By the numbers
Net income: $10.5M
Down 64.2% from the same period in 2021
Q2 organic revenue growth: Up 5%
The secure information destruction (SID) segment drove most of this growth, earning $25.7M for the quarter.
- Economic picture: During Friday’s earnings call, Stericycle CEO Cindy Miller said she was pleased the company is bouncing back from a challenging first quarter. She attributed the second-quarter improvements to stronger hiring, pricing measures to stave off inflationary cost pressures and good organic revenue growth.
- Results: In the company’s North American market, revenue growth from the SID segment increased 12.9% and regulated waste and compliance services increased 2.8%. Unfavorable foreign exchange rates and the impact of $14.8 million in divestitures offset some of these gains.
- Labor and efficiency improvements: Stericycle is “gaining traction” from hiring and training more workers, Miller said. The frontline worker shortfall has improved from a 12% vacancy rate in Q1 to 10% in Q2, and fewer employees are absent due to COVID-19. Stericycle will continue to make adjustments to bring down ongoing overtime costs, which Miller expects will even out as “new employees start to ramp up in terms of their ability to be more productive.” The company will also examine efficiency metrics in areas such as plant volumes and driver route efficiencies, and automation upgrades at some facilities could also help with labor issues.
- Facility updates: Miller touted a patented, internally developed new sharps processing technology currently installed at two facilities; rollouts at additional locations are planned. The equipment has “more than doubled” sharps processing capacity, leading to a shift reduction at each of the two locations. Stericycle has also begun construction on a medical waste incinerator in Nevada, which Miller expects to be operational in 18 to 24 months. It will replace a decommissioned incinerator in Utah, which faced years of protests from residents as well as fines from the U.S. EPA and state regulators.
- Surcharges: Surcharges and fees continue to be a method for offsetting inflation, Miller said. A service cost recovery fee for some North America hospital customers, introduced in the first quarter, contributed about $5 million in revenue in the second quarter, and is expected to contribute another $20 million in the rest of 2022. In Q2, Stericycle increased the recycling revenue surcharge for its North American SID market and expects to continue ongoing fuel surcharges.
- Updated guidance: Stericycle has updated its guidance in several areas, said Chief Financial Officer Janet Zelenka. The new organic revenue growth range is between 4% and 6%, up from 3% to 5%, off a baseline of $2.6 billion. It will narrow the capital expenditure range to $125 million to $135 million, down from $120 million to $140 million. Settlement costs the company expected to pay in 2023 related to a recently resolved corruption investigation will now be paid in 2022 and total $75.8 million. Overall, the company is well-positioned to make further gains in the second half of the year, she said. “The improvement you're going to see is about a third price, a third volume and a third efficiency.”
