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Heritage-Crystal Clean Inc (HCCI) Q1 2021 Earnings Call Transcript

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HCCI earnings call for the period ending March 31, 2021.

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Heritage-Crystal Clean Inc (HCCI 3.28%)
Q1 2021 Earnings Call
May 5, 2021, 10:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to Heritage-Crystal Clean Incorporated First Quarter 2021 Earnings Conference Call. [Operator Instructions] Some of the comments we will make today are forward-looking. Generally, the words aim, anticipates, believe, could, estimate, expect, intend, may, plan, project, should, will be, will continue, will likely result, would, and similar expressions identify forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. These risks and uncertainties include a variety of factors some of which are beyond our control. These forward-looking statements speak as of today and you should not rely on them as representing our views in the future.

We undertake no obligation to update these statements after this call. Please refer to our SEC filings, including our annual report on Form 10-K, as well as our earnings release posted on our website for a more detailed description of the risk factors that may affect our results. Copies of these documents may be obtained from the SEC or by visiting the Investor Relations section of our website. Also, please note that certain financial measures we may use on this call, such as earnings before interest, taxes, depreciation and amortization or EBITDA and adjusted EBITDA are non-GAAP measures. Please see our website for reconciliations of these non-GAAP financial measures to GAAP. For more information about our company, please visit our website at www.crystal-clean.com. With us today from the company are the President and Chief Executive Officer, Mr. Brian Recatto; and the Chief Financial Officer, Mr. Mark DeVita.

At this time, I would like to turn the call over to Brian Recatto. Please go ahead, sir.

Brian Recatto -- President and Chief Executive Officer

Thank you, Mike. Good morning, everyone, and thank you for joining us today. Before discussing our first quarter results and longer-term outlook, I would like to briefly talk about the impact of the pandemic on our business. During the first quarter, we continued executing the company's pandemic response plan and remain focused on ensuring the health and safety of all our employees and their families, as well as those customers we came in contact with. Total lost time from employees off the job due to COVID-19 related health issues and potential exposure was almost 5,400 hours companywide during the first quarter. This result was relatively flat on a normalized basis compared to our experience during the fourth quarter of fiscal 2020. Despite the prevalence of highly contagious strains of the virus, we were able to successfully implement our preventive measures program and avoid any meaningful increase in downtime as a result of the virus during this past quarter.

From a financial standpoint, the company performed extremely well during the quarter with both segments exceeding plan from a revenue and adjusted EBITDA standpoint. In fact, our Q1 adjusted EBITDA performance was a first quarter record for the company. Total first quarter revenue exceeded expectations and finished at $105.4 million, with adjusted EBITDA of $17.7 million, up 33.6% compared to the first quarter of 2020. In the Environmental Services segment, while our revenue was down compared to record results in the first quarter of 2020, we experienced relatively flat sequential revenues compared to the fourth quarter of fiscal 2020 on a normalized basis. We achieved this result despite elevated lost time hours due to COVID-19, as well as significant downtime toward the end of February as winter storms wreaked havoc across various parts of the southern U.S.

On a cumulative basis, our branches were closed for almost 70 days during the quarter as a result of the dangerous weather. Even with these challenges, our containerized waste and antifreeze businesses achieved year-over-year growth during the first quarter. Our profitability in this segment was down only 1.2% during the quarter on a year-over-year basis, despite the comparison to pre-pandemic record results. Lower labor efficiency was a driver of this underperformance. But considering the weather and remaining pandemic-related challenges, we're very pleased with this outcome.

Let me now focus on the Oil Business. During the first quarter of fiscal 2021, Oil Business revenues increased 20.5% to $35.9 million compared to the first quarter of fiscal 2020. This represents a first quarter revenue record. The increase in revenue was mainly due to higher base oil revenue as a result of both higher sales volume and higher average netback. Higher charge for oil in our used oil collection business also contributed to the increase in revenue. Oil Business segment operating margin was a record 28.1% during the first quarter. The increase in margin was primarily due to an increase in our base oil, the charge for oil spread of $0.34 per gallon compared to the first quarter of 2020.

