Clean Harbors (CLH) Q4 2025: PFAS Pipeline Expands 20% as Environmental Services Margin Hits 26%
Clean Harbors delivered record revenue and cash flow in Q4, driven by continued margin expansion in Environmental Services and a robust PFAS, per- and polyfluoroalkyl substances, growth pipeline. Strategic capital deployment—including a $130 million acquisition and a $50 million fleet investment—signals confidence in organic and inorganic growth levers for 2026. Management’s disciplined guidance reflects both optimism about regulatory tailwinds and caution around base oil pricing and industrial demand recovery.
Summary
- PFAS Momentum Builds: Regulatory activity and a new $110 million contract validate Clean Harbors’ expanding PFAS solutions pipeline.
- Environmental Services Margin Strength: Fifteenth straight quarter of margin growth underscores operational discipline and pricing power.
- Balanced Capital Allocation: Share buybacks, M&A, and internal investment all remain active as cash generation and leverage improve.
Performance Analysis
Clean Harbors capped 2025 with record revenue and adjusted free cash flow, surpassing $6 billion in annual sales for the first time. The Environmental Services (ES) segment, which now accounts for the majority of company profits, posted its fifteenth consecutive quarter of year-over-year adjusted EBITDA margin expansion, reaching nearly 26% for the year. Segment growth was fueled by robust demand for disposal, recycling, PFAS remediation, and emergency response services, with Q4 ES revenue up 6% and adjusted EBITDA up 8%.
SKSS, Safety-Kleen Sustainability Solutions, the company’s oil re-refining and collection business, faced continued base oil price pressure but grew Q4 adjusted EBITDA by 22% through higher charge-for-oil (CFO) rates and cost discipline. Group 3 oil production, premium re-refined oil, continued to ramp, offsetting some margin headwinds.
- Cash Generation Surges: Record annual adjusted free cash flow of $509 million, nearly 44% of adjusted EBITDA, highlights the business’s cash conversion strength.
- Operational Leverage: Incineration utilization reached 89% for the year, while landfill volumes jumped over 50% in Q4, reflecting strong project activity.
- Cost Control Delivers: SG&A as a percentage of revenue improved to 12.5% for the year, and net debt to EBITDA fell to a 15-year low of 1.8x.
Emergency response work and PFAS-related projects were key incremental contributors in Q4, while base oil pricing remains a drag on SKSS results. Management’s guidance assumes only modest improvement in these headwinds for 2026, with upside if industrial demand or oil prices recover.
Executive Commentary
"Our performance was driven by profitable growth in both of our operating segments, with our environmental services segment delivering its 15th straight quarter of year-over-year growth in adjusted EBITDA margin. This run of nearly four years of consistent margin expansion against a challenging industrial backdrop reflects the successful delivery of our essential services to customers in execution of our growth strategy along with discipline in pricing, cost management, workforce productivity, and network efficiency."
Eric Gerstenberg, Co-Chief Executive Officer
"We continue to seek opportunities to generate strong returns for shareholders through all elements of our capital allocation framework. We remain well positioned to do so, supported by strength of our balance sheet and our robust cash generation profile."
Mike Battles, Co-Chief Executive Officer
Strategic Positioning
1. PFAS Regulatory and Market Tailwinds
PFAS services are becoming a core growth engine, with Clean Harbors’ solutions validated by both a $110 million military contract and a high-profile EPA study partnership. Regulatory momentum is accelerating, with federal and state agencies expected to set new thresholds and remediation mandates in 2026. Management’s guidance assumes 20% PFAS revenue growth—consistent with recent years—but does not yet factor in potential regulatory inflection.
2. Environmental Services Margin Expansion
Margin discipline in the ES segment is underpinned by pricing power, volume growth, and operational efficiency. The segment’s performance—now exceeding Vision 2027 targets two years ahead of schedule—reflects a scalable network of incinerators, landfills, and field service branches. Management’s internal target is to achieve 30% margins by 2030, driven by mix shift, technology, and further internalization of costs.
3. Capital Allocation Flexibility
Clean Harbors remains active on all fronts—M&A, internal investment, and buybacks. The $130 million DCI acquisition expands the technical and field services footprint, while a $50 million vacuum truck fleet investment is designed to capture organic growth opportunities. A new $350 million share repurchase authorization signals ongoing confidence in the valuation and cash flow outlook.
