US Ecology, Inc.
Q2 2016 Earnings Call Transcript

Published: 29 Jul 2016

[Operator:]

Good morning, and welcome to the US Ecology Second Quarter 2016 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today’s event is being recorded. I would now like to turn the conference over to Eric Gerratt, Chief Financial Officer. Please go ahead, sir.

[Eric Gerratt:]

Good morning and thank you for joining us today. Joining me on the call this morning is Chairman and Chief Executive Officer, Jeff Feeler; and Executive Vice President of Sales and Marketing, Steve Welling. 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 yesterday’s earnings release and our call and presentation today, we refer to adjusted EBITDA, pro forma adjusted EBITDA and adjusted earnings per share. These metrics are not determined in accordance with Generally Accepted Accounting Principles and are therefore are susceptible to varying calculations. A definition, calculation and reconciliation to the financial statements of adjusted earnings per share, adjusted EBITDA, and pro forma adjusted EBITDA can be found in Exhibit A of our earnings release. We believe these non-GAAP metrics are useful in evaluating our reported results and our 2016 guidance. With that, I’d like to turn the call over to Jeff.

[Jeff Feeler:]

Thank you, Eric, and good morning, everyone. I’ll start this morning’s call with a few highlights on our second quarter results released before turning the call back Eric, who will provide more additional details on our financial results. I’ll then close out the call with a review of our 2016 outlook and then open up the call for her questions. For those who are following along with the webcast presentation, I direct your attention to Slide 5. As announced yesterday US Ecology reported financial results that did not meet our expectations, despite the many positives in our business, which included another solid quarter of growth for our Field & Industrial Services business and continues stability in our Environmental Services business. The quarter was overshadowed by slower-than-expected project based Event business. We saw projects expected to ship during the second quarter being delayed. Some are shipping now in the third quarter, while others are expected to be shipping here in the near future. As announced yesterday, second quarter net income was $8.9 million or $0.41 per diluted share. Adjusted earnings per share, was $0.37, which excludes gains from divestitures, business development expenses and foreign currency. This compares to adjusted earnings per share of $0.41 for the second of 2015. Adjusted EBITDA for the second quarter of 2016 was $27.7 million, compared to $31.4 million for the same period last year. Pro forma adjusted EBITDA, which excludes the Allstate financial results and business development expenses, was $28.1 million for the second quarter of 2016, compared to $30.5 million for the same period last year. Moving on to our Environmental Services segment highlights on Slide 6. Base Business performance tracked with expectations, equally net of the prior year. This partially offset the stronger-than-expected Base Business results that we saw on the first quarter of this year, bringing our first-half or year-to-date Base Business growth of 3% over the same period last year. Looking at specific verticals, we saw growth in our refining, general manufacturing and utility verticals over the second quarter last year. We still continue to see headwinds, however in the chemicals metals manufacturing verticals due to challenges with these generators are fundamental businesses. Our event business experienced to 32% decline during the second quarter of 2016 compared to the same quarter last year, much of this decline was expected as recycled to large projects that we’re shipping last year. Excluding the revenue associated from the now completed east coast clean-up project and the nuclear fuel fabrication decommissioning project. Our event business was down 13% in the second quarter of 2016 compared to the same quarter last year. We believe much of the shortfall is directly related to the delays and deferments that we experienced during the quarter. Shifting to Slide 7, our Field & Industrial Services business was again a bright spot for the quarter. Revenue for this segment was $39.6 million, when excluding the $16.9 million of revenue contributed from divested Allstate business in the prior year. This segments revenue grew 10% in the second quarter of 2016. Likewise, we thought strong 13% growth in segment adjusted EBITDA in the second quarter on the higher revenue and continued margin expansion. Adjusted EBITDA margin was up 40 basis points to 13%. Moving on to Slide 8, though, I was disappointed in the quarterly results, we continue to remain strategically focused on our core assets. During the quarter, we further streamlined the organization by divesting non-hazardous waste facility in Augusta, Georgia. We also acquired Environmental Services, Inc., based out of Ontario, Canada. This is a great asset that aligns with our strategy of adding primitive facilities complementary services and new technologies to leverage our already strong infrastructure and expand our service offerings to new geographic markets. Also during the quarter, we announce the authorization of a $25 million stock repurchase program. This program is designed to take advantage for opportunistic stock repurchases in the open market. We believe the strong cash flow generation, we have consistently demonstrated in the strengthening of our balance sheet will allow us to continue organic investments and strategic acquisitions, like, the one just completed, while returning capital to our stockholders, the stock repurchases and to our existing dividend. With that, I’ll turn the call back to Eric.

