Clean Harbors, Inc. (CLH) Q3 2026 Earnings Report, Transcript and Summary

Greetings, and welcome to the Clean Harbors Third Quarter 2026 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tim Rodenberger, General Counsel for Clean Harbors. Mr. Rodenberger, you may begin.

Thank you, Christine, and good morning, everyone. With me on today's call are our Co-Chief Executive Officers, Eric Gerstenberg and Mike Battles; our EVP and Chief Financial Officer, Eric Dugas; and our SVP of Investor Relations, Jim Buckley. Slides for today's call are posted on our Investor Relations website. Matters discussed today that are not historical facts are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Participants are cautioned not to place undue reliance on these statements, which reflect management's opinions only as of today, October 28, 2026. Information on potential factors and risks that could affect our results is included in our SEC filings. The company undertakes no obligation to revise or publicly release the results of any revision to the statements made today other than through filings made concerning this reporting period. Today's discussion includes references to non-GAAP measures. Clean Harbors believes that such information provides an additional measurement and consistent historical comparison of its performance. Reconciliations of these measures to the most directly comparable GAAP measures are available in today's press release on our IR website and in the appendix of today's presentation. I will now turn over the call to Eric Gerstenberg to start. Eric?

Thanks, Tim. Good morning, everyone, and thank you for joining us. Before we discuss our financial performance, we wanted to touch on today's other news as we announced a planned executive transition. On January 1, I will become the sole CEO of the company. Mike will be retiring from his Co-CEO role and Board seat at year-end. This next step in our leadership team is endorsed by both Mike and I, along with our entire Board. I'm honored to lead this company where I have built my career and worked for 37 years. For as long as I have been here, Clean Harbors has been setting the standard for the hazardous waste industry in North America. I'd like to thank the Board for trusting me to carry on this tradition. Our company is second to none. We employ the best team in the business. We take great care of our customers by providing reliable waste and industrial service capabilities based on cutting-edge systems, scarce permitted facilities, more than 900 service locations, extensive equipment and a comprehensive transportation fleet. I expect us to remain on the growth path we have been on for the past decade. I look forward to continuing to reward our shareholders and our employees in the coming years. With that, let me turn things over to Mike.

Thanks, Eric, and good morning, everyone. As I stated in this morning's release, helping to lead Clean Harbors, a company that defines our industry has been an absolute privilege for me and the highlight of my career. I take tremendous pride in seeing what Clean Harbors has accomplished and what the company has become during our tenure as executive leaders and most recently as Co-CEO. At year-end, I will leave here knowing what we accomplished is incredibly special. What I appreciate most, though, are the people. I've had the opportunity to work alongside an incredible group of people across Clean Harbors, many of whom I've known and worked with for years. Those relationships and what we achieved together is what I'll remember most. I've been incredibly fortunate to work with such a talented leadership team, and I know the company is in great hands going forward. I'm also grateful for the investors I've gotten to know and the Board members I've served alongside. I have the utmost confidence that Clean Harbors' best days remain ahead. I couldn't be more bullish about growth prospects for 2027 and beyond. With that, let me turn it back over to Eric.

Thanks, Mike. Turning to a summary of our results on Slide 3. Beginning with safety. We delivered another quarter of industry-leading safety performance in Q3. Our year-to-date total recordable incident rate, or TRIR, is 0.49, which matches the best full year rate in our company's history and is in line with our annual target. Thank you, team, for making safety a priority every day. Nothing is more important to us. Turning to financial results. We materially exceeded our third quarter guidance with both segments contributing to record quarterly revenue and adjusted EBITDA. Our ES segment delivered its 18th consecutive quarter of year-over-year adjusted EBITDA margin expansion with a margin of 27.4% as we continue to demonstrate our ability to price effectively, properly allocate capital to acquisitions and internal projects, take cost out of the business and drive productivity. Within ES, our record results were driven by substantial growth in Field Services, particularly in emergency response work. We also saw continued strong demand for our disposal assets and extensive collection network as well as more PFAS-related work. SK Environmental Services was again a consistent performer and revenue in Industrial Services was up slightly year-over-year. In our SKSS segment, the tight global supply of base oil and lubricants, along with effective spread management contributed to results that far exceeded our expectations, including the highest quarterly adjusted EBITDA in the segment's history. Turning to segment performances, beginning with ES on Slide 4. Q3 revenue in this segment increased $220 million from the prior year. Field Services led that growth with revenue up more than 70% compared to a year ago when we had very few sizable emergency response events. This year, we responded to a number of significant events, including 1 very large event that generated approximately $120 million in revenue in the quarter. Safety-Kleen Environmental Services continued to produce consistent profitable growth with revenue increasing 11% from a year ago, driven by growth in its core offerings, including containerized waste collection and vacuum services. Technical Services grew 3% in the quarter as continued strength in PFAS-related work and other areas offset lower project revenues compared with the year ago period. Incineration utilization was 87%, down slightly from 88% a year ago. Our overall waste collections were very strong in the quarter as reflected by the 20% increase in our deferred revenue balance. We expect to deliver healthy utilization in Q4 and achieve a mid- to high 80% utilization for the full year. Our Industrial Services revenue rose modestly from a year ago due to growth in Canada and some initial data center engagements. That growth offset continued softness from North American refineries, which again operated with limited downtime and turnaround activity. Adjusted EBITDA in ES was up 19% in the quarter, with the segment margin up 60 basis points to 27.4%. We delivered this margin improvement despite some early-stage headwinds from the acquisitions we completed this year, which we estimated reduced segment margin by approximately 20 basis points in the quarter. Overall, it was another exceptional quarter for the segment, reflecting the broad-based demand trends we have seen throughout 2026. Last quarter, I highlighted 2 trends shaping our ES segment, reshoring and customer consolidation of service providers, both continue to hold true. The 10-year $600 million reshoring contract we announced last quarter has commenced here in Q4, and we're excited to see that relationship expand in the coming years. Beyond that award, the growth of U.S. manufacturing related to reshoring is visible in the U.S. ISM that we've seen in the first 9 months of this year. On that second trend, we continue to hear from customers of all sizes who want a single service provider for all their regulated waste, recycling needs and related services. With our unique capabilities and highly versatile asset base, we believe we are a best-positioned waste provider to serve that market need. With that, let me turn things over to Mike to discuss SKSS and our capital allocation strategy. Mike?

