Heritage-Crystal Clean, Inc (NASDAQ:HCCI) Q4 2022 Earnings Call Transcript

Mark DeVita: Yes. We really think, and this is kind of, if you’re accounting geeked out, you really have to look at exactly what you mentioned when you’re talking about reporting segments or at least you should. And we really, when we approach utilizing our plants more, we want to direct a lot more of our field services and this includes our legacy business, not just Patriot, the new Patriot business. But we want to direct a lot of that work. Some of it’s labor of course, but there’s a lot of disposal and treatment that is related to that work. So we want to tie that in with our €“ our new processing capabilities and growing processing capabilities, we hope. So we think that makes a lot more sense. A lot of times that’s not €“ that doesn’t involve a lot of our branch sales and service people, those people that are on a regular route.

This is more project oriented. So from a management and just the type of work, even to a lot of cases, the training, you’re probably going to have to have enhanced training. If you’re €“ some of these people doing some of the work on these field services or industrial services projects, then you would, if you’re on our sales and service routes or part of that legacy branch network. So it really makes sense not just how we go to market, but what the work is and how it aligns with the vertical integration that we structure environmental and field services, which again is the name of the new segment together and strip that out from, in Layman’s terms or even flying term, the environmental services business will be more reflective of just the HCC legacy branch operations.

Kevin Steinke: All right. Understood. Thanks. And then in terms of the cadence of margins, typically you see that seasonal downtick in the environmental services margin in the first quarter. Is that something we should expect to continue to see or the December price increase help mute that or offset it. What’s your kind of expectation there?

Mark DeVita: I don’t think it’s going to be much different. Obviously time will tell. The wild card always is weather. That’s one of the things. And it’s not like we’ve been €“ we’ve avoided any weather in the quarter we have for a lot of the country. There’s talk even coming up here in the next 24 hours of some major storms. So we clearly don’t have our results yet, but I still think there’s reason to believe that that seasonality will still rear its head. It might be a little less so, or a little less negative on a seasonal basis than you would normally expect, only because there has been overall a little more mild winter in a lot of the places that might normally get hit harder. But I don’t think it’s going to be much different. Brian, do you have a different view?

Brian Recatto: No, I agree. Q1 will be consistent to slightly better than Q4 and we expect to ramp up to begin in Q2 because we have the full effect of the price increase and then we’ll obviously continue to work the rifle shot approach on raising prices in RCRA hazardous waste market that we participate in. So the ramp up will begin to happen in Q2 and Q3.

Mark DeVita: Because when you think about the historical even from a price increase, we used to €“ again, 18 months ago, we got out of whack because we did it in beginning of our period 10, so mid-September of 2021 when we did an increase. But typically we’re doing it at the beginning of November or halfway through our Q4 as at least it used to be structured. So Q1 is normally getting that boost from a price increase. So I don’t think, while the timing was slightly different as to when we started to implement it, and it might not be exactly the same, you still have the same general effect as you would versus historical years.