[Eric Gerratt:]

Thanks, Jeff. As shown on Slide 10, revenue for the second quarter of 2016 was $122.4 million, this was down from $139.7 million in the second quarter of 2015. Revenue for the Environmental Services segment for the second quarter was $82.8 million compared to $87 million in the second quarter of last year. The 5% decline was driven by lower treatment in disposal revenue, which was partially offset by higher transportation service revenue. Recurring base business for the Environment Services segment was flat compared to the second quarter of last year and represented 84% of treatment and disposal revenue. Event business for the Environment Services segment decreased 32% from the second quarter last year. The Field & Industrial Services segment deliver revenue of $39.6 million in the second quarter, down from $52.7 million in the second quarter of 2015, which included $16.9 million from the divested Allstate business. Excluding the divested Allstate business, FIS revenue increased approximately 10% due to growth across multiple service lines, including small quantity generation, the managed services group, remediation and industrial services. Slide 11, breakdowns our Environmental Services treatment and disposal revenue for both base and event business by industry verticals. Base business increased in the refining, general manufacturing, utilities and other categories. These increases were offset by declines in the broker/TSDF, transportation, chemical manufacturing, and government verticals during the quarter. The 32% decline in event business was primarily driven by decreases in the chemical manufacturing and refining verticals. As expected the most significant decline in the chemical manufacturing group stemmed from expected reductions in volumes from a large east coast remedial clean-up project and the nuclear fuel fabrication decommissioning project. Turning to Slide 12. Gross profit was $36.9 million in the quarter, down from $41.5 million in the same quarter last year. Our environmental services segment contributed $30.6 million in the second quarter 2016, compared to $32.6 million in the same quarter last year. This decrease was due primarily to lower treatment and disposal volumes. Treatment in disposal margins were flat at 42% for both the second quarters of 2016 and 2015. Gross profit for the field and industrial services segment was $6.3 million in the second quarter of 2016, compared to $8.9 million in the second quarter last year. The decline was primarily due to the divested Allstate business which contributed gross profit of $3.3 million in the second quarter of 2015, excluding the decline related to the Allstate business. Field and industrial services gross profit increased approximately 11% in the second quarter of 2016, compared to the second quarter last year. Selling, general and administrative spending or SG&A was $19.8 million in the second quarter of 2016. This was down 13% from $22.7 million in the second quarter last year, which included $3.7 million of SG&A from Allstate. Excluding the divested Allstate business SG&A increased approximately 4%, due to higher labor and benefit costs in the second quarter of 2016, compared to the same period in 2015. Operating income was $17.1 million in the second quarter, up 41% from operating income of $12.1 million in the same quarter last year. As a reminder, we recorded a non-cash goodwill impairment charge of $6.7 million in the second quarter of 2015. Interest expense for the second quarter decreased to $4.3 million compared to $5.4 million in the same quarter last year. The decrease was primarily result of lower debt levels in the second quarter of this year. Turning to Slide 13. The company’s effective income tax rate for the second quarter was 39.6% up from 36.4% in the second quarter of last year, excluding the nondeductible impairment charge. This increase primarily reflects the lower portion of earnings from our Canadian operation, which are taxed to the lower corporate tax rate. We reported net income of $8.9 million and diluted earnings per share of $0.41 in the second quarter of 2016. This was up from $2.1 million and $0.10 per diluted share in the same quarter last year. Adjusted earnings per share was $0.37 in the second quarter of 2016, down from $0.41 per share in the second quarter last year. Adjusted EBITDA for the second quarter was $27.7 million, down from $31.4 million in the second quarter of 2015. Pro forma adjusted EBITDA which excludes the divested Allstate business and business development expenses were $28.1 million in the second quarter of 2016, which was down 8% from $30.5 million in the second quarter of 2015. Turning now to results for the first six months of 2015 on slide 14. Total revenue was $235.7 million compared to $276.4 million in the first six months of 2015. The divested Allstate business contributed $30.9 million revenue in the first six months of 2015. Revenue for the environmental services segment was $164.3 million compared to $174.4 million in the first six months of 2015. The field and industrial services segment delivered revenue of $71.4 million in the first six months of 2016, compared to $102 million in the same period of 2015. Net income for the first six months of 2016 was $16.5 million or $0.76 per diluted share, compared to $8 million or $0.37 per diluted share for the first six months of 2015. Adjusted earnings per share which excludes the gain of on sale of divested businesses, goodwill impairment charges. The divested Allstate business foreign currency translation and business development expenses was $0.69 for the first six months of 2016. this compared to $0.77 for the same period of 2015. Adjusted EBITDA was $53.9 million compared to $58.7 million for the first six months of 2015. Pro forma adjusted EBITDA which excludes the divested Allstate business and business development expenses was $54.3 million for the first-half of 2016, compared to $58.4 million for the first-half of 2015. Turning to Slide 15. We generated $38.7 million of cash from operations in the first six months of 2016. We also invested $14.5 million in capital projects, paid down a $11.5 million on our long-term debt and paid up $7.8 million in dividends to our stockholders. Our balance sheet continues to improve with net borrowings of $279.9 million at June 30, 2016. Return on invested capital for the 12 months ended June 30, 2016 was 6.4%. Return on assets was 4.2% and return on equity for the same period was 13.2%. With that, I’ll turn the call back to Jeff.

