US Ecology announces Q1 results, discusses implications of COVID-19

US Ecology Inc., Boise, Idaho, has reported a total revenue of $240.7 million and a net loss of $298.1 million, or $9.52 per share, in the first quarter of 2020.

Gross profit for the quarter was $61.1 million, up 73 percent from $35.2 million in the same quarter last year. Specifically, gross profit for the environmental services segment was $44.1 million and included $4.7 million from NRC, up from $31.6 million in the first quarter of 2019.

“Our environmental services segment grew 19 percent with base business growth of 5 percent and event business growth of 102 percent,” said US Ecology CEO Jeff Feeler during the company’s earnings call.

Other highlights of US Ecology’s first quarter include:

• Organic revenue growth of 18 percent on legacy US Ecology business
• Field and industrial services revenue up 14 percent, excluding NRC, with margin expansion
• Net loss of $298.1 million, or $9.52 per diluted share including impairment charge
• Adjusted earnings per diluted share of 12 cents
• Adjusted EBITDA of $43.2 million, up 82 percent including organic growth of 31 percent in legacy US Ecology business
• NRC contributed adjusted EBITDA of approximately $12.2 million

In addition, the company recognized a $283.6 million goodwill impairment charge on its Energy Waste Disposal Services business operating within the environmental services segment. US Ecology also recognized a $16.7 million goodwill impairment charge in its international business within the field and industrial services segment. 

According to a release, these non-cash charges were primarily the result of the supply and demand shock in the global oil market and the associated and expected impact on long-term cash flows of each business.

Response to COVID-19

When discussing the company’s situation regarding the COVID-19 pandemic, Feeler said, “US Ecology’s first quarter financial results were not significantly impacted by of the ongoing pandemic with the exception of our energy waste disposal services business that was already operating in a challenging environment prior to the... pandemic and the oil production war.”

He adds, “Legacy US Ecology revenue grew 18 percent as a direct result of our event business increasing by 102 percent and our base business growing 5 percent over the first quarter last year. This reflects the strong business environment we were experiencing prior to the pandemic."

In order to prioritize safety during these unprecedented times, US Ecology has mobilized a COVID-19 crisis management task force. The company has also deployed safety protocols throughout the organization based off its prior experience with the Bolus, SARS and H1N1 outbreaks.

“We mobilized 30 percent of our workforce to work from home and extended special COVID-19 time off benefits to our team members,” said Feeler. “We have been in constant communication throughout the organization, providing critical information to our team members [that] they can use that personally and professionally to protect themselves and others. We mobilized and secured valued personal protective equipment (PPE) using our established sourcing networks and expanded our sourcing message during this crisis to ensure teams and customers were properly protected at all times.”

2020 business outlook

At the end of this quarter, US Ecology announced certain capital preservation initiatives as a result of the uncertainty due to the COVID-19 pandemic that included:

• Implementation of cost control initiatives expected to generate $15 million to $20 million in annual savings
• Reductions to the 2020 capital spending plan by approximately 30 percent, or $30 million
• The suspension of the quarterly dividend to preserve free cash flow by approximately $6 million per quarter and enhance liquidity

US Ecology also announced the withdrawal of its 2020 financial guidance as a result of uncertainty due to the pandemic.

“Although the impact of the COVID-19 pandemic on our first quarter 2020 results was fairly limited, we currently expect the second quarter to be adversely impacted as social distancing measures and shelter in place took effect.” said Feeler. “In addition to the capital preservation initiatives announced earlier this year, the company continues to evaluate additional cost saving measures and cash flow enhancements to strengthen our already strong balance sheet position, particularly if conditions worsen beyond our current expectations.”

He added that US Ecology will continue to be managed for the long term and is committed to protecting the company's valuable workforce, managing through lower business activity with redeployment of team members to other business lines, reducing hours, and taking advantage of furlough programs to prepare to take advantage of better business conditions.