Stericycle Posts Slight Revenue Growth, Sets Focus on Employee Retention

Medical waste services provider Stericycle, Inc. (Nasdaq: SRCL) released the results of its second-quarter earnings.

The company reported a revenue of $679.8 million, an increase of 1.1 percent compared to $672.7 million in the second quarter of 2021.

The $7.1 million increase is attributed to their organic revenue growth of $25.7 million in combination with $1.8 million thanks to an acquisition. These two increases were counterbalanced by divestitures of $14.8 million and foreign exchange rates of $13.7 million.

“We are not expecting some kind of surge of growth. We will continue to see steady growth,” said Cindy J. Miller, Stericycle president and CEO.

Miller identified COVID-19-related shifts to be a primary factor in the company’s results for the unforeseeable future. “The industry isn’t settled yet into what is the new normal.”

While the medical industry heavily influences the company's growth and losses, the room for growth leaves Miller with hope.

While labor and inflationary costs contributed to slower growth in the quarter, Stericycle managed to utilize pricing levers as a means of improving adjusted EBITDA margin. With these levers offsetting these expenses, the company's second-quarter EBITDA percentage improved 300 basis points compared to the first quarter of 2022.

Last quarter, the company put emphasis on customer relationships.

“One of the things we were most pleased about coming out of that first quarter was our engagement with customers,” Miller said.

The stronger connection with customers is reportedly responsible for $5 million of revenue yielded by fees and surcharges. The company noted that the increased conversation and relationship with customers allowed them to adjust costs, fees and surcharges when inflation struck without losing clientele. It is hoped this same variable will generate upwards of 20 million in the second half of the year.

Miller commented that Stericycle is “looking proactively at inflation rates to make adjustments, our flexibility is much higher today compared to the past few years.”

One area of focus of the company moving forward is going to be internal – the employees. Because of COVID-19-related changes, the company has hired a lot of new employees and believes this has impacted efficiency. It announced that it is “looking forward” to keeping employees around for long enough to improve the quality and amount of work they are able to accomplish with experience.

In order for this to yield results, worker retention rates must increase.

“Retention rates are comparable to historic trends, which is great to hear,” Miller said. “The improvement you are going to see is higher efficiency.”

Looking into the future, Miller has a lot of hope. When asked about the ambitious goal of achieving $400 million in revenue in the coming decades, she stated the following: “If you look at our cash flow for this year, you will see 90 million in payments, which is right on track and we believe we will be able to generate the cash that we state.”

Despite net income decreases, among other decreases, the company believed this is only “a valley in their trajectory” because of outside circumstances such as inflation, global health crisis and national labor shortages.

“There is still plenty of room for us to grow. I am very pleased with this possibility,” Miller concluded.

Q2 2022 Highlights

Revenue: $679.8 million (Q2 2021: $672.7 million)
Net Income: $10.5 million (Q2 2021: $29.3 million)
Adjusted Net Income: $82.0 million (Q2 2021: $105.7 million)
Adjusted EBITDA: $109 million (Q2 2021: $130.4 million)