Document EXHIBIT 99.1
FOR FURTHER INFORMATION CONTACT:
Stericycle Investor Relations 847-607-2012
Stericycle Media 847-964-2288
Stericycle, Inc. Reports Results
For the Second Quarter 2022
BANNOCKBURN, Ill., August 5, 2022 - Stericycle, Inc. (Nasdaq: SRCL) today reported results for the second quarter ended June 30, 2022.
Revenues for the second quarter were $679.8 million, an increase of 1.1% compared to $672.7 million in the second quarter of 2021, with organic revenues1 growing 5.0%. Income from operations was $38.1 million compared to $55.6 million in the second quarter of 2021. Net income was $10.5 million, or $0.11 diluted earnings per share, compared to net income of $29.3 million, or $0.32 diluted earnings per share, in the second quarter of 2021. Adjusted income from operations1 was $82.0 million, compared to $105.7 million in the second quarter of 2021. Adjusted diluted earnings per share1 was $0.48, compared to $0.67 in the second quarter of last year. Cash flow from operations for the six months ended June 30, 2022, was an outflow of $18.4 million, compared to an inflow of $149.8 million in the same period of 2021. Free cash flow2 was an outflow of $88.4 million for the six months ended June 30, 2022, compared to an inflow of $90.1 million in the same period of 2021.
KEY BUSINESS HIGHLIGHTS
•Organic revenues grew 5.0% compared to the second quarter of 2021 with Secure Information Destruction (“SID”) organic revenue growing 12.2% and Regulated Waste and Compliance Services (“RWCS”) growing 1.8%.
•Pricing levers helped offset labor and other supply chain inflationary cost pressures in the second quarter of 2022. As a result, the Adjusted EBITDA1 margin percentage improved 300 basis points compared to the first quarter of 2022.
•Free cash flow was $63.7 million in the second quarter, excluding payments of $75.8 million for the previously disclosed FCPA settlement netted to an outflow of $12.1 million in free cash flow in the second quarter.
“We are pleased with the sequential quarterly improvement in Adjusted EBITDA margin as pricing levers drove additional revenue growth to help offset inflationary costs,” said Cindy J. Miller, President and Chief Executive Officer. “We will continue to proactively manage the business through these dynamic macroeconomic times.”
(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. Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (Adjusted EBITDA) is Income from operations excluding certain adjusting items, depreciation and intangible amortization.
(2)Free cash flow is calculated as Net cash from operating activities less Capital expenditures. We also present Free cash flow excluding the FCPA settlement payments to provide a more normalized level.
SECOND QUARTER FINANCIAL RESULTS
U.S. Generally Accepted Accounting Principles (GAAP) Results
•Revenues in the second quarter were $679.8 million, compared to $672.7 million in the second quarter of 2021. The $7.1 million increase was primarily due to organic revenue growth of $25.7 million in SID and $8.1 million in RWCS and the impact of an acquisition of $1.8 million. Partially offsetting these increases was the impact of divestitures of $14.8 million and unfavorable foreign exchange rates of $13.7 million.
•Income from operations in the second quarter was $38.1 million, compared to $55.6 million in the second quarter of 2021. The $17.5 million decline was primarily due to higher supply chain, wage adjustments and other inflationary costs of approximately $15.0 million; higher headcount, onboarding, and overtime costs of approximately $10.0 million; higher bad debt expense of $9.8 million; and higher adjusted litigation, settlements and regulatory compliance expenses of $7.3 million. These were partially offset by commercial pricing levers resulting in revenue flow through of $14.9 million, lower self-insurance expense of $7.3 million and lower annual incentive compensation expense of $7.1 million.
•Net income in the second quarter was $10.5 million, or $0.11 diluted earnings per share, compared to net income of $29.3 million, or $0.32 diluted earnings per share, in the second quarter of 2021. The difference was primarily related to lower income from operations of $17.5 million, as explained above.
•Cash flow from operations for the first six months of 2022 was an outflow of $18.4 million, compared to an inflow of $149.8 million in the same period of 2021. The year-over-year decline of $168.2 million was primarily driven by the expected FCPA settlement payments in the second quarter of $75.8 million; timing of changes in net working capital of $54.6 million, mainly driven by accounts receivables; and lower cash generated from income from operations of $37.8 million.
•Cash paid for capital expenditures for the first six months of 2022 was $70.0 million, compared to $59.7 million in the same period of 2021. The $10.3 million increase was mainly attributable to the timing of cash payments.
Non-GAAP Results1,2
•For the second quarter of 2022, organic revenues increased 5.0%, which excludes the impact of divestitures, an acquisition and foreign exchange rates. SID and RWCS organic revenues grew 12.2% and 1.8%, respectively.
•Adjusted income from operations was $82.0 million compared to $105.7 million in the second quarter of 2021. As a percentage of revenues, the 360 basis points decline was primarily driven by higher ongoing IT operating expenditures of 220 basis points; higher supply chain, wage adjustments and other inflationary costs of approximately 220 basis points; higher headcount, onboarding, and overtime costs of approximately 150 basis points; and higher bad debt expense of approximately 140 basis points. These were partially offset by commercial pricing actions resulting in revenue flow through of 140 basis points, lower self-insurance expense of 110 basis points and lower annual incentive compensation of 110 basis points.
