Stericycle, Inc. (Nasdaq: SRCL) today reported results for the
third quarter ended September 30, 2023.
Revenues for the third quarter were $653.5
million, a decrease of 5.3% compared to $690.3 million in the third
quarter of 2022. Income from operations was $24.2 million compared
to $50.6 million in the third quarter of 2022. Net income was $2.0
million, or $0.02 diluted earnings per share, compared to $28.0
million, or $0.30 in the third quarter of 2022. Adjusted income
from operations1 was $70.3 million, compared to $92.0 million in
the third quarter of 2022. Adjusted diluted earnings per
share1 was $0.43 compared to $0.65 in the third quarter of last
year. Cash flow from operations for the nine months ended
September 30, 2023 was $193.3 million compared to $43.1
million in the same period of 2022. Free cash flow2 was an inflow
of $91.1 million for the nine months ended September 30, 2023,
compared to an outflow of $62.9 million in the same period of
2022.
KEY BUSINESS
HIGHLIGHTS:
- Successfully
deployed the ERP in the U.S. Regulated Waste and Compliance
Services (“RWCS”) business in the third quarter.
- Grew RWCS organic
revenues1 4.1% during a period of the ERP deployment compared to
the third quarter of 2022.
- Improved free cash
flow2 for the nine months ended September 30, 2023 by $154.0
million compared to 2022.
- Divested our
Netherlands dental recycling business and UAE Secure Information
Destruction (“SID”) joint venture in the third quarter and our
Romania regulated waste business in October.
“In the quarter, our team members successfully
deployed the ERP to the U.S. regulated waste business and RWCS
revenue grew in a period of the ERP deployment. Additionally, we
drove cost efficiencies that helped mitigate headwinds of about $30
million in commodity indexed revenues impacting the business,” said
Cindy J. Miller, President and Chief Executive Officer. “The
success of both our ERP implementation and our on-going continuous
improvement efforts supports our longer-term outlook.”
THIRD QUARTER FINANCIAL
RESULTS
U.S. Generally Accepted Accounting Principles (GAAP)
Results
- Revenues in the
third quarter were $653.5 million compared to $690.3 million in the
third quarter of 2022. The decrease was primarily due to
divestitures of $32.4 million, which was partially offset by
favorable foreign exchange rates of $6.1 million. Organic revenues
in RWCS grew $17.4 million, while SID organic revenues were lower
by $27.9 million. The decline in SID was mainly a result of lower
commodity indexed revenues of $30.1 million due to lower sorted
office paper and lower SID fuel and environmental surcharges.
- Income from
operations in the third quarter was $24.2 million compared to $50.6
million in the third quarter of 2022. The $26.4 million decrease
was mainly due to lower SID North America commodity indexed
revenues and the corresponding margin flow through impact of $22.2
million. The decrease was also due to higher incentive and
stock-based compensation of $7.2 million and a self-insurance
settlement of $2.2 million. These were partially offset by cost
savings and other margin flow through of $8.6 million and lower bad
debt expense of $3.2 million.
- Net income in the
third quarter was $2.0 million, or $0.02 diluted earnings per
share, compared to $28.0 million, or $0.30 in the third quarter of
2022. The $26.0 million decrease was primarily attributable to
lower Income from operations of $26.4 million, as explained
above.
- Cash flow from
operations for the nine months ended September 30, 2023 was
$193.3 million, compared to $43.1 million in the same period of
2022. The year-over-year increase of $150.2 million was
primarily driven by lower FCPA settlement payments of $72.8
million; improved accounts receivables collections, net of deferred
revenues of $55.0 million; and lower annual incentive compensation
payments of $22.3 million.
- Cash paid for
capital expenditures for the nine months ended September 30,
2023 was $102.2 million, compared to $106.0 million in
the same period of 2022.
Non-GAAP
Results1,2
- For the third
quarter of 2023, organic revenues1 decreased 1.6%, which excludes
the impacts of divestitures and foreign exchange rates. RWCS
organic revenues1 increased 4.1% while SID organic revenues1
decreased 11.6%, mainly due to lower commodity indexed revenues, as
explained above.
- Adjusted income
from operations1 was $70.3 million compared to
$92.0 million in the third quarter of 2022. As a
percentage of revenues, the 250 basis points decrease was mainly
due to lower RISI rates impacting sorted office paper and fuel and
environmental surcharges and the corresponding margin flow through
impact of 340 basis points. The decrease was also due to higher
incentive and stock-based compensation of 110 basis points and a
self-insurance settlement of 30 basis points. These were partially
offset by cost savings and margin flow through of 150 basis points
and lower bad debt expense of 50 basis points.
- Adjusted diluted
earnings per share1 was $0.43 compared to $0.65 in the third
quarter of 2022. Excluding the impacts of divestitures and foreign
exchange rates of $0.02, the remaining $0.20 decrease was driven by
lower SID North America commodity indexed revenues of $0.19; higher
incentive and stock-based compensation of $0.06; taxes, interest
and other of $0.03; and a self-insurance settlement of $0.02. These
were partially offset by cost savings and other margin flow through
of $0.07 and lower bad debt expense of $0.03.
- Free cash flow2 for
the nine months ended September 30, 2023 was an inflow of
$91.1 million compared to an outflow of $62.9 million in
the same period of 2022. The $154.0 million increase was
primarily due to higher cash flow from operations of $150.2
million, as explained above, and lower cash paid for capital
expenditures of $3.8 million.
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. Free cash flow is calculated as Net cash from operating
activities less Capital expenditures.
CONFERENCE CALL INFORMATION
Stericycle is holding its third quarter earnings
conference call on Thursday, November 2, 2023, 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 third quarter earnings call is being
recorded and a replay will be available approximately one hour
after the end of the conference call until November 30, 2023.
