Stericycle(US:SRCL)2022-08-05 18:24Financial Data and Key Metrics Changes - Revenues in Q2 2022 were $679.8 million, up from $672.7 million in Q2 2021, with organic revenues increasing by $33.8 million after adjusting for divestitures and foreign exchange impacts [16][25] - U.S. GAAP net income was $10.5 million or $0.11 diluted earnings per share, down from $29.3 million or $0.32 diluted earnings per share in Q2 2021, primarily due to lower income from operations [24][26] - Adjusted income from operations was $82 million, representing 12.1% of revenues, down from 15.7% in the same quarter last year [26] Business Line Data and Key Metrics Changes - Secure Information Destruction organic revenue grew 12.2%, contributing $25.7 million to the overall organic revenue increase, while Regulated Waste and Compliance Services saw a 1.8% increase, contributing $8.1 million [16][21] - Regulated Waste and Compliance Services revenues were $448.4 million, down from $463 million in Q2 2021, with organic revenues in North America increasing by 2.8% [17][18] Market Data and Key Metrics Changes - In North America, organic revenue growth was 6.2%, with Secure Information Destruction increasing by 12.9% and Regulated Waste and Compliance Services increasing by 2.8% [8] - International Regulated Waste and Compliance Services organic revenues declined 2.3% due to decreased pandemic-related waste volumes [20] Company Strategy and Development Direction - The company is focused on executing a pricing strategy to offset inflationary cost pressures, with expectations for continued benefits from surcharge and fee pricing initiatives in the second half of 2022 [9][10] - The company is modernizing its facilities and investing in new technologies, such as the SMS revolution for sharps processing, to improve operational efficiency and competitive positioning [11][12] Management's Comments on Operating Environment and Future Outlook - Management noted improvements in workforce shortages, with frontline workforce shortages decreasing to approximately 10% from 12% in the previous quarter [7] - The company updated its guidance for 2022, raising organic revenue growth expectations to 4% to 6% and tightening adjusted EPS guidance to $2 to $2.15 [29][30] Other Important Information - Cash flow from operations for the first half of 2022 was an outflow of $18.4 million, compared to an inflow of $149.8 million in the same period of 2021, primarily due to expected FCPA settlement payments [25][28] - The company is committed to sustainability, having filed its 2022 CDP climate change survey and launched a partnership with the National Park Foundation [33] Q&A Session Summary Question: Free cash flow guidance and remaining differences - Management explained that the remaining difference in free cash flow guidance is attributed to higher cash expenses and interest rates [38][40] Question: Growth and quality of revenue - Management indicated that they are seeing sequential growth and winning new business, particularly in the regulated side and larger hospital accounts [41][42] Question: Normalization of absenteeism costs - Management noted that operational expenses related to absenteeism peaked in Q1 but are expected to normalize as staffing levels improve [48][50] Question: Positioning against inflationary pressures - Management expressed confidence in achieving long-term free cash flow guidance despite inflationary pressures, emphasizing proactive management [52][53] Question: Accounts receivable and pricing actions - Management clarified that higher accounts receivable are largely due to catch-up efforts in Secure Information Destruction and normal working capital timing [55][60] Question: Volume drivers and operational efficiencies - Management highlighted ongoing positive growth trajectory and improvements in operational efficiencies through automation and modernization initiatives [62][65]