•Adjusted diluted earnings per share was $0.48 compared to $0.67 in the second quarter of 2021. Excluding the impact from divestitures, an acquisition and foreign exchange rates of $0.02, the remaining $0.17 year-over-year decline was driven by higher ongoing IT operating expenditures of $0.11; higher supply chain, wage adjustments and other inflationary costs of $0.11; and higher headcount, onboarding, and overtime costs of $0.08. These were partially offset by commercial pricing actions resulting in revenue flow through of $0.11 and other of $0.02.
•Free cash flow for the first six months of 2022, was an outflow of $88.4 million, compared to an inflow of $90.1 million in the same period of 2021. The $178.5 million decrease was primarily due to lower cash flow from operations of $168.2 million, which reflects the expected FCPA settlement payments of $75.8 million, and increased cash paid for capital expenditures of $10.3 million, as explained above.
(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.
RECENT EVENT
On July 27, 2022, Stericycle filed its 2022 CDP Climate Change Survey with the CDP.
CONFERENCE CALL INFORMATION
Stericycle is holding its second quarter earnings conference call on Friday, August 5, 2022, at 8:00 a.m. central time. Dial (844) 200-6205 in the U.S., (833) 950-0062 in Canada, or (929) 526-1599 if outside the U.S./Canada at least 10 minutes before the call begins. Upon dialing the number, you will be prompted to enter the Access Code
152419. To access presentation materials or listen to the call via an internet webcast, visit investors.stericycle.com.
The second quarter earnings call is being recorded and a replay will be available approximately one hour after the end of the conference call until September 2, 2022. To access a replay of the call, dial (866) 813-9403 in the U.S., (226) 828-7578 in Canada, or +44-204-525-0658 if outside the U.S./Canada and enter the Replay Access Code 770430. A replay of the webcast will also be available at investors.stericycle.com.
ABOUT STERICYCLE
Stericycle, Inc., (Nasdaq: SRCL) 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 the U.S. and 16 other countries worldwide with solutions for regulated waste and compliance services, secure information destruction and patient engagement. 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 and other expenses, decreases in the volume of regulated wastes or personal and confidential information collected from customers, the ability to implement the remaining phases of our ERP system, and disruptions resulting from deployment of our ERP system, disruptions in our supply chain, disruptions in or attacks on information technology systems, developments in the COVID-19 pandemic and the resulting impact on the results of operations, long-term remote work arrangements which may adversely affect our business, measures taken by governmental authorities to prevent the spread of the COVID-19 virus which could disrupt our supply chain, result in disruptions in transportation services and restrictions on the ability of our team members to travel, result in temporary closure of our facilities or the facilities of our customers and suppliers, affect the volume of paper processed by our secure information destruction business and the revenue generated from the sale of SOP, labor shortages, an economic disruption in the U.S. and other countries resulting from the COVID-19 virus, changing market conditions in the healthcare industry, competition and demand for services in the regulated waste and secure information destruction industries, SOP pricing volatility, 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, 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, a downgrade in our credit rating resulting in an increase in interest expense, political, economic, inflationary and other risks related to our foreign operations, the outcome of pending, future or settled litigation or investigations including with respect to the U.S. Foreign Corrupt Practices Act and foreign anti-corruption laws, 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 U.S. Securities and Exchange Commission, including our Annual Report on Form 10-K and subsequent Quarterly Reports on Forms 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 June 30, | | Six Months Ended June 30, |
