Stericycle, Inc. Reports Results For the Second Quarter 2023

Source: Nasdaq GlobeNewswire / 27 Jul 2023 07:00:02 America/New_York

BANNOCKBURN, Ill., July 27, 2023 (GLOBE NEWSWIRE) -- Stericycle, Inc. (Nasdaq: SRCL) today reported results for the second quarter ended June 30, 2023.

Revenues for the second quarter were $669.5 million, a decrease of 1.5% compared to $679.8 million in the second quarter of 2022. Loss from operations was $24.0 million, primarily due to 2023 net divestiture losses of $54.2 million, compared to income from operations of $38.1 million in the second quarter of 2022. Net loss was $49.5 million, or $0.54 diluted loss per share, compared to Net income of $10.5 million, or $0.11 diluted earnings per share in the second quarter of 2022. Adjusted income from operations¹ was $76.0 million, compared to $82.0 million in the second quarter of 2022. Adjusted diluted earnings per share¹ was $0.43, compared to $0.48 in the second quarter of last year. Cash flow from operations for the six months ended June 30, 2023 was an inflow of $154.9 million, compared to an outflow of $18.4 million in the same period of 2022. Free cash flow² was an inflow of $91.2 million for the six months ended June 30, 2023, compared to an outflow of $88.4 million, primarily due to FCPA payments of $75.8 million in 2022.

KEY BUSINESS HIGHLIGHTS:

Grew organic revenues¹ 2.3% compared to the second quarter of 2022 with Regulated Waste and Compliance Services (“RWCS”) growing 4.7%.
Reduced our Credit Agreement defined debt leverage ratio to 2.70X.
Improved free cash flow² in the first half of 2023 by $179.6 million compared to 2022.
Divested our businesses in Brazil, Republic of Korea, Australia, and Singapore for net proceeds of approximately $84 million.

“In the second quarter, we achieved our key business priority of lowering our debt leverage ratio below 3.0X and to the lowest level since 2015. We also made significant progress in executing our portfolio optimization by exiting businesses in four countries and we remain on track to deploy the ERP to U.S. RWCS in the third quarter,” said Cindy J. Miller, President and Chief Executive Officer. “Our first half financial performance came in line with our full-year 2023 guidance, which we are reaffirming.”

SECOND QUARTER FINANCIAL RESULTS

U.S. Generally Accepted Accounting Principles (GAAP) Results

Revenues in the second quarter were $669.5 million, compared to $679.8 million in the second quarter of 2022. The decrease was primarily due to impacts of divestitures of $24.0 million and unfavorable foreign exchange rates of $1.2 million, partially offset by organic revenue growth of $14.9 million. Organic revenues in RWCS grew $19.7 million, while Secure Information Destruction (“SID”) organic revenues were lower by $4.8 million.
Loss from operations in the second quarter was $24.0 million compared to Income from operations of $38.1 million in the second quarter of 2022. The $62.1 million decrease was primarily due to 2023 net divestiture losses of $54.2 million, higher incentive and stock-based compensation of $9.7 million, and higher fleet costs of $4.9 million, partially offset by lower bad debt expense of $8.9 million.
Net loss in the second quarter was $49.5 million, or $0.54 diluted loss per share, compared to Net income of $10.5 million, or $0.11 diluted earnings per share in the second quarter of 2022. The $60.0 million decrease was primarily attributable to lower Income from operations of $62.1 million, as explained above.
Cash flow from operations for the six months ended June 30, 2023 was an inflow of $154.9 million, compared to an outflow of $18.4 million in the same period of 2022. The year-over-year increase of $173.3 million was primarily driven by lower FCPA settlement payments of $67.6 million; accounts receivable improvements of $52.1 million, primarily due to an improvement in Days Sales Outstanding; higher cash generated from operating income of $23.3 million; lower annual incentive compensation payments of $22.3 million; and other working capital improvements of $8.0 million.
Cash paid for capital expenditures for the six months ended June 30, 2023 was $63.7 million, compared to $70.0 million in the same period of 2022.

