Stericycle Uses Q3 to Continue Establishing Launchpad for Growth

Stericycle, Inc. (Nasdaq: SRCL), a U.S.-based medical waste services provider, has announced its results for the third-quarter financial year ending on September 30th.

An earnings report call was held for investors and presented by the president and CEO of the company Cindy J. Miller.

While there was some growth in revenue when comparing this year to last, the numbers are fairly similar.

For the 2022 financial year, Stericycle’s third quarter revenue finished at $690.3 million, which is only an increase of 6.4 percent compared to the revenue of $648.9 million for the same quarter of 2021.

Of this, organic revenue experienced a growth of 10.9 percent.

The company garnered a net income of $28.0 million during Q3, which equates to $0.30 diluted earnings per share.

This number can be compared to a net loss of $66.0 million, or $0.72 diluted loss per share in quarter three of 2021.

“Adjusted diluted earnings per share1 was $0.65, compared to $0.44 in the third quarter of last year.”

Miller expresses an optimistic view that the company's earnings are on an upward trajectory.

“As I mentioned, we actually see cash from operation maintaining, and we are seeing working capital improvements in the fourth quarter to drive that,” she says.

During quarter three, cash flow from operations was $61.5 million, which is an increase of $8.7 million compared to the third quarter of 2021, and an increase of $41.1 million compared to the second quarter of 2022.

A few of the capital improvements that propelled this steady cash flow were highlighted.

One of which is the company’s improved cash collections of 40 to 50 million.

Other mentioned factors leading to this successful drive in cash from operation are as follows: lower interest of 25 million in terms of payments, vendor and other payments of about 30 million, and lower CapEx of 7 to 17 million compared to Q3.

“That’s a Q3 to Q4 momentum story and those are the key drivers of the change.”

With this growing momentum, investors posed concerns about the potential of an impending recession that might throw the company off of the acceleration it is beginning to display.

“We have no idea what is going to happen with inflation. We have no idea if it is going to turn into the recession some folks talk about or whether it is going to be successfully mitigated or muted. What I do know, however, is that we are very well positioned in that relationship with our customers in order to work through anything depending on where that goes,” Miller confidently shared.

In the first nine months of 2022, or the first three quarters, Stericycle invested $106.0 million in expenditures. This was a $20.2 million increase compared to the $85.8 million for the same nine-month period of the prior year.

This $20.2 million increase is the result of higher ongoing IT operating expenditures, higher headcount, a higher bad debt expense of approximately 130 basis points, among other costs.

Miller believes these investments are not only necessary but also beneficial, especially in terms of tech. Miller shares the following on the IT expenditures: “Technology has been a great opportunity for us. It provides a lot of things for improvement and efficiencies.”

Throughout the company’s financial year, the common thread has been a sense of traction.

While Stericycle has not experienced tremendous leaps forward in a lot of areas, all of the investments the company has been making are setting up a solid launchpad for the coming year.

“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. We remain focused on executing on our five key business priorities and continuing this momentum through the rest of this year.”

Q3 2022 Highlights

Revenue: $690.3 million (Q3 2021: $648.9 million)

Net Income:  $28.0 million (Q3 2021: net loss of $66.0 million)

Adjusted EBITDA: 119.3 million (Q3 2021: $99.9 million