Stericycle(US:SRCL)2023-02-23 12:02Financial Performance - Total revenues for Stericycle in 2022 were $2,704.7 million, an increase from $2,646.9 million in 2021, representing a growth of approximately 2.2%[26] - North America segment revenues reached $2,263.1 million in 2022, up from $2,136.5 million in 2021, indicating a growth of about 5.9%[26] - International segment revenues decreased to $441.6 million in 2022 from $510.4 million in 2021, a decline of about 13.5%[26] - Net income attributable to Stericycle, Inc. common shareholders for 2022 was $56.0 million, compared to a net loss of $27.8 million in 2021[276] - The gross profit for 2022 was $1,025.6 million, slightly up from $1,017.2 million in 2021[276] - The total assets decreased to $5,334.1 million in 2022 from $5,473.1 million in 2021, reflecting a decline of approximately 2.5%[281] - Total liabilities decreased to $2,909.6 million in 2022 from $3,070.3 million in 2021, a reduction of about 5.2%[281] - The total equity of Stericycle, Inc. increased to $2,424.5 million in 2022 from $2,402.8 million in 2021, reflecting a growth of approximately 0.9%[282] - The company recorded capital expenditures of $132.2 million in 2022, compared to $116.9 million in 2021, indicating an increase of approximately 13.5%[284] - Net cash from operating activities decreased to $200.2 million in 2022 from $303.1 million in 2021, a decline of approximately 33.9%[284] Revenue Sources - Stericycle's revenue is primarily derived from Regulated Waste and Compliance Services and Secure Information Destruction Services, with revenue recognized upon waste collection[298] - Secure Information Destruction Services in North America generated revenues of $794.3 million in 2022, compared to $679.0 million in 2021, reflecting a growth of approximately 16.9%[26] - Stericycle's international RWCS operations primarily generate revenue from large account customers, such as hospitals and publicly funded healthcare organizations[32] Customer and Market Dynamics - Stericycle's estimated revenue retention rate is approximately 90%, based on internal customer attrition analysis[29] - No single customer accounted for more than 1.6% of total revenues, with the top ten customers collectively representing about 8.5% of total revenues[29] - The company operates in 17 countries, providing services to a diverse range of industries including healthcare, education, and government[22] - The average volume of waste managed per customer site is relatively small, despite handling large volumes overall[28] Operational Efficiency and Investments - The implementation of the North America ERP is expected to enhance operational efficiencies and improve operating margins through real-time information insights[35] - The company has opened four new greenfield autoclave facilities in New Jersey, California, Ireland, and the United Kingdom, and completed over 20 upgrade projects in the past two years[49] - Stericycle's transportation network optimization has resulted in an average reduction of 20,000 miles driven per month in the Western United States[50] Workforce and Diversity - As of December 31, 2022, Stericycle's workforce consists of over 15,000 team members, with 97% employed full-time and a voluntary turnover rate of approximately 28%, an increase of 2% year over year[53] - 12% of Stericycle's total global workforce is covered by collective bargaining agreements, with approximately 650 team members in North America and 1,200 outside North America under such agreements[54] - In 2022, 65% of new hires and 44% of internal promotions in the U.S. were from federally designated racial or ethnic minority categories, and approximately 200 new hires identified as U.S. veterans[57] - Stericycle's commitment to diversity and inclusion is reflected in its employee resource groups, which support various minority communities and promote engagement[58] Regulatory and Compliance Issues - Stericycle is subject to extensive environmental regulations, including the federal Clean Air Act and Clean Water Act in the U.S., and various international laws governing waste management[66] - The company actively engages with regulatory bodies such as the CDC, DEA, and EPA to ensure compliance with evolving regulations affecting its services[63] - Regulatory compliance is critical, as noncompliance could adversely affect operations and growth efforts, with extensive governmental regulations governing waste management[102] Financial Risks and Challenges - The company has accumulated net operating losses (NOLs) of approximately $223.6 million as of December 31, 2022, which may impact future tax expenses if not utilized against taxable income[122] - The company faces aggressive pricing competition from existing competitors and new entrants, which may require price reductions and affect profitability[97] - The company may incur significant charges from portfolio optimization, which may not achieve the desired results[128] - The company is monitoring the geopolitical situation arising from Russia's invasion of Ukraine, assessing its potential impact on operations[153] - The company is experiencing delays in completing certain capital projects due to macroeconomic supply chain disruptions[152] Environmental and Sustainability Initiatives - The company is engaged in ongoing discussions with customers regarding their sustainability goals, which may require operational adjustments and investments[125] - The company may need to invest in higher-cost technologies to meet customer demands for sustainability and carbon neutrality, which could impact future revenues and operational costs[126] - The average age of the population in the countries where Stericycle operates is rising, increasing healthcare demand and the quantity of regulated wastes generated[51] Technology and Cybersecurity - The company relies heavily on information technology systems, and any significant disruptions could adversely affect business operations and financial results[109] - The company is exposed to various cybersecurity risks that could lead to data breaches, resulting in reputational damage and potential litigation[107] Debt and Financial Obligations - As of December 31, 2022, the company had a total outstanding indebtedness of $1.52 billion, including both long-term and short-term debt[135] - The company has a $1.2 billion credit facility due in September 2026, which supports its financial flexibility[26] - Rising interest rates could increase the overall interest expense for the company, particularly affecting variable rate debt[134] - The company reported a potential additional interest expense of approximately $3.5 million over one year from a hypothetical 100 basis points increase in interest rates on variable rate obligations[258]