4. SKSS Spread Management
In the face of persistent base oil price declines, SKSS continues to offset margin pressure through higher CFO rates and a pivot to direct blended lubricant sales. Group 3 oil production, which commands a premium, is a key lever for future margin stability. Management does not assume a base oil price recovery in its 2026 outlook, but sees upside if market conditions improve.
5. Network Scale and Emergency Response
Clean Harbors’ expanded field services branch network and 22,000 emergency response events in 2025 reinforce its role as the first call for industrial incidents and disasters. This network effect supports both baseline growth and the ability to capitalize on large, unplanned events, a structural advantage in the environmental services landscape.
Key Considerations
This quarter showcased Clean Harbors’ ability to balance growth, margin expansion, and capital deployment despite macro and commodity headwinds. The company’s diversified service mix, regulatory exposure, and network scale provide multiple paths for continued value creation.
Key Considerations:
- PFAS Pipeline Visibility: Regulatory developments and customer adoption are expanding the addressable market for remediation and destruction services.
- Pricing Power in Disposal: Incineration and landfill pricing continues to outpace inflation, supporting margin expansion even in a tepid industrial environment.
- SKSS Margin Resilience: CFO pricing actions and Group 3 oil growth are critical to offsetting base oil price declines; further upside possible if market recovers.
- Capital Allocation Optionality: Ample cash, low leverage, and a sizable buyback authorization enable Clean Harbors to pursue both organic and inorganic growth without tradeoffs.
- Industrial Recovery Optionality: Guidance is built on conservative industrial activity assumptions, with upside if PMI and ISM trends translate into higher project volumes.
Risks
Base oil price volatility remains a structural headwind for SKSS, with no improvement assumed in the 2026 guide. Delays in PFAS regulatory action or customer adoption could moderate growth in that segment. Weather and industrial demand recovery are variable and could impact quarterly results. Management’s prudent guidance reflects these uncertainties, but execution risk remains if macro or regulatory environments shift unexpectedly.
Forward Outlook
For Q1 2026, Clean Harbors guided to:
- 4% to 7% adjusted EBITDA growth in Environmental Services
- 1% to 3% consolidated adjusted EBITDA growth
For full-year 2026, management guided to:
- $1.20 billion to $1.26 billion in adjusted EBITDA (midpoint 5% growth)
- $480 million to $540 million in adjusted free cash flow (midpoint $510 million)
Management highlighted several factors that could drive upside:
- Potential acceleration in PFAS revenue if regulatory thresholds are finalized
- Industrial demand recovery not embedded in the base case but monitored closely
Takeaways
Clean Harbors’ Q4 reinforced the company’s positioning as a margin expansion and cash flow story, with regulatory and network tailwinds supporting multi-year growth.
- PFAS and Regulatory Catalysts: The pipeline for PFAS remediation is expanding, and federal action could drive a step-change in demand and pricing over the next 12 to 24 months.
- Capital Allocation Remains Balanced: Management is deploying capital across M&A, fleet expansion, and buybacks, signaling confidence in both organic and inorganic growth levers.
- Industrial and Commodity Recovery Optionality: Guidance is conservative, with upside if industrial activity or base oil pricing rebounds in 2026.
Conclusion
Clean Harbors enters 2026 with record financial momentum, a robust PFAS growth pipeline, and multiple levers for margin and cash flow expansion. Management’s disciplined outlook and active capital allocation set the stage for continued outperformance, with regulatory and industrial recovery as potential catalysts.
Industry Read-Through
Clean Harbors’ results signal that network scale, regulatory exposure, and service diversification are critical differentiators in the environmental services sector. The company’s ability to drive margin expansion through pricing, operational efficiency, and targeted capital deployment sets a high bar for peers. PFAS remediation is emerging as a secular growth theme, with regulatory action likely to benefit well-positioned incumbents. Base oil price volatility remains a challenge for re-refiners, but those with pricing power and direct sales channels are better equipped to weather commodity cycles. Investors in adjacent waste, industrial services, and specialty chemicals should monitor regulatory momentum and network effects as key drivers for 2026 and beyond.