[Jeff Feeler:]

Thank you, Eric. As summarized on slide 16 and as we announced in yesterday’s press release, we are guiding to the low-end of our previously issued 2016 earnings guidance as a result, of recent project delays. As a reminder, our 2016 guidance called for adjusted earnings per share ranging between $1.80 to $1.95 per diluted share and adjusted EBITDA ranging from $126 million to $132 million. Our guidance excludes any impact from foreign currency translation gains or losses, business development costs or other unusual nonrecurring transactions. Interest expense for the second-half of the year is expected to approximate the first-half. As a result of timing and lower anticipated debt pay down. Our effective income tax rate is expected to approximate 39% for the full year of 2016. We are also reviving our expected capital expenditures downward slightly. And now expect the total capital spending to range between $34 million and $37 million. And we currently expect to be at the low-end of this range too. As we look at the underlying business conditions in each segment, base business for our environmental services segment is tracking to plan and we are reaffirming our expectations of base business will grow in the low single digit range. Though, we expect a substantial improvement in our event business over the balance of the year. Project delays are resulting and thus tempering our expectations. Though project deferrals are inherent in our business, we have seen a heightened level in 2016 and are now expecting that they will continue. Thereby, pushing some of the revenue and volume into 2017. In addition, one of our larger multi-year projects has grown in size and complexity, which is resulted in a regulatory review. Normally, this is a positive for our business and has the potential for future services. However, in many cases, a scope change results in shipment delays, as the customer works with regulators to potentially revise work plans and shipment schedule. As a result of this review, we believe it’s likely that some of the volume that we had anticipated here in 2016 was shipped to 2017. As for the pipeline, there continues to be good opportunities in the marketplace that we’re actively bidding on, with new opportunities emerging daily. However, compared with - comparing current market conditions with our expectations when we initiated guidance back in February, conditions appear somewhat softer with fewer opportunities. For the field and industrial services segment, we expect second-half performance to be improved over the first-half with continued focus on revenue quality, cost control and margin enhancement. Further, we continue to see good bidding opportunities that will begin to benefit 2016 with even greater benefits in outer years. Though, I’m disappointed with the second quarter results and our tempered expectations for 2016. Our business outlook remains quite positive. We are performing well, despite likely in two large projects. Our teams continue to execute and deliver on our initiatives driving the business forward. We remain bullish on our multi-year outlook and any delays that were seen in 2016, we believe will be added into that outlook. In the meantime, we are focused on our core assets and looking for key strategic investments to further enhance our market and competitive positioning. This continues to be an exciting time for U.S. Ecology and I look forward to updating you in future quarters. With that operator, please open up the call for questions.

