US Ecology Management Discusses Q2 2013 Results - Earnings Call Transcript

| About: US Ecology, (ECOL)

US Ecology (NASDAQ:ECOL)

Q2 2013 Earnings Call

July 30, 2013 10:00 am ET

Executives

Eric L. Gerratt - Chief Financial Officer, Chief Accounting Officer, Executive Vice President and Treasurer

Jeffrey R. Feeler - Chief Executive Officer and President

Steven D. Welling - Executive Vice President of Sales and Marketing

Analysts

Richard Wesolowski - Sidoti & Company, LLC

Brian J. Butler - Wunderlich Securities Inc., Research Division

Robert W. Stone - Cowen and Company, LLC, Research Division

Operator

Good day, ladies and gentlemen, and welcome to the Q2 2013 US Ecology, Inc. Earnings Conference Call. My name is Ian, and I'll be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.

Now I'd like to turn the call over to Mr. Eric Gerratt, Executive Vice President and Chief Financial Officer. Please proceed, sir.

Eric L. Gerratt

Good morning, and thank you for joining us today. Joining me on the call today is President and Chief Executive Officer, Jeff Feeler. Also on the line are Executive Vice President of Sales and Marketing, Steve Welling; and Executive Vice President of Operations, Simon Bell.

Before we begin, please note that certain statements contained in this conference call that do not describe historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

Since forward-looking statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. Factors that could cause results to differ materially from those expressed include, but are not limited to, those discussed in the company's filings with the Securities and Exchange Commission.

Management cannot control or predict many factors that determine future results. Listeners should not place undue reliance on forward-looking statements, which reflect management's views only on the date such statements are made. We undertake no obligation to revise or update any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

For those joining by webcast, you can follow along with today's presentation. For those listening by phone, you can access today's presentation on our website at www.usecology.com. Throughout our call today, and yesterday's earnings release, we refer to adjusted EBITDA and adjusted earnings per share. Both adjusted EBITDA and adjusted earnings per share are not determined in accordance with Generally Accepted Accounting Principles and are therefore susceptible to varying calculations. A definition, calculation and reconciliation to the financial statements of each can be found in Exhibit A of our earnings release. We believe these 2 non-GAAP metrics are useful in evaluating our reported results.

Now I'll turn the call over to Jeff.

Jeffrey R. Feeler

Thank you, Eric, and good morning, everyone. I'll start the morning -- this morning call with a few summary comments on our record results that were released yesterday. I'll then turn the call back to Eric, who will provide more details on those financial results. I will close out the call with comments regarding the business outlook for the balance of 2013, including our earnings guidance. After that, we'll open up the call for questions and comments.

For those following along on our webcast presentation, please see Slide 5. The second quarter was an exceptional quarter for the company. We posted record quarterly financial results across our diversified product offering.

Treatment and Disposal revenue was up 8% over the prior year levels on improved pricing from a combination of service mix and general pricing increases.

Our project-based work or Event Business grew solidly at 7% during the quarter. Growth in our Event Business was driven by increased activity in the commercial sector that more than offset the anticipated softness in our government sector.

Our Base Business grew 5% during the quarter, including some loss Safety-Kleen business after it was acquired by a competitor. Our Base Business grew approximately 7% during the quarter and was in line with our expectations.

We were able to expand our Treatment and Disposal gross margin to 49% despite lower landfill volumes, as a result of favorable service mix, as well as margin expansion at our Stablex US Ecology Michigan and thermal recycling services.

All of our facilities contributed to these record results. Regionally, we saw the strongest growth in the northeast and southwest with Stablex and Nevada well exceeding our expectation. The combination of these factors help deliver record operating income of $12.4 million during the quarter. 13% above what was a record quarter in 2012.

Adjusted EBITDA also grew an impressive 10% over the same quarter last year. Adjusted earnings per share, which excludes foreign currency translation charges and business development expenses, grew an impressive 13% to $0.44 per diluted share.

So far, first half of 2013 has delivered exceptional financial results, as summarized on Slide 6, including a 14% growth in Treatment and Disposal revenue, Treatment and Disposal gross margins of 46%, a 27% growth in operating income, adjusted EBITDA growth of 19% and adjusted earnings per share of $0.76, representing a 27% growth over the same period last year.

Our key financial return metrics remained at or near industry-leading levels, with us delivering a 15.6% return on invested capital, a 12.3% return on total assets and a 24.2% return on shareholder's equity.