In the prior year quarter, we were in a slight pay for oil position on a weighted average basis. But during the first quarter of 2021, we were in the net charge for oil position. We also continue to attract used oil feedstock from third-parties at fair prices, which helped to improve operating margin during the quarter. Mark will provide more detail regarding cost improvements in a few minutes. During the first quarter, our rerefinery team picked up where they left off at the end of 2020. As you remember, outside of our planned shutdown of the rerefinery due to supply and demand issues, as a result of the pandemic, in many ways 2020 was our best year in terms of execution at the rerefinery. We continue to reap the benefits of the mechanical integrity and other programs, which have helped create a more proactive approach to the overall operation of the rerefinery. As a result, we produced 12.1 million gallons of base oil during the first quarter.

We continue to demonstrate why we believe the rerefinery operation is now strength of our Oil Business segment. In our Environmental Services segment, from a revenue perspective, we expect to outperform our pandemic impact in 2020 results for the remainder of 2021. More importantly, we now expect to produce revenue growth compared to 2019 for the remainder of this year. Initially, we expect the growth percentage will be in the low-single digits compared to 2019 with the level of growth building throughout the year. We expect to exit the year at a mid-single-digit growth rate or higher. From an operating margin percentage standpoint, while we should benefit from improved labor efficiency as a result of higher revenue, we also anticipate inflationary headwinds for at least the next few quarters.

Despite the cost pressure, we expect to see our operating margin continue to grow throughout the remainder of 2021 and our goal remains to have our operating margin approach 27% in the segment by the end of the year. From an Oil Business segment perspective, we continue to see tight supply in the base oil market, which has continued to push prices higher into the second quarter. While we believe the factors driving much of the supply tightness are temporary, we expect to see continued strong oil pricing through the second and into the third quarter. Although our charge for oil was improved on a year-over-year basis during the first quarter, our used oil collection charges were lower compared to the fourth quarter of 2020. This downward pressure on used oil collection charges was due in part to an increase in the price of crude oil over 35%. We have continued to see downward pressure on our charge for oil at the beginning of the second quarter and we expect that we will move into slight pay for oil position at some point during the quarter.

Overall, we expect operating margin of over 20% during the second quarter. We expect spreads will remain elevated compared to recent years during the second half of 2021. With the increase in the percentage of the U.S. population who are fully vaccinated against the COVID-19 virus, we continue to see evidence of a broad reopening of the economy. As a result, we're optimistic this positive momentum will continue in both of our reporting segments for the remainder of 2021.

Before I turn things over to Mark, I want to remind our investors that we remain focused on promoting ESG here at the company. We continue to work on a formal sustainability program we launched earlier this year. While the foundation of our company was built on sustainability with activities such as turning the used oil, waste antifreeze and waste solvent into reusable products, we realized the need to create a formal program to better inform our stakeholders and the general public about the sustainability aspects of our business. We remain on-track to reach our goal of issuing our first sustainability report during the second half of this year. We believe we have a great story to tell and look forward to sharing it with everyone.

With that, Mark will take us through our first quarter financial results.

Mark DeVita -- Chief Financial Officer

Thanks, Brian. It's great to be with everyone this morning. In the first quarter of 2021, we generated $105.4 million of revenue compared to $107.3 million in the same quarter of 2020, a decrease of $1.9 million or 1.8%. The decrease in revenue was primarily driven by the non-recurrence of a large field services project and the negative impacts of the COVID-19 pandemic, partially offset by higher revenues in our Oil Business segment. Net income was a record $9.2 million or $0.39 per diluted share for the first quarter of 2021. This compares to net income of $5.3 million or $0.23 per diluted share in the year earlier quarter. From a reporting segment standpoint, the Environmental Services segment reported revenue of $69.5 million, a decrease of $8 million or 10.3% compared to a year ago quarter.

As I just mentioned, the decrease in revenue was mainly due to a large field services project which occurred during the first quarter of 2020, but did not reoccur during the first quarter of 2021. This accounted for $5.8 million of the $8 million decrease. If you exclude the impact of the project from last year's revenue, the decline in revenue during the first quarter of 2021 would have been only 3.1%. As Brian mentioned, the remaining shortfall was due to lingering impacts of the COVID-19 pandemic and weather-related disruption.