Turning to SKSS on Slide 5. This segment delivered extraordinary Q3 results. Revenue grew 46% and adjusted EBITDA more than tripled from last year to $126 million, reflecting tight supply of refined products. While public attention is centered on diesel and gasoline prices, the same market dynamics have driven higher prices for base oil and lubricants. Our team has continued to manage our oil collection services effectively, gathering the volumes our re-refineries need while maintaining an overall charge-for-oil position. Demand for all our re-refined products remained strong throughout the quarter. Although Q4 is typically slower due to seasonality, supply constraints have not shown signs of easing. During Q3, we've also benefited from the strategic initiatives we discussed over the past several years to grow and stabilize the oil business, including greater Group III production and higher blended volumes sold. Production of Group III increased approximately 20% from a year ago and Group III carries a much higher level of profitability. We've also increased our blended direct gallons sold, which account for 12% of total volumes sold, up from 9% a year ago. As I mentioned, our collection team actively managed both volume and cost. We gathered 62 million gallons of waste oil in the quarter, while maintaining a healthy charge-for-oil rate even with base oil pricing at record levels. While we are benefiting from strong profitability and cash flows in SKSS today, we remain focused on positioning the business for the long term when pricing eventually normalizes. We are continuing our strategy to expand our mix of higher-value products such as fully blended lubricants and Group III base oil and are advancing construction of the SDA unit. Turning to capital allocation on Slide 6. We continue to see multiple opportunities, both internal and external, to invest our shareholders capital and generate the highest sustainable returns. On the acquisition side, the ES&H and EnviroServe transactions we recently closed reflect that philosophy. Integration of both is well underway, and early signs are encouraging. During the recent hurricane, ES&H demonstrated how quickly it can mobilize into action. With EnviroServe, we are confident in achieving the synergy targets we outlined given the significant volume of customer waste we can bring into our network. Looking ahead, we see a healthy pipeline of acquisition opportunities. Internally, we are moving forward with elements of the $500 million organic investment plan we outlined in our Q3 call a year ago. As part of that plan, we recently closed on a $55 million purchase of a property in Los Angeles that will serve as a major West Coast hub. This site will allow us to consolidate several operations in the area, a number of which have reached full capacity, limiting their growth. At this site, we see opportunity to expand our wastewater treatment, e-waste and waste consolidation capabilities and to bring all our businesses together in 1 location. We expect annual savings in the range of $5 million to $7 million of lease consolidation alone, along with the strong growth potential of the site. In addition to this West Coast hub, we are accelerating and increasing our investment in the data center growth opportunity. Last quarter, we outlined an expected $50 million capital spend over the next 2 years with about $10 million this year. Given the early success of the data center initiative, we are increasing our investment this year to $15 million to an overall target of $70 million in dedicated data center capital. Based on this momentum we have built during the first few months of the initiative, we expect this capital to generate superior returns well above our cost of capital. We continue to maintain a strong balance sheet and low leverage, which gives us the flexibility to execute all facets of our capital allocation strategy, including share repurchases, which remain an attractive option given our positive outlook. As we enter the final quarter of the year, we expect to close 2026 and enter 2027 with momentum in both of our operating segments. We see tangible volume growth in our collection network against a favorable U.S. economy that appears to be strengthening on the manufacturing side. Ongoing reshoring is underpinning that growth, including the major 10-year contract we previously announced. We see no slowdown in PFAS pipeline as opportunities in both water filtration and remediation continue to come to market, both on the private and government fronts. The large ER this year and acquisitions bolster our long-term outlook for Field Services. Within Industrial Services, our data center offerings are getting great traction as we await a rebound in our core offerings, including refinery turnarounds. For SKSS, market factors are supportive of our re-refining spread in Q4 and most likely into 2027. And the team continues to manage the business well across many key initiatives. Overall, we see a clear path to delivering our record results in 2026 with a number of tailwinds we expect to carry into 2027 and beyond. With that, let me turn it over to our CFO, Eric Dugas, to discuss our financials.