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, SOP pricing volatility or
pricing volatility in other commodities, decreases in the volume of
regulated waste or personal and confidential information collected
from customers, the ability to complete our system modernization
efforts, and disruptions resulting from deployment of our ERP
system, disruptions in our supply chain, disruptions in or attacks
on information technology systems, labor shortages, a recession or
economic disruption in the U.S. and other countries, inflationary
cost pressure in labor, supply chain, energy, and other expenses,
rising interest rates or a downgrade in our credit rating resulting
in an increase in interest expense, changing market conditions in
the healthcare industry, competition and demand for services in the
regulated waste and secure information destruction industries,
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,
reliance on third parties to provide a variety of services, our
ability to realize expected financial benefits from our continuous
improvement efforts, charges related to portfolio optimization or
the failure of acquisitions or divestitures to achieve the desired
results, failure to consummate transactions with respect to
non-core businesses, the obligations to service substantial
indebtedness and comply with the covenants and restrictions
contained in our credit agreements and notes, political, economic,
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, supply
chain disruptions, disruptions in transportation services,
restrictions on the ability of our team members to travel, closures
of our facilities or the facilities of our customers and suppliers,
changes in the volume of paper processed by our secure information
destruction business and the revenue generated from the sale of
SOP, 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, the outcome of pending, future or settled litigation or
investigations, including the investigation by the DEA discussed in
our SEC reports and litigation or investigations with respect to
the U.S. Foreign Corrupt Practices Act and foreign anti-corruption
laws, 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 our 2022 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 September 30, |
|
Nine months ended September 30, |
|
2023 |
|
% Revenues |
|
2022 |
|
% Revenues |
|
% Change |
|
2023 |
|
% Revenues |
|
2022 |
|
% Revenues |
|
% Change |
Revenues |
$ |
653.5 |
|
100.0 % |
|
$ |
690.3 |
|
100.0 % |
|
(5.3) % |
|
$ |
2,007.3 |
|
100.0 % |
|
$ |
2,034.4 |
|
100.0 % |
|
(1.3) % |
Cost of revenues |
407.8 |
|
62.4 % |
|
424.1 |
|
61.4 % |
|
(3.8) % |
|
1,249.5 |
|
62.2 % |
|
1,263.3 |
|
62.1 % |
|
(1.1) % |
Gross
profit |
245.7 |
|
37.6 % |
|
266.2 |
|
38.6 % |
|
(7.7) % |
|
757.8 |
|
37.8 % |
|
771.1 |
|
37.9 % |
|
(1.7) % |
Selling, general and
administrative expenses |
217.3 |
|
33.3 % |
|
215.6 |
|
31.2 % |
|
0.8 % |
|
654.2 |
|
32.6 % |
|
676.5 |
|
33.3 % |
|
(3.3) % |
Divestiture losses, net |
4.2 |
|
0.6 % |
|
— |
|
— % |
|
nm |
|
63.4 |
|
3.2 % |
|
— |
|
— % |
|
nm |
Income from
operations |
24.2 |
|
3.7 % |
|
50.6 |
|
7.3 % |
|
(52.2) % |
|
40.2 |
|
2.0 % |
|
94.6 |
|
4.7 % |
|
(57.5) % |
Interest expense, net |
(17.4) |
|
(2.7) % |
|
(19.8) |
|
(2.9) % |
|
(12.1) % |
|
(56.9) |
|
(2.8) % |
|
(54.6) |
|
(2.7) % |
|
4.2 % |
Other income (expense), net |
0.1 |
|
— % |
|
2.3 |
|
0.3 % |
|
(95.7) % |
|
(0.3) |
|
— % |
|
0.8 |
|
— % |
|
(137.5) % |
Income (loss) before
income taxes |
6.9 |
|
1.1 % |
|
33.1 |
|
4.8 % |
|
(79.2) % |
|
(17.0) |
|
(0.8) % |
|
40.8 |
|
2.0 % |
|
(141.7) % |
Income tax expense |
(4.8) |
|
(0.7) % |
|
(5.1) |
|
(0.7) % |
|
(5.9) % |
|
(19.1) |
|
(1.0) % |
|
(16.4) |
|
(0.8) % |
|
16.5 % |
Net income
(loss) |
2.1 |
|
0.3 % |
|
28.0 |
|
4.1 % |
|
(92.5) % |
|
(36.1) |
|
(1.8) % |
|
24.4 |
|
1.2 % |
|
(248.0) % |
Net income attributable to
noncontrolling interests |
(0.1) |
|
— % |
|
— |
|
— % |
|
nm |
|
(0.2) |
|
— % |
|
(0.2) |
|
— % |
|
— % |
Net income (loss)
attributable to Stericycle, Inc. common shareholders |
$ |
2.0 |
|
0.3 % |
|
$ |
28.0 |
|
4.1 % |
|
(92.9) % |
|
$ |
(36.3) |
|
(1.8) % |
|
$ |
24.2 |
|
1.2 % |
|
(250.0) % |
Income (loss) per common
share attributable to Stericycle, Inc. common
shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.02 |
|
|
|
$ |
0.30 |
|
|
|
(93.3) % |
|
$ |
(0.39) |
|
|
|
$ |
0.26 |
|
|
|
(250.0) % |
Diluted |
$ |
0.02 |
|
|
|
$ |
0.30 |
|
|
|
(93.3) % |
|
$ |
(0.39) |
|
|
|
$ |
0.26 |
|
|
|
(250.0) % |
Weighted average number
of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
92.5 |
|
|
|
92.2 |
|
|
|
|
|
92.4 |
|
|
|
92.1 |
|
|
|
|
Diluted |
92.9 |
|
|
|
92.4 |
|
|
|
|
|
92.4 |
|
|
|
92.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
nm - percentage change not meaningful for comparison
STATISTICS - U.S. GAAP AND NON-GAAP
ADJUSTED FINANCIAL
MEASURES(Unaudited)
In millions, except per share data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine months ended September 30, |
|
2023 |
|
% Revenues |
|
2022 |
|
% Revenues |
|
2023 |
|
% Revenues |
|
2022 |
|
% Revenues |
Statistics - U.S.
GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
69.6 % |
|
|
|
15.4 % |
|
|
|
(112.4) % |
|
|
|
40.2 % |
|
|
Statistics -
Adjusted (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted gross profit |
$ |
245.7 |
|
37.6 % |
|
$ |
266.2 |
|
38.6 % |
|
$ |
761.2 |
|
37.9 % |
|
$ |
771.1 |
|
37.9 % |
Adjusted selling, general and
administrative expenses |
$ |
175.4 |
|
26.8 % |
|
$ |
174.2 |
|
25.2 % |
|
$ |
530.2 |
|
26.4 % |
|
$ |
538.1 |
|
26.5 % |
Adjusted income from
operations |
$ |
70.3 |
|
10.8 % |
|
$ |
92.0 |
|
13.3 % |
|
$ |
231.0 |
|
11.5 % |
|
$ |
233.0 |
|
11.5 % |
Adjusted EBITDA |
$ |
96.4 |
|
14.8 % |
|
$ |
119.3 |
|
17.3 % |
|
$ |
309.7 |
|
15.4 % |
|
$ |
314.5 |
|
15.5 % |
Adjusted net income
attributable to common shareholders |
$ |
39.6 |
|
6.1 % |
|
$ |
59.8 |
|
8.7 % |
|
$ |
125.2 |
|
6.2 % |
|
$ |
132.9 |
|
6.5 % |
Adjusted effective tax
rate |
25.1 % |
|
|
|
19.7 % |
|
|
|
27.9 % |
|
|
|
25.7 % |
|
|
Adjusted diluted earnings per
share |
$ |
0.43 |
|
|
|
$ |
0.65 |
|
|
|
$ |
1.36 |
|
|
|
$ |
1.44 |
|
|
Adjusted diluted shares
outstanding |
92.9 |
|
|
|
92.4 |
|
|
|
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.
STERICYCLE,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(Unaudited)
In millions, except per share data |
|
|
|
|
|
|
September 30, 2023 |
|
December 31, 2022 |
ASSETS |
|
|
|
|
|
Current
Assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
29.7 |
|
$ |
56.0 |
Accounts receivable, less
allowance for doubtful accounts of $47.1 in 2023 and $53.3 in
2022 |
|
465.6 |
|
|
414.5 |
Prepaid expenses |
|
39.9 |
|
|
33.2 |
Other current assets |
|
52.0 |
|
|
55.0 |
Total Current Assets |
|
587.2 |
|
|
558.7 |
Property, plant and equipment,
less accumulated depreciation of $665.3 in 2023 and $657.7 in
2022 |
|
702.8 |
|
|
715.7 |
Operating lease right-of-use
assets |
|
442.7 |
|
|
398.9 |
Goodwill |
|
2,738.5 |
|
|
2,784.9 |
Intangible assets, less
accumulated amortization of $889.2 in 2023 and $823.3 in 2022 |
|
708.0 |
|
|
811.1 |
Other assets |
|
66.9 |
|
|
64.8 |
Total
Assets |
$ |
5,246.1 |
|
$ |
5,334.1 |
LIABILITIES AND
EQUITY |
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
Current portion of long-term
debt |
$ |
15.8 |
|
$ |
22.3 |
Bank overdrafts |
|
— |
|
|
2.9 |
Accounts payable |
|
202.5 |
|
|
213.5 |
Accrued liabilities |
|
219.6 |
|
|
244.1 |
Operating lease liabilities |
|
102.1 |
|
|
91.2 |
Deferred revenues |
|
65.1 |
|
|
7.9 |
Other current liabilities |
|
45.3 |
|
|
40.0 |
Total Current Liabilities |
|
650.4 |
|
|
621.9 |
Long-term debt, net |
|
1,297.0 |
|
|
1,484.0 |
Long-term operating lease
liabilities |
|
360.5 |
|
|
329.0 |
Deferred income taxes |
|
426.1 |
|
|
427.0 |
Long-term income taxes
payable |
|
9.4 |
|
|
11.8 |
Other liabilities |
|
26.4 |
|
|
35.9 |
Total
Liabilities |
|
2,769.8 |
|
|
2,909.6 |
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
Common stock (par value $0.01 per
share, 120.0 shares authorized, 92.5 and 92.2 issued and
outstanding in 2023 and 2022, respectively) |
|
0.9 |
|
|
0.9 |
Additional paid-in capital |
|
1,312.0 |
|
|
1,285.4 |
Retained earnings |
|
1,374.5 |
|
|
1,410.8 |
Accumulated other comprehensive
loss |
|
(211.8) |
|
|
(276.9) |
Total Stericycle, Inc.’s Equity |
|
2,475.6 |
|
|
2,420.2 |
Noncontrolling interests |
|
0.7 |
|
|
4.3 |
Total Equity |
|
2,476.3 |
|
|
2,424.5 |
Total Liabilities and
Equity |
$ |
5,246.1 |
|
$ |
5,334.1 |
|
|
|
|
|
|
STERICYCLE,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(Unaudited)
In millions |
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2023 |
|
2022 |
OPERATING
ACTIVITIES: |
|
|
|
|
|
