Thanks, Michael. Good morning, everyone, and thanks for joining us today. Starting on Slide 3. I want to start today with a focus on safety, which is a key component of our corporate strategy and culture. There’s nothing more critical to the success of our company than making sure that every night, every employee goes home to their family uninjured. Safety is important not only for the well-being of our workforce and the costs associated with injuries and lost time, but it’s a competitive differentiator and a critical selling point with our customers.
You can see on this slide the tremendous progress we have made as an organization over the past two decades, reducing our total recordable incident rate, or TRIR, by 74% since 2002. It’s a metric we take a lot of pride in.
As part of our continuous improvement approach to safety, we relaunched our highly successful Safety Starts with Me: Live It 3-6-5 program this year. The program really personalizes safety for every employee and includes each employee’s five personal reasons why they choose to be safe at work, on the road and at home, and we believe this relaunch will allow us to sustain this successful journey on safety.
Moving to Slide 4.
As we outlined in this morning’s release, we have updated our reporting segments to better reflect the operations of the company today. After a detailed planning process, we took a new approach to our Safety-Kleen organization that we believe will be beneficial to the company and our shareholders alike. This approach is based on two critical changes.
First, we consolidated the core Environmental Services of our Safety-Kleen branches into the legacy Environmental Services sales and service regions.
We expect this change to strengthen our allocation of resources, whether that is people, trucks or equipment.
We also expect this to reduce third-party spend, generate even greater cross-selling opportunities across all our environmental lines of business and it also enables efficiency gains in routing and network consolidation.
The second change we made was to combine all the pieces of our sustainable lubricants business.
Our newly formed Safety-Kleen Sustainability Solutions segment or SKSS consists of both sides of the spread we manage in our Re-refining business. It will be focused on providing the best, most environmentally friendly and sustainable lubricant products to our customers. The collection of services for waste oil, used oil filters, waste antifreeze and other related items will all be tightly managed under a standalone organization. This should enable us to collect more used motor oil and supply our re-refineries with the best available feedstock. Overall, we believe this new structure better aligns the legacy Safety-Kleen operations within our company and will enable us to maximize the value of those assets.
Turning to Q1 performance. We kicked off 2021 with a strong start as our results exceeded our expectations.
Our Environmental Services segment, after a difficult February due to the deep freeze in the South, rebounded with an outstanding March, driven by greater volumes of high-value waste streams and the ongoing recovery in many of our service businesses.
Our newly formed SKSS segment delivered better-than-expected profitability due to ongoing base oil pricing gains driven by market conditions. Adjusted EBITDA in Q1 was $129.5 million, which included $5.4 million in benefits from government assistance programs.
Our margin grew by an impressive 130 basis points to 16%, reflecting the benefits of our cost controls, along with productivity and pricing initiatives.
We also generated strong adjusted free cash flow of more than $62 million.
Turning to our segment results, beginning with Environmental Services on Slide 5. Revenue was down year-over-year due to the lingering effects of the pandemic both on project work and certain service offerings as well as the effect of the February storm, but we closed Q1 with revenues on an upward trajectory. Adjusted EBITDA was down 4% from a year-ago, mostly due to the lower revenue. Even so our margins were up 70 basis points and this was driven by a combination of pricing, cost savings, revenue mix and $4.5 million in government assistance. Revenue from our COVID-19 decon work totaled $28 million in Q1, which was higher than we anticipated. We’ve now completed well over 17,000 total COVID responses since the program began a little over a year ago. In Q1, our incineration utilization dipped to 80%, entirely due to the lost days in February at both our Deer Park and El Dorado incinerator as a result of the storm. At the same time, we continue to gather a lot of high-value waste streams and record number of drums, which pushed our average price up 8% from a year-ago. The adverse weather and strong volumes drove our deferred revenue to the highest level in our history at $83.2 million, providing us with a terrific backlog heading into Q2. Landfill volumes were down 29% due to less projects, while average pricing rose 24%, which helped to offset a portion of that volume decline. The pace of parts washer services picked up nicely in the quarter, growing 6% from Q4 to 235,000 services. In Q1, we saw most of the Safety-Kleen Environmental branch core offerings in the U.S. trending up from a year-end as people began driving more with the rollout of vaccines and SK’s non-automotive service customers also beginning to rebound.
Moving to Slide 6. Revenue for Safety-Kleen Sustainability Solutions was essentially flat with the prior year as higher base oil pricing and charge for oil rates were offset by slightly lower volumes, particularly on the waste oil collection side. On a sequential basis, SKSS revenue increased 19% from Q4, fueled by stronger demand and higher pricing. Adjusted EBITDA in this segment climbed 31% to go along with a 480 basis point margin improvement, which reflects the widening of our re-refining spread. The SKSS margin was driven higher by the productivity and cost initiatives we implemented as part of our organizational changes over the past year. Government programs accounted for $800,000 of contribution in Q1 in this segment. Waste oil collections were modest at 47 million gallons.
Our percentages of blended products and direct volumes came in as expected in Q1 and consistent with the prior year.
Given the market environment, we prioritized opportunities to move larger volumes of base oil at higher than normal margins.
Turning to Slide 7.
Given our cash balance, low leverage and 2021 cash flow, we remain in excellent position from a capital allocation standpoint.
We expect to focus on internal growth capital on our plants and other assets that will generate the best returns.
Our M&A pipeline is robust. And as the U.S. emerges from the pandemic, we see more acquisition candidates are coming to market. We intend to be active on this front.
We also will continue to – with our share repurchases program as we believe our stock represents a great value at the current levels.
Our focus in recent years has been on increasing our return on invested capital.
Our adjusted ROIC has more than doubled since 2016. Every year since then, we’ve grown our annual EBITDA, while also acquiring companies that support our core businesses and pruning our portfolio by divesting some energy-related assets.
Our adjusted ROIC today exceeds our cost of capital. In summary, we are excited about our prospects for this year. We see a promising environment as North America reopens from the pandemic. We believe both our segments have favorable outlooks for the remainder of the year. Within Environmental Services, we began Q2 with a substantial backlog of waste at our plants and significant waste stream opportunities for us to pursue. We would expect our incinerators, landfills, TSDFs and other permitted disposal and recycling facilities to deliver strong performance in 2021. In the quarters ahead, we also expect many of our service offerings, including industrial, technical and field services, along with the SK Environmental branches to grow from last year.
Given our Q1 results, we now expect $30 million to $40 million in COVID-related revenues for the full-year 2021. Within SKSS, we intend to capitalize on the positive market conditions, particularly as demand in the base oil market returns to more normalized levels.
We expect our re-refining production levels to remain strong over the next several quarters, and we will continue to actively manage our spread. We intend to grow our used motor oil gallons collected in the months ahead, in conjunction with the ongoing vaccine rollout and the pent-up travel demand. Overall, we expect a year of profitable growth in 2021, generating healthy free cash flow to support our capital allocation strategy.
And so with that, let me turn it over to Mike Battles. Mike?