[Operator:]

[Operator Instructions] today’s first question comes from Michael Hoffman from Stifel. Please go ahead.

[Michael Hoffman:]

Hi Jeff, Eric. Thanks for taking my questions.

[Jeff Feeler:]

Good morning Michael.

[Michael Hoffman:]

So you mentioned this in your closing remarks there, just on the base, first-half 3% is there anything that says it’s not three in a second or I mean, you’re creating a range of low-single, but - do you see anything in the context of sort of general business activity, incremental slowdown, do we have a repeat of the inventory correction that happened last fall that - I mean, this isn’t 3% in the second-half.

[Jeff Feeler:]

Yes. We are not seeing that. We’ve given a guide of low-single-digit, so in our mind that could be anywhere from 1% to 5%, depending on your definition of that. 3% is in line with our expectations. When I look at the second-half, do I think it’s going to be 3% in each of the next two quarters, probably not. It doesn’t work that way unfortunately, there is timing in base business as well. But the fact is that when you look at the full year, we still think in the low-single-digits, and I think a 3% range is probably a good estimate to use. It could be less, could be a little bit more.

[Michael Hoffman:]

Okay. And then, on the event side, it’s a precursor to eventually start getting cancellations by slowdown the rate of conversion into - in shipments. So are you seeing rate cancellations, yet or is this truly no, some we need to do or we’re not going to do it yet.

[Steve Welling:]

Michael, this is Steve Welling. Now, we are not really seeing outright cancellations. We just had delays and startup. We had one job in the Midwest, it was supposed to start three months ago, and that actually didn’t start till right after the July 4 for a variety of reasons related to regulatory approvals. And we have other projects that have remedial contractors on-site. And but the piece of work that’s hazardous, that would go to our facility got delayed due to some unforeseen circumstances, when they initially started to dig. So it’s been a wide variety of reasons, but there is no trend that we’re seeing in terms of delays for any specific reasons, it’s just a variety of different things.

[Michael Hoffman:]

And the guidance to - stay in the guidance, but at the lower end, means you have really good visibility on that piece of event that has to keep it in the low end?

[Jeff Feeler:]

Yes, it does. The risks on the low-end of the guidance still continue to stem from delays. And couple of our larger projects that are going through, what I’ll call this regulatory review and continue to have challenges on-site that are outside of our control. If more of that flips into 2017 yes, there is a risk that we could be below the guidance range, but based on what we’re seeing right now. We’re tracking towards the low-end and that’s - based on the information we have today.

[Michael Hoffman:]

Okay. So an indirect competitor in this business had lower guidance yesterday on around this business particularly around the project and event part of it. Now, they don’t have disposal, so they’re at a disadvantage, but they clearly are sending a message that hyper competitive - fewer projects and hyper competitive. How do you frame that market?

[Jeff Feeler:]

This business continues to be competitive, Michael, regardless of cycles. And the commentary with regard to how current market conditions are today versus what we anticipated coming into the year, being a little bit softer is real. We’re seeing less opportunities that are out there. There are still good opportunities and we do have the luxury having some great assets that help us positioned to win those projects. But from - when you really compare and contrast first-half - beginning in the first-half of the year to now, little wider, not enough to - it wouldn’t be enough for us to adjust guidance just from that pre fact alone, but it is a reality in the marketplace and we’re hearing it across the industry. This goes through cycles, probably just a typical cycle we’re going through right now, with some lower growth potentials on the event side of things. But as we look at multi-year, we’re still seeing great opportunities through 2017, 2018 and even into 2019 already.

[Michael Hoffman:]

Okay.

[Eric Gerratt:]

Also, Michael…

[Michael Hoffman:]

Yes, go ahead.

[Eric Gerratt:]

I was going to say that, four of the projects that we’re currently doing, couple that are kicking off and some in progress are actually regulatory negotiated clean-ups. So these are voluntary, they are not necessarily impacted by economy and the generator can’t change their mind and stop shipping. So we’re fairly confident in those projects.

