Stericycle (SRCL) Tops Q4 EPS by 3c, Revenues Miss; Offers FY20 Revenue Mid-Point Guidance Above Consensus

Stericycle (NASDAQ: SRCL) reported Q4 EPS of $0.72, $0.03 better than the analyst estimate of $0.69. Revenue for the quarter came in at $799.9 million versus the consensus estimate of $807.69 million.

FOURTH QUARTER FINANCIAL RESULTS

U.S. Generally Accepted Accounting Principles (GAAP) Results

• Revenues for the quarter ended December 31, 2019, were $799.9 million, compared to $852.7 million in the fourth quarter of last year. The decline was due to divestitures, which reduced revenues by $36.2 million, and macroeconomic factors of SOP pricing and foreign exchange rates, which reduced revenues by $19.3 million and $9.0 million, respectively. Organic revenue growth for RWCS and Secure Information Destruction (“SID”) excluding SOP pricing was 2.0% and 1.8%, respectively. Organic revenue growth was partially offset by declines in Manufacturing and Industrial (“M&I”) and Communication and Related Services (“CRS”).
• Loss from operations in the quarter was $198.5 million, compared to loss from operations of $345.9 million in the fourth quarter of last year. Excluding the year-over-year impact of non-cash impairment and divestiture charges, income from operations was $53.3 million, an increase of $7.2 million from 2018. This improvement was the result of lower SG&A, primarily related to reduced consulting and professional fees for litigation, compliance and material weakness remediation of $36.1 million. The improvement was partially offset by the SOP pricing impact of $19.3 million and higher costs related to hazardous waste operations of $9.8 million.
• Net loss was $219.3 million, or $2.41 diluted loss per share, compared with $318.4 million, or $3.51 diluted loss per share, in the fourth quarter of last year. This reflects the previously highlighted significant charges and operational items, as well as a lower effective tax rate on a loss from operations compared to the fourth quarter of 2018.
• Cash flow from operations for the full year was $248.0 million, compared to $165.7 million for 2018. In 2018, cash flow from operations was reduced by the Small Quantity customer class action settlement payment of $295.0 million. Excluding the settlement payment, cash flow from operations decreased $212.7 million, primarily due to lower operating performance in 2019, as previously highlighted, and payments in 2019 for certain litigation matters, 2018 incentive compensation and ERP-related prepaid software.
• Cash paid for capital expenditures for the year was $194.2 million as compared to $130.8 million in 2018, primarily driven by investment in our ERP implementation.

Non-GAAP Results

• Adjusted EBITDA was $152.8 million, compared to $180.5 million in the fourth quarter of last year. The decrease was driven by SOP pricing of $19.3 million and higher costs related to hazardous waste operations of $9.8 million.
• Adjusted diluted earnings per share was $0.72, compared to $1.03 in the fourth quarter of last year, primarily due to SOP pricing, higher operating costs, and a higher effective tax rate, partially offset by lower interest expense.
• Free Cash Flow for the quarter was $13.8 million, bringing the year to date total to $53.8 million.

“I am pleased with the progress we’ve shown since our new leadership team was put into place. Our actions enabled us to hit the highest growth rate in our core regulated medical waste business in over three years and to generate free cash flow in the second half of the year,” said Cindy J. Miller, Chief Executive Officer. “Our fourth quarter results demonstrate that we continue to move in the right direction to drive growth, improve profitability and deliver long-term shareholder value.”

GUIDANCE:

Stericycle sees FY2020 revenue of $3.22-3.3 billion, versus the consensus of $3.22 billion.

For earnings history and earnings-related data on Stericycle (SRCL) click here.

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