| 2022 | | % Revenues | | 2021 | | % Revenues | | % Change | | 2022 | | % Revenues | | 2021 | | % Revenues | | % Change |
| Revenues | $ | 679.8 | | | 100.0 | % | | $ | 672.7 | | | 100.0 | % | | 1.1 | % | | $ | 1,344.0 | | | 100.0 | % | | $ | 1,340.7 | | | 100.0 | % | | 0.2 | % |
| Cost of revenues | 419.3 | | | 61.7 | % | | 403.6 | | | 60.0 | % | | 3.9 | % | | 839.0 | | | 62.4 | % | | 810.2 | | | 60.4 | % | | 3.6 | % |
| Gross profit | 260.5 | | | 38.3 | % | | 269.1 | | | 40.0 | % | | (3.2) | % | | 505.0 | | | 37.6 | % | | 530.5 | | | 39.6 | % | | (4.8) | % |
| Selling, general and administrative expenses | 222.4 | | | 32.7 | % | | 213.5 | | | 31.7 | % | | 4.2 | % | | 461.0 | | | 34.3 | % | | 415.8 | | | 31.0 | % | | 10.9 | % |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Income from operations | 38.1 | | | 5.6 | % | | 55.6 | | | 8.3 | % | | (31.5) | % | | 44.0 | | | 3.3 | % | | 114.7 | | | 8.6 | % | | (61.6) | % |
| Interest expense, net | (18.5) | | | (2.7) | % | | (17.9) | | | (2.7) | % | | 3.4 | % | | (34.8) | | | (2.6) | % | | (36.3) | | | (2.7) | % | | (4.1) | % |
| | | | | | | | | | | | | | | | | | | |
| Other (expense) income, net | (0.7) | | | (0.1) | % | | 0.7 | | | 0.1 | % | | (200.0) | % | | (1.5) | | | (0.1) | % | | — | | | — | % | | — | % |
| Income before income taxes | 18.9 | | | 2.8 | % | | 38.4 | | | 5.7 | % | | (50.8) | % | | 7.7 | | | 0.6 | % | | 78.4 | | | 5.8 | % | | (90.2) | % |
| Income tax expense | (8.4) | | | (1.2) | % | | (9.1) | | | (1.4) | % | | (7.7) | % | | (11.3) | | | (0.8) | % | | (22.9) | | | (1.7) | % | | (50.7) | % |
| Net income (loss) | 10.5 | | | 1.5 | % | | 29.3 | | | 4.4 | % | | (64.2) | % | | (3.6) | | | (0.3) | % | | 55.5 | | | 4.1 | % | | (106.5) | % |
| Net income attributable to noncontrolling interests | — | | | — | % | | — | | | — | % | | — | % | | (0.2) | | | — | % | | (0.1) | | | — | % | | 100.0 | % |
| Net income (loss) attributable to Stericycle, Inc. common shareholders | $ | 10.5 | | | 1.5 | % | | $ | 29.3 | | | 4.4 | % | | (64.2) | % | | $ | (3.8) | | | (0.3) | % | | $ | 55.4 | | | 4.1 | % | | (106.9) | % |
| Earnings (loss) per common share attributable to Stericycle, Inc. common shareholders: | | | | | | | | | | | | | | | | | | | |
| Basic | $ | 0.11 | | | | | $ | 0.32 | | | | | (65.6) | % | | $ | (0.04) | | | | | $ | 0.60 | | | | | (106.7) | % |
| Diluted | $ | 0.11 | | | | | $ | 0.32 | | | | | (65.6) | % | | $ | (0.04) | | | | | $ | 0.60 | | | | | (106.7) | % |
| Weighted average number of common shares outstanding: | | | | | | | | | | | | | | | | | | | |
| Basic | 92.1 | | | | | 91.8 | | | | | | | 92.0 | | | | | 91.7 | | | | | |
| Diluted | 92.2 | | | | | 92.1 | | | | | | | 92.0 | | | | | 92.1 | | | | | |
STATISTICS - U.S. GAAP AND NON-GAAP ADJUSTED FINANCIAL MEASURES
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| In millions, except per share data | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2022 | | % Revenues | | 2021 | | % Revenues | | 2022 | | % Revenues | | 2021 | | % Revenues |
| Statistics - U.S. GAAP | | | | | | | | | | | | | | | |
| Effective tax rate | 44.4 | % | | | | 23.7 | % | | | | 146.8 | % | | | | 29.2 | % | | |
Statistics - Adjusted (1) | | | | | | | | | | | | | | | |
| Adjusted gross profit | $ | 260.5 | | 38.3 | % | | $ | 269.1 | | 40.0 | % | | $ | 505.0 | | 37.6 | % | | $ | 530.5 | | 39.6 | % |
| Adjusted selling, general and administrative expenses | $ | 178.5 | | 26.3 | % | | $ | 163.4 | | 24.3 | % | | $ | 364.0 | | 27.1 | % | | $ | 314.8 | | 23.5 | % |
| Adjusted income from operations | $ | 82.0 | | 12.1 | % | | $ | 105.7 | | 15.7 | % | | $ | 141.0 | | 10.5 | % | | $ | 215.7 | | 16.1 | % |
| Adjusted EBITDA | $ | 109.0 | | 16.0 | % | | $ | 130.4 | | 19.4 | % | | $ | 195.3 | | 14.5 | % | | $ | 265.6 | | 19.8 | % |
| Adjusted net income attributable to common shareholders | $ | 44.1 | | 6.5 | % | | $ | 61.4 | | 9.1 | % | | $ | 73.1 | | 5.4 | % | | $ | 126.3 | | 9.4 | % |
| Adjusted effective tax rate | 29.8 | % | | | | 30.4 | % | | | | 30.0 | % | | | | 29.4 | % | | |
| Adjusted diluted earnings per share | $ | 0.48 | | | | $ | 0.67 | | | | $ | 0.79 | | | | $ | 1.38 | | |
| Adjusted diluted shares outstanding | 92.2 | | | | 92.1 | | | | 92.2 | | | | 92.1 | | |
(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.