Thank you, Mike, and good morning, everyone. Turning to Slide 8. Our quarterly results came in well ahead of the expectations we provided in July, driven by strong execution and performance from both operating segments. Total revenues increased 21% to $1.87 billion, reflecting a continuation of many of the favorable trends we saw in both segments during the first half of the year. Q3 adjusted EBITDA increased an impressive 42% year-over-year to $456 million. Our consolidated adjusted EBITDA margin reached 24.4%, the highest quarterly margin in our company's history and 370 basis point improvement over the prior year. The SKSS business experienced a significant step-up in margins. And as Eric highlighted, the ES segment delivered outstanding results of its own, powered by a large emergency response event, steady volumes, effective pricing and productivity gains in labor, equipment and transportation. Our revenue growth translated directly into operating leverage. SG&A expense as a percentage of revenue improved 60 basis points year-over-year. For the full year, we continue to expect SG&A in the mid- to high 12% range as a percentage of revenue. Depreciation and amortization was $123 million, up slightly from a year ago and in line with our expectations. For 2026, we now expect depreciation and amortization in the range of $490 million to $500 million. Third quarter income from operations was $318 million, up 65% from the prior year. Net income in Q3 increased 75% as we delivered earnings per share of $3.93. Turning to the balance sheet on Slide 9. We ended the quarter with cash and short-term marketable securities of $517 million. Note that the figures on this slide do not reflect our successful $600 million note offering, which closed on October 1 after the end of the quarter. As with our last several debt issuances, investor demand for the offering was exceptionally strong, which enabled us to secure an attractive interest rate and favorable terms. The proceeds from the offering were used to fund our acquisitions of EnviroServe and ES&H. Including this new debt, along with the expected Q4 EBITDA and cash flow generation, we now expect our net leverage ratio to be in the low 2x range at year-end. Turning to cash flows on Slide 10. Our cash generation in the quarter was outstanding. Cash provided from operations reached a record $419 million in Q3, up nearly 40% from a year ago. We put that cash to work, investing $168 million in CapEx, net of disposals, including the strategic growth initiatives that Mike mentioned. Excluding these strategic projects, adjusted free cash flow in the quarter was a record $323 million. Looking at the full year, we are investing approximately $145 million in strategic growth initiatives. That includes $55 million for the Los Angeles hub location, $50 million for the SDA unit, $25 million for the specialized fleet investments and $15 million related to our data center growth strategy. Excluding these investments, we continue to expect annual net CapEx to be in the range of $370 million to $430 million with a midpoint of $400 million. During Q3, we repurchased approximately 82,000 shares of Clean Harbors stock at an average price of $306 per share for a total of $25 million. As of September 30, we had just under $525 million remaining under our share repurchase authorization. Turning to our guidance on Slide 11. Based on our year-to-date performance, planned investments and current market conditions, we are raising our 2026 adjusted EBITDA guidance to a range of $1.44 billion to $1.48 billion. The midpoint of $1.46 billion is $80 million higher than the midpoint of our previous guidance shared in July. At this revised midpoint, our full year outlook now implies adjusted EBITDA growth of $290 million or approximately 25% over fiscal year 2025. For Q4, we expect healthy year-over-year increases in both operating segments, and we are confident in our ability to deliver on this revised outlook. Looking at our updated annual guidance from a quarterly perspective, we expect Q4 adjusted EBITDA to grow 23% to 26% year-over-year on a consolidated basis. As a reminder, we had large-scale ER events in Q4 of 2025, and our guidance for this year assumes that no large-scale events occur in Q4. Turning to how our full year guidance breaks down by reporting segment. For the Environmental Services segment, we now expect 2026 EBITDA to grow approximately 9% to 11% at the midpoint of our guidance range. That outlook includes approximately $10 million in combined contributions from the ES&H and EnviroServe acquisitions. Our 2026 guidance midpoint assumes the SKSS segment delivers approximately $340 million of adjusted EBITDA. Ongoing disruptions to global refining capacity have created significant ambiguity around how long the current market environment will last and how long base oil and lubricant prices will stay elevated. As a result, we continue to take a conservative approach to our outlook for this segment. Within corporate, we now expect 2026 adjusted EBITDA expense to increase by 14% to 17% from 2025 at the midpoint of our guidance. This increase from our prior outlook primarily reflects higher incentive compensation, the impact of acquisitions, higher insurance claim costs and incremental costs associated with our strategic initiatives. As a percentage of revenue, we continue to expect corporate expense to be in line with the prior year. For 2026, we are raising our adjusted free cash flow to a range of $600 million to $660 million with a midpoint of $630 million or an increase of $80 million from our prior outlook. The increase reflects our higher adjusted EBITDA outlook, the impact of recent acquisitions and some updated CapEx assumptions. As it relates to fiscal year 2027, we know analysts and investors will be interested in our expectations for next year. And consistent with our historical practice, we plan to provide our 2027 guidance when we report fourth quarter and year-end results in February after our annual budgeting process is complete. Looking ahead, we remain enthusiastic about the near- and long-term growth prospects for both segments as we close out 2026. Our sales and project pipelines remain healthy as evidenced by our deferred revenue balance increasing in Q3 and reflecting the continuation of growing collection volumes across our network. Our sales pipeline is robust and larger than it was 90 days ago with opportunities in our legacy business as well as emerging areas such as PFAS and data centers. We see several tailwinds in our ES segment to be excited about, and our SKSS segment continues to benefit from strong conditions in energy and refined products. We exit Q3 with a healthy outlook and are well positioned to capitalize on these market dynamics through the disciplined capital allocation strategy Mike outlined. We remain bullish on our prospects and look forward to building on a record Q3 with a strong finish to the year. And lastly, I would be remiss if I didn't recognize Mike and thank him for his leadership, mentorship and friendship over the past 12 years. Mike has made a lasting impact on Clean Harbors. His contributions are far too numerous to mention, but there is no question that he has helped move this company forward and position us well for the future. I am incredibly happy for Mike and his family as he begins this next chapter, and we all wish them nothing but the very best. With that, Christine, please open the call up for questions.

[Operator Instructions] Our first question comes from the line of Noah Kaye with Oppenheimer.

Congratulations. Very much in order for you, Eric, and Mike, for you as well. We'll miss you, but I appreciate all the dialogue over the years. Just wanted to start with a question on capital allocation. You're doing this L.A. hub project now. You talked a little bit about the expected savings there. Maybe talk about the results you've had with the hub strategy in Baltimore and Phoenix, the ROI that you've seen there? And just how many more of these opportunities do you see in the business for this type of organic investment?

Yes. Noah, thanks for the question. When we look at our hub strategy, as we talked about Baltimore and Phoenix, along with many other locations that we already had prior to purchase of those, our strategy has been to make sure that we get every 1 of our business units operating together within a common location and create a hub where those business units can feed off of each other from both people and equipment and cross-selling into customers that we can grow our base. And outside of those hubs, we obviously have a lot of spokes that can feed materials into them. We run distribution centers out of those locations. We provide maintenance for all of our rolling stock out of those locations. We provide internal equipment rental. So the -- that hub strategy has been extremely successful for us to help us really penetrate and grow in a number of different locations. Throughout North America, we have about 12 different areas that we've been growing these hubs. The investment in L.A. was an area that we've had 6 legacy smaller branches that were outgrowing their footprint in their locations and prohibiting a little bit of our ability to grow as much as we were with all of the customers in that area. So we've been on a search for many years to find the right location that is easy to access that we could consolidate 6 locations 5 different business units into, and we finally came across that great opportunity and pulled the trigger on that. And we were beginning right away consolidating some of those branches into that location. But it has really helped us grow. It will allow us to grow significantly in that market. It's a tough market, but with -- from a regulatory standpoint, and that's a good thing for us because it's obviously fueling a lot of growth for us. So the ability for all of our business units to grow off of each other, get that site over the goal line. That's bigger on scale, obviously, than what we had to buy in Phoenix and Baltimore, but that's the California market, as we all know it. And so that's the biggest one we'll probably ever do. The other locations we have, we can continue to grow in and much smaller. So good to get this up and running over the goal line and allow our business units to grow in that market.

Noah, the only thing I'd add to that, all good points by Eric, is that the hub strategy and having these kind of centralized locations has provided the organization with the team to be able to develop without having to move locations. So if someone comes in, if they're all in 1 location, you don't have to move offices to be able to move your career forward because all the things that Eric said, all the different types of things we have in these hubs, it allows people to do different types of jobs, move up in the organization without leaving the organization. And that's part of the reason why it's led to kind of our all-time low in voluntary turnover rates have been great. Part of the reason is having these Mega Hubs and providing opportunities for people to move up without having to move out. And so that's been a good intangible. It's hard to put a number on that, but it's certainly -- as I've toured some of these sites, it's provided opportunities for people to move up, learn more about the business without having to kind of pack up and move.