Net (loss) income |
$ |
(36.1) |
|
$ |
24.4 |
Adjustments to reconcile net
(loss) income to net cash from operating activities: |
|
|
|
|
|
Depreciation |
|
78.7 |
|
|
81.5 |
Intangible amortization |
|
84.2 |
|
|
94.7 |
Stock-based compensation expense |
|
28.2 |
|
|
20.1 |
Deferred income taxes |
|
2.6 |
|
|
12.0 |
Divestiture losses, net |
|
63.4 |
|
|
— |
Asset impairments, (gain) loss on disposal of property plant and
equipment and other charges |
|
6.2 |
|
|
2.2 |
Other, net |
|
2.8 |
|
|
3.9 |
Changes in operating assets and
liabilities: |
|
|
|
|
|
Accounts receivable |
|
(63.1) |
|
|
(60.3) |
Prepaid expenses |
|
(8.3) |
|
|
5.4 |
Accounts payable |
|
(3.2) |
|
|
(9.4) |
Accrued liabilities |
|
(11.6) |
|
|
(101.5) |
Deferred revenues |
|
57.7 |
|
|
(0.1) |
Other assets and liabilities |
|
(8.2) |
|
|
(29.8) |
Net cash from operating
activities |
|
193.3 |
|
|
43.1 |
INVESTING
ACTIVITIES: |
|
|
|
|
|
Capital expenditures |
|
(102.2) |
|
|
(106.0) |
Proceeds from divestiture of
businesses, net |
|
84.6 |
|
|
1.6 |
Other, net |
|
2.1 |
|
|
0.9 |
Net cash from investing
activities |
|
(15.5) |
|
|
(103.5) |
FINANCING
ACTIVITIES: |
|
|
|
|
|
Repayments of long-term debt and
other obligations |
|
(11.3) |
|
|
(9.8) |
Proceeds from foreign bank
debt |
|
1.3 |
|
|
1.6 |
Repayments of foreign bank
debt |
|
(0.3) |
|
|
(1.7) |
Repayments of term loan |
|
(75.0) |
|
|
— |
Proceeds from credit
facility |
|
862.7 |
|
|
1,018.8 |
Repayments of credit
facility |
|
(971.0) |
|
|
(945.3) |
(Repayments) proceeds of bank overdrafts, net |
|
(2.9) |
|
|
1.1 |
Payments of finance lease
obligations |
|
(2.0) |
|
|
(2.4) |
Payments of debt issuance
costs |
|
— |
|
|
(0.4) |
Proceeds from issuance of common
stock, net of (payments of) taxes from withheld shares |
|
(5.2) |
|
|
(5.0) |
Payments to noncontrolling
interest |
|
(1.5) |
|
|
(0.2) |
Net cash from financing
activities |
|
(205.2) |
|
|
56.7 |
Effect of exchange rate changes
on cash and cash equivalents |
|
1.1 |
|
|
(7.9) |
Net change in cash and cash
equivalents |
|
(26.3) |
|
|
(11.6) |
Cash and cash equivalents at
beginning of period |
|
56.0 |
|
|
55.6 |
Cash and cash equivalents
at end of period |
$ |
29.7 |
|
$ |
44.0 |
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW
INFORMATION: |
|
|
|
|
|
Interest paid, net of capitalized
interest |
$ |
67.1 |
|
$ |
64.3 |
Income taxes paid, net |
$ |
18.4 |
|
$ |
3.0 |
Capital expenditures in Accounts
payable |
$ |
24.6 |
|
$ |
25.6 |
Free Cash Flow (1) |
$ |
91.1 |
|
$ |
(62.9) |
|
|
|
|
|
|
(1) Free Cash Flow is
calculated as Net cash from operating activities less Capital
expenditures.
Table 1–A: REVENUE CHANGES BY SERVICE
AND SEGMENT (UNAUDITED) –THREE
MONTHS ENDED SEPTEMBER 30, 2023
and 2022
|
Three Months Ended September 30, |
|
In millions |
|
|
|
Components of Change (%)(1) |
|
2023 |
|
2022 |
|
Change ($) |
|
Change (%) |
|
Organic Growth(2) |
|
Divestitures |
|
Foreign Exchange(3) |
Revenue by
Service |
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated Waste and Compliance Services |
$ |
439.9 |
|
$ |
447.8 |
|
$ |
(7.9) |
|
(1.8) % |
|
4.1 % |
|
(6.7) % |
|
1.1 % |
Secure Information Destruction Services |
213.6 |
|
242.5 |
|
(28.9) |
|
(11.9) % |
|
(11.6) % |
|
(1.0) % |
|
0.5 % |
Total Revenues |
$ |
653.5 |
|
$ |
690.3 |
|
$ |
(36.8) |
|
(5.3) % |
|
(1.6) % |
|
(4.7) % |
|
0.9 % |
North
America |
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated Waste and Compliance Services |
$ |
368.0 |
|
$ |
369.7 |
|
$ |
(1.7) |
|
(0.5) % |
|
3.9 % |
|
(4.1) % |
|
(0.1) % |
Secure Information Destruction Services |
189.1 |
|
215.1 |
|
(26.0) |
|
