Harsco Corporation Reports First Quarter 2023 Results

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

Note: Adjusted diluted earnings (loss) per share from continuing operations and adjusted EBITDA details presented throughout this release are adjusted for unusual items; in addition, adjusted diluted earnings per share from continuing operations is adjusted for acquisition-related amortization expense. See harsco.com for the definition of these non-GAAP measures.

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

Harsco Environmental revenues totaled $273 million in the first quarter of 2023, an increase of 4 percent compared with the prior-year quarter. This change is attributable to increases in both volume and price, partially offset by the impact of FX translation. The segment’s GAAP operating earnings and adjusted EBITDA totaled $22 million and $44 million, respectively, in the first quarter of 2023. These figures compare with GAAP operating income of $18 million and adjusted EBITDA of $48 million in the prior-year period. The year-on-year change in adjusted earnings reflects the above-mentioned items as well as the impact of select site exits, higher operating costs due to inflation, and certain items (i.e. recovery of Brazil sales taxes) in the prior-year quarter which were not repeated in 2023.

Clean Earth

Clean Earth revenues totaled $222 million in the first quarter of 2023, a 17 percent increase over the prior-year quarter as a result of higher volumes and services pricing. The segment’s GAAP operating income was $16 million and adjusted EBITDA was $27 million in the first quarter of 2023. These figures compare with a GAAP operating loss of $1 million and adjusted EBITDA of $10 million in the prior-year period. The year-on-year improvement in adjusted earnings reflects higher volumes and price as well as cost reduction and efficiency initiatives, partially offset by inflationary pressures on certain expenditures such as labor and disposal. As a result, Clean Earth’s adjusted EBITDA margin increased to 12.3 percent in the first quarter of 2023 versus 5.3 percent in the comparable quarter of 2022.

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).

Additional information can be found at www.harsco.com.

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