Very helpful, guys. And then Eric, I heard you loud and clear on when you're going to provide guidance. But the high-level question here is it's been a great quarter and year for SKSS, and you had this $120 million large ER event. So there is a comps challenge for next year, but it seems like you've got this momentum in the project pipeline, PFAS, data centers and deferred revenue growth. Is there a good way to think about the underlying growth algo being intact into next year? I mean within ES specifically, is this still kind of all things considered a high single-digit EBITDA grower?

Yes. No, great question. And like I said in my prepared comments, we will be more clear kind of in February after we go through our budgeting process. But I think your general premise there on ES is correct. When you think about the guide we gave coming into this year, I think we guided to 5% to 6% growth in ES for the year. We're going to deliver 10%, and we've had a great year with some of those ER projects and things. If you look at past years and the development of our long-term models, we've probably been in that same kind of mid-single-digit growth on ES and then upside with large ERs, greater volumes, some of the new strategic initiatives we're looking at. So what I would say -- and again, this is probably just guidelines. It's not guidance. I would say as you think about future years in ES, it's certainly kind of that mid-single-digit grower at a minimum.

Our next question comes from the line of Bryan Burgmeier with...

Yes, I totally understand you don't want to get too far into 2027. Just curious if you could maybe try to frame your ongoing conversations with the owners of captive incinerators. Just curious if you think maybe the momentum in reshoring sort of incentivizes those incinerators to stay open? Or conversely, does ongoing rising costs kind of continue to pressure that business model?

Yes, Bryan, we very much continue to stay active with all of those owners of captive incinerators. And we continue to see some nice opportunities with those. The onshoring, we would say no, that does not provide a catalyst for them to continue to be open or to want to stay open. What we've seen with the onshoring is really a change in some of the waste streams that are being produced by particularly chemical companies when you look at those captives. And that has lowered overall the utilization of those captive incinerators and continues to present a catalyst for us to be able to provide a broader scale of services and take those unique streams that they're producing that their existing incinerators are really not built or suited to be able to burn those and manage those waste streams. So we continue to be bullish about the opportunity over the next couple of 3 years to see another 1 or 2 come offline as we go forward.

I would add, Bryan, that our guidelines, as Eric said earlier, don't include any captives nor do they include any kind of large-scale kind of ER events. Those are all, in my mind, upside to these models.

Got it. Got it. Really appreciate that detail. And then just 1 more, just following up on capital allocation. So you provided a lot of detail on that hub in Los Angeles, which sounds like a great opportunity. I think you also pushed out a little bit of spending on SDA. So just curious if that changes the start-up date at all. We were sort of wondering if you might pull forward some spending considering the opportunity in base oils. So just thoughts on SDA.

Yes, Bryan, we continue to look to bring that unit online at the tail end of 2028. The spending allocation is really just how the movement of the construction has changed. It hasn't delayed the start-up of the operation at all. We're continuing to proceed extremely well to our goal of getting that online and reaping the benefits of making that great 600 Neutral product from that site.

Our next question comes from the line of Tyler Brown with Raymond James.

Mike, been a pleasure. Wish you all the best. Eric Dugas, so there's a lot to unpack bridging the $80 million of EBITDA, if I look at kind of the midpoint change. Can you just talk about some of the puts and takes? I think you said ES&H and EnviroServe maybe $10 million. But then how much did the large emergency work add? I assume that was incremental to the guide. It sounds like maybe incentive comp is a bit of a headwind. And then it just still seems that you are modeling a substantial step down in Q4 SKSS. But can you just kind of go through the puts and takes on how we get to that $80 million change?

Sure, Tyler. I'll give it a shot. Starting with kind of ES, when you think about kind of the movement there, I'd say, coming off a strong Q3, we beat our estimates by about $30 million. I'd say half of that, maybe a little more than half of that was probably the large ER. The rest of it is still continued great volumes and strong execution by the business. As you roll kind of into Q4, a little bit of change from our guidance from 3 months ago. What you see there is, as you noted, an additional $10 million from the ES&H and EnviroServe acquisitions, probably offset by a little bit of that large ER job probably getting accelerated versus 3 months ago, probably seeing more of that in Q3 rather than in Q4. That job is pretty much completed at this point. So -- those are probably the big movers. Q4 now, we're guiding to about a 6%, 7% increase year-on-year, and that's against a difficult comp. Q4 last year had some ERs and some really good landfill work on top of it. So those are the piece parts, I think, on the ES side. With SKSS, Tyler, you're right, we are seeing a little bit of -- as you move from Q3 to Q4, we are guiding the business down on a sequential quarterly basis. Typically, in years past, we've seen seasonality there play a part from Q3 to Q4, and that's how we've guided. I'd like to think that the supply challenges we're seeing in the business probably dampen that a little bit, and there's probably some upside hopefully in both segments. But certainly, if we see continued strong supply and pricing in Q4 on SKSS, I think there's some upside there.

Okay. That's helpful. And then, Eric, just real quick, can you give any -- maybe just a little extra color, what was the large emergency response work in nature generally?

Yes, Tyler, there was a large warehouse, a food transfer and distribution warehouse out in the L.A. area that had quite an extensive fire burned down half of the building. And our teams and have to applaud our emergency response teams because we were on the scene within 24 hours, and it was a massive project that was over 75,000 tons of frozen food waste that was deteriorating quickly. And our teams did an incredible job of mobilizing cleaning up that event and keeping it moving as fast as possible, obviously, cleaning it up within just Q3 and generating for us $120 million in revenue was a substantial, substantial task. So applaud all of our employees that worked on that event and just a great job. And I think it really elevated to show our capabilities throughout North America that we are the premier provider of those great large-scale emergency responses, and we have the capabilities to really accomplish anything to help protect the environment and get it cleaned up very expeditiously.

Okay. Wow, interesting. And then just lastly, you guys did mention PFAS a few times in the release. Can you just update us where you think that number will finish this year? And then can you talk about the NDAA and how that might be a catalyst into not only next year, but maybe over the next few years?

Yes. Overall, this year, we continue to see our revenue on PFAS-related work grow by 30%, and that will put it north of $150 million to $200 million year-over-year. When you kind of break down that revenue, we're seeing it across the board in both industrial and drinking water treatment. We're seeing remediation events that are happening that -- to answer your question -- part of your question there, too, that material that we're remediating is going into both landfill and incineration. And we also see continued growth in work of AFFF change-outs and removals, and that's driving material that would go into our -- that does go into our incinerators as well. So a strong continued pipeline. We continue to act for our customers and educate our customers and Congressmen, Senators and the EPA on our PFAS-related guidelines. And it's clear that, that has gotten traction out there. There is -- when we're performing ERs, when we're performing change-outs and we educate them on what we believe those thresholds of guidance and disposal should be and treatment, there -- that has taken hold in some states more than others, clearly, based on the dynamics within the state, but it's been growing strong, and we continue to look or feel bullish about it going into 2027.