Non-GAAP Results^1,2

For the second quarter of 2023, organic revenues¹ increased 2.3%, which excludes the impacts of divestitures and foreign exchange rates. RWCS organic revenues¹increased 4.7% while SID decreased 2.1%.
Adjusted income from operations¹ was $76.0 million, compared to $82.0 million in the second quarter of 2022. As a percentage of revenues, the 70 basis points decrease was mainly due to higher incentive and stock-based compensation of 150 basis points and higher fleet costs of 70 basis points, partially offset by lower bad debt expense of 130 basis points.
Adjusted diluted earnings per share¹ was $0.43, compared to $0.48 in the second quarter of 2022. Excluding the impacts of divestitures and foreign exchange rates of $0.01, the remaining $0.04 decrease was driven by higher incentive and stock-based compensation of $0.08 and higher fleet costs of $0.04. These were partially offset by lower bad debt expense of $0.07 and lower tax expense of $0.01.
Free cash flow² for the six months ended June 30, 2023 was an inflow of $91.2 million, compared to an outflow of $88.4 million in the same period of 2022. The $179.6 million increase was primarily due to higher cash flow from operations of $173.3 million, as explained above, and lower cash paid for capital expenditures of $6.3 million.

CONFERENCE CALL INFORMATION

Stericycle is holding its second quarter earnings conference call on Thursday, July 27, 2023, at 8:00 a.m. central time. Dial (833) 470-1428 in the U.S., (833) 950-0062 in Canada, or visit investors.stericycle.com for global dial-in numbers. Upon dialing the number, you will be prompted to enter the Access Code: 119356. 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 August 24, 2023. To access a replay of the call, dial (866) 813-9403 and enter the Replay Access Code: 979851. A replay of the webcast will also be available at investors.stericycle.com.

NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures are reconciled to the most comparable U.S. GAAP measures in the schedules attached hereto.

ABOUT STERICYCLE

Stericycle, Inc., is a U.S. based business-to-business services company and leading provider of compliance-based solutions that protects people and brands, promotes health and well-being and safeguards the environment. Stericycle serves customers in the U.S. and 12 countries with solutions for regulated waste and compliance services and secure information destruction. For more information about Stericycle, please visit stericycle.com.

^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.

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, energy, 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, labor shortages, a recession or economic disruption in the U.S. and other countries, SOP pricing volatility or pricing volatility in other commodities, rising interest rates or a downgrade in our credit rating resulting in an increase in interest expense, changing market conditions in the healthcare industry, competition and demand for services in the regulated waste and secure information destruction industries, 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, political, economic, and other risks related to our foreign operations, pandemics and the resulting impact on the results of operations, long-term remote work arrangements which may adversely affect our business, supply chain disruptions, disruptions in transportation services, restrictions on the ability of our team members to travel, closures of our facilities or the facilities of our customers and suppliers, changes in the volume of paper processed by our secure information destruction business and the revenue generated from the sale of SOP, 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, the outcome of pending, future or settled litigation or investigations including the investigation by the DEA discussed in our SEC reports and litigation or investigations with respect to the U.S. Foreign Corrupt Practices Act and foreign anti-corruption laws, failure to maintain an effective system of internal control over financial reporting, as well as other factors described in our filings with the SEC, including our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 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 (LOSS) INCOME (Unaudited)