(12.1) % |
|
(11.9) % |
|
— % |
|
(0.2) % |
Total North America Segment |
$ |
557.1 |
|
$ |
584.8 |
|
$ |
(27.7) |
|
(4.7) % |
|
(2.1) % |
|
(2.6) % |
|
(0.1) % |
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated Waste and Compliance Services |
$ |
71.9 |
|
$ |
78.1 |
|
$ |
(6.2) |
|
(7.9) % |
|
5.4 % |
|
(18.9) % |
|
6.6 % |
Secure Information Destruction Services |
24.5 |
|
27.4 |
|
(2.9) |
|
(10.6) % |
|
(9.2) % |
|
(8.7) % |
|
6.4 % |
Total International Segment |
$ |
96.4 |
|
$ |
105.5 |
|
$ |
(9.1) |
|
(8.6) % |
|
1.3 % |
|
(16.2) % |
|
6.6 % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See footnote descriptions below Table 1 – C
Table 1–B: REVENUE CHANGES BY SERVICE
AND SEGMENT (UNAUDITED) –NINE
MONTHS ENDED SEPTEMBER 30, 2023
and 2022
|
Nine months ended September 30, |
|
In millions |
|
|
|
Components of Change (%)(1) |
|
2023 |
|
2022 |
|
Change ($) |
|
Change (%) |
|
Organic Growth(2) |
|
Divestitures |
|
Foreign Exchange(3) |
Revenue by Service |
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated Waste and Compliance Services |
$ |
1,335.9 |
|
$ |
1,348.9 |
|
$ |
(13.0) |
|
(1.0) % |
|
4.6 % |
|
(5.2) % |
|
(0.2) % |
Secure Information Destruction Services |
671.4 |
|
685.5 |
|
(14.1) |
|
(2.1) % |
|
(1.1) % |
|
(0.5) % |
|
(0.5) % |
Total Revenues |
$ |
2,007.3 |
|
$ |
2,034.4 |
|
$ |
(27.1) |
|
(1.3) % |
|
2.6 % |
|
(3.6) % |
|
(0.3) % |
North America |
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated Waste and Compliance Services |
$ |
1,103.1 |
|
$ |
1,097.5 |
|
$ |
5.6 |
|
0.5 % |
|
5.0 % |
|
(4.1) % |
|
(0.2) % |
Secure Information Destruction Services |
592.6 |
|
599.7 |
|
(7.1) |
|
(1.2) % |
|
(0.7) % |
|
— % |
|
(0.4) % |
Total North America Segment |
$ |
1,695.7 |
|
$ |
1,697.2 |
|
$ |
(1.5) |
|
(0.1) % |
|
2.9 % |
|
(2.7) % |
|
(0.3) % |
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated Waste and Compliance Services |
$ |
232.8 |
|
$ |
251.4 |
|
$ |
(18.6) |
|
(7.4) % |
|
2.5 % |
|
(9.7) % |
|
— % |
Secure Information Destruction Services |
78.8 |
|
85.8 |
|
(7.0) |
|
(8.2) % |
|
(3.8) % |
|
(3.9) % |
|
(0.6) % |
Total International Segment |
$ |
311.6 |
|
$ |
337.2 |
|
$ |
(25.6) |
|
(7.6) % |
|
0.8 % |
|
(8.2) % |
|
(0.2) % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See footnote descriptions below Table 1 – C
Table 1–C: COMPONENTS
OF REVENUE CHANGE IN
DOLLARS (UNAUDITED)
(In millions) |
|
Three Months Ended September 30,
2023 |
|
Nine Months Ended September 30, 2023 |
Organic Growth (2) |
$ |
(10.5) |
|
$ |
51.1 |
Divestitures |
|
(32.4) |
|
|
(73.0) |
Foreign exchange (3) |
|
6.1 |
|
|
(5.2) |
Total Change |
$ |
(36.8) |
|
$ |
(27.1) |
|
|
|
|
|
|
(1) Components of Change (%) in
summation may not crossfoot to the total Change (%) due to
rounding.
(2) Organic growth is the change in
revenues which includes SOP (sorted office paper) pricing and
volume and excludes the impact of divestitures and foreign
exchange.
(3) The comparisons at constant currency
rates (foreign exchange) reflect comparative local currency
balances at prior period’s foreign exchange rates. Stericycle
calculated these percentages by taking current period reported
Revenues less the respective prior period reported Revenues,
divided by the prior period reported Revenues, all at the
respective prior period’s foreign exchange rates. This measure
provides information on the change in Revenues assuming that
foreign currency exchange rates have not changed between the prior
and the current period. Management believes the use of this measure
aids in the understanding of changes in Revenues without the impact
of foreign currency.