[Michael Hoffman:]

Okay, so when they start they’ll start and then you’re on to the races.

[Eric Gerratt:]

Correct.

[Michael Hoffman:]

Got it. All right. And switching gears to Field & Industrial Services, you’ve always thought that business is going to have a better growth rate than the environmental, 10% is a good place to be or is that better than your thought. How do you think about sort of a pattern in that ex the Allstate?

[Jeff Feeler:]

Yes. We were really pleased with what the field and industrial services group did this quarter. And this is on top of what they did in the first quarter of the year. And so we’re making good traction there. We’re seeing growth and opportunities across all our service lines within that, whether you’re talking pure industrial services. You’re talking our small quantity generation or a managed services group. The teams are focused. The teams are executed. We’re seeing good bidding opportunities. So I think, that’s probably a good growth rate to kind of use. Yes, it’s going to oscillate between quarter to quarter, but we’re focused and we see good opportunities for continued growth in that segment.

[Michael Hoffman:]

And you made terrific progress in the margin. What’s the sort of incremental upside from yours? 15 is sort of a good place to be or can it be 15 to 20?

[Jeff Feeler:]

Yes. Well, that’s a good question. We always like to challenge our teams even more and throughout the 15% of the team and I think they were shocked by that goal and they’re almost hitting that right now. So I still think that this business is 10% to 15%, when you’re hitting on all cylinders and you’re driving volume through those facilities. Yes. You’re going to get on the upper end of that range. We’re cycling through the second quarter. They saw good growth projections there and good opportunities especially in the industrial services side of things and some larger projects that we’re going through for that group. So I think, that’s kind of on the upper end of that. I mean, going forward I would still say 10% to 15% is kind of the target zone. Yes. I would like to see 15% to 20%, but maybe that’s a next year initiative, but this year it’s in the 10% to 15%.

[Michael Hoffman:]

Okay. And then you did initiate an authorization. Can you talk about sort of the philosophy behind when you would use the authorization?

[Jeff Feeler:]

Yes. You know, Michael, the pure stock repurchase program that we put in place was designed to be opportunistic. So yes, we have our own criteria, when we would be in the market, when we would be out of the market. But there is so many variables and so many factors that will determine if we’re in the market or not. Now, lot of it has to do with what is our opportunities to deploy capital, whether it’s internal organic investments, whether throughout the market at that stage. We think that this is a great tool to have, when there is definitely a disconnect in the marketplace. And we’ve seen that in the past in our stock and it will be a great return for our shareholders on that. Though, this is not a designed program to be in the market, every single month, every single quarter regardless of price point, regardless without factoring in other opportunities that we see to deploy capital.

[Michael Hoffman:]

So it is simplest level, this is buy your own company, you’re buying another company against the same analysis?

[Jeff Feeler:]

Pretty much.

[Michael Hoffman:]

Okay. Great. Thank you.

[Operator:]

And our next question come from Joe Box of KeyBanc Capital Markets. Please go ahead.

[Joe Box:]

Hey, good morning guys.

[Jeff Feeler:]

Good morning, Joe.

[Joe Box:]

So just want to ask some follow up questions on the guidance and then the project is under review. I guess first, what’s your conviction that a scope change doesn’t result and maybe the project changing and potentially walking away from ECOL? And then two, are you seeing phase 1 of the project come through or at this point, is the entire project under review?

[Jeff Feeler:]

Project is underway. And almost every major project we’ve had in the last 10 years, they run into unforeseen things, when you start digging and it results in potential delays and rework of work plans. Potentially, having to do one area that takes two months longer than they had expected, which delays another part of the property which was destine for our facility. So that’s what we’re seeing here, not necessarily delay in a project just, some change in scope which has impacted us a bit.

[Joe Box:]

Okay. So obviously, low risk that - they could just say you get put a capital for those material or it changes and goes to bid to somebody else. But, okay. And then I guess, second part of that question is on the guidance, it wasn’t clear to me based on where you guys stand today. If this project doesn’t go to phase 2 does that put the low-end of the guide at range? I just wanted to ask that specifically, we’re at risk.

[Jeff Feeler:]

So let me make sure, I got your question, Joe. If this does not go to phase 2, so I mean phase 2 within future years, does this put the low end of the guidance at risk. Does that answer your question?