Overall, I'm extremely pleased with the solid execution across the facilities and business lines. Our end markets continue to be healthy and our project pipeline remains strong, which should translate into a strong second half of the year.

I'll now turn the call back to Eric for the financial details.

Eric L. Gerratt

Thank you, Jeff. As shown on Slide 7, and as Jeff mentioned, second quarter 2013 revenue was up 15% to $45.8 million. This was driven by higher Treatment and Disposal revenue and higher Transportation revenue. Organic Treatment and Disposal revenue was up 2% in the quarter, excluding US Ecology Michigan. We disposed of 253,000 tons in the second quarter of 2013, down 3% from 261,000 tons disposed in the second quarter last year.

Excluding US Ecology Michigan, volumes declined 15% in the second quarter of 2013, compared to the second quarter last year. The volume decline was primarily the result of lower shipments from the U.S. Army Corps of Engineers and other Event Business in Texas that benefited prior-year results.

Our average selling price, or ASP, increased 13% in the second quarter of 2013 over the same period last year as a result of a more favorable service mix and general price increases.

Slide 8 breaks down our Base and Event Business over the last 6 quarters, excluding US Ecology Michigan. Recurring Base Business contributed 63% of Treatment and Disposal revenue during the second quarter of 2013. Base Business revenue was 5% higher than the second quarter last year. Event Business was 37% of Treatment and Disposal revenue, up 7% from the second quarter last year.

Slide 9 breaks down Treatment and Disposal revenue for both Base and Event Business by customer category. As with the previous slide, US Ecology Michigan is excluded. Treatment and Disposal revenue from private cleanup events increased 113% in the second quarter of 2013, compared to the same period last year. This increase primarily reflects shipments from a nuclear fueled fabrication decommissioning project and an East Coast cleanup project in the second quarter of 2013.

Our Refinery business was up 75% quarter-over-quarter. This increase reflects higher landfill disposal volumes and improved pricing on thermal recycling project sourced directly from refinery customers.

Treatment and Disposal revenue from third-party waste brokers was up 2% in the second quarter of 2013 over the second quarter of 2012. This reflects increased shipments across the diverse range of waste generators directly served by our multiple broker customers, including higher volumes of brokered thermal recycling projects.

Thermal recycling business may be included in our refinery, broker or other industry category depending on who our customer is. Thermal recycling revenue declined 10% to $3.4 million in the second quarter of 2013. This was driven by a 12% decline in volume, which was partially offset by a 3% increase in ASP. The volume decrease was a direct result of product mix. Demand for this service line thus remained strong.

Treatment and Disposal revenue from our Other Industry category decreased 7% over the same quarter last year, reflecting decreased shipments from a broad group of industrial customers.

Our Government Cleanup business decreased 49% in the second quarter of 2013. This decline was primarily due to lower volumes from the U.S. Army Corps of Engineers. Treatment and Disposal revenue from the Army Corps was 62% lower in the second quarter of 2013 than the same period last year.

Continuing to Slide 10, gross profit was $18.9 million in the second quarter of 2013. This was up 9% from $17.3 million in the second quarter last year. Overall, gross margin was 41.3% in the second quarter of 2013, down from 43.3% in the same quarter last year.

Treatment and Disposal gross margin for the second quarter of 2013 was 49%, up from 48.2% in the same quarter last year. This gross margin improvement reflects a more favorable service mix in the second quarter of 2013.

Selling, general and administrative spending, or SG&A, was $6.5 million in the second quarter of 2013. This was up slightly from $6.4 million in the second quarter last year, but down as a percentage of sales from 16% to 14%. The increase primarily reflects a full quarter of SG&A expenses related to our Michigan operation, which was acquired in May of 2012 and the contingency accrual associated with the U.S. GA matter of our Texas facility. These increases were partially offset by lower incentive compensation and business development expenses.

Operating income grew 13% to a quarterly record of $12.4 million for the second quarter of 2013, up from $11 million in the same quarter last year.

Adjusted EBITDA for the second quarter of 2013 was $16.9 million, also a quarterly record and an increase of 10% from $15.4 million in the same period last year. We realized $1.2 million of noncash net foreign currency losses in the second quarter of 2013 on a weaker Canadian dollar. This compared to noncash net foreign currency losses of $921,000 in the second quarter last year.

Net income for the quarter was $7.2 million, or $0.39 per diluted share. Adjusted earnings per share, which excludes a foreign currency loss of $0.05 per share, was $0.44. This was up 13% from adjusted earnings per share of $0.39 for the second quarter last year.