RECONCILIATION OF U.S. GAAP TO NON-GAAP
FINANCIAL MEASURES (UNAUDITED)
Table 2-A: THREE MONTHS ENDED SEPTEMBER
30, 2023 and 2022
(In millions, except per share data) |
|
Three Months Ended September 30, 2023 |
|
Gross Profit |
|
Selling,General and
AdministrativeExpenses |
|
Income from Operations |
|
Net Income Attributable to Common Shareholders
c |
|
Diluted Earnings Per Share |
U.S. GAAP Financial
Measures |
$ |
245.7 |
|
$ |
217.3 |
|
$ |
24.2 |
|
$ |
2.0 |
|
$ |
0.02 |
Adjustments: |
|
|
|
|
|
|
|
|
|
ERP and System Modernization 1 |
— |
|
(4.8) |
|
4.8 |
|
3.9 |
|
0.04 |
Intangible Amortization 2 |
— |
|
(27.9) |
|
27.9 |
|
21.6 |
|
0.24 |
Portfolio Optimization 3 |
— |
|
(0.8) |
|
5.0 |
|
4.8 |
|
0.05 |
Litigation, Settlements and Regulatory Compliance 4 |
— |
|
(5.3) |
|
5.3 |
|
4.2 |
|
0.05 |
Asset Impairments 5 |
— |
|
(3.1) |
|
3.1 |
|
3.1 |
|
0.03 |
Total Adjustments |
— |
|
(41.9) |
|
46.1 |
|
37.6 |
|
0.41 |
Adjusted Financial
Measures a |
$ |
245.7 |
|
$ |
175.4 |
|
$ |
70.3 |
|
$ |
39.6 |
|
$ |
0.43 |
Depreciation |
|
|
|
|
26.1 |
|
|
|
|
Adjusted
EBITDA b |
|
|
|
|
$ |
96.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions, except per share data) |
|
Three Months Ended September 30, 2022 |
|
Gross Profit |
|
Selling,General and
AdministrativeExpenses |
|
Income from Operations |
|
Net IncomeAttributable to Common
Shareholders c |
|
Diluted Earnings Per Share |
U.S. GAAP Financial
Measures |
$ |
266.2 |
|
$ |
215.6 |
|
$ |
50.6 |
|
$ |
28.0 |
|
$ |
0.30 |
Adjustments: |
|
|
|
|
|
|
|
|
|
ERP and System Modernization 1 |
— |
|
(3.9) |
|
3.9 |
|
3.0 |
|
0.04 |
Intangible Amortization 2 |
— |
|
(31.5) |
|
31.5 |
|
24.3 |
|
0.26 |
Portfolio Optimization 3 |
— |
|
(1.4) |
|
1.4 |
|
1.0 |
|
0.01 |
Litigation, Settlements and Regulatory Compliance 4 |
— |
|
(2.6) |
|
2.6 |
|
2.0 |
|
0.02 |
Asset Impairments 5 |
— |
|
(2.0) |
|
2.0 |
|
1.5 |
|
0.02 |
Total Adjustments |
— |
|
(41.4) |
|
41.4 |
|
31.8 |
|
0.35 |
Adjusted Financial
Measures a |
$ |
266.2 |
|
$ |
174.2 |
|
$ |
92.0 |
|
$ |
59.8 |
|
$ |
0.65 |
Depreciation |
|
|
|
|
27.3 |
|
|
|
|
Adjusted
EBITDA b |
|
|
|
|
$ |
119.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions, except per share data) |
|
Third Quarter 2023 Change Compared to Third Quarter
2022 |
|
Gross Profit |
|
Selling,General and Administrative
Expenses |
|
Income from Operations |
|
Net IncomeAttributable to Common
Shareholders |
|
Diluted Earnings Per Share |
U.S. GAAP Financial
Measures |
$ |
(20.5) |
|
$ |
1.7 |
|
$ |
(26.4) |
|
$ |
(26.0) |
|
$ |
(0.28) |
Adjustments: |
|
|
|
|
|
|
|
|
|
ERP and System Modernization |
— |
|
(0.9) |
|
0.9 |
|
0.9 |
|
— |
Intangible Amortization |
— |
|
3.6 |
|
(3.6) |
|
(2.7) |
|
(0.02) |
Portfolio Optimization |
— |
|
0.6 |
|
3.6 |
|
3.8 |
|
0.04 |
Litigation, Settlements and Regulatory Compliance |
— |
|
(2.7) |
|
2.7 |
|
2.2 |
|
0.03 |
Asset Impairments |
— |
|
(1.1) |
|
1.1 |
|
1.6 |
|
0.01 |
Total Adjustments |
— |
|
(0.5) |
|
4.7 |
|
5.8 |
|
0.06 |
Adjusted Financial
Measures |
$ |
(20.5) |
|
$ |
1.2 |
|
$ |
(21.7) |
|
$ |
(20.2) |
|
$ |
(0.22) |
Depreciation |
|
|
|
|
(1.2) |
|
|
|
|
Adjusted
EBITDA |
|
|
|
|
$ |
(22.9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides adjustments to Income from
operations categorized as follows:
(In
millions) |
|
Three Months Ended September 30, |
|
2023 |
|
2022 |
Non-Cash Related 6 |
$ |
35.1 |
|
$ |
33.5 |
Cash Related |
|
11.0 |
|
|
7.9 |
Total |
$ |
46.1 |
|
$ |
41.4 |
|
|
|
|
|
|
U.S. GAAP results for the three months ended
September 30, 2023 and 2022 include:
- ERP and System Modernization: In 2023 and 2022, Selling,
General, and Administrative expenses (“SG&A”) includes
consulting and professional fees related to our ERP and system
modernization.
- Intangible Amortization: Intangible amortization expense
from acquisitions.
- Portfolio Optimization: In 2023, Divestitures losses, net
includes aggregate net losses of $4.2 million (inclusive of $0.1
million related to deal costs) related to the International exit of
operations in Romania. In 2023 and 2022, SG&A includes
consulting and professional fees associated with our Portfolio
Optimization efforts of $0.8 million and $1.4 million,
respectively.
- Litigation, Settlements, and Regulatory Compliance: In
2023 and 2022, SG&A includes $5.3 million (which includes FCPA
monitor related fees of $1.2 million) and $2.6 million,
respectively, of primarily consulting and professional fees and
estimated contingent liability provisions related to certain
litigation, settlement and regulatory compliance matters.
- Asset Impairments: In 2023, SG&A includes an impairment of
$3.1 million in International associated with certain
intangible assets in Spain. In 2022, SG&A includes an
impairment of $2.0 million associated with exiting certain
North American office facilities.
- Non-Cash Related Adjustments: In 2023 and 2022, non-cash
related adjustments include $35.1 million and $33.5 million,
respectively, consisting of intangible amortization, portfolio
optimization, and asset impairment items.