[Joe Box:]

Correct. Yes. If you don’t start bringing in phase 2 volumes into your facilities later this year, could the guidance be at risk?

[Jeff Feeler:]

So, I will answer at this way. Assuming all of the other assumptions that are in our guidance hold through and that is a singular point that this phase 2 ships to all in 2017 and yes, it would be at risk.

[Joe Box:]

Oaky, got it. And then, just maybe to drill into the base business quickly, I wonder if we could peel back the onion a little bit more than on Page 11. Curious, if there any maybe customer issues that cause the base business to flat now. And I believe comps should get a little bit easier in 3Q for you. And I think you’ve already given some good commentary on how you can get to that low-single-digit for the rest of the year, but any one-time issues that you saw.

[Jeff Feeler:]

No. On the base business, I think, if you recall at the last quarter call, we thought 7% growth in the first quarter and lot of people are getting excited to about it, we kind of tempered expectations and I think even a follow-up question during that call was, see, you’re actually expecting it to contract in future quarters. And we’re like, yes, we are. We did cycle a higher comp in the second quarter of last year, we grew about 3%. So being flat in this market, what’s kind of that expectation, when you look at where we are at for the first six months? What 3% is within expectation? When we start look into Q3, Q3 was our surprise quarter last year, we were down about 7%, and there so theoretically, we would think that, yes, we are going to have a better comp, and then, could show higher growth in Q3, but we saw good rebound in Q4. So when we look at the balance of the year, we are not seeing fundamental problems with the underlying business, we are seeing good volumes coming in. We are expecting to be in that low-single-digit range for the full year.

[Joe Box:]

Got it. That’s helpful. Thank you, guys.

[Jeff Feeler:]

Thanks, Joe.

[Operator:]

And our next question comes from Scott Levine of Imperial Capital. Please go ahead.

[Scott Levine:]

Hey, good morning, guys.

[Jeff Feeler:]

Good morning, Scott.

[Scott Levine:]

So I guess, I just want to push a little bit more on the event weakness, so it sounds like from your commentary, some misunderstanding it, that it’s really both timing delays, including these regulatory overview of project, you guys already have, it’s contributing the P&L. But you also spoke to softening in the bid funnel or pipeline, if you will. Am I right about that, is one bigger issue than the other both with respect to the guidance and just with respect to the environment, call it, the multiyear outlook here? And as a follow-up to that, sorry about two more question, but is it - so we expect anything - any shortfall for this year to be made up entirely next year or just a portion.

[Jeff Feeler:]

Yes, so Scott, good questions. When you look at the guidance that was really two more primary factors that causes us to guide to low-end, one was just general deferrals we are seeing. And this has been a trend, we’ve been seeing really over the last year, and it seems like every quarter, we are seeing more and more deferrals. And it’s not that the project to get cancelled, it’s just that quarter, that individual quarters getting the impacted by one reason that are moved project to future period. We thought in Q1, one of the reasons, why our event business was lighter in Q1, we saw it again in Q2, which was predominately the singular myth that we had and from our own expectations in Q2. We see that those deferrals benefiting Q3 and Q4. But the fact, this trend has been continuing on and so our expectation is that will continue, when we had Q4, probably, we are expecting that there is going to be continued deferrals, it’s going to push volume into 2017. So that’s probably the biggest singular one. The next one is the project, we talked about just under regulatory review, there is a whole host of different situations everything from the comment that Joe questioned, could Joe mentioned that it shifts all the 2017 to all the sudden maybe the scope changes and we get more volume in this year. So it’s across the board - different scenarios and so we are looking kind of the best case of what - not the best case, but most likely case and what’s going to happen. When you talk about the projects softening, it’s the reality, that’s in the industry. And so when you listen to our competitors and others that are in the space talked about the same thing that there are seeing less opportunity there. We are seeing the same thing, but it would not been single big enough factor for us to have changed our guidance, if that was the only thing going on. We are continuing to see good opportunity in the marketplace, we are continuing to win our fair share, it’s just not as robust that’s what we had soft when we enter the year. And if you think about our guidance range to be in $6 million spread from $126 million of EBITDA to $132 million that one factor would not have allowed us to be up at the upper end of the range, but we would have still been in the range.