In millions, except per share data
	Three Months Ended June 30,															Six Months Ended June 30,
		2023		% Revenues				2022		% Revenues			% Change				2023		% Revenues				2022		% Revenues			% Change
Revenues	$	669.5		100.0		%	$	679.8		100.0		%	(1.5	)	%	$	1,353.8		100.0		%	$	1,344.0		100.0		%	0.7		%
Cost of revenues		418.4		62.5		%		419.3		61.7		%	(0.2	)	%		841.7		62.2		%		839.0		62.4		%	0.3		%
Gross profit		251.1		37.5		%		260.5		38.3		%	(3.6	)	%		512.1		37.8		%		505.0		37.6		%	1.4		%
Selling, general and administrative expenses		220.9		33.0		%		222.4		32.7		%	(0.7	)	%		436.9		32.3		%		461.0		34.3		%	(5.2	)	%
Divestiture losses, net		54.2		8.1		%		—		—		%	nm				59.2		4.4		%		—		—		%	nm
(Loss) income from operations		(24.0	)	(3.6	)	%		38.1		5.6		%	(163.0	)	%		16.0		1.2		%		44.0		3.3		%	(63.6	)	%
Interest expense, net		(19.1	)	(2.9	)	%		(18.5	)	(2.7	)	%	3.2		%		(39.5	)	(2.9	)	%		(34.8	)	(2.6	)	%	13.5		%
Other expense, net		(0.6	)	(0.1	)	%		(0.7	)	(0.1	)	%	(14.3	)	%		(0.4	)	—		%		(1.5	)	(0.1	)	%	(73.3	)	%
(Loss) income before income taxes		(43.7	)	(6.5	)	%		18.9		2.8		%	(331.2	)	%		(23.9	)	(1.8	)	%		7.7		0.6		%	(410.4	)	%
Income tax expense		(5.8	)	(0.9	)	%		(8.4	)	(1.2	)	%	(31.0	)	%		(14.3	)	(1.1	)	%		(11.3	)	(0.8	)	%	26.5		%
Net (loss) income		(49.5	)	(7.4	)	%		10.5		1.5		%	nm				(38.2	)	(2.8	)	%		(3.6	)	(0.3	)	%	nm
Net (loss) income attributable to noncontrolling interests		—		—		%		—		—		%	nm				(0.1	)	—		%		(0.2	)	—		%	(50.0	)	%
Net (loss) income attributable to Stericycle, Inc. common shareholders	$	(49.5	)	(7.4	)	%	$	10.5		1.5		%	nm			$	(38.3	)	(2.8	)	%	$	(3.8	)	(0.3	)	%	nm
(Loss) income per common share attributable to Stericycle, Inc. common shareholders:
Basic	$	(0.54	)				$	0.11					nm			$	(0.41	)				$	(0.04	)				nm
Diluted	$	(0.54	)				$	0.11					nm			$	(0.41	)				$	(0.04	)				nm
Weighted average number of common shares outstanding:
Basic		92.5						92.1									92.3						92.0
Diluted		92.5						92.2									92.3						92.0
nm - percentage change not meaningful for comparison

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,
		2023		% Revenues			2022		% Revenues			2023		% Revenues			2022		% Revenues
Statistics - U.S. GAAP
Effective tax rate	(13.3)		%				44.4	%			(59.8)		%				146.8	%
Statistics - Adjusted ⁽¹⁾
Adjusted gross profit	$	254.5		38.0	%	$	260.5		38.3	%	$	515.5		38.1	%	$	505.0		37.6	%
Adjusted selling, general and administrative expenses	$	178.5		26.7	%	$	178.5		26.3	%	$	354.8		26.2	%	$	364.0		27.1	%
Adjusted income from operations	$	76.0		11.4	%	$	82.0		12.1	%	$	160.7		11.9	%	$	141.0		10.5	%
Adjusted EBITDA	$	102.0		15.2	%	$	109.0		16.0	%	$	213.3		15.8	%	$	195.3		14.5	%
Adjusted net income attributable to common shareholders	$	40.3		6.0	%	$	44.1		6.5	%	$	85.5		6.3	%	$	73.1		5.4	%
Adjusted effective tax rate		28.5	%				29.8	%				29.1	%				30.0	%
Adjusted diluted earnings per share	$	0.43				$	0.48				$	0.93				$	0.79
Adjusted diluted shares outstanding		92.7					92.2					92.7					92.2
⁽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, 2023			December 31, 2022
ASSETS
Current Assets:
Cash and cash equivalents	$	30.7		$	56.0
Accounts receivable, less allowance for doubtful accounts of $44.1 in 2023 and $53.3 in 2022		410.3			414.5
Prepaid expenses		33.5			33.2
Other current assets		52.7			55.0
Total Current Assets		527.2			558.7
Property, plant and equipment, less accumulated depreciation of $662.0 in 2023 and $657.7 in 2022		692.5			715.7
Operating lease right-of-use assets		431.1			398.9
Goodwill		2,751.9			2,784.9
Intangible assets, less accumulated amortization of $873.2 in 2023 and $823.3 in 2022		743.8			811.1
Other assets		66.6			64.8
Total Assets	$	5,213.1		$	5,334.1
LIABILITIES AND EQUITY
Current Liabilities:
Current portion of long-term debt	$	15.6		$	22.3
Bank overdrafts		—			2.9
Accounts payable		207.0			213.5
Accrued liabilities		243.2			244.1
Operating lease liabilities		99.6			91.2
Other current liabilities		53.7			47.9
Total Current Liabilities		619.1			621.9
Long-term debt, net		1,293.7			1,484.0
Long-term operating lease liabilities		352.4			329.0
Deferred income taxes		429.0			427.0
Long-term income taxes payable		9.3			11.8
Other liabilities		26.8			35.9
Total Liabilities		2,730.3			2,909.6