STATISTICS - U.S. GAAP AND NON-GAAP ADJUSTED FINANCIAL MEASURES
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| In millions |
| Three Months Ended June 30, | | Three Months Ended March 31, | | Change |
| 2022 | | % Revenues | | 2022 | | % Revenues | | 2022 | | % Revenues |
Statistics - Adjusted (1) | | | | | | | | | | | |
| Adjusted EBITDA | $ | 109.0 | | | 16.0 | % | | $ | 86.3 | | | 13.0 | % | | $ | 22.7 | | | 3.0 | % |
(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 | | | |
| June 30, 2022 | | December 31, 2021 |
| ASSETS | | | |
| Current Assets: | | | |
| Cash and cash equivalents | $ | 45.9 | | | $ | 55.6 | |
Accounts receivable, less allowance for doubtful accounts of $54.4 in 2022 and $43.3 in 2021 | 466.2 | | | 420.4 | |
| Prepaid expenses | 35.4 | | | 45.6 | |
| Other current assets | 49.4 | | | 53.9 | |
| Total Current Assets | 596.9 | | | 575.5 | |
Property, plant and equipment, less accumulated depreciation of $681.2 in 2022 and $658.5 in 2021 | 719.8 | | | 711.0 | |
| Operating lease right-of-use assets | 357.1 | | | 344.8 | |
| Goodwill | 2,784.3 | | | 2,815.7 | |
Intangible assets, less accumulated amortization of $787.7 in 2022 and $736.6 in 2021 | 887.4 | | | 964.5 | |
| Other assets | 62.5 | | | 61.6 | |
| Total Assets | $ | 5,408.0 | | | $ | 5,473.1 | |
| LIABILITIES AND EQUITY | | | |
| Current Liabilities: | | | |
| Current portion of long-term debt | $ | 16.5 | | | $ | 19.9 | |
| Bank overdrafts | 1.0 | | | 1.6 | |
| Accounts payable | 207.1 | | | 218.9 | |
| Accrued liabilities | 256.2 | | | 359.6 | |
| Operating lease liabilities | 85.4 | | | 85.5 | |
| Other current liabilities | 52.4 | | | 46.2 | |
| Total Current Liabilities | 618.6 | | | 731.7 | |
| Long-term debt, net | 1,676.3 | | | 1,589.8 | |
| Long-term operating lease liabilities | 292.2 | | | 279.8 | |
| Deferred income taxes | 412.9 | | | 411.0 | |
| Long-term taxes payable | 17.3 | | | 19.1 | |
| Other liabilities | 37.0 | | | 38.9 | |
| Total Liabilities | 3,054.3 | | | 3,070.3 | |
| | | |
| Commitments and contingencies | | | |
| | | |
| EQUITY | | | |
Common stock (par value $0.01 per share, 120.0 shares authorized, 92.1 and 91.9 issued and outstanding in 2022 and 2021, respectively) | 0.9 | | | 0.9 | |
| Additional paid-in capital | 1,271.2 | | | 1,261.8 | |
| Retained earnings | 1,351.0 | | | 1,354.8 | |
| Accumulated other comprehensive loss | (273.2) | | | (218.8) | |
| Total Stericycle, Inc.’s Equity | 2,349.9 | | | 2,398.7 | |
| Noncontrolling interests | 3.8 | | | 4.1 | |
| Total Equity | 2,353.7 | | | 2,402.8 | |
| Total Liabilities and Equity | $ | 5,408.0 | | | $ | 5,473.1 | |
STERICYCLE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| In millions | | | |
| Six Months Ended June 30, |
| 2022 | | 2021 |
| OPERATING ACTIVITIES: | | | |
| Net (loss) income | $ | (3.6) | | | $ | 55.5 | |
| Adjustments to reconcile net (loss) income to net cash from operating activities: | | | |
| Depreciation | 54.3 | | | 50.4 | |
| Intangible amortization | 63.2 | | | 59.9 | |
| | | |
| Stock-based compensation expense | 12.6 | | | 12.2 | |
| Deferred income taxes | 5.2 | | | (8.8) | |
| | | |
| | | |
| Loss on disposal of property plant and equipment and other charges | 0.3 | | | — | |
| Other, net | 1.6 | | | 2.2 | |
| Changes in operating assets and liabilities: | | | |
| Accounts receivable | (53.4) | | | (22.8) | |
| Prepaid expenses | 10.0 | | | 30.9 | |
| Accounts payable | (12.5) | | | (7.2) | |
| Accrued liabilities | (91.6) | | | (11.0) | |
| Other assets and liabilities | (4.5) | | | (11.5) | |
| Net cash from operating activities | (18.4) | | | 149.8 | |
| INVESTING ACTIVITIES: | | | |
| Capital expenditures | (70.0) | | | (59.7) | |
| | | |
| Proceeds (payments) from divestiture of businesses, net | 1.6 | | | (0.7) | |
| Other, net | 0.8 | | | 2.0 | |
| Net cash from investing activities | (67.6) | | | (58.4) | |
| FINANCING ACTIVITIES: | | | |
| Repayments of long-term debt and other obligations | (8.4) | | | (11.6) | |
| | | |
| Repayments of foreign bank debt | (0.1) | | | (0.2) | |
| | | |
| Repayments of term loan | — | | | (104.3) | |
| | | |
| Proceeds from credit facility | 732.5 | | | 648.0 | |
| Repayments of credit facility | (637.9) | | | (610.6) | |
| (Repayment of) proceeds from bank overdrafts, net | (0.6) | | | 2.3 | |