During the first quarter, we experienced volume declines in our parts cleaning and wastewater and vacuum services businesses, but saw increases due to pricing and mix in these businesses. In the containerized waste and antifreeze businesses, we experienced increased sales volume but declines driven by pricing and mix. Our Environmental Services profit before corporate selling, general and administrative expenses was $16 million or 23% of revenue compared to $18.8 million or 24.2% of revenue in the year ago quarter. The decrease in operating margin was mainly driven by lower revenue, higher disposal and health and welfare costs, as well as lower labor cost efficiency.

During the first quarter of fiscal 2021, Oil Business revenues were first quarter record of $35.9 million, an increase of $6.1 million or 21% compared to $29.8 million in the first quarter of fiscal 2020. A 20% increase in lubricating base oil revenue was the main driver of this improvement, along with an increase in used oil collection revenue compared to the prior year quarter. Base oil sales volume was up 1.2 million gallons to 11.7 million gallons and our base oil netback increased by $0.16 per gallon compared to the first quarter of 2020. From a profitability standpoint, Oil Business segment operating margin increased sharply to a record 28.1% in the first quarter of 2021 compared to 3.1% in the first quarter of fiscal 2020. The higher operating margin compared to the first quarter of 2020 was due to several factors. In addition to the previously mentioned improvement in base oil selling price, we experienced an $0.18 per gallon improvement from the change from pay for oil during the first quarter last year to charge for oil in the first quarter of this year. A $0.21 per gallon decrease in the cost of third-party used oil feedstock compared to the year-ago quarter also helped push operating margin higher. Our transportation costs were lower in the first quarter of 2021 on a year-over-year basis due to more feedstock being received from third-party sources for which we do not pay freight.

Finally, during the first quarter, we recorded an entry to correct excess depreciation expense taken during fiscal 2020. The impact of the correcting entry was approximately a 4% improvement in our operating margin during the first quarter. Our overall corporate SG-and-A expense of $13.4 million increased by $1 million compared to the year ago quarter. Corporate SG-and-A expense as a percentage of revenue was 12.8% compared to 11.6% in the year ago quarter, driven primarily by higher amortization expense, bad debt expense and bank fees associated with our amended credit agreement. EBITDA of $16.5 million was a record, up 35.3% compared to the year ago quarter. This was the second consecutive quarter of record EBITDA. The company's effective income tax rate for the first quarter of fiscal 2021 was 25.9% compared to 21.5% in the first quarter of fiscal 2020. The rate increase is principally attributable to the opposing effect of non-deductible expenses in a projected loss year as compared to a projected income year.

Looking at the balance sheet. We had $46.7 million of cash on hand at the end of the quarter. Our cash balance decreased by $20.9 million compared to the end of fiscal 2020, but only because we paid off our $30 million term loan during the first quarter. During the quarter we amended our credit agreements, which no longer contains a term loan, but it's made up only of $100 million revolving loan. There were no amounts outstanding on the revolving loan as of the end of the first quarter. However, we did generate $16.2 million in cash flow from operations during the quarter, which represents a 54.7% increase compared to the first quarter of 2020. We continued to pursue multiple acquisition opportunities as we look to utilize our strong balance sheet to capitalize on inorganic growth opportunities during the remainder of 2021.

To summarize, we're very pleased with the continued improvement we're seeing in our Environmental Services segment as we look to move past the negative impacts of the COVID-19 pandemic. We are also happy with the continued execution in our Oil Business and our ability to take advantage of favorable market conditions.

This concludes our prepared remarks. I will now turn the call over to Mike to take your questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from Jim Ricchiuti from Needham and Company.

Jim Ricchiuti -- Needham and Company -- Analyst

Hi. Thank you.

Brian Recatto -- President and Chief Executive Officer

Hi Jim.