Tyler, when I think about the NDAA in particular, I mean, there is drafts out there that talk about forcing those bases to clean up a certain amount of bases in a certain amount of years. Obviously, that's good for us. That's putting pressure on the Department of Defense or Department of War to actually clean these bases up. And so that's obviously a big positive for us.

Our next question comes from the line of Adam Bubes with Goldman Sachs.

M&A activity has really accelerated over the past few quarters. Just wondering, would you attribute that to an increase in the overall M&A pipeline of opportunities? Is it a greater willingness on your part to pursue acquisitions right now, simply a function of timing? And what are the implications for go-forward M&A?

Yes, Adam, last year, the M&A pipeline was strong as well, although we just did not -- we just did not get to the point of closing a deal that was within our parameters that made sense to us and sense to our investors. The activity through this year has been very strong as well, as you know. And this year, we've been more successful at meeting and acquiring companies that meet our metrics to be -- and roll them in and create synergies across the business. Right now, it continues to be very active as we go into 2027 as well. So we see strength in that pipeline of being able to continue to do much of the same. Obviously, higher interest rates out there might change a little dynamics for some of our competition on some of those opportunities. So we will stay disciplined, and we will continue to look within our swim lanes and continue to acquire the right companies that fit our portfolio and our culture and our swim lanes.

Adam, just to clarify that, nothing has changed. Nothing changed from 2025 to 2026, nor will it change in 2027, frankly. I think we've proven to ourselves and to our Board and to our investors that we're good allocators of capital. We're disciplined, we're patient and nothing changes there. And the fact we got a bunch of this year and not so much last year, that's just circumstance. It wasn't because we weren't trying. We just have certain price points we go to, and then that's that.

Great. And then overall, really robust performance in the Environmental Solutions segment. Just drilling down into Technical Services, I think revenues rose 3%, and that does include some contribution from M&A is my understanding. Can you just break out the organic versus M&A growth there? And then just trying to understand in context of the really robust volumes across the portfolio, was this a tough comp situation or -- can you just unpack the performance a little bit there?

Sure, Adam. It's Eric Dugas. I'll take this one. Just in terms of organic growth in Q3 in ES, we had overall growth of almost 17%, almost 16% of that was organic. So very little of that of inorganic growth in Q3. When you think about the Q3 performance in Tech Services and the 3% year-over-year growth, you just need to keep in mind, Q3 last year, we did have some good-sized projects that were -- that added to a tough comp with Tech Services. I mean for the full year, we'll still see growth rates north of that. I can tell you, we mentioned our deferred revenue on the call. A lot of that is coming through Tech Services. So we're still seeing good volumes multiple types of mix streams and really good utilization at all of our Tech Service facilities. So a bit of an anomaly, a bit of a tough comp, I think, here in the third quarter.

Congrats on all the success, Mike.

Our next question comes from the line of Trevor Romeo with William Blair.

Maybe I'll actually just pick up on that last question, just in terms of the volume growth that you're seeing in the kind of core ES business, and you did talk about that deferred revenue strength with the backlog of waste growing. So maybe you could talk a little bit about end market strength and mix that you're seeing? I mean, are you generally seeing broad-based strength here and particularly would love to hear about the chemicals vertical? Are you seeing any ramp-up there yet?

Trevor, we're seeing a slight ramp-up in chemicals. However, most of the volume increase has been in other verticals when you think about semiconductor, manufacturing, retail, to name a few that have been growing substantially. And our volumes for the third quarter were very, very robust and strong from both Technical Services generating waste as well as Safety-Kleen Environmental generating waste into our network. And we continue to be bullish about it as we've entered fourth quarter here, too, really strong volumes across the network. That growth in the deferred revenue is obviously an example of that. We completed -- we pulled forward 1 of our incinerator outages into Q3. So that had a little bit of change to some of that deferral. But by and large, most of that growth in our deferral was due to volume growth through the network. So we're pretty proud of that and really getting embedded better and better embedded with our customers, being that single service provider, multiple lines of business, multiple different waste streams, feeding not only incineration, but water treatment, our TSDFs, our consolidation of recycling. That's been another area of pharmaceuticals growth has been very strong. And as we mentioned a couple of times in our script, our startup -- the start-up of our partnership on the $600 million account that we have, that has proceeded ahead of expectations at this point and is ramping up well. So across the board, many different verticals.

That's great. And then I was also just wondering about your data center offerings. I think you mentioned some initial projects starting to kind of ramp up here. So maybe just since you announced the offering to investors last quarter, are there any kind of early commercial updates you can give us, whether it's how discussions are progressing with customers, new deals or kind of the growth of the number of lines of business you can offer to customers with data centers?

Yes. Great, Trevor. That's a good one. I had the opportunity to travel into 1 of the data center jobs that we're working on up in North Dakota, where we're actively doing chemical passivation and flushing their lines and helping them to get the start-up of that data center. Our relationships with our general contractors has grown substantially. When those GCs that are building the data centers understand the capabilities that we have had through our industrial group for a long time and our footprint, it really has accelerated our ability to grow our pipeline in data centers. And when we look at our pipeline right now, there's about 12 active projects that we see us getting nestled with a footprint in. On the line of business side, yes, when you travel out to the data centers, there was additional lines of business that we believe we can offer on a longer-term solution, not only on the start-up, particularly around the cooling that is cooling the data centers and a partnership that we're working on with 1 of the cooling providers that we would be able to do coolant change-out analytical of that coolant along the way as it deteriorates in performance and pull that out of those data centers and recycle it through 1 of our recycle systems to recycle centers to be able to re-provide it back into the market. So any time we've gone out to these data centers and we've developed those relationships with the GCs, which we've been doing, we see additional lines of business that Clean Harbors can provide. And we're pretty excited so far about our start-up and our prospects exceeding what our early term goals were already.

Our next question comes from the line of James Schumm with TD Cowen.

Also want to echo my congratulations to Mike. And Mike, I'm not going to let you go with a softball here. I was wondering if you'd be willing to provide like a 2027 worst-case scenario for SKSS in terms of EBITDA? Like what is the floor now? Or any color you could provide on that, that would be great.