Now turning to year-to-date results on Slide 13. Revenue for the first 6 months of 2013 was $88.7 million. This was up from $73 million in the first 6 months of 2012.

Treatment and Disposal revenue was up 14% in the first half of 2013 over the same period of 2012.

Transportation service revenue was up 92% in the first 6 months of 2013, compared to the same period of 2012, reflecting more bundled transportation and disposal services on our project-based work.

Base Business revenue increased 1% in the first half of 2013 over the first half of 2012, while Event Business was up 25% from the first half of last year.

Our average selling price, or ASP, was up 15% in the first 6 months of 2013, compared to the same period in 2012, and volumes were flat over that same period.

Slide 14 breaks down Treatment and Disposal revenue for both Base and Event Business by customer category. And as with earlier slide, this excludes US Ecology Michigan.

Our Private Cleanup business was up 121%, reflecting shipments from a nuclear fuel fabrication decommissioning project and an East Coast cleanup project in the first half of 2013.

Treatment and Disposal revenue from our refinery customer group increased 51%, reflecting higher landfill disposal volumes and improved pricing on thermal recycling projects sourced directly from refinery customers.

Our Government Cleanup business decreased 30% in the first 6 months of 2013, compared to the same period of last year. This decline was primarily due to lower volumes from the U.S. Army Corps of Engineers.

Treatment and Disposal gross margin for the first 6 months of 2013 was 45.6%, up from 45% in 2012, reflecting a more favorable service mix.

SG&A was $12.2 million in the first half of 2013, up from $12 million in the first half of 2012, but down as a percentage of sales from 16% to 14%.

Operating income grew 27% to $22.1 million in the first 6 months of 2013, compared to $17.4 million in the same period of 2012.

Adjusted EBITDA for the first half of 2013 was $30.8 million, up 19% from $26 million in the first half of 2012.

Net income for the first 6 months of 2013 was $12.6 million, or $0.68 per diluted share, compared to $10.9 million, or $0.60 per diluted share in the first 6 months of 2012.

Adjusted earnings per share grew 27% to $0.76 per share in the first half of 2013 from $0.60 in the first half of 2012.

Slide 18 summarizes our financial position and return metrics. At June 30, 2013, we had $4 million in cash. Borrowings on our credit agreement totaled $43 million, which left $42.4 million available under our credit facility for future borrowings.

During the first 6 months of 2013, we generated $17.7 million of cash from operating activities. We invested $12.5 million in capital projects, paid down our reducing revolving line of credit by $2 million and paid out $3.3 million in dividends to our stockholders.

As Jeff mentioned earlier, our return on invested capital for the 12 months ended June 30, 2013, was 15.6%. Our return on total assets was 12.5%, and return on equity for the same period was 24.2%.

With that, I'll turn the call back to Jeff.

Jeffrey R. Feeler

Thank you, Eric. For those following along with our presentation, I refer you to Slide 19. As I indicated in my opening remarks, I'm very pleased with the performance in the first half of 2013.

Overall, our end markets we serve remain healthy, commercial activity continues to be strong for both Base and Event Business. Looking into the second half of the year, we expect those conditions will continue.

As anticipated, the government sector has been soft and we are not projecting any improvement in this area as budgetary pressures are impacting all government agencies. The bright spot is that these projects are being deferred, not lost, and should benefit future periods.

We expect industrial production to continue to grow in the second half translating into continued Base Business grow.

Our Event Business pipeline remains strong, with multiple cleanup projects under contract and shipping. Several of the projects that we shipped during the first half of the year are expected to increase shipments in the second half with some continuing into 2014.

We continue to see strong demand for our thermal recycling services and are currently scheduled out through September.

The combination of these factors put the company on track for a solid finish to 2013. We are reaffirming our previously issued guidance, a $1.45 to $1.55 per diluted share, or adjusted EBITDA of $62 million to $65 million.

Given the first half performance and continued positive outlook for our business, we expect to end the year towards the upper end of our guidance range. As a reminder, our earnings and adjusted EBITDA guidance excludes any foreign currency translations, gains or losses, as well as business development expenses.

Moving into other modeling guidance, we expect our Treatment and Disposal gross margin to be higher than our original estimates of 43% to 45%, primarily as a result of more favorable product mix, as well as margin expansion at our Canadian operations. For modeling purposes, we would recommend using a range of 45% to 47% for the balance of the year.

