Stericycle, Inc. Reports Results For The Fourth Quarter 2023

BANNOCKBURN, Ill., Feb. 28, 2024 (GLOBE NEWSWIRE) — Stericycle, Inc. (NASDAQ:SRCL) today reported results for the fourth quarter ended December 31, 2023.

Revenues for the fourth quarter were $652.0 million, a decrease of 2.7% compared to $670.4 million in the fourth quarter of 2022. Income from operations was $37.1 million, compared to $59.1 million in the fourth quarter of 2022. Net income in the fourth quarter was $14.9 million, or $0.16 diluted earnings per share, compared to $31.8 million, or $0.35 in the fourth quarter of 2022. Adjusted income from operations1 was $84.5 million, compared to $90.6 million in the fourth quarter of 2022. Adjusted diluted earnings per share1 was $0.54, compared to $0.60 in the fourth quarter of 2022. Cash flow from operations for the year ended December 31, 2023 was $243.3 million, compared to $200.2 million in 2022. Free cash flow2 for the year ended December 31, 2023 was $112.0 million, compared to $68.0 million in 2022.

KEY BUSINESS HIGHLIGHTS:

Grew Regulated Waste and Compliance Services (“RWCS”) organic revenues1 3.1% compared to the fourth quarter of 2022.
Improved gross profit 150 basis points compared to the fourth quarter of 2022.
Acquired a U.S. regulated waste tuck-in business in January 2024.
Continued to implement workforce management actions in the first quarter of 2024, which are expected to generate over $35 million in cost savings in 2024.

“Throughout 2023, we made strong progress executing across all of our key business priorities, most notably the ERP deployment for our U.S. Regulated Waste and Compliance Services business and portfolio optimization, as we completed eight divestitures in the year. 2023 organic revenue and Adjusted EPS(3) performance came in line with our expectations. We continued to drive efficiency improvements in cost of revenues that helped mitigate headwinds of approximately $50 million in commodity indexed revenues in 2023,” said Cindy J. Miller, President and Chief Executive Officer. “We look forward to building on the strength of the foundation we have established, leveraging our next generation of key business priorities to drive growth. We plan to harness a streamlined workforce, modern technology, updated facilities, and a refreshed fleet, which we expect will drive growth in top line and profitability.”

Adjusted financial measures are Non-GAAP measures and exclude adjusting items as described and reconciled to comparable U.S. GAAP financial measures in the Reconciliation of U.S. GAAP to Non-GAAP Financial Measures contained in this Press Release.
Free cash flow is calculated as Net cash from operating activities less Capital expenditures.
Earnings per Share (EPS).
Foreign Corrupt Practices Act (FCPA).

FOURTH QUARTER FINANCIAL RESULTS

U.S. Generally Accepted Accounting Principles (GAAP) Results

Revenues in the fourth quarter were $652.0 million compared to $670.4 million in the fourth quarter of 2022. The decrease was primarily due to divestitures of $28.6 million, which was partially offset by favorable foreign exchange rates of $5.0 million. Organic revenues grew $5.2 million, with RWCS growing $13.2 million and Secure Information Destruction (“SID”) organic revenues declining $8.0 million. The decline in SID was mainly a result of lower SID commodity indexed revenues due to lower recycling revenue and lower fuel and environmental surcharges of $18.0 million.
Income from operations in the fourth quarter was $37.1 million compared to $59.1 million in the fourth quarter of 2022. The $22.0 million decrease was mainly due to a gain on divestitures in 2022 of $15.6 million; lower SID commodity indexed revenue margin flow-through of $10.2 million; higher bad debt expense of $8.1 million, primarily due to a lower fourth quarter of 2022 bad debt expense level as a result of improved North America SID collections; and higher incentive and stock based compensation of $7.1 million. These were partially offset by margin flow-through of $18.9 million, including cost savings from productivity initiatives.
Net income in the fourth quarter was $14.9 million, or $0.16 diluted earnings per share, compared to $31.8 million, or $0.35 in the fourth quarter of 2022. The decrease was primarily attributable to lower Income from operations of $22.0 million, as explained above.
Cash flow from operations for the year ended December 31, 2023, was $243.3 million, compared to $200.2 million in 2022. The year-over-year increase of $43.1 million was primarily driven by lower FCPA4 settlement payments of $72.8 million and lower annual incentive compensation payments of $22.3 million, partially offset by increased accounts receivable, net of deferred revenues of $68.5 million.
Cash paid for capital expenditures for the year ended December 31, 2023 was $131.3 million, compared to $132.2 million in 2022.