James, you're right. You didn't leave me with that -- you didn't give me a softball. You could have tried again with an easy one. I would say this. So first of all, a couple of things, that we're having a great year in the SKSS business. The team has done an outstanding job of holding the line on UMO collection costs to, as you see here today, a charge-for-oil position really is a testament given the high base oil pricing and the profitability of the business, it really kind of comes on through. When you think about 2027, it is difficult because it is such a commodity-based business, and we are a price taker in many areas. And so as oil prices come down, it may be difficult for us to kind of project what the profitability is. We do use some standard guidelines to try to drive as we give out guidance, and we have for many quarters now. We'll use that again as we get ready for 2027. But I would say the team has done an excellent job of driving more Group III gallons, more blended volumes, working on the SDA unit to kind of -- when oil prices do come down, they won't come down as far because we have a much more stable business. And so I'm of the view that I'm not here to give guidance on 2027. You should ask Eric for that. But the -- but I will tell you that the team has done an excellent job so that when prices do come down, we'll be much better positioned than we have historically.

Eric? No, I'm just kidding. So for PFAS, I believe there's a bipartisan bill in Congress for $10 billion of funding for PFAS water treatment. Curious if you could tell us what portion of your PFAS revenues are water filtration? And what's your exposure to like municipal water, if any?

Yes. Right now, Trevor, our -- when you look at our revenue base, breaking it down again, about 1/3 of that revenue is around water treatment, industrial and municipal water treatment. We're doing a lot for bases as well, around the globe actually. And when you look at our footprint moving forward and you look at the pipeline, we see many more opportunities coming from municipal in particular. Our exposure, our footprint is helping to grow that opportunity for us. We have treatment systems that we're building to be able to supply and perform for municipal water companies as well. So it's a continues to be a great opportunity. It's about 1/3 now. We continue to see it be about 1/3 of our overall revenue, along with that remediation work, T&D and change out of AFFF.

Our next question comes from the line of Jerry Revich with Wells Fargo.

Mike and Eric, congratulations. Mike, while you were the CFO, you had, I think, 1 of the most impressive runs in terms of consecutive quarters of beating guidance. And just to help you continue that tradition here, you folks at the Analyst Day for ES spoke about roughly 50 basis points per year of margin improvement. I know you don't have your budget for '27, but can we just talk about the puts and takes for ES margins, '27 versus '26 versus that framework given the large-scale job that you mentioned in the quarter and anything else we should keep in mind as we frame expectations for '27?

Sure, Jerry. It's Eric. I'll take that one. And again, maybe not providing guidance, but just some guideline thoughts here. As we move as the calendar turns into 2027, we do have a good deal of acquisitive growth coming through. We'll be continuing to integrate those businesses, realizing the synergies. There will be a headwind on margins as we bring those businesses in. I would say a rough shot of magnitude, somewhere in the neighborhood of 30 basis points of headwind probably, given some of the things we're thinking about. Certainly, the other headwind that we may see as we go into 2027 with the ES margins is on the large ER jobs. And I say that because some of these very large ones that we've been able to complete this year, they're difficult to forecast. You can't assume they're going to happen again. But what I would say is that there's lots of things that we're doing in the field services business today to set ourselves up to continue to win that type of work. I mean the execution that the team has done and the leadership that they've showed, we mentioned Eric highlighted kind of the warehouse fire job that we did this year. That just proves that we are the #1 player in the space. And although we can't forecast that we'll have these jobs in the future, we put ourselves in a very, very good position. So although we weren't -- we won't guide for those, I think they provide good upside to whatever guidance we do give out in February. I'd like to also think, though, Jerry, to your point, we'll continue to see underlying base margin expansion through all the great volumes that we're seeing, the ability to deliver more and more services and handle more and more types of waste. That's all very margin accretive across our -- we have a lot of fixed costs kind of just leveraging our network. So there'll be upsides, too. So again, we'll provide more guidance in February. We do have some headwinds, but I think there's a lot of great things that will help us to continue to drive margins in the underlying business.

Really appreciate the color. And can I ask separately, last quarter, you folks announced a 10-year contract with an unspecified counterparty. Can you just talk about the cadence of the revenue on that contract? Do we have to wait for the associated facilities to be online for the revenue to really ramp? Or is there a big component of revenue opportunity for you folks in the construction phase as well? Can you just calibrate us on whether you're seeing any revenue flowing through yet?

Yes. What I would say, Jerry, and I'll turn it over to Eric, who might be a little closer to the day-to-day on this. But what we said last quarter was we expected this contract to kind of kick in, in the fourth quarter. We expected maybe $10 million of revenues in the fourth quarter. I'd say -- I'm excited to say, and I think Eric alluded to this that, that work has started. We started to see the first loads. As we moved into '27 thinking kind of $25 million to $35 million, I think we're probably still thinking about in that range. But I think so far, kind of the kickoff and the integration of this large contract has gone well. I think we're seeing some other opportunities we might be able to help the customer with. So we'll update that probably as we move along here in a few months. But right now, $10 million-ish in Q4 is what we have in our current guide.

Our next question comes from the line of David Manthey with Baird.

Mike, it feels like you're pulling a Barry Sanders here, but congratulations to you and Eric, to you as well. Question on crack spreads and how that relates to the Industrial Services business. So crack spread is still high, but seem to be rolling over. I think they're like a 3-month low right now. Does your Industrial Services calendar -- I mean how quickly does that start to be reflected in there? Are you seeing it? Are some of those 7-day engagements turning back to 17-day ones that help better diffuse that mobilization burden for you?

Yes, Dave, we -- as you know, the refineries have been running full tilt 92% utilization throughout the year. We have seen some of our turnarounds that we performed on this year grow on scope. So that's been a good indicator. We fully expect that as we go into next year, based on the feedback from those clients that turnaround should ramp up. They're run to failure as we see it. And we think that our job right now is to be well positioned with those 400, 500 locations that will have turnarounds in North America next year and make sure that we're their first call. So we're feeling a little bit better that it should be a little bit more robust, although we're not forecasting that yet.

I think, Dave, just 1 thing to add there. I think that we've done a really good job. I think Eric and the team have done a very good job of really understanding our customers, where they are in their cycle, reaching out to them, spending time with them so that when there is an upset, we're going to get that call. That was an open question. Things have gone -- have things gone down because we've lost work or things come down because they've just slowed down. I think we've proven to ourselves that it really has just slowed down. And so when that does turn around, we should be in a very good position to take advantage of that.