We expect our effective income tax rate to range from 36% to 37% for the full year of 2013. This is down from our previous guidance of 39%, reflecting the strong Canadian operation and its overall lower tax rate.

On the capital expenditure side, we continue to expect 2013 capital spending to approximate $23 million, consistent with our previous guidance. We have completed construction of additional landfill space in Texas and construction activities are underway in Nevada and Québec. We continue to invest in property and equipment upgrades at all of our facilities to maintain the service excellence we are known for, as well as operational efficiencies that we expect.

Strategically, we remain focused on driving revenue and building business through a combination of organic and carefully targeted acquisitions. We continue to look for high-quality assets, like Stablex and US Ecology Michigan, that expand our disposal network or expand our service offerings.

We continue to be pleased with the results and execution of those 2 acquisitions and their solid contributions to our growth. The current deal flow for acquisitions continues to improve, and we are dedicating additional resources to evaluate these opportunities. Supplementing our organic growth we targeted, acquisitive growth has been and will continue to be a long-term strategy for us.

In closing, I am very pleased with the second quarter and first half results. We are excited to continue this momentum into the second half of the year and expect to close out 2013 on a strong note. We continue to believe we have best-in-class assets and permits, combined with the focus strategy that provides a platform for us to deliver sustainable, long-term shareholder value.

With that, I'll turn the call back to the operator to open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] First question comes from the line of Rich Wesolowski with Sidoti & Company.

Richard Wesolowski - Sidoti & Company, LLC

In the -- onto the questions, in the first half, the Treatment and Disposal revenue per ton is running about 1/3 above where you were a couple of years ago. And I understand that you've raised base prices in parts since then. I was hoping you could give us even some anecdotal examples of where the favorable service mix also boosts that ASP's stat, and maybe comment on the degree which stat's predictable or sustainable into 2014?

Jeffrey R. Feeler

Sure. Rich, this is Jeff. I'll start out and I'll let Steve supplement where needed. When we really looked back at the map that you're running with T&D revenue divided by tonnage, and running the higher rates compared to historical levels, really, there's been a big positive impact, really, since 2010 from a number of factors, including the addition of Stablex into the mix, really, advancements in our rheological programs and take advantage of some of those permit modifications that were put in place back in 2008. We'd also seen a significant growth in our thermal recycling services, which also would drive up some of those ASP, which all are sustainable in our view. Operationally, we continue to improve our containerized waste handling system, which, on a per ton equivalent basis, actually drive the higher price per ton. And that's really attributed to the teams being able to process more throughput at each one of our facilities. So all of those factors are sustainable in our view into 2014 and beyond.

Richard Wesolowski - Sidoti & Company, LLC

Big help. The Event through the pipeline has been strong for a number of quarters now. We saw another 7% increase in the Event revenue in the June quarter. Would you characterize the Event outlook as still expanding from where it was earlier in the year? Or has the pipeline steadied at the recent strong pace?

Steven D. Welling

Rich, this is Steve. We don't exactly look at it that way. What I can tell you is the pipeline remained strong. We're seeing some increased commercial activity, which is making up for government work being done right now. The positive news about that is we're expecting government to increase again in future periods. So that combined with additional commercial work, we're expecting strong 2014 and second half of the year.

Richard Wesolowski - Sidoti & Company, LLC

Great. And then, lastly, with respect to guidance. I understand management's strategy in laying out the numbers and remaining prudent, but even the high end of the range implies a decline for the second half of the year ago, and I'm wondering, with regard to the uncertainty you see in the second half profit, if it relates more to the profitability of jobs that you already have in process or rather the pace of wins that you haven't yet booked?

Jeffrey R. Feeler

Yes, Rich, this is Jeff. So really comparing the second half more to the first half is we're at a minimum thinking that the second half is going to be equal to the first half with positive -- with slightly better improvement based on the pipeline we're seeing right now. The projects that are shipping and benefited the first half, several of those are on the multi-year awards that will continue to ship at increasing rates in the second half. And so, we're actually seeing some strong momentum moving into the third and fourth quarter of the year.

Richard Wesolowski - Sidoti & Company, LLC

Great. So just alternatively stated this was not an atypically front-loaded 2013 for Ecology?

Jeffrey R. Feeler

No.

Operator

And we have another question for you. This one is from Brian Butler of Wunderlich Securities.

Brian J. Butler - Wunderlich Securities Inc., Research Division

First one is on the Event Business. Kind of based on your statement, you expect the projects that are multi-period to increase the shipments in the second half of 2014. Can you put any, I guess -- could you quantify that as kind of what kind of growth that represents, just increased shipments from the current Event Business that's running?