Commitments and contingencies

EQUITY
Common stock (par value $0.01 per share, 120.0 shares authorized, 92.5 and 92.2 issued and outstanding in 2023 and 2022, respectively)		0.9			0.9
Additional paid-in capital		1,299.8			1,285.4
Retained earnings		1,372.5			1,410.8
Accumulated other comprehensive loss		(191.0	)		(276.9	)
Total Stericycle, Inc.’s Equity		2,482.2			2,420.2
Noncontrolling interests		0.6			4.3
Total Equity		2,482.8			2,424.5
Total Liabilities and Equity	$	5,213.1		$	5,334.1

STERICYCLE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

In millions
	Six Months Ended June 30,
		2023			2022
OPERATING ACTIVITIES:
Net loss	$	(38.2	)	$	(3.6	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation		52.6			54.3
Intangible amortization		56.3			63.2
Stock-based compensation expense		17.8			12.6
Deferred income taxes		4.9			5.2
Divestiture losses, net		59.2			—
Asset impairments, (gain) loss on disposal of property plant and equipment and other charges		3.1			0.3
Other, net		1.2			1.6
Changes in operating assets and liabilities:
Accounts receivable		(1.3	)		(53.4	)
Prepaid expenses		(1.6	)		10.0
Accounts payable		(1.5	)		(12.5	)
Accrued liabilities		8.4			(91.6	)
Other assets and liabilities		(6.0	)		(4.5	)
Net cash from operating activities		154.9			(18.4	)
INVESTING ACTIVITIES:
Capital expenditures		(63.7	)		(70.0	)
Proceeds from divestiture of businesses, net		88.9			1.6
Other, net		1.2			0.8
Net cash from investing activities		26.4			(67.6	)
FINANCING ACTIVITIES:
Repayments of long-term debt and other obligations		(10.0	)		(8.4	)
Proceeds from foreign bank debt		0.1			—
Repayments of foreign bank debt		(0.3	)		(0.1	)
Repayments of term loan		(50.0	)		—
Proceeds from credit facility		601.0			732.5
Repayments of credit facility		(737.7	)		(637.9	)
Repayment of bank overdrafts		(2.9	)		(0.6	)
Payments of finance lease obligations		(1.4	)		(1.3	)
Proceeds from issuance of common stock, net of (payments of) taxes from withheld shares		(5.2	)		(5.2	)
Payments to noncontrolling interest		(1.5	)		—
Net cash from financing activities		(207.9	)		79.0
Effect of exchange rate changes on cash and cash equivalents		1.3			(2.7	)
Net change in cash and cash equivalents		(25.3	)		(9.7	)
Cash and cash equivalents at beginning of period		56.0			55.6
Cash and cash equivalents at end of period	$	30.7		$	45.9

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of capitalized interest	$	38.0		$	31.9
Income taxes paid, net	$	13.7		$	4.0
Capital expenditures in Accounts payable	$	21.9		$	30.8
Free Cash Flow ⁽¹⁾	$	91.2		$	(88.4	)
⁽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, 2023 and 2022