Jim Ricchiuti -- Needham and Company -- Analyst

Question just with respect to the Oil Business. It sounds like things are tracking better than you were expecting exiting 2020. And you had given some color about operating margins, I guess, during the first half of 2021. And Mark, I think you were saying in the mid-teens. And I'm just wondering -- I may have missed it -- are you updating that outlook? It sounds like you're also anticipating the strength in that business continuing into Q3. And I wonder if you could just maybe elaborate on that?

Mark DeVita -- Chief Financial Officer

Yes, to be clear, we're definitely updating. We -- based on what we had at, or what we knew back then when we announced Q4 earnings, we had guided to that mid-teens. And you heard Brian in his prepared remarks, guide to higher. And we have clarity, at least for Q2 and into Q3. We don't know how far into it. So it really, we aren't giving much clarity beyond that. We do think we're going to continue to see favorable conditions relative to the historical performance in that business. We just don't have a ton of clarity beyond kind of the summer.

Jim Ricchiuti -- Needham and Company -- Analyst

Okay...

Brian Recatto -- President and Chief Executive Officer

And that's dependent on us where we're forecasting right now four to five days of downtime for the quarter, which is normal for us. That's absent any issue. We're guiding at that 20% margin level if you listened to our prepared remarks. And as Mark said, we are bullish on the business. Base oil supply still has been restricted because the refineries are not yet back at full capacity. They are into the 80% range, probably 80% on utilization now versus mid-70s last quarter. So we are seeing more supply, but the demand is still strong and the prices are still good. We obviously worry about the other side of the equation as Mark mentioned in his prepared remarks, used motor oil, we're seeing a change on the street. We think we'll move to unfortunately a slight pay in the quarter. But we're still bullish.

Jim Ricchiuti -- Needham and Company -- Analyst

And you alluded to inflationary pressures, and I'm just wondering if that extends into other parts of the business. And Mark if you could also talk a little bit about what --- how we might think about corporate SG-and-A over the balance of 2021?

Brian Recatto -- President and Chief Executive Officer

Yes, I'll touch on maybe some broad macro on what we're seeing from an inflationary standpoint. We are seeing commodity prices way up. I mean, Mark talked about hydrocarbon crude prices being up. We're seeing chemical prices up. We're seeing supply shortages too. I am worried about supply chain issues. If we continue to see inflationary pressure, we may even think about mid-third quarter price increase. Typically, we do it late third quarter, early fourth quarter. We may have to do it earlier this year if we continue to see inflationary pressure. We are also worried about labor. We've got a quite a few vacancies today. Until the inflated unemployment runs out by September, we're going to struggle to get people in to run the service route for work. We are working hard to recruit. So certainly, worried about inflation and labor cost.

Mark DeVita -- Chief Financial Officer

From an SG-and-A standpoint, Jim, we're looking at a pretty flat environment, at least that's what we're forecasting for the remainder of the year, flat to what we had on again -- Q4, as you know it's longer duration than the other quarters, but in line, I guess, that is what we experienced in the first quarter. There are certain things like writing off some of the bank fees that when we did our, amended our credit agreement that were -- that's kind of one-time because we changed up our bank group slightly. We can't carry over some of those costs. You just got to write them off. So, yes, there is some of that. But in general, there will be probably other figures that would replace that. So we think a flattish forecast is probably a good way to model it.

Jim Ricchiuti -- Needham and Company -- Analyst

Got it. Thanks -- thanks very much though.

Brian Recatto -- President and Chief Executive Officer

Thank you.

Mark DeVita -- Chief Financial Officer

Thanks.

Operator

Your next question comes from Brian Butler from Stifel.

Brian Recatto -- President and Chief Executive Officer

Hi Brian.

Mark DeVita -- Chief Financial Officer

Hi. Good morning Brian.

Brian Butler -- Stifel -- Analyst

Good morning. Thanks for taking my question.

Brian Recatto -- President and Chief Executive Officer

Welcome.

Mark DeVita -- Chief Financial Officer

Yes. No worries.

Brian Butler -- Stifel -- Analyst

Could you just maybe, you said there are 45 days built into 2Q, I think, for maintenance. Can you talk just kind of utilization targets for 2Q? And then what other maintenance you have planned for 3Q and 4Q and what the utilizations might look like?