| | | |
| Payments of finance lease obligations | (1.3) | | | (2.0) | |
| | | |
| Proceeds from issuance of common stock, net of (payments of) taxes from withheld shares | (5.2) | | | (3.6) | |
| | | |
| Payments to noncontrolling interest | — | | | (0.6) | |
| Net cash from financing activities | 79.0 | | | (82.6) | |
| Effect of exchange rate changes on cash and cash equivalents | (2.7) | | | (0.4) | |
| Net change in cash and cash equivalents | (9.7) | | | 8.4 | |
| Cash and cash equivalents at beginning of period | 55.6 | | | 53.3 | |
| Cash and cash equivalents at end of period | $ | 45.9 | | | $ | 61.7 | |
| | | |
| SUPPLEMENTAL CASH FLOW INFORMATION: | | | |
| | | |
| Interest paid, net of capitalized interest | $ | 31.9 | | | $ | 23.0 | |
| Income taxes paid (refunded), net | $ | 4.0 | | | $ | 8.1 | |
| Capital expenditures in Accounts payable | $ | 30.8 | | | $ | 14.9 | |
Free Cash Flow (1) | $ | (88.4) | | | $ | 90.1 | |
(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 JUNE 30, 2022 AND 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, |
| In millions | | | | Components of Change (%) (1) |
| 2022 | | 2021 | | Change ($) | | Change (%) | | Organic Growth (2) | | Acquisition | | Divestitures | | Foreign Exchange(3) |
| Revenue by Service | | | | | | | | | | | | | | | |
Regulated Waste and Compliance Services | $ | 448.4 | | | $ | 463.0 | | | $ | (14.6) | | | (3.1) | % | | 1.8 | % | | 0.4 | % | | (3.2) | % | | (2.1) | % |
| Secure Information Destruction Services | 231.4 | | | 209.7 | | | 21.7 | | | 10.3 | % | | 12.2 | % | | — | % | | — | % | | (1.9) | % |
| Total Revenues | $ | 679.8 | | | $ | 672.7 | | | $ | 7.1 | | | 1.1 | % | | 5.0 | % | | 0.3 | % | | (2.2) | % | | (2.0) | % |
| North America | | | | | | | | | | | | | | | |
Regulated Waste and Compliance Services | $ | 365.6 | | | $ | 362.2 | | | $ | 3.4 | | | 1.0 | % | | 2.8 | % | | 0.5 | % | | (2.3) | % | | (0.1) | % |
| Secure Information Destruction Services | 203.0 | | | 180.4 | | | 22.6 | | | 12.5 | % | | 12.9 | % | | — | % | | — | % | | (0.4) | % |
| Total North America Segment | $ | 568.6 | | | $ | 542.6 | | | $ | 26.0 | | | 4.8 | % | | 6.2 | % | | 0.3 | % | | (1.5) | % | | (0.2) | % |
| International | | | | | | | | | | | | | | | |
Regulated Waste and Compliance Services | $ | 82.8 | | | $ | 100.8 | | | $ | (18.0) | | | (17.9) | % | | (2.3) | % | | — | % | | (6.5) | % | | (9.1) | % |
| Secure Information Destruction Services | 28.4 | | | 29.3 | | | (0.9) | | | (3.0) | % | | 8.0 | % | | — | % | | — | % | | (11.0) | % |
| Total International Segment | $ | 111.2 | | | $ | 130.1 | | | $ | (18.9) | | | (14.5) | % | | — | % | | — | % | | (5.1) | % | | (9.5) | % |
See footnote descriptions below Table 1 – C
Table 1–B: REVENUE CHANGES BY SERVICE AND SEGMENT (UNAUDITED) –
SIX MONTHS ENDED JUNE 30, 2022 AND 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| In millions | | | | Components of Change (%) (1) |
| 2022 | | 2021 | | Change ($) | | Change (%) | | Organic Growth (2) | | Acquisition | | Divestitures | | Foreign Exchange(3) |
| Revenue by Service | | | | | | | | | | | | | | | |
Regulated Waste and Compliance Services | $ | 901.2 | | | $ | 936.6 | | | $ | (35.4) | | | (3.8 | %) | | 0.4 | % | | 0.4 | % | | (3.0 | %) | | (1.5) | % |
| Secure Information Destruction Services | 442.8 | | | 404.1 | | | 38.7 | | | 9.6 | % | | 10.9 | % | | — | % | | — | % | | (1.3) | % |
| Total Revenues | $ | 1,344.0 | | | $ | 1,340.7 | | | $ | 3.3 | | | 0.2 | % | | 3.5 | % | | 0.3 | % | | (2.1 | %) | | (1.5) | % |
| North America | | | | | | | | | | | | | | | |
Regulated Waste and Compliance Services | $ | 727.8 | | | $ | 729.0 | | | $ | (1.2) | | | (0.2 | %) | | 1.5 | % | | 0.5 | % | | (2.1 | %) | | (0.1) | % |
| Secure Information Destruction Services | 384.5 | | | 347.3 | | | 37.2 | | | 10.7 | % | | 10.9 | % | | — | % | | — | % | | (0.2) | % |
| Total North America Segment | $ | 1,112.3 | | | $ | 1,076.3 | | | $ | 36.0 | | | 3.3 | % | | 4.5 | % | | 0.4 | % | | (1.4 | %) | | (0.1) | % |
| International | | | | | | | | | | | | | | | |
Regulated Waste and Compliance Services | $ | 173.4 | | | $ | 207.6 | | | $ | (34.2) | | | (16.5 | %) | | (3.5 | %) | | — | % | | (6.3 | %) | | (6.7) | % |