- The Non-GAAP financial measures contained in this press release
are reconciled to the most comparable measures calculated in
accordance with U.S. GAAP in the schedules attached to this
release. Management believes the Non-GAAP financial measures are
useful measures of Stericycle’s performance because they provide
additional information about Stericycle’s operations and exclude
certain adjusting items, allowing better evaluation of underlying
business performance and better period-to-period comparability. The
Non-GAAP financial measures contained in this press release may not
be calculated in the same manner as certain other Non-GAAP
financial measures and are used solely to evaluate management’s
performance for incentive compensation purposes. All Non-GAAP
financial measures are intended to supplement the applicable U.S.
GAAP measures and should not be considered in isolation from, or a
replacement for, financial measures prepared in accordance with
U.S. GAAP and may not be comparable to or calculated in the same
manner as Non-GAAP financial measures published by other
companies.
- Adjusted Earnings Before Interest, Tax, Depreciation and
Amortization (Adjusted EBITDA) is Income from operations excluding
certain adjusting items, depreciation and intangible
amortization.
- Under the Net Income Attributable to Common Shareholders
column, adjustments are shown net of tax in aggregate of
$8.5 million and $9.6 million for the three months
ended September 30, 2023 and 2022, respectively, based on
applying the statutory tax rate for the jurisdictions in which the
adjustment occurred or, by adjusting the tax effect to consider the
impact of applying an annual effective tax rate on an interim
basis. For purposes of reconciling adjusted diluted earnings per
share with respect to taxes period-over-period, the company
utilizes a “rate approach” to highlight the impact of the adjusted
tax rate. It is computed by multiplying the prior period adjusted
rate by the current period adjusted income before taxes to
determine the expected tax expense. Such expected tax expense is
then compared to actual tax expense. Expected tax in excess of
actual tax variance is favorable; actual tax in excess of expected
tax variance is unfavorable. The variance divided by diluted shares
outstanding at the end of the period yields the impact on earnings
per share. Management believes the use of this measure best aids in
explaining the impact of a changing tax rate.
Table 2-B: NINE MONTHS ENDED SEPTEMBER
30, 2023 and 2022
(In millions, except per share data) |
|
Nine Months Ended September 30, 2023 |
|
Gross Profit |
|
Selling,General and Administrative
Expenses |
|
Income from Operations |
|
Net (Loss) IncomeAttributable to Common
Shareholders c |
|
Diluted (Loss) Earnings Per Share |
U.S. GAAP Financial
Measures |
$ |
757.8 |
|
$ |
654.2 |
|
$ |
40.2 |
|
$ |
(36.3) |
|
$ |
(0.39) |
Adjustments: |
|
|
|
|
|
|
|
|
|
ERP and System Modernization 1 |
— |
|
(12.9) |
|
12.9 |
|
10.0 |
|
0.11 |
Intangible Amortization 2 |
— |
|
(84.2) |
|
84.2 |
|
65.3 |
|
0.71 |
Portfolio Optimization 3 |
— |
|
(1.4) |
|
64.8 |
|
63.9 |
|
0.69 |
Litigation, Settlements and Regulatory Compliance 4 |
— |
|
(22.4) |
|
22.4 |
|
15.8 |
|
0.17 |
Asset Impairments 5 |
3.4 |
|
(3.1) |
|
6.5 |
|
6.5 |
|
0.07 |
Total Adjustments |
3.4 |
|
(124.0) |
|
190.8 |
|
161.5 |
|
1.75 |
Adjusted Financial
Measures a |
$ |
761.2 |
|
$ |
530.2 |
|
$ |
231.0 |
|
$ |
125.2 |
|
$ |
1.36 |
Depreciation |
|
|
|
|
78.7 |
|
|
|
|
Adjusted
EBITDA b |
|
|
|
|
$ |
309.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions, except per share data) |
|
Nine Months Ended September 30, 2022 |
|
Gross Profit |
|
Selling,General and Administrative
Expenses |
|
Income from Operations |
|
Net IncomeAttributable to Common
Shareholders c |
|
Diluted Earnings Per Share |
U.S. GAAP Financial
Measures |
$ |
771.1 |
|
$ |
676.5 |
|
$ |
94.6 |
|
$ |
24.2 |
|
$ |
0.26 |
Adjustments: |
|
|
|
|
|
|
|
|
|
ERP and System Modernization 1 |
— |
|
(13.0) |
|
13.0 |
|
9.8 |
|
0.11 |
Intangible Amortization 2 |
— |
|
(94.7) |
|
94.7 |
|
73.4 |
|
0.79 |
Portfolio Optimization 3 |
— |
|
(2.7) |
|
2.7 |
|
2.0 |
|
0.02 |
Litigation, Settlements and Regulatory Compliance 4 |
— |
|
(26.0) |
|
26.0 |
|
22.0 |
|
0.24 |
Asset Impairments 5 |
— |
|
(2.0) |
|
2.0 |
|
1.5 |
|
0.02 |
Total Adjustments |
— |
|
(138.4) |
|
138.4 |
|
108.7 |
|
1.18 |
Adjusted Financial
Measures a |
$ |
771.1 |
|
$ |
538.1 |
|
$ |
233.0 |
|
$ |
132.9 |
|
$ |
1.44 |
Depreciation |
|
|
|
|
81.5 |
|
|
|
|
Adjusted
EBITDA b |
|
|
|
|
$ |
314.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions, except per share data) |
|
Year-to-Date 2023 Change Compared to 2022 |
|
Gross Profit |
|
Selling,General and Administrative
Expenses |
|
Income from Operations |
|
Net (Loss) IncomeAttributable to Common
Shareholders |
|
Diluted (Loss) Earnings Per Share |
U.S. GAAP Financial
Measures |
$ |
(13.3) |
|
$ |
(22.3) |
|
$ |
(54.4) |
|
$ |
(60.5) |
|
$ |
(0.65) |
Adjustments: |
|
|
|
|
|
|
|
|
|
ERP and System Modernization |
— |
|
0.1 |
|
(0.1) |
|
0.2 |
|
— |
Intangible Amortization |
— |
|
10.5 |
|
(10.5) |
|
(8.1) |
|
(0.08) |
Portfolio Optimization |
— |
|
1.3 |
|
62.1 |
|
61.9 |
|
0.67 |
Litigation, Settlements and Regulatory Compliance |
— |
|
3.6 |
|
(3.6) |
|
(6.2) |
|
(0.07) |
Asset Impairments |
3.4 |
|
(1.1) |
|
4.5 |
|
5.0 |
|
0.05 |
Total Adjustments |
3.4 |
|
14.4 |
|
52.4 |
|
52.8 |
|
0.57 |
Adjusted Financial
Measures |
$ |
(9.9) |
|
$ |
(7.9) |
|
$ |
(2.0) |
|
$ |
(7.7) |
|
$ |
(0.08) |
Depreciation |
|
|
|
|
(2.8) |
|
|
|
|
Adjusted
EBITDA |
|
|
|
|
$ |
(4.8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides adjustments to Income from
operations categorized as follows:
(In millions) |
|
Nine Months Ended September 30, |
|
2023 |
|
2022 |
Non-Cash Related 6 |
$ |
152.0 |
|
$ |
96.7 |
Cash Related |
|
38.8 |
|
|
41.7 |
Total |
$ |
190.8 |
|
$ |
138.4 |
|
|
|
|
|
|
U.S. GAAP results for the nine months ended
September 30, 2023 and 2022 include:
- ERP and System Modernization: In 2023 and 2022, SG&A
includes consulting and professional fees related to our ERP and
system modernization.
