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

Brian Butler: Okay. And then maybe just one last quick book-keeping. Can you give some thoughts on just tax rate and interest expense for 2023 on how we should be kind of thinking and modeling that?

Mark DeVita: Yes. Tax rates, I think we’re going to be in that 26% range where we’ve been the last couple years. We have some permanent items that pop-up here and there, which get us to that. I don’t want to do too deeper dive, but we can go into more detail later on that issue. And from an interest expense standpoint, we do plan to €“ and this is all material acquisitions, any that would cause us to dip into or borrow money, increase our revolving restructure or debt, whatever. But given the current situation, if we just consider that to be that status quo to be in place for the year. You’re probably looking in that $6 million range. And that would include some pay downs because obviously we’re going to be generating cash, we believe anyway, or we expect to, and we’ll be using some of that to pay down what our balance is as of year end.

Brian Butler: Great. Thank you.

Brian Recatto: Thank you.

Mark DeVita: Thanks, Brian.

Operator: Your next question comes from the line of Jim Ricchiuti from Needham & Company. Your line is open.

James Ricchiuti: All right. Thank you.

Brian Recatto: Good morning, Jim.

James Ricchiuti: Good morning. So in addition to the pricing which should benefit your ES margins over the balance of the year, you talked about a plan to improve in the upcoming quarters and I’m wondering if you could elaborate on. I think you touched on a few of them, but if you could just elaborate on some of the measures you’re taking that gives you the confidence on that margin uplift?

Brian Recatto: Yes. One of the things that’ll help us with the margin uplift is going to be the full-year effect of having the ability to process more of our waste containers internally. I think you heard in our prepared remarks that we’re going to increase that by roughly 30,000 containers in 2023. A lot of these sites were permitted and built over the last 18 months. So it’s the full-year effect of being able to use our internal network. And there are other costs. We had lots of other inflationary issues that we dealt with outside of third-party price increases, which are beginning to moderate as the economy cools off. A lot of the input costs into our drum business. I mean simple things like containers, fuel, chemicals, treatment chemicals, solvents for our parts washer program.

All of that started to stabilize toward the end of the year, which gives us more comfort on our ability to improve margins. And then I think we’re not done with price, especially as it relates to RCRA hazardous waste. We feel really good about where our non-haz price it is, the complex has changed a lot over the last couple of years and we’re going to tweak our hazardous waste pricing.

Mark DeVita: As Brian mentioned, you layer all on top of all that, you layer not having to go through extra trans cost and extra cost. We incur not having any RCRA permitted Part B permitted facilities to terminate manifest. We’re having to move waste to make sure we’re compliant. And that is adding a lot of cost into his earlier point about some of these outlets opening up as they’ve been opening up and as they work through their backlog, that’s naturally going to €“ even if they didn’t change any of our prices, those costs are naturally going to go away because we won’t be taking a trailer of waste tier and we have to transfer to another site to make sure we’re compliant.