By the numbers
Q4 net income: $14.8M
Down 53.9% year over year, mainly due to lower income from operations
North American secure information destruction revenue: $188.8M
Down 2.9% compared to Q4 2022 due to lower commodity values and other costs
- Economic picture: During Wednesday’s earnings call, CEO Cindy Miller touted the company’s continued focus on efficiency and cost savings. That includes completing eight divestitures and deploying its enterprise resource planning system for the Regulated Waste and Compliance division. She also touted a series of planned “workforce management actions” meant to save $35 million in 2024.
- Labor and workforce: Stericycle is undertaking a “structural reduction in our workforce” of 6% year over year, Miller said. The company expects to launch a “targeted reduction” during the first quarter of 2024, which is meant to generate $20 million in savings. Miller did not mention how many direct layoffs were part of that process, but she said the company expects to pay between $5 million and $7 million in severance. Stericycle conducted a similar round of workforce reductions in October, which Miller said cost $3 million in severance payments but saved the company $8 million. Attrition and “careful hiring” are other cost saving strategies, she said.
- Secure information destruction: Q4 organic revenue for Stericycle’s North American secure information destruction division decreased $5.9 million, or 3%, year over year. CFO Janet Zelenka said lower recycled paper revenues of $11.5 million contributed to the decline, as well as lower fuel and environmental surcharges. However, a recycling recovery surcharge offset about half of the lower revenue, she said. Some customers have stopped or paused service due to post-COVID changes to office footprints, but such service stops occurred at a slower pace in Q4 than in previous quarters, Miller added. “We’re still very, very positive about the shred side of the business, especially with their efficiencies and how they’re adapting and learning from data,” she said, adding that the sector is gaining customers.
- Commodity pricing trends: Stericycle continued to see lower revenues from recycled paper in Q4, a trend the company saw throughout 2023 due to less tonnage and lower pricing for sorted office paper. Overall commodity indexed revenues faced a headwind of $50 million in 2023, Miller said. Zelenka expects Stericycle to face a “challenging” year-over-year pricing variance during the first half of the year due to relatively high sorted office paper price per ton of between $185 to $200 a ton in Q1 and Q2 2023. She expects SOP prices to mellow in the second half of 2024, which could get them closer to the historical average range of $140 to $160 a ton.
- Acquisitions: In January, Stericycle acquired what it describes as a regulated medical waste company in the Southeastern U.S. The business is expected to generate about $4 million in revenue. Miller said the company will be “very strategic” about how it approaches potential future acquisitions, especially tuck-ins, based on factors such as market conditions, benefits to its overall network and company culture.
- Incinerator updates: Stericycle continues to build its regulated medical waste incinerator in Nevada. Miller said the construction phase is on track to be completed in the first half of 2024 now that some of the main equipment, such as boilers and incinerator stacks, is being installed. The goal is to move into the testing phase and regulatory review later this year, then achieve full production by mid-2025, Miller said.
- 2024 guidance: In 2024, Stericycle expects organic revenue growth of between 3% and 5% on a 2023 base of $2.63 billion. Capital expenditures for the year are expected to be between $140 million and $160 million, Zelenka said.