- Intangible Amortization: Intangible amortization expense
from acquisitions.
- Portfolio Optimization: In 2023 Divestitures losses, net
includes aggregate net losses of $63.4 million (inclusive of $2.1
million related to deal costs) related to International
divestitures of Romania, Republic of Korea, Australia, Singapore,
Brazil, and a container manufacturing operation. In 2023 and 2022,
SG&A includes consulting and professional fees associated with
our Portfolio Optimization efforts of $1.4 million and $2.7
million, respectively.
- Litigation, Settlements, and Regulatory Compliance: In
2023 and 2022, SG&A includes $17.7 million (which includes
FCPA monitor related fees of $7.0 million) and
$12.9 million, respectively, of primarily consulting and
professional fees and estimated contingent liability provisions net
of releases related to certain litigation, settlement and
regulatory compliance matters. Additionally in 2023, SG&A
includes a value-added tax reclaim credit of $6.0 million, a
settlement charge associated with a vendor dispute of
$6.0 million, other settlement charges of $5.6 million,
and a FCPA settlement release of $0.9 million. Additionally in
2022, SG&A includes FCPA settlement expense of
$9.6 million and a settlement charge related to a multi-year
indirect tax related IRS examination of $3.5 million.
- Asset Impairments: In 2023, COR includes an impairment of
$3.4 million in International associated with certain
long-lived assets, primarily property, plant and equipment, in
Romania, and SG&A includes an impairment of $3.1 million
associated with certain intangible assets in Spain. In 2022,
SG&A includes an impairment of $2.0 million associated
with exiting certain North American office facilities.
- Non-Cash Related Adjustments: In 2023 and 2022, non-cash
related adjustments include $152.0 million and
$96.7 million, respectively, consisting of intangible
amortization, portfolio optimization, and asset impairment
items.
- The Non-GAAP financial measures contained in this press release
are reconciled to the most comparable measures calculated in
accordance with U.S. GAAP in the schedules attached to this
release. Management believes the Non-GAAP financial measures are
useful measures of Stericycle’s performance because they provide
additional information about Stericycle’s operations and exclude
certain adjusting items, allowing better evaluation of
underlying business performance and better period-to-period
comparability. The Non-GAAP financial measures contained in this
press release may not be calculated in the same manner as certain
other Non-GAAP financial measures and are used solely to evaluate
management’s performance for incentive compensation purposes. All
Non-GAAP financial measures are intended to supplement the
applicable U.S. GAAP measures and should not be considered in
isolation from, or a replacement for, financial measures prepared
in accordance with U.S. GAAP and may not be comparable to or
calculated in the same manner as Non-GAAP financial measures
published by other companies.
- Adjusted Earnings Before Interest, Tax, Depreciation and
Amortization (Adjusted EBITDA) is Income from operations excluding
certain adjusting items, depreciation and intangible
amortization.
- Under the Net (Loss) Income Attributable to Common Shareholders
column, adjustments are shown net of tax in aggregate of
$29.3 million and $29.7 million for the nine months
ended September 30, 2023 and 2022, respectively, based on
applying the statutory tax rate for the jurisdictions in which the
adjustment occurred or, by adjusting the tax effect to consider the
impact of applying an annual effective tax rate on an interim
basis. For purposes of reconciling adjusted diluted earnings per
share with respect to taxes period-over-period, the company
utilizes a “rate approach” to highlight the impact of the adjusted
tax rate. It is computed by multiplying the prior period adjusted
rate by the current period adjusted income before taxes to
determine the expected tax expense. Such expected tax expense is
then compared to actual tax expense. Expected tax in excess of
actual tax variance is favorable; actual tax in excess of expected
tax variance is unfavorable. The variance divided by diluted shares
outstanding at the end of the period yields the impact on earnings
per share. Management believes the use of this measure best aids in
explaining the impact of a changing tax rate.
FOR FURTHER INFORMATION CONTACT:Stericycle
Investor Relations 847-607-2012Stericycle Media Relations
847-964-2288
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