This audio is auto-generated. Please let us know if you have feedback.
By the numbers
2022 net income: $56.5M
Q4 revenue: $670.4M
Up 2% year over year
2022 capital expenditures: $132.2M
Includes improvements to autoclaves, incinerators and other facilities
- Economic picture: During its Q4 earnings call on Thursday, CEO Cindy Miller said Stericycle’s performance was “in line with our expectations” despite lingering impacts from inflation. Organic revenues for the quarter grew 7.6% year over year in the company’s North American market. The secure information destruction sector drove that growth, increasing 13.2% in the quarter and earning $24.5 million. Its North American regulated waste and compliance services sector grew 4.9%.
- Operations income: Stericycle’s net income for Q4 was $31.8 million, compared with a net loss of $17.2 million in the fourth quarter of 2021. Stericycle’s income has started to improve due in part to lower expenses from bad debt, self-insurance and annual incentive compensation, said CFO Janet Zelenka. Stericycle also paid lower litigation, settlement and regulatory compliance expenses in Q4. It paid $81 million in 2022 as part of a settlement of a corruption investigation resolved last year.
- Labor and efficiency: Stericycle paid higher costs for vehicles and wages in 2022, but it spent less on overtime wages in the fourth quarter because it hired more employees in an effort to “optimize our staffing model,” Miller said. Stericycle has been working to reduce its job vacancy rates it says are caused by lingering COVID-19 effects and a tight labor market.
- Divestitures: Stericycle continued its “portfolio optimization” initiative in the fourth quarter when it earned $45 million from the divestiture of its North American communication solutions operations, Zelenka said. Stericycle continued its divestment process in January when it sold its Sanypick Plastics medical waste container business for about $2.2 million. However, divestitures offset Q4 revenues by about $10.8 million.
- Capital expenditures: Stericycle upgraded several facilities in 2022. Stericycle also expects its new medical waste incinerator in Nevada to open later in the year, which Miller touted as “setting the bar” because of sustainability and emissions reduction features. It replaces a decommissioned incinerator in Utah that prompted fines from regulators. Stericycle could spend between $125 million and $145 million in capital expenditures in 2023 and plans upgrades to more than 20 facilities.
- Fleet optimization: Miller also touted continued work on optimizing Stericycle’s truck and trailer fleet with more efficient models. Supply chain disruptions in 2022 delayed the process, but in 2023 “we are starting to see more equipment deliveries,” she said. Stericycle will continue optimizing its routes, particularly long-haul routes, partly by consolidating some facilities while locating new facilities closer to customers and taking on hauling once done by third parties.
- Outlook: Stericycle expects an organic revenue growth rate of between 3% and 5% in 2023 and free cash flow between $175 million and $205 million, Zelenka said. Stericycle will start focusing future guidance metrics on earnings before interest, taxes, depreciation and amortization growth and free cash flow conversion rates instead of absolute free cash flow dollar targets, which Zelenka said will be a more consistent growth measure. Through 2027, Stericycle expects an adjusted EBITDA growth rate between 13% and 17%.