	Three Months Ended June 30,
	In millions									Components of Change (%)⁽¹⁾
		2023		2022	Change ($)			Change (%)		Organic Growth⁽²⁾		Divestitures		Foreign Exchange⁽³⁾
Revenue by Service
Regulated Waste and Compliance Services	$	444.7	$	448.4	$	(3.7	)	(0.8)	%	4.7	%	(5.1)	%	(0.1)	%
Secure Information Destruction Services		224.8		231.4		(6.6	)	(2.9)	%	(2.1)	%	(0.4)	%	(0.4)	%
Total Revenues	$	669.5	$	679.8	$	(10.3	)	(1.5)	%	2.3	%	(3.5)	%	(0.2)	%
North America
Regulated Waste and Compliance Services	$	366.4	$	365.6	$	0.8		0.2	%	4.8	%	(4.2)	%	(0.2)	%
Secure Information Destruction Services		198.8		203.0		(4.2	)	(2.1)	%	(1.6)	%	—	%	(0.4)	%
Total North America Segment	$	565.2	$	568.6	$	(3.4	)	(0.6)	%	2.4	%	(2.7)	%	(0.3)	%
International
Regulated Waste and Compliance Services	$	78.3	$	82.8	$	(4.5	)	(5.4)	%	3.9	%	(9.4)	%	0.5	%
Secure Information Destruction Services		26.0		28.4		(2.4	)	(8.5)	%	(5.4)	%	(3.3)	%	0.1	%
Total International Segment	$	104.3	$	111.2	$	(6.9	)	(6.2)	%	1.4	%	(7.9)	%	0.4	%
See footnote descriptions below Table 1 – C

Table 1–B: REVENUE CHANGES BY SERVICE AND SEGMENT (UNAUDITED) – SIX MONTHS ENDED JUNE 30, 2023 and 2022

	Six Months Ended June 30,
	In millions									Components of Change (%)⁽¹⁾
		2023		2022	Change ($)			Change (%)		Organic Growth⁽²⁾		Divestitures		Foreign Exchange⁽³⁾
Revenue by Service
Regulated Waste and Compliance Services	$	896.0	$	901.2	$	(5.2	)	(0.6)	%	4.6	%	(4.4)	%	(0.8)	%
Secure Information Destruction Services		457.8		442.8		15.0		3.4	%	4.6	%	(0.2)	%	(1.0)	%
Total Revenues	$	1,353.8	$	1,344.0	$	9.8		0.7	%	4.6	%	(3.0)	%	(0.8)	%
North America
Regulated Waste and Compliance Services	$	735.1	$	727.8	$	7.3		1.0	%	5.4	%	(4.1)	%	(0.2)	%
Secure Information Destruction Services		403.5		384.5		19.0		4.9	%	5.5	%	—	%	(0.6)	%
Total North America Segment	$	1,138.6	$	1,112.3	$	26.3		2.4	%	5.4	%	(2.7)	%	(0.3)	%
International
Regulated Waste and Compliance Services	$	160.9	$	173.4	$	(12.5	)	(7.2)	%	1.3	%	(5.5)	%	(3.0)	%
Secure Information Destruction Services		54.3		58.3		(4.0	)	(6.9)	%	(1.4)	%	(1.6)	%	(3.9)	%
Total International Segment	$	215.2	$	231.7	$	(16.5	)	(7.1)	%	0.6	%	(4.5)	%	(3.2)	%
See footnote descriptions below Table 1 – C

Table 1–C: COMPONENTS OF REVENUE CHANGE IN DOLLARS (UNAUDITED)

