PHILADELPHIA, PA — Harsco Corporation (NYSE: HSC) this week reported first quarter 2023 results. On a U.S. GAAP basis, the first quarter of 2023 diluted loss per share from continuing operations was $0.12, after unusual items including a net gain on a lease to relocate a site. Adjusted diluted loss per share from continuing operations in the first quarter of 2023 was $0.11. These figures compare with first quarter of 2022 GAAP diluted loss per share from continuing operations of $0.09 and adjusted diluted loss per share from continuing operations of $0.01.
GAAP operating income from continuing operations for the first quarter of 2023 was $29 million. Adjusted EBITDA was $63 million in the quarter, compared to the Company’s previously provided guidance range of $45 million to $50 million.
“Harsco delivered another quarter of strong operating and financial performance, as we continued to benefit from steady demand for our environmental solutions and focused execution by our teams across the company,” said Harsco Chairman and CEO Nick Grasberger. “Our results were supported by healthy underlying volumes and favorable cost performance relative to our earlier expectations, with operating costs aided by proactive internal initiatives. These positive financial results, coupled with our cash management, have led to a sequential decrease in our leverage, a trend we expect to continue in the coming quarters.
“Looking forward, demand within our key markets remains solid, and we anticipate continued positive momentum in both Clean Earth and Harsco Environmental. As a result, we are raising our outlook for the year. Business performance at Rail is also trending positively and our efforts to simplify and de-risk the business are ongoing, as we continue to position the business for a sale. Overall, we are encouraged by our progress and expect that continued execution of our key priorities will position Harsco well to create significant shareholder value in the coming years.”
Harsco Corporation—Selected First Quarter Results
| ($ in millions, except per share amounts) | Q1 2023 | Q1 2022 | ||||||
| Revenues | $ | 496 | $ | 453 | ||||
| Operating income from continuing operations – GAAP | $ | 29 | $ | 8 | ||||
| Diluted EPS from continuing operations – GAAP | $ | (0.12 | ) | $ | (0.09 | ) | ||
| Adjusted EBITDA – Non GAAP | $ | 63 | $ | 49 | ||||
| Adjusted EBITDA margin – Non GAAP | 12.7 | % | 10.8 | % | ||||
| Adjusted diluted EPS from continuing operations – Non GAAP | $ | (0.11 | ) | $ | (0.01 | ) | ||
Consolidated First Quarter Operating Results
Consolidated revenues from continuing operations were $496 million, an increase of 9 percent compared with the prior-year quarter. Both Harsco Environmental and Clean Earth realized an increase in revenues compared to the first quarter of 2022 due to higher demand for environmental services and higher services pricing. Foreign currency translation negatively impacted first quarter 2023 revenues by approximately $13 million (3 percent), compared with the prior-year period.
The Company’s GAAP operating income from continuing operations was $29 million for the first quarter of 2023, compared with GAAP operating income of $8 million in the same quarter of 2022. Meanwhile, adjusted EBITDA totaled $63 million in the first quarter of 2023 versus $49 million in the first quarter of the prior year. Clean Earth achieved significantly higher adjusted EBITDA relative to the prior-year quarter, while Harsco Environmental’s adjusted EBITDA was below the comparable quarter of 2022 as anticipated.
First Quarter Business Review
Harsco Environmental
| ($ in millions) | Q1 2023 | Q1 2022 | ||||||
| Revenues | $ | 273 | $ | 262 | ||||
| Operating income – GAAP | $ | 22 | $ | 18 | ||||
| Adjusted EBITDA – Non GAAP | $ | 44 | $ | 48 | ||||
| Adjusted EBITDA margin – Non GAAP | 16.1 | % | 18.4 | % | ||||
Clean Earth
| ($ in millions) | Q1 2023 | Q1 2022 | ||||||
| Revenues | $ | 222 | $ | 191 | ||||
| Operating income (loss) – GAAP | $ | 16 | $ | (1 | ) | |||
| Adjusted EBITDA – Non GAAP | $ | 27 | $ | 10 | ||||
| Adjusted EBITDA margin – Non GAAP | 12.3 | % | 5.3 | % | ||||
Cash Flow
Net cash provided by operating activities was $37 million in the first quarter of 2023, compared with net cash used by operating activities of $34 million in the prior-year period. Free cash flow (excluding Rail) was $12 million in the first quarter of 2023, compared with $(29) million in the prior-year period. The increase in free cash flow compared with the prior-year quarter is mainly attributable to higher cash earnings, the timing of certain payments and lower net capital spending.
2023 Outlook
The Company has increased its 2023 guidance to reflect its positive business momentum and improved visibility in each of its businesses, relative to the outlook provided with the Company’s fourth quarter 2022 results. Comments by business segments are as follows:
Harsco Environmental adjusted EBITDA is projected to be modestly above 2022 results. For the year, higher services pricing, restructuring benefits, site improvement initiatives and new contracts are expected to be partially offset by FX translation impacts and lower commodity prices.
Clean Earth adjusted EBITDA is expected to significantly increase versus 2022, as a result of higher services pricing as well as cost reduction and operational improvement actions, offsetting the impacts of continued labor-market and supply-chain (disposal) tightness.
Corporate spending is anticipated to be higher relative to the prior year due to the normalization of certain expenditures, including travel and higher planned incentive compensation.
Lastly, Harsco Free Cash Flow is now projected to be within a range of $25 million to $45 million for the year, which represents a significant improvement in underlying cash flows due to higher cash earnings and working capital (adjusted for the Accounts Receivable Securitization benefit in 2022).
| 2023 Full Year Outlook (Continuing Operations) |
Current | Prior |
| GAAP Operating Income/(Loss) | $101 – $116 million | $74 – $94 million |
| Adjusted EBITDA | $260 – $275 million | $240 – $260 million |
| GAAP Diluted Earnings/(Loss) Per Share from Continuing Operations | $(0.33) – $(0.54) | $(0.50) – $(0.80) |
| Adjusted Diluted Earnings/(Loss) Per Share from Continuing Operations | $(0.12) – $(0.33) | $(0.23) – $(0.52) |
| Free Cash Flow | $25 – $45 million | $20 – $40 million |
| Net Interest Expense | $92 – $95 million | $91 – $95 million |
| Account Receivable Securitization Fees | $10 million | $9 – $10 million |
| Pension Expense (Non-Operating) | $20 – $22 million | $20 – $22 million |
| Tax Expense, Excluding Any Unusual Items | $12 – $15 million | $8 – $11 million |
| Net Capital Expenditures | $125 – $135 million | $125 – $135 million |
| Q2 2023 Outlook (Continuing Operations) | ||
| GAAP Operating Income | $24 – $31 million | |
| Adjusted EBITDA | $65 – $72 million | |
| GAAP Diluted Earnings/(Loss) Per Share from Continuing Operations | $(0.07) – $(0.16) | |
| Adjusted Diluted Earnings/(Loss) Per Share from Continuing Operations | $(0.01) – $(0.09) | |
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