Business in the first quarter, then maybe what we had anticipated, so a little bit of a headwinds. But honestly, the pipeline remains positive for both of those in the Texas market place as we see the balance of 2019 plan out.

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Brian Joseph Butler, Stifel, Nicolaus & Company, Incorporated, Research Division - Research Analyst [30]

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Okay. That's helpful. And on the Event Business, when you think of that pipeline going to the remainder of 2019, what's the pace of that? Is that -- is there any visibility on whether that's going to be lumpy in one of the quarters? Or is it just hoping -- looking for a kind of a steady build throughout the remainder of the year?

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

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Brian, again, this is Jeff. Yes, it will be lumpy and the reality is, I'd love to draw a straight line and say, it's going to be this nice, smooth growth rate. But you will see a similar pattern, the way it's building right now it's what we saw in 2018. Q2 should be much improved over Q1. Q3 would most likely be one of the highest points and depending on shipments schedules towards the end of Q3, it'll depend on Q4. As -- and -- so it's really shaping up to a similar pattern that we saw last year.

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Brian Joseph Butler, Stifel, Nicolaus & Company, Incorporated, Research Division - Research Analyst [32]

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Okay. Great. And then just last one. What's the split on your debt for variable and fixed?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [33]

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Yes. Brian, it's -- today, we're about -- I think we're about, with the Winnie acquisition which we put that full purchase price on the line, we're about 50% to 60% variable, which shifted, prior to Winnie, it was the other way. But that acquisition came onto the line in the variable portion.

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Brian Joseph Butler, Stifel, Nicolaus & Company, Incorporated, Research Division - Research Analyst [34]

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Any expectation on what your target is on that split? Or is that going to be, kind of, going forward that's where you want to be?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [35]

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I think we'll see the variable portion will come down faster than the fixed, as we pay it down. Just the way the facility works? But I wouldn't expect it to be dramatically different.

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Operator [36]

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(Operator Instructions) We'll take our next question from Michael Hoffman with Stifel.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [37]

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Brian was in there for Stifel. So I don't know if Michael's jumping on.

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Operator [38]

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We'll take our next question from Jeff Silber.

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

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I'm not from Stifel. You had mentioned in the prepared remarks on the event side that there was some issue in the first quarter because of project timing. Could you quantify what that was compared to where you thought it would be?

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

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We really haven't gone through that quantification effort, Jeff. It would've been pretty significant in there is that -- and that really the timing piece of it is tied up into a couple of larger projects that we actually have a habit of saying they're going to ship in January, and then don't end up shipping until April or May. And so we probably should learn our lesson from that. But the reality is that really shifted forward. And I think the key methods that you should take away from that is we're -- it's business that's lost, and we're highly confident in the projects that we'll get that in the balance of the 3 quarters I'm here.

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

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Okay. Right. And then I guess my follow-up on that is, should we see -- if you would kind of give us some gauge for the cadence, for the rest of the year. I know it's hard to judge, but do you think you might see some shipping around between the quarters? Or you think just kind of the normal cadence where we compared to last year is what we should be expecting?

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

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I -- it's going to be building up, and I would use the cadence of last year. That's the way it's really like looking like it's shaping out.

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

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Okay. Fair enough. I know it's tough to kind of monitor on a quarterly basis. You called out on CapEx some of the additional spending for landfill. We've got to model out the 2020, I know you haven't provided any guidance. But what kind of normalized or what number should we be using for 2020 for CapEx?

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

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So I'll -- what I would use is, we'll probably spend another $15 million in growth capital, and we'll probably have somewhere between $10 million and $50 million of landfill with about $20 million in maintenance.

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Operator [45]

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(Operator Instructions) We'll take our next question from Michael Hoffman with Stifel.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Group Head of Diversified Industrials Research [46]

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I did have a follow-up, but I can dial in late, so I apologize if it's been answered already. So within your guidance, you did show the (inaudible), and I appreciate the clarity on that. Does it include

(inaudible)?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [47]

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Michael, your connection is really choppy. We're not getting -- I heard some put and takes, but I didn't get the -- get what question is. Can you try to repeat?

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Group Head of Diversified Industrials Research [48]

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I will. (inaudible) cell service in America. The inventory

(technical difficulty)

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [49]

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Yes. So there -- if I heard the question right is, does our guidance includes an assumption for business interruption insurance. And yes, that has been included in there. Not the -- for business interruption operating recoveries, not properties. So that's why we're stripping out the property in there. And so when we entered the year, it was around $3 million to $5 million, probably is what we thought we'd recover. And Eric had mentioned on the earlier question, is probably year-to-date. We're probably in that $2.5 million to $3 million range that will price start recovering. And then our operations is coming back, so those will indulge through the balance of the year.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [50]

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And just as a clarification, Michael. The way -- it will work for us is, we will also have additional property insurance recoveries that we'll flow through. We're going to capture those separately, and we'll adjust those out of EBITDA and adjusted EPS as we go like we did in the first quarter. The business interruption, the lost profit portion that we haven't recognized in yet. As that rolls in that will flow through and, obviously, we won't be adjusting that out because it'll be recapturing lost profit.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Group Head of Diversified Industrials Research [51]

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Okay. And then within the context of the confidence about the business, what particular end markets are you seeing behaving in a manner that gives you this increasing confidence?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [52]

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Yes, Michael. Honestly it's across end market. We're seeing in almost all of our service lines, positive developments/and when you look at the waste side of the business, we're seeing it in the chemical, we're seeing it in the refining, we're seeing in the metals markets and the small quantity market. It's -- there's help pretty much everywhere. There's very few areas of weakness that we think are going to be prolonged.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Group Head of Diversified Industrials Research [53]

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And that would be same for the Event side? In fact there's a diversity across the portfolio of [pipeline] projects?

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [54]

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Yes. So on the Events side, maybe that's a good question, give a little bit color on the pipeline is -- we're seeing a really strong pipeline. And there are probably about 4 projects that are larger this year, 2 of which we won 2 years ago that will be just commencing shipments here this year. And a couple of others that have been shipping for under multi-year agreements. And we've seen the rewards of those in the previous years. The real excitement we have in the pipeline isn't the large opportunities. It's -- as it's built out, it's a whole bunch of smaller 1,000 to 5,000 ton-type projects that are really building out that pipeline that we really hadn't seen to this level the last few years. And so I think it's indicative of what we're seeing with the underlying industrial economy is that there's just a healthier -- there's more investments being made, there's more opportunities being granted in that pipeline. So ...

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Group Head of Diversified Industrials Research [55]

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Last one for me, the follow-through on the capital spending conversation, [when we] traveled together in April you talked about a high in '19 in Michigan land fill. A slight lift in that '20 and then a lift again in '21 and then back to a much more normalized mix between growth and maintenance. Was that still the way to think and that would be sustained for a while? Because you already built that...

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Eric L. Gerratt, US Ecology, Inc. - Executive VP, CFO & Treasurer [56]

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Yes. So 2019 is going to be a high watermark year. We'll see a dip in 2020 and then it should pop back up in 2021, as we're building out another phase of our Michigan landfill as well as other landfills that we have. But once you get out to -- past 2021, which is a long way away, you should see the landfill spend decline. And it probably will decline at a more sustainable rate for several years.

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Operator [57]

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This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Jeff Feeler, Chief Executive Officer for any additional or closing remarks.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO & President [58]

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All right. Well I want to thank everybody for attending today's conference call, and we look forward to updating you on 2Q results or the conference in the second quarter towards the end of July or early August.

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Operator [59]

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Thank you. This conference has now concluded. Thank you for attending today's presentation.