[Scott Levine:]

Got it. That’s clear. Thank you. Then, as a follow-up on the field industrial services, nice growth there, underlying basis and margins too, maybe a little bit more color with regard to what types of activities are strongest, weakest maybe, a little bit more color with regard to where the business is doing the best right now and maybe where you’re optimistic into the back-half in FIS?

[Jeff Feeler:]

Sure, for the second quarter, the group that saw the largest growth year-over-year was our Remediation group. And we had projects going on during the quarter, which we didn’t have as many going on last year. Another area that’s been real positive in that group is our Industrial Services group. And again, they continue to win projects in areas that they compete in, and continue to focus there. And the group is really doing a fabulous job. And we see some good opportunities there as well even in the back-half of the year. Our Small Quantity Generation, which would include our LTL, our lab-pack, our other technical type services, including retail saw some great growth over the quarter. And we continue to see good opportunities on the bidding side in that. We still think that that’s an area that we can expect to see better than an average growth for the group. And then our MSG group, we won the projects last year that new accounts that came onboard. And those have been contributing this year, and the team is executing well and continues to gain traction there. We’re currently bidding on new opportunities that are in the marketplace. This group, when you go to market and bid on, this is in the long lead cycle. And you’re going in and providing a full compliance program on an outsource basis. And so it doesn’t happen overnight. And so our objective is to win a couple of those this year that will benefit 2017 and 2018 and future years and continue to grow that out. Hopefully, that gives you some additional color.

[Scott Levine:]

It does. Thanks, I’ll leave it there.

[Operator:]

[Operator Instructions] Our next question comes from Barbara Noverini of Morningstar. Please go ahead.

[Barbara Noverini:]

Hey, good morning, everybody.

[Jeff Feeler:]

Good morning, Barbara.

[Barbara Noverini:]

You mentioned that your latest environmental services acquisition will benefit your Michigan-based operation. So maybe you can tell us a little bit about the mechanics of caring waste across country borders. And secondly, many companies are setting weakness in the Canadian industrial economy. And I understand a lot of that is coming out of Western Canada, but maybe you can tell us a little bit about what you are seeing in the Canadian environment that are near your facilities.

[Jeff Feeler:]

Sure, so, little bit of background on asset that we acquired is, it’s located just across the border, about 45 miles away from Detroit in Ontario, Canada. We closed on this in May. It’s a great facility providing that industrial zone across the border. As far as waste receipts going to Canada and back to the United States, that happens. I mean, that’s one of the benefits that NAFTA brought, is that it opened up some free-trade agreements going back across the border. There is waste going both directions. And so, this is a market that was hard for us to tap into, because of the fact that you have to establish and have a fixed facility to be able to penetrate that border - across the border. So this again gives that platform to identify those project base works, other service offerings in that industrial sector there. It gives us a launch point to leverage our core assets in the Michigan marketplace to be able to provide services, really aligned. As far as the overall Canadian economy, that’s probably one of our software areas that we’ve seen and not particularly with this asset. This asset is actually doing very well since our ownership and even before. But our Stablex asset in Quebec is - the market up there is a lot softer than it is in other areas of the U.S. Steve, you have anything to add?

[Steve Welling:]

Yes, Barbara, Steve Welling. The market in Ontario that we’re targeting, a lot of it is automotive. So there is a large automotive market in that area. This makes it simpler for the customers to be able to bring their waste materials to our facility. And then, we have all the pre-notifications and approvals set up to make a quick shipment then on to Michigan. So we’re seeing upside in Michigan also with our industrial services. A number of the auto plants have been retooling. So that particular part of the economy seems to be strong.

[Barbara Noverini:]

Interesting, thanks for the detail.

[Operator:]

And ladies and gentlemen, this concludes our question-and-answer session. I’d like to turn the conference back over Jeff Feeler for any closing remarks.

[Jeff Feeler:]

Great. Thank you all for attending and interest in our company. And look forward to updating you in future quarters.

[Operator:]

Thank you, sir. Today’s conference has now concluded and we thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.