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Stericycle Inc., Bannockburn, Illinois, has released its results for the second quarter, which showed an increase of 2.3 percent in organic revenue growth compared with the second quarter of 2022, with Regulated Waste and Compliance Services (RWCS) growing 4.7 percent.
The company reports reduced credit agreement-defined debt leverage ratio to 2.7 times and improved free cash flow in the first half of this year by $179.6 million compared with 2022. Stericycle also divested its businesses in Brazil, South Korea, Australia and Singapore for net proceeds of approximately $84 million.
“In the second quarter, we achieved our key business priority of lowering our debt leverage ratio below 3 times and to the lowest level since 2015," Stericycle President and CEO Cindy J. Miller says. "We also made significant progress in executing our portfolio optimization by exiting businesses in four countries, and we remain on track to deploy the [enterprise resource planning software] to U.S. RWCS in the third quarter. Our first half financial performance came in line with our full-year 2023 guidance, which we are reaffirming.”
Stericycle reports revenues of $669.5 million for the second quarter compared with $679.8 million for the second quarter of 2022. The decrease was primarily due to the impacts of divestitures of $24 million and unfavorable foreign exchange rates of $1.2 million, which the company says were partially offset by organic revenue growth of $14.9 million. Organic revenues in RWCS grew $19.7 million, while secure information destruction (SID) organic revenues were lower by $4.8 million.
Loss from operations in the second quarter was $24 million compared to income from operations of $38.1 million in the second quarter of 2022. The $62.1 million decrease for the first half was primarily due to 2023 net divestiture losses of $54.2 million, higher incentive and stock-based compensation of $9.7 million and higher fleet costs of $4.9 million, partially offset by lower bad debt expense of $8.9 million.
Net loss in the second quarter was $49.5 million compared to net income of $10.5 million in the second quarter of 2022. The $60 million decrease was primarily attributable to lower income from operations of $62.1 million.
Cash flow from operations was an inflow of $154.9 million, compared to an outflow of $18.4 million in the same period of 2022. The year-over-year increase of $173.3 million was primarily driven by:
lower FCPA settlement payments of $67.6 million;
accounts receivable improvements of $52.1 million, primarily due to an improvement in day sales outstanding;
higher cash generated from operating income of $23.3 million coupled with lower annual incentive compensation payments of $22.3 million; and
other working capital improvements of $8 million.
Cash paid for capital expenditures was $63.7 million, compared to $70 million in the same period of 2022.
Organic revenues increased 2.3 percent in Q2, which excludes the impact of divestitures and foreign exchange rates.
Adjusted income from operations was $76 million, compared to $82 million in the second quarter of 2022. As a percentage of revenues, the 70 basis points decrease was mainly due to higher incentive and stock-based compensation of 150 basis points and higher fleet costs of 70 basis points, partially offset by lower bad debt expense of 130 basis points.
Adjusted diluted earnings per share were 43 cents, compared to 48 cents in the second quarter of 2022. Excluding the impacts of divestitures and foreign exchange rates of 1 cent, the remaining 4-cent decrease was driven by higher incentive and stock-based compensation of 8 cents and higher fleet costs of 4 cents. These were partially offset by lower bad debt expense of 7 cents and lower tax expense of 1 cent.
Free cash flow in Q2 was an inflow of $91.2 million, compared to an outflow of $88.4 million in the same period of 2022. The $179.6 million increase was primarily due to higher cash flow from operations of $173.3 million and lower cash paid for capital expenditures of $6.3 million.
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