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Stericycle Inc. reports gains, losses in third quarter

The company is reporting revenues of $690.3 million for Q3, compared with $648.9 million the year prior.

November 8, 2022

Stericycle Inc. has released its results for the third quarter, which ended Sept. 30. The report showed an increase of 6.4 percent in revenue, with organic revenue growing 10.9 percent.   

“Our third-quarter results build upon the momentum we began to experience in the second quarter as revenue, margin, adjusted earnings per share and free cash flow all improved,” says Cindy J. Miller, president and CEO of Stericycle, Bannockburn, Illinois. “We remain focused on executing our five key business priorities and continuing this momentum through the rest of this year."  

The company is reporting revenues of $690.3 million for Q3 compared with $648.9 million in Q3 2021. The $41.4 million increase was primarily because of organic revenue growth of $60.5 million in Secure Information Destruction, or SID, $10.2 million in Regulated Waste and Compliance Services, or RWCS, and the impact of an acquisition of $2 million. Partially offsetting these increases were unfavorable foreign exchange rates of $18 million and the impact of divestitures of $13.3 million.  

Income from operations in the third quarter was $50.6 million compared with a loss from operations in the third quarter of 2021 of $50.6 million. The $101.2 million increase was because of several factors:  

  • the foreign corrupt practices act (FCPA) litigation settlement accrual recorded in the third quarter of 2021 of $61 million;   

  • 2022 commercial pricing levers resulting in revenue flow-through of $34.6 million;   

  • nonrecurring typical enterprise resource planning (ERP) startup challenges in the third quarter of 2021 of $13.2 million;   

  • divestiture losses in the third quarter of 2021 of $10.9 million; and   

  • lower annual incentive compensation expense in 2022 of $3.6 million.   

These were partially offset by higher supply chain, wage adjustments and other inflationary costs of approximately $19.2 million and by higher bad debt expense of $9.2 million, higher headcount and onboarding costs of about $6.3 million.  

Net income in the third quarter was $28 million, or 30 cents diluted earnings per share, compared with a net loss of $66 million, or 72 cents diluted loss per share, in the third quarter of 2021. The difference was primarily attributable to higher income from operations of $101.2 million.  

Cash flow from operations was $43.1 million compared with $202.2 million in the same period of 2021. The year-over-year loss of $159.1 million primarily was driven by the FCPA settlement payments in 2022 of $81 million, the timing of vendor payments of $36.2 million, an increase in days sales outstanding that equates to $30.3 million and higher interest payments of $9.3 million.  

Cash paid for capital expenditures for Q3 was $106 million compared with $85.8 million in the same period of 2021. The $20.2 million increase mainly was attributable to the timing of cash payments.  

For the third quarter of 2022, organic revenues increased by 10.9 percent, excluding the impact of divestitures, acquisition and the impact of foreign exchange rates. SID organic revenues grew 32.3 percent, mainly from higher service and recycling revenues and nonrecurring typical ERP startup challenges experienced in the third quarter of 2021. RWCS organic revenues grew 2.2 percent.  

Adjusted income from operations was $92 million compared with $72.5 million in the third quarter of 2021. As a percentage of revenues, the 210 basis points increase was primarily driven by revenue flow-through of about 500 basis points, nonrecurring typical ERP startup challenges in the third quarter of 2021 of about 190 basis points and lower annual incentive compensation expense of about 50 basis points. These were partially offset by higher supply chain, wage adjustments and other inflationary costs of about 280 basis points, higher bad debt expense of approximately 130 basis points, higher headcount and onboarding costs of about 90 basis points and higher ongoing information technology operating expenditures of about 70 basis points.  

Adjusted diluted earnings per share were 65 cents compared with 44 cents in the third quarter of 2021. Excluding the impact from divestitures, acquisition and the impact of foreign exchange rates of 1 cent, the remaining 22 cent increase was driven by:  

  • revenue flow-through of 31 cents;   

  • nonrecurring typical ERP startup challenges in the third quarter of 2021 of 11 cents; and   

  • tax, interest and other of 5 cents.   

These were partially offset by higher supply chain, wage adjustments and other inflationary costs of 16 cents, higher headcount and onboarding costs of 5 cents and higher ongoing IT operating expenditures of 4 cents.  

Free cash flow was an outflow of $62.9 million compared with an inflow of $116.4 million in the same period of 2021. The $179.3 million decrease was from lower cash flow from operations of $159.1 million, which reflects the FCPA settlement payments in 2022 of $81 million and increased cash paid for capital expenditures of $20.2 million.