Brian Recatto -- President and Chief Executive Officer

Yes, I think on the fourth quarter call, we signaled over roughly 28 days of maintenance. We're still in that 28, maybe a couple of extra days, because we are running at pretty hard right now. From a production standpoint, we expect to see base oil production in the -- I'll just give you a range, 11 million to 12 million gallons. Not that different from Q1, because our maintenance schedule is very similar to Q1. We're expecting four days to five days this quarter, like we had in the first quarter. We did push out a larger turnaround to Q4, driven by the fact that we think base oil will be weaker by the fourth quarter, and we certainly want to -- and don't need to do it until back end of the year. So we're going to push that off. So we're still projecting 48 million gallons, 49 million gallons of base oil production for the year.

Brian Butler -- Stifel -- Analyst

Okay. That's helpful. And when you think, I guess, the spread and the margin volatility, I mean, you expect the strength to kind of continue into 3Q. What maybe the right way to think about this business longer term with the spread? I mean, obviously, you had a very nice move to the spread. But when you get back to a normal, let's say, a more normalized spread, is this still a mid-teens kind of margin, operating margin business?

Brian Recatto -- President and Chief Executive Officer

Yes, I mean, obviously, Brian, we'd like to think it is. We certainly don't think it's going to be a mid to high-20s business. But we do think we'll begin to see some impact from IMO 2020. We're not seeing the large aggregations of used motor oil. Matter of fact, we tried to sell used motor oil at one of our RFO plants, because we had excess supply where we're going to put a barge load together. Not a lot of interest out there for large supplies of used motor oil. So we think we're going to see some impact from IMO 2020. We think it's a mid-teens operating business, that's our ultimate goal. We've got the cost structure in much better shape today, I mean, our operating cost for the quarter were $0.64 per gallon, when you compare it to a run rate in 2020 and 2019 in the 70s. So we're continuing to make progress at the plant, and our goal and pitched to our Board of Directors is that we are going to get into the teens on a consistent basis.

Brian Butler -- Stifel -- Analyst

Okay. And then I guess you touched on M-and-A in your prepared remarks. But could you give maybe a little bit more color on kind of -- what's kind of your capacity or desire for size in what -- what types of -- what you're kind of looking at, I guess would be the best way to say?

Brian Recatto -- President and Chief Executive Officer

Well, I mean obviously, we're being very aggressive. We're seeing a significant increase in our pipeline, driven by the potential for the capital gains taxes to change. So not a shortage of potential targets. Most of them are unfortunately smaller in nature and tuck-ins, but great companies for us, because it continues to expand our footprint in our processing capabilities. We will get a few deals closed this year, deals that we are very far along with. They're smaller, but very strategic for us. Obviously, we'd love to do a larger deal if something pops up. If you see our balance sheet, we have quite a bit of free cash flow generation, significant EBITDA, a low leverage, the ability to finance a larger deal, cooperative shareholders. So we certainly are going to get aggressive when we see the opportunity.

Mark DeVita -- Chief Financial Officer

And we've been in some formal processes as well as a lot of the ones Brian speaks to are kind of more home grown, I guess, head cost.

Brian Recatto -- President and Chief Executive Officer

Yes.

Mark DeVita -- Chief Financial Officer

And not formally bank. But we're in on some of those processes and some of them are pretty big. But the bigger you get there is a lot of fish in that pond so to speak. So the chances are obviously low that any one bidder is going to win it. And we're just trying to play the numbers game. We had a better pipeline and more of it is going to come out at the back end if we put more through the front end.

Brian Recatto -- President and Chief Executive Officer

But continually focused on acquisitions in the environmental business. We like where we stand today in oil. Great complement to our overall environmental business, because of the cross-selling potential. We are going to launch a new automotive program here over the next month or two to get more aggressive in that area. So pleased with the Oil Business. We want to grow the ES business via acquisitions and most of our capital will go into the ES business, obviously.

Brian Butler -- Stifel -- Analyst

All right. And then you mentioned the kind of the balance sheet and the leverage, all of your debt going to 0. Can you give maybe a little thoughts, just high level, what are the targets for kind of leverage? I mean, is the goal to be at 0 debt or is there a right amount of debt that you think Heritage can carry?