Non-GAAP Results

For the fourth quarter of 2023, organic revenues1 increased 0.9%, which excludes the impacts of divestitures and foreign exchange rates. RWCS organic revenues1 increased 3.1% while SID organic revenues1 decreased 3.6%, mainly due to lower SID commodity indexed revenues, as explained above.
Adjusted income from operations1 was $84.5 million compared to $90.6 million in the fourth quarter of 2022. As a percentage of revenues, the 50 basis points decrease was mainly due to lower commodity indexed revenue margin flow-through of 160 basis points; higher bad debt expense of 120 basis points, as explained above; and higher incentive and stock based compensation of 110 basis points. These were partially offset by margin flow-through of 340 basis points, including cost savings and portfolio optimization.
Adjusted diluted earnings per share1 was $0.54, compared to $0.60 in the fourth quarter of 2022. The $0.06 decrease was mainly driven by lower SID commodity indexed revenue margin flow-through of $0.09; higher bad debt expense of $0.07, as explained above, and higher incentive compensation of $0.06. These were partially offset by margin flow-through of $0.16.
Free cash flow2 for the year ended December 31, 2023 was $112.0 million, compared to $68.0 million in 2022. The $44.0 million increase was primarily due to higher cash flow from operations of $43.1 million, as explained above.

Adjusted financial measures are Non-GAAP measures and exclude adjusting items as described and reconciled to comparable U.S. GAAP financial measures in the Reconciliation of U.S. GAAP to Non-GAAP Financial Measures contained in this Press Release.
Free cash flow is calculated as Net cash from operating activities less Capital expenditures.
Earnings per Share (EPS).
Foreign Corrupt Practices Act (FCPA).

CONFERENCE CALL INFORMATION

Stericycle is holding its fourth quarter earnings conference call on Wednesday, February 28, 2024, at 8:00 a.m. central time. To access presentation materials, conference call numbers, or listen to the call via an internet webcast, visit investors.stericycle.com.

The fourth quarter earnings call is being recorded and a replay will be available approximately one hour after the end of the conference call until March 28, 2024. To access a replay of the call, visit investors.stericycle.com.

NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures are reconciled to the most comparable U.S. GAAP measures in the schedules attached hereto.

ABOUT STERICYCLE

Stericycle, Inc., is a U.S. based business-to-business services company and leading provider of compliance-based solutions that protect people and brands, promote health and well-being and safeguard the environment. Stericycle serves customers in North America and Europe with solutions for regulated waste and compliance services and secure information destruction. For more information about Stericycle, please visit stericycle.com.

SAFE HARBOR STATEMENT

This document may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. When we use words such as “believes”, “expects”, “anticipates”, “estimates”, “may”, “plan”, “will”, “goal”, or similar expressions, we are making forward-looking statements. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of our management about future events and are therefore subject to risks and uncertainties, which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Factors that could cause such differences include, among others, inflationary cost pressure in labor, supply chain, energy, and other expenses, decreases in the volume of regulated wastes or personal and confidential information collected from customers, and disruptions resulting from deployment of systems, disruptions in our supply chain, disruptions in or attacks on data information technology systems, labor shortages, a recession or economic disruption in the U.S. and other countries, changing market conditions in the healthcare industry, competition and demand for services in the regulated waste and secure information destruction industries, SOP (Sorted Office Paper) pricing volatility or pricing volatility in other commodities, changes in the volume of paper processed by our secure information destruction business and the revenue generated from the sale of SOP, foreign exchange rate volatility in the jurisdictions in which we operate, changes in governmental regulation of the collection, transportation, treatment and disposal of regulated waste or the proper handling and protection of personal and confidential information, the level of government enforcement of regulations governing regulated waste collection and treatment or the proper handling and protection of personal and confidential information, the outcome of pending, future or settled litigation or investigations, charges related to portfolio optimization or the failure of acquisitions or divestitures to achieve the desired results, the obligations to service substantial indebtedness and comply with the covenants and restrictions contained in our credit agreements and Senior Notes, rising interest rates or a downgrade in our credit rating resulting in an increase in interest expense, political, economic, war, and other risks related to our foreign operations, pandemics and the resulting impact on the results of operations, long-term remote work arrangements which may adversely affect our business, restrictions on the ability of our team members to travel, closures of our facilities or the facilities of our customers and suppliers, weather and environmental changes related to climate change, requirements of customers and investors for net carbon zero emissions strategies, and the introduction of regulations for greenhouse gases, which could negatively affect our costs to operate, failure to maintain an effective system of internal control over financial reporting, as well as other factors described in our filings with the SEC, including the 2023 Form 10-K and subsequent Quarterly Reports on Form 10-Q. As a result, past financial performance should not be considered a reliable indicator of future performance, and investors should not use historical trends to anticipate future results or trends. We disclaim any obligation to update or revise any forward-looking or other statements contained herein other than in accordance with legal and regulatory obligations.

STERICYCLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)

In millions, except per share data

 
Three Months Ended December 31,
 
Year Ended December 31,

 
 
2023
 
 
% of
Revenues
 
 
2022
 
 
% of
Revenues
 
% Change
 
 
2023
 
 
% of
Revenues
 
 
2022
 
 
% of
Revenues
 
% Change

Revenues
$
652.0
 
 
100.0
 %
 
$
670.4
 
 
100.0
 %
 
(2.7
)%
 
$
2,659.3
 
 
100.0
 %
 
$
2,704.7
 
 
100.0
 %
 
(1.7
)%

Cost of revenues
 
395.2
 
 
60.6
 %
 
 
416.0
 
 
62.1
 %
 
(5.0
)%
 
 
1,644.7
 
 
61.8
 %
 
 
1,679.1
 
 
62.1
 %
 
(2.0
)%

Gross profit
 
256.8
 
 
39.4
 %
 
 
254.4
 
 
37.9
 %
 
0.9
 %
 
 
1,014.6
 
 
38.2
 %
 
 
1,025.6
 
 
37.9
 %
 
(1.1
)%

Selling, general and administrative expenses
 
219.7
 
 
33.7
 %
 
 
210.9
 
 
31.5
 %
 
4.2
 %
 
 
873.9
 
 
32.9
 %
 
 
887.5
 
 
32.8
 %
 
(1.5
)%

Divestiture (gains) losses, net
 
—
 
 
—
 %
 
 
(15.6
)
 
(2.3
)%
 
(100.0
)%
 
 
63.4
 
 
2.4
 %
 
 
(15.6
)
 
(0.6
)%
 
nm

Income from operations
 
37.1
 
 
5.7
 %
 
 
59.1
 
 
8.8
 %
 
(37.2
)%
 
 
77.3
 
 
2.9
 %
 
 
153.7
 
 
5.7
 %
 
(49.7
)%

Interest expense, net
 
(17.0
)
 
(2.6
)%
 
 
(20.9
)
 
(3.1
)%
 
(18.7
)%
 
 
(73.9
)
 
(2.8
)%
 
 
(75.5
)
 
(2.8
)%
 
(2.1
)%

Other income (expense), net
 
0.2
 
 
0.0
 %
 
 
(0.1
)
 
—
 %
 
(300.0
)%
 
 
(0.1
)
 
—
 %
 
 
0.7
 
 
—
 %
 
(114.3
)%

Income before income taxes
 
20.3
 
 
3.1
 %
 
 
38.1
 
 
5.7
 %
 
(46.7
)%
 
 
3.3
 
 
0.1
 %
 
 
78.9
 
 
2.9
 %
 
(95.8
)%

Income tax expense
 
(5.5
)
 
(0.8
)%
 
 
(6.0
)
 
(0.9
)%
 
(8.3
)%
 
 
(24.6
)
 
(0.9
)%
 
 
(22.4
)
 
(0.8
)%
 
9.8
 %

Net income (loss)
 
14.8
 
 
2.3
 %
 
 
32.1
 
 
4.8
 %
 
(53.9
)%
 
 
(21.3
)
 
(0.8
)%
 
 
56.5
 
 
2.1
 %
 
(137.7
)%

Net income (loss) attributable to noncontrolling interests
 
0.1
 
 
—
 %
 
 
(0.3
)
 
—
 %
 
(133.3
)%
 
 
(0.1
)
 
—
 %
 
 
(0.5
)
 
—
 %
 
(80.0
)%

Net income (loss) attributable to Stericycle, Inc. common shareholders
$
14.9
 
 
2.3
 %
 
$
31.8
 
 
4.7
 %
 
(53.1
)%
 
$
(21.4
)
 
(0.8
)%
 
$
56.0
 
 
2.1
 %
 
(138.2
)%

Earnings (loss) per common share attributable to Stericycle, Inc. common shareholders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Basic
$
0.16
 
 
 
 
$
0.35
 
 
 
 
(54.8
)%
 
$
(0.23
)
 
 
 
$
0.61
 
 
 
 
(138.0
)%

Diluted
$
0.16
 
 
 
 
$
0.35
 
 
 
 
(54.5
)%
 
$
(0.23
)
 