Okay. Yes, sounds good. And then on your own utilization of incinerators, you said 88% in the third quarter of '25. But I think at the time, you said 92% ex Kimball. I'm trying to sort that in my head. Does that mean that you had greater core downtime kind of ex Kimball in the third quarter of this year? Or what was the utilization ex Kimball in the third quarter of '26?

Ex Kimball, it's -- when you look at it, Dave, I guess I'd respond by saying, #1, that our utilization, when we look at the 87%, that was tempered a little because we had pulled some turnaround days forward from Q4 into Q3 of this year. So it's a little bit of a difference of comparing turnaround timing from Q3 last year to Q3 of this year. So that affected some of it. On the Kimball side, our ramp-up of tonnage into that unit has been very strong. We're exceeding our original goal this year of throughput for that unit. And we're continue to -- we will be running strong through the fourth quarter and end with that mid- to high 80s percent while we filled up Kimball.

I would say, Dave, 1 last point is that whether it's 85%, 88%, 91%, these are just benchmarks that we look to make sure the incinerators are running well. And I wouldn't draw conclusions as to, well, last quarter, it was -- last year, it was 91%. This year, it's at 88% or 87%, whatever the answer is. It's more like that's just the movement of like 1 turnaround from October to September. And so I don't want investors to read into it too far because it really can be moved around. It's a very simple average. And so we just got to be careful. I guess the way I look at it from where I'm sitting is like, hey, how are the plants running? Well, they're running at 85% or 88% utilization. That's kind of where I stop because I say, well, that means it's running well. And whether the down days are up or down, as Eric said, that just moves with kind of when the turnaround schedules are and when they need to be taken down.

Okay. Congratulations again.

Our next question comes from the line of Lawrence Solow with CJS Securities.

Great. I like the Barry Sanders metaphor, but I was thinking more maybe hopefully, Michael Jordan or something, if he'd come back.

You guys. There's no reason to butter me up. I'm leaving. So I don't know why you're doing that, but I appreciate it anyway. All right.

Well, I wasn't picking George Foreman or anything. So don't go that way. Let's think about it. Most of my questions have been answered. Just a few. Actually, 1 for you, Mike, not too much on the SKSS. I know it's a minority division these days. But just the underlying spread management, I always feel like that's like the biggest driver. Sure your other initiatives have certainly directionally moved positively, but kind of modest if you kind of look out over a 5-year period. But I feel like the -- just your spread management, your ability to manage that spread, especially in periods of falling prices. Do you feel like that's improved in the -- since you kind of over the last 5 years since you put out the Vision '27?

I think it's an absolute yes. I think the team has done an excellent job of holding the line, driving the industry forward on charge-for-oil when oil prices came down and the tale of sadness for the past 2 or 3 years, Larry, that was what we did. And I think it turned out to be very, very good. And because we're talking about a waste, a waste that needs to be disposed of properly, a waste in some states it's labeled as hazardous. So I think the team has done an excellent job of educating our customers on the importance of that, and that has allowed us to have -- here where we are today when prices have turned around and be able to kind of manage that spread at a very, very wide level.

Okay. That's fair. And how about -- just a question for Eric Gerstenberg. You talked a lot about -- the theme has been a lot about just onshoring and customers seeking 1 vendor. And you announced a nice large-sized contract last quarter. Just curious, just -- not asking you specifics, but do you see like other large customers or I know you don't call out specific contracts normally, but do you see a replication or just how is your queue of opportunities now going forward? It seems like we're still probably in the early innings of that, certainly onshoring. Any thoughts on that?

Yes. I would say, Larry, that we have seen some great opportunities to be a single service provider for large organizations that need a footprint like ours to be able to grow with. And that's a continued trend. The number of opportunities, RFPs that we've seen that are looking for a total solution, total waste management, as we call it, with embedding in our environmental solutions, our applications that we utilize in our facilities into their facilities has been a very strong trend for us. We're excited about that opportunity, and we have a number of them in the works. So what has happened with that large company that we signed that multiyear deal with has been great. When you get embedded like that, you get our systems, you get our people in place, those companies realize what Clean Harbors can provide for them as a total provider, total waste management recycling provider for them and a very good trend there, and we're going to continue to capitalize on that. And that's fueled a lot by the onshoring that we're seeing throughout North America.

Yes, Larry, we went through an operating review over the last week or 2, and I really saw not just the large contract that Kirsty mentioned, but a lot of other smaller contracts that are real evidence of reshoring here in North America.

Our next question comes from the line of James Ricchiuti with Needham & Company.

I want to just offer my best wishes to you, Mike, and congratulations, Eric. Most of the questions have been answered. But I wonder if you could just remind us of what the organic growth rate has been for the Industrial Services business. I know it's -- obviously, it's been a tough period over the past year, 1.5 years. But just in general, it seems like you have the potential for some easier comps in that part of the business in contrast to some of the other areas where you've got tougher comps looking out to 2027.

Yes, Jim, it's Eric Dugas. I'll take that one. In terms of organic versus inorganic growth, there's very little, if no kind of inorganic growth in industrial. The acquisitions we did this year are virtually all in the field service and tech services space for the most part. If you look at the last 2 quarters on Industrial Services, revenue has been flattish. I would say margins probably down a little bit year-on-year. As Eric has mentioned a few times on this call, we're really not seeing the benefits of those larger scope turnarounds. So there probably is as customers kind of run their plants to failure and need to do the more regular sized turnaround activity on into the future, that does hopefully provide some upside to us later on next year. But as Eric said, we're not forecasting any of that in the fourth quarter here.

Okay. But again, I know none of the M&A that you did recently has contributed to that. But I was just thinking looking back over the last few years, it just seems like looking out to 2027, that has the potential to be a better part of your business just it would seem like it's going to have to return to some normal trends.

Got to think so, Jim.

Yes. Jim, I'd also add that when you look at our revenues, we're up about 1%, 2% year-over-year in Industrial Services revenue for the quarter. And what's nice to see about that, relatively speaking, is that with a lower turnaround year and lower turnaround size and scope year-over-year that we are still growing our Industrial Services business in other areas with things like specialty work, tanks and cleanouts as well as the data center opportunity that we have ahead of us. So when we think into the future, our data center opportunity, along with turnarounds getting back on track, it does set some groundwork for us to be able to do a better job next year of really having a more sizable organic growth number.