Brian Recatto -- President and Chief Executive Officer

I'll give a little bit of color. No, we're not happy. We would have loved to have some leverage. That means we've been able to do a deal or two. I don't like the fact that we're, again, 0 net debt and cash in the bank and we haven't been able to pull off a larger deal. So that's priority number one. In terms of leverage, I mean, I think I personally could get comfortable in the three-plus range. I mean, especially if we pull off a deal that has meaningful synergies, which we think we would have synergies with a larger deal. That's just my personal perspective. And Mark can add color if he wants.

Mark DeVita -- Chief Financial Officer

Yes, that's right on where we're thinking in an aligned way. So we don't want to be where, I guess, I'll just reiterate what Brian said. We want to be more levered and we will be, it's just a matter of finding, and not just finding but closing on the right opportunity or opportunities.

Brian Butler -- Stifel -- Analyst

All right. Great. Thanks.

Brian Recatto -- President and Chief Executive Officer

Your welcome.

Mark DeVita -- Chief Financial Officer

Thanks Brian.

Operator

[Operator Instructions] Your next question comes from Kevin Steinke from Barrington Research.

Brian Recatto -- President and Chief Executive Officer

Hi Kevin. How are you?

Mark DeVita -- Chief Financial Officer

Good morning Kevin.

Kevin Steinke -- Barrington Research -- Analyst

Good -- good. Good morning.

Brian Recatto -- President and Chief Executive Officer

We're good...

Mark DeVita -- Chief Financial Officer

Good.

Brian Recatto -- President and Chief Executive Officer

A lot better than what we were last night.

Kevin Steinke -- Barrington Research -- Analyst

Yes. Absolutely yes. Really nice results.

Brian Recatto -- President and Chief Executive Officer

Yes. Thank you.

Kevin Steinke -- Barrington Research -- Analyst

So you -- you called out the impact on ES growth from the large field services project in the year ago quarter. Did you take a crack at kind of trying to figure out what the impact of weather was on ES growth in the first quarter?

Mark DeVita -- Chief Financial Officer

We had about 70 days. I think Brian mentioned that, that we were down total branch days and again your average branches couple of million bucks a year. You can do the math on what that means. But that's kind of the only detail that we've done. We haven't gone any deeper than that.

Brian Recatto -- President and Chief Executive Officer

But our guess, whenever we have weather issues, we are pretty resilient and find a way to go out and get the customer serviced. But certainly, when you are manufacturer and you are shut down for three days, you're going to generate less waste. So it affected them and it affected us. As Mark said, we can't put an accurate dollar figure on it, but it was $0.5 million to $1 million for sure.

Kevin Steinke -- Barrington Research -- Analyst

Yes. No, no, that's helpful. That's good color. I think in your prepared comments -- Mark, correct me if I'm wrong. You talked about containerized waste, a negative pricing product mix dynamic. There might have been one other business there too. But can you just kind of talk about what you're referring to there?

Brian Recatto -- President and Chief Executive Officer

Yes, some of that is -- I mean, overall, there's a great story of probably one of our businesses were most optimistic about along with our wastewater and vacuum business, but really good growth. We mentioned for probably a couple of years now, and you've been covering us long enough to remember about our push to -- in one of the areas in addition acquisition, but areas where we're going to invest is in vertical integration, specifically in doing more processing and specifically as it relates to non-hazardous waste. So a lot of that waste, like an average per gallon per pound, whatever your unit of measure is, is less expensive. But we're driving toward some of that. So that's more of a mix issue. It's not so much that we're not getting a great price for that. But from a pure revenue standpoint, that was a negative.

Kevin Steinke -- Barrington Research -- Analyst

Okay. All right, got it. -- And you -- I think you said also that you brought in more third-party used oil this quarter and maybe versus a year ago. I mean, is that -- was that a function of maybe lower collection volumes due to the weather or kind of what drove that?

Brian Recatto -- President and Chief Executive Officer

I think a lot of it was -- I was wanting to be prepared.

