Jeremy L. Dillon
RW Monitor
11/7/2014
U.S. Ecology announced better than expected third quarter financial results this week, with positive net income and operating income. During the third quarter, the company’s net income was $13.3 million, up from $10.3 million earned in the same period in 2013. Operating income was $26.8 million, up from $15.5 million in the third quarter last year. Treatment and disposal revenue increased 11 percent from the same period in the prior year, reflecting a 10 percent increase in Base Business and an 11 percent increase in project-based Event Business, the company said.
For year-to-date results, US Ecology earned a net income of $29.6 million, up from $22.9 million in the same period of 2013. Operating income increased for the first nine months of 2014 to $53.3 million, up from $37.6 million for the same period last year; and gross profit for the nine months was $100.1 million (including $32.7 million from EQ) up from $55.9 million for the first nine months of 2013. Total waste volume disposed or processed was 867,000 tons (excluding EQ) in the first nine months of 2014, up 17 percent from 742,000 tons in the first nine months of 2013.
Much of the success was attributed to the recently acquired EQ sites, as well as strong legacy US Ecology business. “Strong execution across US Ecology’s facilities, including the acquired EQ operations, delivered better than anticipated quarterly results,” President and CEO Jeff Feeler said in a statement. “In the legacy US Ecology business, continued strength in project-based Event Business and solid growth in our recurring Base Business drove year-over-year organic growth. The acquired EQ business performed consistent with expectations in aggregate in this seasonally high point of the year; fueled by strength in the environmental services group. All in, I cannot be more pleased with the collective effort of the team in this first full quarter of the combined company. We look forward to leveraging this unique combination of high quality treatment and disposal assets and complementary services provided by the acquisition of EQ.”
Revised 2014 and Future Outlook
US Ecology’s better-than-expected third quarter results also led the company to adjust its expected earnings for the year. “Based on these results and the continued strength of our business, we’re revising our full year guidance upward and now expect adjusted earnings per share to range between $1.92 to $1.97 per share, up from $1.70 to $1.80 per share,” Feeler said during the company’s third quarter earnings call this week. “We also expect adjusted EBITDA to range from $110 million to $115 million, up from our previous adjusted EBITDA range of $100 million to $110 million.”
Part of the reason for the increased expectations for the year has to do with the continued success of the company’s base business. “Base Business is expected to continue delivering mid-single digit revenue growth in the fourth quarter on continued strong industrial production,” Feeler said. “While we anticipate a solid fourth quarter, our projections are tempered compared to the third quarter as a result of normal seasonality that is more pronounced in the legacy EQ business during winter months. Our pipeline remains strong and we continue to identify new opportunities to leverage our unique set of combined assets.”
While not providing any specifics into 2015, Feeler indicated that the results of 2014 could be replicated. “Though I’m not going to provide any specific guidance for 2015 at this time, I will say we continue to see a solid pipeline of longer-term opportunities that will likely benefit 2015 and beyond,” Feeler said. “We are seeing no fundamental changes in the overall economic condition, which should continue to support strong industrial production and which we believe will translate into continued strong performance in 2015.”
EQ Integration Going Smoothly
Feeler also noted that the EQ acquisition integration was moving ahead smoothly, resulting in three times the amount of revenue in the quarter than last year. Total revenue for the third quarter of 2014 was $170.9 million (including $111.3 million in revenue from EQ), up from $53.1 million in the third quarter of 2013. “I’m pleased to report that our integration is progressing on schedule with little surprise,” Feeler said. “Organizational structures for most functional areas have been established, and the teams are working well together.” He added, “Over the last 140 days, a tremendous amount of work has been accomplished, integrating the two companies. And the outcomes are impressive. Each day that passes, we are becoming a more unified team with a common goal to bring unmatched customer solutions with best-in-class customer service.”