And just a quick follow-up just since you bring it up again on the data center side of the business. I know it's a small part of the business. But I'm wondering, are there opportunities potentially for you guys to accelerate the growth in that area through perhaps inorganically as opposed to stepping up investments internally. But I'm just wondering what -- whether that is in the mix at all?

We haven't seen anything that would make sense for us on the inorganic side yet with data centers.

Our next question comes from the line of Shlomo Rosenbaum with Stifel.

I wanted to ask a little bit about the bringing down 1 of the incinerators, I guess, for maintenance, I guess, accelerating the schedule from October to September. Just was that something that was done that was kind of unscheduled, -- there was kind of a reason for it? If you can just operationally explain, do you look like when there's maybe a little less volume of activity coming at a time, you just decide it makes sense to accelerate that? Or is there something that happens that makes you do that, just so that operationally, we can understand how that happens? And what impact did that have on the utilization going from, let's say, 91% to 87% this quarter. I understand you're just looking at the health of it, but just trying to understand this operationally.

Yes. It has nothing to do with volumes. We continue to have robust volumes throughout the network. It really is just based on the performance of the unit and some of the blends that we're managing. You start to see a tail off of the throughput of the incinerator and that can cause a pull forward of a normal scheduled time frame. But it's really only typically a few weeks or a couple of weeks in this case, bridging the quarter. So that's -- we deal with that on an annual basis in different incineration units. Sometimes when we have a planned turnaround, we're going to get longer life and extend from when we originally planned the turnaround. Sometimes it's going to be a little bit of a pull forward. And it all, again, depends on the mix that we're feeding and the performance of the unit and we see if it tail off, then we're going to pull it forward. If we see continued strength in the throughput of the unit, we're going to push the turnaround a few weeks. It's just -- it's a normal course of events in large part.

I would say, Shlomo, that you got to look at it on an annual basis. I think you look at it quarter-to-quarter, we're getting ourselves tied up in that 92% versus 87%. You got to look at it more on an annual basis because as Eric said, it's literally just pulling a turnaround back and forth, and that's kind of standard operating procedure for the incinerators that we run. And we just manage that kind of day-to-day, and you got to look at it on a more on annual basis versus every 90 days. You get some unusual questions and some unusual conclusions if you try to do it kind of over a 90-day period.

Got it. And then can you talk about the charge for oil? How did that trend through the quarter? That just continue to trend all the way down? And like what are you at? Is there a number that you can provide us for like where you're at, at the end of the quarter?

Yes, Shlomo, we don't give that number out on a public call just because we have a lot of different constituents that are listening to the call. But we do -- we are very proud of the fact that we ended the Q3 in a charge-for-oil position and even with base oil prices at kind of record highs. And so that's really allowed us to have, as Eric Dugas said, kind of a record-setting kind of Q3. And so I'm of the view that I'm hopeful we're going to hold the line as best we can to hold that charge-for-oil position as we get through year-end.

Are you getting a lot of pushback on that, though, with people looking at you and saying, "Hey, look where oil is right now and why are you charging me for it and other people will do it for free?

I mean at the end of the day, Shlomo, it's a hand-to-hand combat no matter what the price is. I mean, so we have a very good conversations. We have a very good customer base. We have very good conversations with our customers. And of course, those are very difficult conversations. I think the sales team and the organization has done a very good job of managing it.

Our next question comes from the line of Nandita Nayar with Bank of America.

I just want to quickly touch on the 27.4% ES margins. You also talked about that included the $120 million of emergency response revenue. Just to get everyone on the same page, how should we kind of think about the underlying ES margin just excluding that event? And so that's just question 1. Just like just to follow-up. As we normalize for that ER activity, but also layer in the recent higher-margin M&A that you guys have been doing, just in the outer years, like how are you guys thinking of the pathway and the timing of that 30% plus ES margins? Would you kind of say there's some like increased confidence there?

Nandita, this is Eric Dugas. I'll take that one. And first is there's certainly the margins were positively impacted by these large ER jobs here in Q3, there's no doubt. But I think underlying, we've long said that we expect something from 25 to 50 basis points of margin expansion in ES on an annual basis. And we've overdelivered on that over the last number of years here. As I look forward, I think at this point, it would be prudent to that, that assumption has served us well. It's guided the team well. And like I said, we've over-delivered. On the 30% margins long term, that is -- remains an aspirational goal of ours. To put an exact date on it is probably tricky at this point. But certainly, with the good strategies that we're seeing, the tailwinds that we're seeing just from better manufacturing space, reshoring, data center initiatives, PFAS, continued collection of more and more volumes -- and then when you sprinkle in some great acquisitions this year that will get fully integrated over the next year, 1.5 years and then a really super strong balance sheet where we can continue to do nice acquisitions here in the future, that 30% is -- we can see it. I just hesitate to put an exact date on it. But for sure, that 25 to 50 basis points is -- that's what will grow each year here.

Got it. And I just want to just double-click on the CapEx outlook here, Eric. At the midpoint, the '26 guide, the CapEx guide, I think around like $560 million. And like free cash flow conversion now is already approaching 43% versus, I think it was like 40% in the prior guide. So should we kind of think of '26 as like a peak CapEx year? And as kind of recent investments begin to mature and you guys kind of harvest those returns, could you kind of say free cash flow conversion reaches the mid-40% target range sooner than previously expected? Just any color there would be helpful.

Nandita, when I look at our trailing 12-month free cash flow conversion, just as we sit here in September, it is in that mid, I believe, 45%, 46%. We're guiding to 43%. So I think we're there. Some of that is aided by a super strong year in SKSS. But I think safer to say we're kind of in that 40% range pretty clearly and looking to grow from there. The current guide of 43%, again, I think a very good number this year and something we'll continue to look to grow, but stay safely in that 40% range.

Yes. I would say that as we grow EBITDA margins, we're going to grow free cash flow conversion. I think they're very much connected. And so I think that as we hold the line on CapEx and think about CapEx into the future, I think that, that conversion kind of falls right through. And that's -- you can see that in the financial results.

Perfect. Mike, Eric congratulations.

This now concludes our question-and-answer session. I would now like to turn the floor back over to Mr. Gerstenberg for closing comments.

Thanks, Christine. We certainly appreciate everybody joining us today. We have many upcoming investor events, starting with the Baird Industrial Conference in Chicago in early November. We hope to connect with many of you at these events. And as always, have a very safe rest of your week.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.