| Secure Information Destruction Services | 58.3 | | | 56.8 | | | 1.5 | | | 2.7 | % | | 10.7 | % | | — | % | | — | % | | (8.0) | % |
| Total International Segment | $ | 231.7 | | | $ | 264.4 | | | $ | (32.7) | | | (12.4 | %) | | (0.5 | %) | | — | % | | (5.0 | %) | | (7.0) | % |
See footnote descriptions below Table 1 – C
Table 1–C: COMPONENTS OF REVENUE CHANGE IN DOLLARS (UNAUDITED)
| | | | | | | | | | | |
| (In millions) |
| Three Months Ended
June 30, 2022 | | Six Months Ended
June 30, 2022 |
Organic Growth (2) | $ | 33.8 | | | $ | 47.4 | |
| Acquisition | 1.8 | | | 4.0 | |
| Divestitures | (14.8) | | | (28.5) | |
Foreign exchange (3) | (13.7) | | | (19.6) | |
| Total Change | $ | 7.1 | | | $ | 3.3 | |
(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, acquisitions 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 JUNE 30, 2022 and 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions, except per share data) |
| | Three Months Ended June 30, 2022 |
| | | Selling,
General and Administrative
Expenses | | Income from Operations | | Net Income Attributable to Common Shareholders d | | Diluted Earnings
Per Share |
| U.S. GAAP Financial Measures | | | $ | 222.4 | | | $ | 38.1 | | | $ | 10.5 | | | $ | 0.11 | |
| Adjustments: | | | | | | | | | |
ERP Implementation 1 | | | (3.5) | | | 3.5 | | | 2.6 | | | 0.03 | |
Intangible Amortization 2 | | | (30.8) | | | 30.8 | | | 23.9 | | | 0.26 | |
| | | | | | | | | |
| | | | | | | | | |
Portfolio Optimization 3 | | | — | | | — | | | — | | | — | |
Litigation, Settlements and Regulatory Compliance 4 | | | (9.6) | | | 9.6 | | | 7.1 | | | 0.08 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Other Tax Matter 5 | | | — | | | — | | | — | | | — | |
| Total Adjustments | | | (43.9) | | | 43.9 | | | 33.6 | | | 0.37 | |
Adjusted Financial Measures a | | | $ | 178.5 | | | $ | 82.0 | | | $ | 44.1 | | | $ | 0.48 | |
Depreciation | | | | | 27.0 | | | | | |
Adjusted EBITDA c | | | | | $ | 109.0 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions, except per share data) |
| | Three Months Ended June 30, 2021 |
| | | Selling,
General and Administrative
Expenses | | Income from Operations | | Net Income Attributable to Common Shareholders d | | Diluted Earnings
Per Share |
| U.S. GAAP Financial Measures | | | $ | 213.5 | | | $ | 55.6 | | | $ | 29.3 | | | $ | 0.32 | |
| Adjustments: | | | | | | | | | |
ERP Implementation 1 | | | (17.3) | | | 17.3 | | | 12.9 | | | 0.14 | |
Intangible Amortization 2 | | | (30.1) | | | 30.1 | | | 22.7 | | | 0.25 | |
| | | | | | | | | |
| | | | | | | | | |
Portfolio Optimization 3 | | | (0.4) | | | 0.4 | | | 0.3 | | | — | |
Litigation, Settlements and Regulatory Compliance 4 | | | (2.3) | | | 2.3 | | | 1.7 | | | 0.02 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Other Tax Matter 5 | | | — | | | — | | | (5.5) | | | (0.06) | |
| Total Adjustments | | | (50.1) | | | 50.1 | | | 32.1 | | | 0.35 | |
Adjusted Financial Measures a | | | $ | 163.4 | | | $ | 105.7 | | | $ | 61.4 | | | $ | 0.67 | |
Depreciation b | | | | | 24.7 | | | | | |
Adjusted EBITDA c | | | | | $ | 130.4 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions, except per share data) |
| | Second Quarter 2022 Change Compared to Second Quarter 2021 |
| | | Selling,
General and Administrative Expenses | | Income from Operations | | Net Income
Attributable to Common Shareholders | | Diluted Earnings
Per Share |
| U.S. GAAP Financial Measures | | | $ | 8.9 | | | $ | (17.5) | | | $ | (18.8) | | | $ | (0.21) | |
| Adjustments: | | | | | | | | | |
| ERP Implementation | | | 13.8 | | | (13.8) | | | (10.3) | | | (0.11) | |
| Intangible Amortization | | | (0.7) | | | 0.7 | | | 1.2 | | | 0.01 | |
| | | | | | | | | |
| | | | | | | | | |
| Portfolio Optimization | | | 0.4 | | | (0.4) | | | (0.3) | | | — | |
| Litigation, Settlements and Regulatory Compliance | | | (7.3) | | | 7.3 | | | 5.4 | | | 0.06 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Other Tax Matter | | | — | | | — | | | 5.5 | | | 0.06 | |
| Total Adjustments | | | 6.2 | | | (6.2) | | | 1.5 | | | 0.02 | |
| Adjusted Financial Measures | | | $ | 15.1 | | | $ | (23.7) | | | $ | (17.3) | | | $ | (0.19) | |
| Depreciation | | | | | 2.3 | | | | | |
| Adjusted EBITDA | | | | | $ | (21.4) | | | | | |
The following table provides adjustments to Income from operations categorized as follows:
| | | | | | | | | | | |
| (In millions) |
| Three Months Ended June 30, |
| 2022 | | 2021 |
Non-Cash Related 6 | $ | 30.8 | | | $ | 30.3 | |
| Cash Related | 13.1 | | | 19.8 | |
| Total | $ | 43.9 | | | $ | 50.1 | |
U.S. GAAP results for the three months ended June 30, 2022 and 2021 include:
1.ERP Implementation: In 2022, Selling, General, and Administrative expenses (“SG&A”) includes $3.5 million of consulting and professional fees related to our ERP Implementation. In 2021, SG&A includes $17.3 million of expenses related to our ERP Implementation, of which $10.7 million related to consulting and professional fees, $3.3 million related to software usage/maintenance fees, $2.8 million related to internal costs, and $0.5 million of other related costs.
2.Intangible Amortization: Intangible amortization expense from acquisitions.
3.Portfolio Optimization: In 2021, SG&A includes consulting and professional fees associated with our Portfolio Optimization efforts of $0.4 million.
4.Litigation, Settlements, and Regulatory Compliance: In 2022, SG&A includes a $3.5 million settlement charge related to a multi-year indirect tax related Internal Revenue Service (“IRS”) examination and a FCPA settlement accrual increase of $0.4 million. Additionally, in 2022 and 2021, SG&A includes $5.7 million and $2.3 million, respectively, of primarily consulting and professional fees related to certain litigation, settlement and regulatory compliance matters.
5.Other Tax Matter: In 2021, a tax benefit associated with resolution of a matter that was subject to a pre-filling agreement (“PFA”) with the IRS was recognized.
6.Non-Cash Related Adjustments: In 2022, non-cash related adjustments include $30.8 million in intangible amortization. In 2021, non-cash related adjustments include $30.1 million in intangible amortization and $0.2 million in depreciation charges related to the ERP implementation.
a.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.
b.Three months ended June 30, 2021, excludes depreciation charges of $0.2 million, which is included in ERP Implementation.
c.Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (Adjusted EBITDA) is Income from operations excluding certain adjusting items, depreciation and intangible amortization.
d.Under the Net Income Attributable to Common Shareholders column, adjustments are shown net of tax in aggregate of $10.3 million and $17.8 million for the three months ended June 30, 2022 and 2021, 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: SIX MONTHS ENDED JUNE 30, 2022 and 2021
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions, except per share data) |
| | Six Months Ended June 30, 2022 |
| | | Selling,
General and Administrative Expenses | | Income from Operations | | Net (Loss) Income Attributable to Common Shareholders d | | Diluted (Loss) Earnings
Per Share |
| U.S. GAAP Financial Measures | | | $ | 461.0 | | | $ | 44.0 | | | $ | (3.8) | | | $ | (0.04) | |
| Adjustments: | | | | | | | | | |
ERP Implementation 1 | | | (9.1) | | | 9.1 | | | 6.8 | | | 0.07 | |
Intangible Amortization 2 | | | (63.2) | | | 63.2 | | | 49.1 | | | 0.53 | |
| | | | | | | | | |
| | | | | | | | | |
Portfolio Optimization 3 | | | (1.3) | | | 1.3 | | | 1.0 | | | 0.01 | |
Litigation, Settlements and Regulatory Compliance 4 | | | (23.4) | | | 23.4 | | | 20.0 | | | 0.22 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Other Tax Matter 5 | | | — | | | — | | | — | | | — | |
| Total Adjustments | | | (97.0) | | | 97.0 | | | 76.9 | | | 0.83 | |
Adjusted Financial Measures a | | | $ | 364.0 | | | $ | 141.0 | | | $ | 73.1 | | | $ | 0.79 | |
| Depreciation | | | | | 54.3 | | | | | |
Adjusted EBITDA c | | | | | $ | 195.3 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions, except per share data) |
| | Six Months Ended June 30, 2021 |
| | | Selling,
General and Administrative Expenses | | Income from Operations | | Net Income Attributable to Common Shareholders d | | Diluted Earnings
Per Share |
| U.S. GAAP Financial Measures | | | $ | 415.8 | | | $ | 114.7 | | | $ | 55.4 | | | $ | 0.60 | |
| Adjustments: | | | | | | | | | |
ERP Implementation 1 | | | (35.2) | | | 35.2 | | | 26.2 | | | 0.28 | |
Intangible Amortization 2 | | | (59.9) | | | 59.9 | | | 45.8 | | | 0.50 | |
| | | | | | | | | |