Jeffrey R. Feeler

Brian, we really can't put any quantification around those individual projects. We don't get into project-by-project details. What I can tell you is that those projects, what we've been hearing from the project teams there, is that those are expected to increase shipments in the second half of the year. Outside of those, our pipeline still looks robust to where there's enough replacement opportunities for those projects that we have completed in the first half. So the pipeline remains healthy. We see momentum going into the second half of the year that will easily replicate first half performance, if not, be slightly better.

Brian J. Butler - Wunderlich Securities Inc., Research Division

Okay. And then, on the Base Business, when you think about that second half growth, the first half was kind of average, somewhere in that 2%, 3%. In the second half, how does that look on a percent growth basis, third and fourth quarter, when you account for the Safety-Kleen piece, is that running at 7%? Or is it something less once you account for kind of the impact of the Safety-Kleen or any other pieces of Base Business?

Jeffrey R. Feeler

We're still seeing our end markets being pretty strong with regards to Base Business. The 5% growth we saw in the first or in the second quarter really had some noise in it with regard to the decline in the Safety-Kleen business that we anticipated with -- would be lost with the acquisition by one of our competitors. We also had some -- had some broker business that was more project based over a 4-year period that actually completed. And so, when you strip out some of the noise in our Base Business, we actually saw that grow close to 10% during the quarter. I -- looking out into the second quarter, we anticipate growth. I still think it's going to be in the low -- or in the mid-single digits to low double digits for Q3 and Q4, and we'll probably end up the full year right around the mid-single digits.

Brian J. Butler - Wunderlich Securities Inc., Research Division

Full year is kind of -- okay, some single digits. And then, on the SG&A level, was that $6.5 million, is that the right run rate going through the next -- the third and the fourth quarter?

Eric L. Gerratt

Yes, Brian, this is Eric. I think that in the second quarter, we had a little bit higher SG&A for -- due to a couple of things. As we mentioned in the prepared remarks, we had a contingency accrual related to an EPA matter. That was $240,000-ish during the quarter. I think as we lookout into Q3 and Q4, we expect SG&A to be between $6 million to $6.2 million, with a run rate for the full year to be between $24 million and $25 million.

Operator

We have another question from the line of Rich Wesolowski of Sidoti.

Richard Wesolowski - Sidoti & Company, LLC

Quick come back. Eric, I apologize if I missed it, but did you mention how much revenue the company generated in Canada in the quarter?

Eric L. Gerratt

I did not. It will be disclosed in our 10-Q, but I can give you the numbers right now. So in the second quarter of '13, Stablex did about $13.2 million total revenue.

Richard Wesolowski - Sidoti & Company, LLC

And as you look at the profitability of Stablex, it was a goal of management to improve that from the year 1. Could you characterize how far are you along in between where you were then and your goal? Even if it's halfway, more work ahead versus more work behind, et cetera?

Jeffrey R. Feeler

Yes, Rich, this is Jeff. The team effort at Stablex has done a fabulous job at driving operational excellence and improvements into the organization from the cost side, which at the end of the day, that's the one area of the business we have ultimate control on. Product mix up there and really, the markets that in the northeast of kind of North America had been strong, stronger than what we had anticipated this year. So we've seen some good margin expansion there. A lot of it is sustainable, but then also, product mix is actually helping out the overall margin up there. So right now, we're probably ahead of plan in that area with regard to sustainable levels of margin expansion at that facility.

Richard Wesolowski - Sidoti & Company, LLC

Okay. Is there still room for higher profit from -- in improving waste mix in the thermal unit done in Texas, or has that run its course?

Jeffrey R. Feeler

Yes, Rich, this is Jeff again. There are opportunities for continued margin expansion with the thermal unit, especially as we go through the regulatory process and get our Subpart X permit, is we're constantly trying to optimize the mix into that unit and make sure that we can drive as much throughput, as well as driver as much margin through there as possible.

Richard Wesolowski - Sidoti & Company, LLC

Okay. And I know I'm jumping around a bit, but with Westinghouse, I'm wondering if the contract -- the first phase that you are working on is turning out to be shipping more wastes in aggregate than you first signed up for?

Steven D. Welling

Correct. We're about 1/3 of the way through, Rich, where we are right now. And we're expecting increased shipments in the second half from what we did in the first half.

Richard Wesolowski - Sidoti & Company, LLC

Okay. How about the total volume of the waste that's being dug up? Is that similar to what was originally thought? Or has it risen as the project has unfolded?

