Stericycle's Q3 Earnings Call Highlights Implementation of ERP System

Stericycle (Nasdaq: SRCL) posted its Q3 2021 earnings on the heels of its social governance report release.

President and CEO Cindy J. Miller described the impact of technology on the medical waste disposal provider with the implementation of an ERP system to streamline operations.

"Overall, our results of the quarter demonstrate that we continue to execute on our key business priorities. We delivered on our quality of revenue initiatives driving organic revenue growth and Regulated Waste and Compliance Services. We also achieved an important milestone in our transformational journey - the launch of our ERP system," she told investors.

The company's new ERP system went live in August 2021, built on secure information destruction in North America operations. 

Miller cited a transformation of the company to a "modernized data and technology environment" as the impetus for the implementation across eight key processes. The system touches Stericycle's operational and commercial processes as well as financial and procurement.

The technology advancement allows Stericycle to market to quote, onboard new customers, manage contracts and renewals and allocate payments to vendors. Miller also noted an overall improvement in customer experience and business performance.

Miller added that the company's focus for the fourth quarter is "to continue tuning and enhancing the platform. While it is still early in the rollout."

Revenue was $648.9 million, up from $636.4 million, or 2 percent year over year (YOY). The $12.5 million growth was attributed to a $30.4 million increase in the company's Regulated Waste and Compliance Services (“RWCS”) line of business.

Favorable foreign exchange rates also added $5.8 million. However, divestitures of $12.6 million for the quarter and a drop in SID organic revenue contributed to offsets.

With the exclusion of divestitures and foreign exchange rates, organic revenues increased 4.4% in Q3. Loss from operations fell to $50.6 million from $55.8 million in Q3 2020. Net loss totaled $66 million, down $81.2 million YOY. 

The company reported that it divested its Japan operations in Q3 for cash proceeds totaling $11.3 million.

"The team continues to make strong progress executing on our portfolio optimization initiatives, as this marks our ninth semester since 2019," Miller said. "Proceeds from this divestiture were applied toward debt reduction."

Stericycle showed a decrease in adjusted income from operations, a total of $72.5 million in Q3 2021, down from $101 million in the previous year. The company posted cash flow from operations of $202.2 million, a 44.6 percent decrease from $365.4 million in Q3 2020. Free cash flow fell to $116.4 million from $270.5 million in the previous year, a 57 percent decrease YOY.

As part of a strategic initiative to improve its network, Stericycle opened its new regulated waste facility in Northern California in Q3. 

"This is an important achievement that secures and strengthens Stericycle medical waste capabilities in Northern California, and furthers our commitment to sustainability," Miller commented. "This facility provides a 75 percent capacity increase to better serve the healthcare needs In heavily populated Northern California. This strategic location is expected to improve our network by reducing vehicles lead miles driven fuel consumption and emissions."

Q3 2021 Highlights:
Revenue: $648 million
Net Loss: $66 million
Adjusted income from operations: $72.5 million
Free cash flow: $116.4 million