Hoffman Estates, IL March 1, 2023 — Heritage-Crystal Clean, Inc. (Nasdaq: HCCI), a leading provider of parts cleaning, hazardous and non-hazardous waste services, used oil re-refining, antifreeze recycling, industrial and field services, and emergency and spill response services today announced results for the fourth quarter of fiscal 2022 and for the full fiscal year, which ended December 31, 2022.
To view the financial results for the 2022 fourth quarter and 2022 fiscal year, please visit our financial releases page.
The Company will host a conference call on Thursday, March 2, 2023, at 9:30 AM Central Time, during which management will give a brief presentation focusing on the Company’s operations and financial results. Interested parties can listen to the audio webcast available through our company website, https://www.crystal-clean.com/investor-relations/, and can participate on the call by dialing (888) 440-4149. After dialing the number, you will be required to provide the following passcode before being joined to the conference call: 8889427.
To register for the webcast of the conference call, visit https://events.q4inc.com/attendee/245611812
Fourth Quarter Review
Total revenue for the fourth quarter of 2022 increased 42.2% to $241.1 million compared to $169.5 million for the same quarter of 2021. The Company’s fourth quarter of fiscal 2022 was comprised of 77 working days compared to 76 working days in the fiscal fourth quarter of 2021. On a sales-per-working day basis, revenue increased approximately 40.4% compared to the prior year quarter. The increase in revenue was due to improvement in base oil pricing in our Oil Business segment along with increased demand and higher selling prices for our Environmental Services segment products and services as well as by revenue from an acquisition made during the third quarter of 2022.
Our operating margin percentage decreased to 22.8% in the fourth quarter of 2022 compared to 26.6% in the fourth quarter of 2021. The decrease was mainly due to increased costs for solvent, disposal costs, depreciation expense, fuel cost, and equipment rental, partially offset by an increase in the spread between the netback (sales price net of freight impact) on our base oil sales and the price paid/charged to our customers for the collection of their used oil. Our corporate SG&A expense as a percentage of revenue decreased slightly to 11.9% from 12.1% of revenue in the fourth quarter of 2021 mainly due to higher revenue and lower share-based compensation expense.
Net income was $27.6 million, or $1.16 per diluted share, for the fourth quarter of 2022. This compares to net income of $18.1 million, or $0.77 per diluted share, in the year earlier quarter. Adjusted net income for the quarter was $18.8 million. The most significant adjustment to net earnings was subtracting a $12.2 million gain from the revaluation of one of our investments.
Fiscal 2022 Review
In 2022, we generated $709.3 million in revenue compared to prior year revenue of $515.3 million, an increase of $194.0 million, or 37.6%. The Company’s 2022 fiscal year was comprised of 254 working days compared to 253 working days in fiscal 2021. On a sales-per-working day basis, revenue increased approximately 37.1% in fiscal 2022 compared to the prior year. This increase in revenue was due to the increase in base oil pricing in our Oil Business segment and the continued reopening of the U.S. economy from the COVID-19 pandemic as well as inorganic growth in the Environmental Services segment.
Our operating margin percentage for 2022 was 26.2% compared to 28.0% operating margin in fiscal 2021. The decrease was mainly due to increased costs for solvent, disposal costs, depreciation expense, fuel costs, equipment rental, and hydrogen expense, partially offset by an increase in the spread between the netback on our base oil sales and the price paid/charged to our customers for the removal of their used oil. Corporate SG&A expense for fiscal 2022 was 11.2% of revenue, compared to 12.1% of revenue in fiscal 2021.
Net income for fiscal 2022 was $84.8 million, or $3.58 per diluted share, compared to net income of $60.9 million, or $2.59 per diluted share, for fiscal 2021. Adjusted net income for the year was $78.8 million.
Segments
Our Environmental Services segment includes parts cleaning, hazardous and non-hazardous waste disposal, wastewater vacuum, antifreeze recycling, industrial and field services, and emergency and spill response. The Environmental Services segment reported revenue of $165.8 million, an increase of $62.2 million, or 60.0%, during the fourth quarter of fiscal 2022 compared to the fourth quarter of fiscal 2021. The increase in revenue was mainly due to the continued reopening of the U.S. economy post the COVID-19 pandemic as well as revenue from an acquisition made during the third quarter of fiscal 2022. We experienced revenue increases across a majority of our service lines in the segment during the fourth quarter of fiscal 2022 when compared to the fourth quarter of 2021. On a sales-per-working day basis, Environmental Services segment revenue increased approximately 57.9% compared to the prior year quarter.
Profit before corporate SG&A expense in the Environmental Services segment during the fourth quarter was $35.1 million and as a percentage of revenue was 21.2% compared to 22.0% in the year ago quarter. The decline in margin on a percentage basis was mainly due to higher fuel costs, solvent expenses, and equipment rental expense.
During fiscal 2022, Environmental Services segment revenue increased $130.9 million, or 41.1%, compared to fiscal 2021, while our 2022 profit before corporate SG&A expense as a percentage of revenue was 20.9% compared to 23.6% in fiscal 2021.
President and CEO Brian Recatto commented, “Due to the inflationary pressure we continue to face in various parts of our Environmental Services segment, we implemented another price increase in December of 2022. Implementation of this increase should help improve our operating margin during 2023.”
Our Oil Business segment includes used oil collection activities, sales of recycled fuel oil, and re-refining activities. During the fourth quarter of fiscal 2022, Oil Business revenues increased 14.3% to $75.3 million compared to the fourth quarter of fiscal 2021. An increase in our base oil netback was the main driver of the increase in revenue. On a sales-per-working day basis, our Oil Business segment revenue increased approximately 12.9% compared to the prior year quarter.
Our Oil Business segment operating margin percentage decreased to 26.4% in the fourth quarter of 2022 compared to 33.7% during the same period of 2021. The decrease in operating margin was mainly due to increased costs related to transportation and hydrogen partially offset by an increase in the spread between the netback on our base oil sales and the price paid/charged to our customers for the removal of their used oil.
Full year 2022 Oil Business segment revenue increased by 32.0% compared to fiscal 2021, while operating margin also slightly increased to 35.3% compared to 35.2% in fiscal 2021.
Recatto commented, “Despite the significant decline in base oil netback compared to the third quarter, base oil netback during the fourth quarter remained above our netback for the fourth quarter of 2021. The higher netback allowed us to increase our spread on a year-over-year basis and generate better than expected operating margin during the quarter. For the year, we are very pleased with the record annual revenue and profitability in the Oil Business segment.”
The complete 2022 fourth quarter and 2022 fiscal year results can be found on our financial releases page.