| | | | | | | | | |
Portfolio Optimization 3 | | | (1.6) | | | 1.6 | | | 1.2 | | | 0.02 | |
Litigation, Settlements and Regulatory Compliance 4 | | | (4.3) | | | 4.3 | | | 3.2 | | | 0.04 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Other Tax Matter 5 | | | — | | | — | | | (5.5) | | | (0.06) | |
| Total Adjustments | | | (101.0) | | | 101.0 | | | 70.9 | | | 0.78 | |
Adjusted Financial Measures a | | | $ | 314.8 | | | $ | 215.7 | | | $ | 126.3 | | | $ | 1.38 | |
Depreciation b | | | | | 49.9 | | | | | |
Adjusted EBITDA c | | | | | $ | 265.6 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (In millions, except per share data) |
| | Year-to-Date 2022 Change Compared to 2021 |
| | | Selling,
General and Administrative Expenses | | Income from Operations | | Net (Loss) Income Attributable to Common Shareholders | | Diluted (Loss) Earnings Per Share |
| U.S. GAAP Financial Measures | | | $ | 45.2 | | | $ | (70.7) | | | $ | (59.2) | | | $ | (0.64) | |
| Adjustments: | | | | | | | | | |
| ERP Implementation | | | 26.1 | | | (26.1) | | | (19.4) | | | (0.21) | |
| Intangible Amortization | | | (3.3) | | | 3.3 | | | 3.3 | | | 0.03 | |
| | | | | | | | | |
| | | | | | | | | |
| Portfolio Optimization | | | 0.3 | | | (0.3) | | | (0.2) | | | (0.01) | |
| Litigation, Settlements and Regulatory Compliance | | | (19.1) | | | 19.1 | | | 16.8 | | | 0.18 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Other Tax Matter | | | — | | | — | | | 5.5 | | | 0.06 | |
| Total Adjustments | | | 4.0 | | | (4.0) | | | 6.0 | | | 0.05 | |
| Adjusted Financial Measures | | | $ | 49.2 | | | $ | (74.7) | | | $ | (53.2) | | | $ | (0.59) | |
| Depreciation | | | | | 4.4 | | | | | |
| Adjusted EBITDA | | | | | $ | (70.3) | | | | | |
The following table provides adjustments to Income from operations categorized as follows:
| | | | | | | | | | | |
| (In millions) |
| Six Months Ended June 30, |
| 2022 | | 2021 |
Non-Cash Related 6 | $ | 63.2 | | | $ | 60.4 | |
| Cash Related | 33.8 | | | 40.6 | |
| Total | $ | 97.0 | | | $ | 101.0 | |
U.S. GAAP results for the six months ended June 30, 2022 and 2021 include:
1.ERP Implementation: In 2022, SG&A includes $9.1 million of consulting and professional fees related to our ERP Implementation. In 2021, SG&A includes $35.2 million of expenses related to our ERP Implementation, of which $22.3 million related to consulting and professional fees, $6.4 million related to software usage/maintenance fees, $5.5 million related to internal costs, and $1.0 million of other related costs.
2.Intangible Amortization: Intangible amortization expense from acquisitions.
3.Portfolio Optimization: In 2022 and 2021, SG&A includes primarily consulting and professional fees associated with our Portfolio Optimization efforts of $1.3 million and $1.6 million, respectively.
4.Litigation, Settlements, and Regulatory Compliance: In 2022, SG&A includes a FCPA settlement accrual increase of $9.6 million and a settlement charge related to a multi-year indirect tax related IRS examination of $3.5 million. Additionally, in 2022 and 2021, SG&A includes $10.3 million and $4.3 million, respectively, of primarily consulting and professional fees related to certain litigation, settlement and regulatory compliance matters.
5.Other Tax Matter: In 2021, a tax benefit associated with resolution of a matter that was subject to a PFA with the IRS was recognized.
6.Non-Cash Related Adjustments: In 2022, non-cash related adjustments include $63.2 million in intangible amortization. In 2021, non-cash related adjustments include $59.9 million in intangible amortization and $0.5 million in depreciation charges related to the ERP implementation.
a.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.
b.Six months ended June 30, 2021, excludes depreciation charges of $0.5 million which is included in ERP Implementation.
c.Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (Adjusted EBITDA) is Income from operations excluding certain adjusting items, depreciation and intangible amortization.
d.Under the Net (Loss) Income Attributable to Common Shareholders column, adjustments are shown net of tax in aggregate of $20.1 million and $29.9 million for the six months ended June 30, 2022 and 2021, 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.