(In millions)
	Three Months Ended June 30, 2023			Six Months Ended June 30, 2023
Organic Growth ⁽²⁾	$	14.9		$	61.7
Divestitures		(24.0	)		(40.6	)
Foreign exchange ⁽³⁾		(1.2	)		(11.3	)
Total Change	$	(10.3	)	$	9.8
⁽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 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, 2023 and 2022
(In millions, except per share data)
	Three Months Ended June 30, 2023
	Gross Profit		Selling, General and Administrative Expenses			(Loss) Income from Operations			Net (Loss) Income Attributable to Common Shareholders ^c			Diluted (Loss) Earnings Per Share
U.S. GAAP Financial Measures	$	251.1	$	220.9		$	(24.0	)	$	(49.5	)	$	(0.54	)
Adjustments:
ERP and System Modernization¹		—		(5.4	)		5.4			4.1			0.04
Intangible Amortization ²		—		(28.1	)		28.1			21.8			0.24
Portfolio Optimization³		—		—			54.2			53.8			0.58
Litigation, Settlements and Regulatory Compliance ⁴		—		(8.9	)		8.9			6.7			0.07
Asset Impairments ⁵		3.4		—			3.4			3.4			0.04
Total Adjustments		3.4		(42.4	)		100.0			89.8			0.97
Adjusted Financial Measures ^a	$	254.5	$	178.5		$	76.0		$	40.3		$	0.43
Depreciation							26.0
Adjusted EBITDA ^b						$	102.0

(In millions, except per share data)
	Three Months Ended June 30, 2022
	Gross Profit		Selling, General and Administrative Expenses			Income from Operations		Net Income Attributable to Common Shareholders ^c		Diluted Earnings Per Share
U.S. GAAP Financial Measures	$	260.5	$	222.4		$	38.1	$	10.5	$	0.11
Adjustments:
ERP and System Modernization¹		—		(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
Asset Impairments ⁵		—		—			—		—		—
Total Adjustments		—		(43.9	)		43.9		33.6		0.37
Adjusted Financial Measures ^a	$	260.5	$	178.5		$	82.0	$	44.1	$	0.48
Depreciation							27.0
Adjusted EBITDA ^b						$	109.0

(In millions, except per share data)
	Second Quarter 2023 Change Compared to Second Quarter 2022
	Gross Profit			Selling, General and Administrative Expenses			(Loss) Income from Operations			Net (Loss) Income Attributable to Common Shareholders			Diluted (Loss) Earnings Per Share
U.S. GAAP Financial Measures	$	(9.4	)	$	(1.5	)	$	(62.1	)	$	(60.0	)	$	(0.65	)
Adjustments:
ERP and System Modernization		—			(1.9	)		1.9			1.5			0.01
Intangible Amortization		—			2.7			(2.7	)		(2.1	)		(0.02	)
Portfolio Optimization		—			—			54.2			53.8			0.58
Litigation, Settlements and Regulatory Compliance		—			0.7			(0.7	)		(0.4	)		(0.01	)
Asset Impairments		3.4			—			3.4			3.4			0.04
Total Adjustments		3.4			1.5			56.1			56.2			0.60
Adjusted Financial Measures	$	(6.0	)	$	—		$	(6.0	)	$	(3.8	)	$	(0.05	)
Depreciation								(1.0	)
Adjusted EBITDA							$	(7.0	)

The following table provides adjustments to Income from operations categorized as follows:

(In millions)
	Three Months Ended June 30,
	2023		2022
Non-Cash Related⁶	$	83.8	$	30.8
Cash Related		16.2		13.1
Total	$	100.0	$	43.9

Non-cash related adjustments include the following:

(In millions)
	Three Months Ended June 30, 2023
	Depreciation and Impairments of Property, Plant and Equipment		Amortization of Intangibles		Divestiture Losses (Gains), net		Total
Adjustments:
Intangible Amortization²	$	—	$	28.1	$	—	$	28.1
Portfolio Optimization³		—		—		52.3		52.3
Asset Impairments⁵		3.4		—		—		3.4
Total Non-Cash Charges	$	3.4	$	28.1	$	52.3	$	83.8