Steven D. Welling

It has risen since the project unfolded for sure.

Richard Wesolowski - Sidoti & Company, LLC

Okay. And then, lastly, this is kind of an out there question because it's likely not to affect you in the next few quarters at the very least, but I read that Waste Management has received an initial permit to expand their Kettleman Hill site [ph] by half after few years of struggling with the opposition there. Comment -- would you comment on how the expansion of that nature would affect your company and maybe the industry total?

Steven D. Welling

Sure, Rich. This is Steve again. First of all, my understanding of where they are today is the state has recommended the permit. There's still a process to go through, which will involve multiple public meetings, and the outcome of that, you can watch that along with me and keep me posted. But at this point, we're not sure. Waste management is a competitor of ours all throughout the country and they've been a competitor in California for many years. So in terms of how that will effect us, I think it's somewhat business as usual. But if they open up next year or the year after, I mean, we'll just have to watch it closely.

Operator

We have another question for you. This one is from Rob Stone at Cowen and Company.

Robert W. Stone - Cowen and Company, LLC, Research Division

A couple of questions, if I may. First of all, you mentioned that Event Business and commercial activity is offsetting the expected softness in government business, but the projects are deferred, not lost, and you are expecting government business to come back in due course. I was wondering if you could just add a little bit more to that in terms of when does it come back? What is the thing that triggers that?

Steven D. Welling

This is Steve. A lot of release federal budget, so a good example is the FUSRAP program. The last couple of years, they have been running a budget of approximately $109 million, $104 million to $109 million under the 2013 budget that got cut back into the high 80s, I believe at $87 million or $89 million. So that has reduced some of the volumes under that program. We understand that the President's proposal for 2014 would be back to that $109 million -- $104 million to $109 million range. So that's not approve yet, obviously, but that's something we'll be watching.

Robert W. Stone - Cowen and Company, LLC, Research Division

Yes, of course, they get a new budget every year, so there's more money to spend. On CapEx, based on year-to-date and the guidance, your cadence is fairly steady, first half to second half, maybe slightly lower in the second half. Do you have a view on what you might spend for CapEx next year?

Jeffrey R. Feeler

That's a good question, Rob. This is Jeff. So CapEx for next year, we're still not through our full planning cycles there, but we would expect it to be slightly lower than what we thought this year. We had some, I'll call them unusual activity in our CapEx spending where we were -- had an opportunity to expand and buy additional property around our Texas facility, which was several millions of dollars. And then, we also had a pretty high carryover from the previous years. So depending on how we ultimately get our projects aligned and what we end up spending for 2013. If we get everything done that we expect to get done this year, we would expect 2014 to be lower, probably in the low, slightly below $20 million next year.

Robert W. Stone - Cowen and Company, LLC, Research Division

Okay. And my final question is on thermal recycling. I think you mentioned that the business was down a bit, but you continue to see strong demand, how do you think about a trendline there? Is there any element of seasonal -- or is that quarterly-driven trend to that demand?

Jeffrey R. Feeler

There tends to be some seasonality to the business because a lot of the waste is generated during turnaround season. That being said, we've been very consistent in the scheduling of that unit. There's been high demand. Our volumes that we've been processing is actually been fairly consistent, averaging right around the 2,500 tons per month. As I look to the balance of the year, I see about the same thing. The -- similar to our landfill business, the thermal business is a little more complicated, mix really drives process volumes. And so, there's certain waste streams that just take a lot more time to process throughput. And there's other waste streams that has higher throughput. And the market conditions right now, what we see out there is we tend to be getting a little higher mix that's requiring more processing time. And so, as I look to the balance of the year, I see right around that 2,500 tons a month, strong demand were scheduled through the end of Q3, scheduling into Q4 right now. As we continue to execute on our -- and giving our Subpart X permit, it's going to increase the opportunities that we see to be able to optimize and actually expand our addressable market to get some more material to be able to increase throughput on that unit.

Operator

There's no further questions at the moment. [Operator Instructions]

Eric L. Gerratt

Well, operator, it looks like we don't have any more questions.

Operator

No, there's no more questions.

Eric L. Gerratt

Okay, we're good. Well, thank you so much for all that attended the call today. We appreciate your interest in US Ecology and we look forward to updating you in October.

Operator

Thank you. So thank you for your participation in today's conference. Ladies and gentlemen, this concludes the presentation. You may now disconnect. Good day.

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