 
 
$
0.61
 
 
 
 
(137.8
)%

Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Basic
 
92.5
 
 
 
 
 
92.2
 
 
 
 
 
 
 
92.4
 
 
 
 
 
92.1
 
 
 
 
 

Diluted
 
92.8
 
 
 
 
 
92.5
 
 
 
 
 
 
 
92.4
 
 
 
 
 
92.4
 
 
 
 
 

nm – percentage change not meaningful

STATISTICS – U.S. GAAP AND ADJUSTED MEASURES
(Unaudited)

In millions, except per share data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Three Months Ended December 31,
 
Year Ended December 31,

 
2023
 
% of
Revenues
 
2022
 
% of
Revenues
 
2023
 
% of
Revenues
 
2022
 
% of
Revenues

Statistics – U.S. GAAP
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Effective tax rate
 
27.1
%
 
 
 
 
15.7
%
 
 
 
 
745.5
%
 
 
 
 
28.4
%
 
 

Statistics – Adjusted (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Adjusted gross profit
$
259.2
 
 
39.8
%
 
$
254.4
 
 
37.9
%
 
$
1,020.4
 
 
38.4
%
 
$
1,025.6
 
 
37.9
%

Adjusted selling, general and administrative expenses
$
174.7
 
 
26.8
%
 
$
163.8
 
 
24.4
%
 
$
704.9
 
 
26.5
%
 
$
701.9
 
 
26.0
%

Adjusted income from operations
$
84.5
 
 
13.0
%
 
$
90.6
 
 
13.5
%
 
$
315.5
 
 
11.9
%
 
$
323.7
 
 
12.0
%

Adjusted EBITDA (2)
$
110.3
 
 
16.9
%
 
$
117.6
 
 
17.5
%
 
$
420.0
 
 
15.8
%
 
$
432.2
 
 
16.0
%

Adjusted net income attributable to common shareholders
$
49.9
 
 
7.7
%
 
$
55.5
 
 
8.3
%
 
$
175.1
 
 
6.6
%
 
$
188.4
 
 
7.0
%

Adjusted effective tax rate
 
26.4
%
 
 
 
 
19.8
%
 
 
 
 
27.4
%
 
 
 
 
24.1
%
 
 

Adjusted diluted earnings per share
$
0.54
 
 
 
 
$
0.60
 
 
 
 
$
1.89
 
 
 
 
$
2.04
 
 
 

Adjusted diluted shares outstanding
 
92.8
 
 
 
 
 
92.5
 
 
 
 
 
92.8
 
 
 
 
 
92.4
 
 
 

(1) Adjusted financial measures are Non-GAAP measures and exclude adjusting items as described and reconciled to comparable U.S. GAAP financial measures in the Reconciliation of U.S. GAAP to Non-GAAP Financial Measures contained in this Press Release.

(2) Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (Adjusted EBITDA) is Income from operations excluding certain adjusting items, depreciation and intangible amortization.

STERICYCLE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

In millions, except per share data
 
 
 

 
December 31,

 
 
2023
 
 
 
2022
 

ASSETS
 
 
 

Current Assets:
 
 
 

Cash and cash equivalents
$
35.3
 
 
$
56.0
 

Accounts receivable, less allowance for doubtful accounts of $44.7 in 2023 and $53.3 in 2022
 
553.9
 
 
 
414.5
 

Prepaid expenses
 
31.6
 
 
 
33.2
 

Other current assets
 
50.7
 
 
 
55.0
 

Total Current Assets
 
671.5
 
 
 
558.7
 

Property, plant and equipment, less accumulated depreciation of $675.4 in 2023 and $657.7 in 2022
 
708.3
 
 
 
715.7
 

Operating lease right-of-use assets
 
464.3
 
 
 
398.9
 

Goodwill
 
2,755.6
 
 
 
2,784.9
 

Intangible assets, less accumulated amortization of $925.8 in 2023 and $823.3 in 2022
 
686.5
 
 
 
811.1
 

Other assets
 
66.4
 
 
 
64.8
 

Total Assets
$
5,352.6
 
 
$
5,334.1
 

LIABILITIES AND EQUITY
 
 
 

Current Liabilities:
 
 
 

Current portion of long-term debt
$
19.6
 
 
$
22.3
 

Bank overdraft
 
1.0
 
 
 
2.9
 

Accounts payable
 
212.1
 
 
 
213.5
 

Accrued liabilities
 
259.5
 
 
 
244.1
 

Operating lease liabilities
 
105.4
 
 
 
91.2
 

Deferred revenues
 
72.6