Stericycle, Inc.

Good morning, ladies and gentlemen. Thank you for attending today's Theory Cycle Q1 2022 earnings call. My name is Jaquita. I will be your moderator for today's call. Our lines will be muted during the presentation portion of the call with the opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to your host, Andrew Ellis with Theory Cycle. Andrew, please go ahead.

Good morning, and thank you for joining StairCycle's 2022 First Quarter Earnings Call. On the call today will be Cindy Miller, our Chief Executive Officer, and Janet Zelenka, our Chief Financial Officer and Chief Information Officer. The discussion today includes forward-looking statements that involve risks and uncertainties. When we use words such as believes, expects, anticipates, estimates, may, plan, will, goal, or similar expressions, we are making forward-looking statements. Forward-looking statements are perspective in nature and are not based on historical facts but rather on current expectations and projections of our management about future events and are therefore subject to risks and uncertainties. Our actual results could differ significantly from those described in such forward-looking statements. Factors that could cause our actual results to differ are discussed in a safe harbor statement in our earnings press release and in greater detail within the risk factors in our filings with the U.S. Securities and Exchange Commission. Our past financial performance should not be considered a reliable indicator of our future performance, and investors should not use historical results to anticipate future results or trends. We disclaim any obligation to update or revise any forward-looking statement other than in accordance with legal and regulatory obligations. On the call, we will discuss non-GAAP financial measures. For additional information and reconciliation to the most comparable US GAAP measures, please refer to the schedules in our earnings press release, which can be found on Stericycle's investor relations website at investors.stericycle.com. The prepared comments for today's call correspond to an earnings presentation, which is also available at Stericycle's investor relations website. Throughout the call, we may reference specific slides from the presentation. This call is being recorded, and a replay will be available approximately one hour after the end of the conference call today until May 26, 2022. To access a replay of the call, dial 866-813-9403 in the U.S., 226-828-7578 in Canada, or 44204-525-0658 if outside the U.S., Canada, and enter replay access code 281677. A replay of the webcast will also be available on StairCycle's Investor Relations website. Time-sensitive information provided during today's call, which is occurring on April 28, 2022, may no longer be accurate at the time of a replay. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of StairCycle is prohibited. I'll now turn the call over to Cindy.

Thank you, Andrew, and good morning and welcome to today's call. As Janet and I will discuss, we are encouraged by our overall organic revenue growth this quarter, and like all companies, we navigated the unprecedented convergence of COVID-19 variants, labor shortages, supply chain disruptions, and accelerating inflation. On our call, I will highlight the positive trends we are experiencing with improving staffing levels and how our quality of revenue initiatives are able to mitigate accelerating inflation. which is providing us the confidence to reaffirm our 2022 guidance. During my introductory remarks on prior calls, many times I have referenced the resilience and dedication of our frontline workers as they face continued challenges. This quarter further demonstrated our team members' commitment to servicing our customers as we overcame a 21% shortfall in driver staffing in North America in the first half of the quarter due to COVID-19-related illnesses that were clustered in specific markets and hiring challenges due to the nationwide driver shortage. In March, we began to see significant improvement in COVID-19 absences, and our recruiting team made substantial progress, which collectively reduced our driver shortfall to 12%. As I reflect on our staffing journey over the past 18 months, We have insourced and invested in our recruiting team and technology and increased wages in numerous markets to improve staffing. These actions, coupled with our strengthened employee value proposition connected to our promise of we protect what matters, contribute to the momentum we are seeing in our ability to attract talent in a challenging market. Turning to our key business priorities, I'll start with quality of revenue. We delivered another quarter of overall organic revenue growth with 2.1% growth in the first quarter. We remain focused on our pricing strategy and continue to execute on our three pricing levers to mitigate the higher inflationary pressures we saw in supply chain and labor-related costs, which included higher wages, overtime, and new team member onboarding. As a reminder, our three main pricing levers are as follows. One, for all multi-year contracts, we adjust pricing at contract anniversary and renewal. Two, for all new customers and purchasers of our one-time services, we adjust our rates at point of sale. And three, for many of our customers, we also have surcharges and fees that provide inflationary cost protection for commodity and other price volatility. Examples include our new service cost recovery fee for some North America hospital customers, fuel surcharges in secure information destruction and apportion of regulated waste and compliance services, and our recycling surcharge in North America secure information destruction. Our pricing actions have gained momentum towards the latter half of the first quarter, including our adjustment of surcharges and fees which provide the most flexible mechanism to help offset inflationary costs. Throughout 2022, we estimate that we will introduce approximately $25 million of pricing from the surcharge and fee lever, excluding fuel surcharges, which are offsetting fuel costs to mitigate supply chain and other inflationary cost pressures. As we have stated before, these charges generally lag the immediate impact of inflationary pressures. The benefit from all of our expected pricing initiatives is included in our 2022 guidance, as shown on slide 11. We continue to expect that these initiatives will have a larger impact on results in the second half of 2022. Turning to operational efficiency, modernization, and innovation, I'd like to update you on some important developments which also tie directly to our continuing ESG journey. First, I'm pleased to announce that we will be expanding our capacity in the New York metro area in the second quarter with the expected launch of our new medical waste facility. This facility, located in New Jersey, is another important achievement in our long-term facility modernization plan to strengthen our medical waste capabilities throughout the Northeast. Similar to our Northern California waste facility that went operational in the third quarter of 2021, The New Jersey facility will strengthen our environmental efforts as it is strategically located to improve the efficiency of our network by reducing vehicles, fleet miles driven, fuel consumption, and greenhouse gas emissions. This modernized automated facility is also anticipated to process waste more cost efficiently and reliably and improve employee safety. Our design efforts have focused on sustainability. including the use of a closed-loop system that allows us to recycle steam that is used for heating the facility's washer system, as well as utilizing new technologies that minimize overall emissions. And second, I am excited to share our launch of our latest innovation, SafeShield medical waste containers. These first-to-market containers are coated with an antimicrobial protectant, and the all plastic construction is made with 15% recyclable content. The antimicrobial component is an additional protectant that further reduces the potential spread of infection and odor. The containers also feature an improved design and standard sizes that are nestable and stackable, allowing for more efficient transportation and storage. After completing a successful pilot in 2021, and further innovating our solution based on customer feedback, we plan a nationwide rollout of the SafeShield medical waste containers over the coming years. The launch of this initiative is an important step forward as we standardize and reduce our container network from more than 150 container sizes to less than 20. Our focus on sustainability as we developed this initiative is also reflected by our work with plastics recyclers to pelletize our old containers and sell them as recycled raw material. Further, because of SafeShield's high-quality construction and durability, it is expected to last considerably longer than our existing containers, reducing our demand for plastics in the future. Looking ahead to North America regulated waste and compliance services ERP deployment, we remain on track to deploy pilots in the second half of 2022 for subsets of our North America regulated waste customers in preparation for the continued rollout next year. Our disciplined and detailed approach is a direct reflection of the complexity of the regulated waste business. And finally, last week we announced that we had reached agreements with the Department of Justice and the Securities and Exchange Commission as well as Brazilian authorities to resolve the FCPA investigations which focused on conduct prior to 2017 by employees in our Latin American operations. Resolving this legacy matter represents another important milestone in Stericycle's business transformation journey, and I am happy to put this matter behind us. Over the past several years, We have focused on fully remediating the issues identified during the investigation. This includes instituting new policies and procedures and internal controls, and building a culture of compliance, integrity, and accountability that aligns with our core values across our entire global organization. I'll now turn the call over to Janet to review our financial results.