(In millions)
	Three Months Ended June 30, 2022
	Depreciation and Impairments of Property, Plant and Equipment		Amortization of Intangibles		Divestiture Losses (Gains), net		Total
Adjustments:
Intangible Amortization²	$	—	$	30.8	$	—	$	30.8
Total Non-Cash Charges	$	—	$	30.8	$	—	$	30.8
U.S. GAAP results for the three months ended June 30, 2023 and 2022 include:
ERP and System Modernization: In 2023 and 2022, Selling, General, and Administrative expenses (“SG&A”) includes consulting and professional fees related to our ERP and system modernization. Intangible Amortization: Intangible amortization expense from acquisitions. Portfolio Optimization: In 2023, Divestitures losses, net includes aggregate net losses of $54.2 million (inclusive of $1.9 million related to deal costs) related to International divestitures of Brazil, Republic of Korea, Australia, Singapore, and other businesses. Litigation, Settlements, and Regulatory Compliance: In 2023 and 2022, SG&A includes $5.2 million (which includes FCPA monitor related fees of $2.4 million) and $3.5 million, respectively, of primarily consulting and professional fees and estimated contingent liability provisions related to certain litigation, settlement and regulatory compliance matters. Additionally in 2023, SG&A includes a settlement charge associated with a vendor dispute of $4.0 million, other settlement charges of $0.6 million, and a FCPA settlement release of $0.9 million. Additionally 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 FCPA settlement expense of $0.4 million. Asset Impairments: In 2023, Cost of Revenues (“COR”) includes an impairment of $3.4 million in International associated with certain long-lived assets, primarily property, plant and equipment, in Romania. Non-Cash Related Adjustments: In 2023 and 2022, non-cash related adjustments include $83.8 million and $30.8 million, respectively, consisting of intangible amortization, portfolio optimization, and asset impairment items.
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. Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (Adjusted EBITDA) is (Loss) income from operations excluding certain adjusting items, depreciation and intangible amortization. Under the Net (Loss) Income Attributable to Common Shareholders column, adjustments are shown net of tax in aggregate of $10.2 million and $10.3 million for the three months ended June 30, 2023 and 2022, 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, 2023 and 2022

(In millions, except per share data)
	Six Months Ended June 30, 2023
	Gross Profit		Selling, General and Administrative Expenses			Income from Operations		Net (Loss) Income Attributable to Common Shareholders ^c			Diluted (Loss) Earnings Per Share
U.S. GAAP Financial Measures	$	512.1	$	436.9		$	16.0	$	(38.3	)	$	(0.41	)
Adjustments:
ERP and System Modernization¹		—		(8.1	)		8.1		6.1			0.07
Intangible Amortization ²		—		(56.3	)		56.3		43.7			0.47
Portfolio Optimization ³		—		(0.6	)		59.8		59.1			0.64
Litigation, Settlements and Regulatory Compliance ⁴		—		(17.1	)		17.1		11.5			0.12
Asset Impairments ⁵		3.4		—			3.4		3.4			0.04
Total Adjustments		3.4		(82.1	)		144.7		123.8			1.34
Adjusted Financial Measures ^a	$	515.5	$	354.8		$	160.7	$	85.5		$	0.93
Depreciation							52.6
Adjusted EBITDA ^b						$	213.3

(In millions, except per share data)
	Six Months Ended June 30, 2022
	Gross Profit		Selling, General and Administrative Expenses			Income from Operations		Net (Loss) Income Attributable to Common Shareholders ^c			Diluted (Loss) Earnings Per Share
U.S. GAAP Financial Measures	$	505.0	$	461.0		$	44.0	$	(3.8	)	$	(0.04	)
Adjustments:
ERP and System Modernization¹		—		(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
Asset Impairments ⁵		—		—			—		—			—
Total Adjustments		—		(97.0	)		97.0		76.9			0.83
Adjusted Financial Measures ^a	$	505.0	$	364.0		$	141.0	$	73.1		$	0.79
Depreciation							54.3
Adjusted EBITDA ^b						$	195.3

