Stericycle Inc., Bannockburn, Illinois, reported results for the third quarter on Nov. 2.
Revenues for the third quarter were $648.9 million, an increase of 2 percent compared to $636.4 million in the third quarter of 2020, primarily due to the increase in regulated waste and compliance services (RWCS) revenues, which were partially offset by the impact of divestitures.
Organic revenues increased 4.4 percent when excluding the impact of divestitures and foreign exchange rates. Loss from operations was $50.6 million, compared to a loss from operations of $55.8 million in the third quarter of 2020. Net loss was $66 million compared to a net loss of $81.2 million in the third quarter of 2020. Adjusted income from operations was $72.5 million, compared to $101 million in the third quarter of 2020. Adjusted diluted earnings per share was 44 cents, compared to 68 cents in the third quarter of last year. Cash flow from operations for the first three quarters was $202.2 million, compared to $365.2 million in the same period in 2020. Free cash flow for the first three quarters was $116.4 million, compared to $270.5 million in the same period of 2020.
Key business highlights
- Stericycle completed the deployment of its Enterprise Resource Planning (ERP) system for its North America finance and procurement processes and secure information destruction (SID) business.
- Organic revenues increased 4.4 percent, driven by RWCS organic revenues, which increased 6.8 percent in the third quarter compared to 2020.
- The company renewed its credit agreement, which maintains its revolving credit facility of $1.2 billion and establishes a term loan facility of $200 million, with new maturity dates of Sept. 30, 2026.
“We are pleased with the continued strong revenue growth in regulated waste and compliance services. In addition, we achieved an important milestone in one of our key business priorities by completing the deployment of the North America ERP system for secure information destruction,” Cindy Miller, CEO of Stericycle, says. “This deployment represents a significant accomplishment in our transformation journey, establishing the technological foundation that we anticipate will help us to achieve our long-term outlook, enhance the experience for our customers and unlock value for shareholders in the years to come.”
Third quarter financial results
- Revenues in the third quarter were $648.9 million, compared to $636.4 million in the third quarter of 2020. Of the $12.5 million increase, RWCS organic revenue increased $30.4 million, and the positive impact of foreign exchange rates was $5.8 million. These increases were partially offset by the impact of divestitures of $21.6 million and decline in SID organic revenue of $2.1 million.
- Loss from operations in the third quarter was $50.6 million, compared to a loss from operations of $55.8 million in the third quarter of 2020. The $5.2 million improvement was primarily due to divestitures, with lower year-over-year divestiture and impairment losses of $93.2 million. This improvement was partially offset by an estimated aggregate FCPA settlement accrual of $61 million, typical start-up challenges associated with the ERP system deployment of approximately $13.2 million, ongoing IT operating expenditures from its new ERP system of approximately $10.8 million, and higher labor costs of approximately $5.4 million.
- Net loss in the third quarter was $66 million compared to a net loss of $81.2 million in the third quarter of 2020. The difference was primarily related to a higher tax benefit of $9.5 million and an improvement in loss from operations of $5.2 million.
- Cash flow from operations for the first three quarters was $202.2 million, compared to $365.2 million in the same period of 2020. The year-over-year decline of $163 million was primarily driven by 2020 favorable cash flow which created non-recurring variances of $141.1 million and net working capital changes of $21.9 million, mainly driven by the timing of customer collections. The non-recurring variances include:
- U.S. CARES Act net operating loss carryback refund of $48 million in 2020;
- Annual incentive compensation payout of $38.6 million in 2021 versus a nominal payout in 2020;
- Government-related payment deferrals in 2020 associated with pandemic-related relief and subsequent 2021 payments in aggregate of $35.3 million; and
- Advances received on a service agreement related to the divestiture of domestic environmental solutions of $19.2 million in 2020.
- Cash paid for capital expenditures for the first three quarters of 2021 was $85.8 million, compared to $94.7 million in the same period of 2020.