Mark DeVita -- Chief Financial Officer

Yes.

Brian Recatto -- President and Chief Executive Officer

Again, you've been covering us long enough. You know that those winter months can be most challenging in that collection part of the business. Yes, there are challenges in running a plant when -- if there's cold weather. Everyone nationwide has experienced that. And we have managed to get through that really well, because we are used to dealing with it in Indianapolis. But not having feedstock and even not so much just from an absolute standpoint, but we have been getting real low on a larger feed tank gets you into layers of oil, I don't want to get too technical here, but layers of oil that don't run as well, that you have a little less pure oil in. So we just wanted to be overly prepared. And while we had taken more third-party or bring in more third-party than we did in the last Q1, we were a lot more prepared. And as a result, now, we're bringing in less. So I think --

Mark DeVita -- Chief Financial Officer

We just were worried. Vehicle miles driven, obviously, down because of the pandemic. I have been here for four years. I don't think we've ever made it through a winter with a full oil tank and we were committed, as Mark said, to keep oil in our feed tank, not run low this year regardless it, but an increase in our third-party supply during the winter months and it has helped us.

Kevin Steinke -- Barrington Research -- Analyst

Okay, great. Yes, that makes sense. Over the longer term, is the goal still to continue to increase your internal used oil collection volumes at the expense of third -- buying in third-party used oil?

Brian Recatto -- President and Chief Executive Officer

Yes, I mean I think that's the ultimate goal for us. We certainly value our third-party customers and we'll continue to support them. But it's critical for us from a cost standpoint to increase the route density of our oil trucks. I think I mentioned earlier that we're launching an automotive program specifically to help us support the needs of our plant internally, so we can reduce our overall collections and logistics cost. So, absolutely, that is the goal.

Mark DeVita -- Chief Financial Officer

So we're -- and remember that there is a reason why we've invested $100 million in that plant. It's really -- the main goal is to extend our reach and allow us to have more customer contact, so then we can sell more environmental services to them. So we've never operated it, never will [Indecipherable]. This is a way to get in the door and sell other services. So that's really on top of the route density and all the great things Brian just mentioned that real motivator there is one step down the line, which is if you're in there doing used oil, it probably needs something else. And we're going to hopefully go after that business. When we have the direct relationship as opposed to when we don't, it is really a lot harder.

Kevin Steinke -- Barrington Research -- Analyst

Yes, absolutely, you are right. That makes sense. How much of a margin lift is still available from improving used oil route collection density? And you kind of need to improve that meaningfully to get to that mid-teens, yes, Brian, in OB margin on a more sustainable basis?

Brian Recatto -- President and Chief Executive Officer

Yes, we don't need meaningful improvement on where we're at. We are already running at better efficiencies than we had pre-pandemic and we've been able to -- it's certainly the pandemic has been terrible for basically everybody on the planet. But we have grown stronger through some of it. And we have a more efficient route collection network even now. And while incremental gains will help solidify the consistency of producing that mid-single teens result, we certainly don't need a sizable improvement to reach in route density to reach that goal.

Kevin Steinke -- Barrington Research -- Analyst

Okay, got it. And then just lastly, did you give the rerefinery utilization number on the call?

Brian Recatto -- President and Chief Executive Officer

No. We didn't. It was 107.1%.

Kevin Steinke -- Barrington Research -- Analyst

Okay. Great. All right -- thanks.

Brian Recatto -- President and Chief Executive Officer

Thank you.

Operator

And that was our last question. At this time, I will turn the call back over to the presenters.

Brian Recatto -- President and Chief Executive Officer

Thank you.

Mark DeVita -- Chief Financial Officer

Yes, that's all we have today. Thank you, everybody.

Operator

[Operator Closing Remarks]

Duration: 36 minutes

Call participants:

Brian Recatto -- President and Chief Executive Officer

Mark DeVita -- Chief Financial Officer

Jim Ricchiuti -- Needham and Company -- Analyst

Brian Butler -- Stifel -- Analyst

Kevin Steinke -- Barrington Research -- Analyst

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Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/10/2022.

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