(In millions, except per share data)
	Year-to-Date 2023 Change Compared to 2022
	Gross Profit		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	$	7.1	$	(24.1	)	$	(28.0	)	$	(34.5	)	$	(0.37	)
Adjustments:
ERP and System Modernization		—		1.0			(1.0	)		(0.7	)		—
Intangible Amortization		—		6.9			(6.9	)		(5.4	)		(0.06	)
Portfolio Optimization		—		0.7			58.5			58.1			0.63
Litigation, Settlements and Regulatory Compliance		—		6.3			(6.3	)		(8.5	)		(0.10	)
Asset Impairments		3.4		—			3.4			3.4			0.04
Total Adjustments		3.4		14.9			47.7			46.9			0.51
Adjusted Financial Measures	$	10.5	$	(9.2	)	$	19.7		$	12.4		$	0.14
Depreciation							(1.7	)
Adjusted EBITDA						$	18.0

The following table provides adjustments to Income from operations categorized as follows:

(In millions)
	Six Months Ended June 30,
		2023		2022
Non-Cash Related⁶	$	116.9	$	63.2
Cash Related		27.8		33.8
Total	$	144.7	$	97.0

Non-cash related adjustments include the following:

(In millions)
	Six Months Ended June 30, 2023
	Depreciation and Impairments of Property, Plant and Equipment		Amortization of Intangibles		Divestiture Losses (Gains), net		Total
Adjustments:
Intangible Amortization²	$	—	$	56.3		—	$	56.3
Portfolio Optimization³		—		—		57.2		57.2
Asset Impairments⁵		3.4		—		—		3.4
Total Non-Cash Charges	$	3.4	$	56.3	$	57.2	$	116.9

(In millions)
	Six Months Ended June 30, 2022
	Depreciation and Impairments of Property, Plant and Equipment		Amortization of Intangibles		Divestiture Losses (Gains), net		Total
Adjustments:
Intangible Amortization²	$	—	$	63.2		—	$	63.2
Total Non-Cash Charges	$	—	$	63.2	$	—	$	63.2
U.S. GAAP results for the six months ended June 30, 2023 and 2022 include:
ERP and System Modernization: In 2023 and 2022, SG&A includes consulting and professional fees related to our ERP and system modernization. Intangible Amortization: Intangible amortization expense from acquisitions. Portfolio Optimization: In 2023 Divestitures losses, net includes aggregate net losses of $59.2 million (inclusive of $2.0 million related to deal costs) related to International divestitures of Brazil, Republic of Korea, Australia, Singapore, a container manufacturing operation, and other businesses. In 2023 and 2022, SG&A includes consulting and professional fees associated with our Portfolio Optimization efforts of $0.6 million and $1.3 million, respectively. Litigation, Settlements, and Regulatory Compliance: In 2023 and 2022, SG&A includes $12.4 million (which includes FCPA monitor related fees of $5.8 million) and $10.3 million, respectively, of primarily consulting and professional fees and estimated contingent liability provisions net of releases related to certain litigation, settlement and regulatory compliance matters. Additionally in 2023, SG&A includes a value-added tax reclaim credit of $6.0 million, a settlement charge associated with a vendor dispute of $6.0 million, other settlement charges of $5.6 million, and a FCPA settlement release of $0.9 million. Additionally in 2022, SG&A includes FCPA settlement expense of $9.6 million and a settlement charge related to a multi-year indirect tax related IRS examination of $3.5 million. Asset Impairments: In 2023, COR includes an impairment of $3.4 million in International associated with certain long-lived assets, primarily property, plant and equipment, in Romania. Non-Cash Related Adjustments: In 2023 and 2022, non-cash related adjustments include $116.9 million and $63.2 million, respectively, consisting of intangible amortization, portfolio optimization, and asset impairment items.
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. Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (Adjusted EBITDA) is Income from operations excluding certain adjusting items, depreciation and intangible amortization. Under the Net Loss Attributable to Common Shareholders column, adjustments are shown net of tax in aggregate of $20.9 million and $20.1 million for the six months ended June 30, 2023 and 2022, 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.

FOR FURTHER INFORMATION CONTACT:
Stericycle Investor Relations 847-607-2012
Stericycle Media Relations 847-964-2288

Stericycle, Inc. Reports Results For the Second Quarter 2023

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