Stericycle, Inc.

Hello all and a warm welcome to the third quarter 2022 StereoCycles earnings conference call. My name is Louisa and I'll be your operator today. If you would like to ask a question, you will have the opportunity to do so at the Q&A portion. Please press star followed by one on your telephone keypad. I now have the pleasure of handing over the call to Andrew Ellis, Vice President of Investor Relations and Enterprise Finance. Andrew, please go ahead.

Good morning, and thank you for joining StairCycle's 2022 Third Quarter Earnings Call. On the call today will be Cindy Miller, our Chief Executive Officer, and Jan 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 discussing the safe harbor statement in our earnings press release and in greater detail within the risk factors in our filings with the US 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 StairCycle's Investor Relations website at investors.staircycle.com. The prepared comments for today's call correspond to an earnings presentation, which is also available at StairCycle'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 December 1st 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 a replay access code 984608. A replay of the webcast will also be available on the Stericycle Investor Relations website. Time-sensitive information provided during today's call, which is occurring on November 3rd, 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 Stericycle is prohibited. I'll now turn the call over to Cindy. Thank you, Andrew.

Good morning and welcome to today's call. Before we begin, I want to recognize all those who had been impacted by Hurricanes Ian and Fiona. Leading up to and in the wake of the hurricanes, we've continued to support our customers, the medical facilities and hospital staff that are working in extreme conditions. Stericycle is proud to support our customers to continue to safeguard the health and safety of our communities. To assist our Stericycle team members who have been affected, we mobilized our SteriCares Fund, an employee-sponsored fund that is used to help support our employees who have suffered loss. As shown in our results, In the third quarter, we continued to build on our momentum in the second quarter as revenue, margin, adjusted earnings per share, and free cash flow all improved. Turning to the quality of revenue, we delivered another quarter of overall organic revenue growth growing 10.9% with secure information destruction increasing 32.3% and regulated waste and compliance services increasing 2.2%. In North America, organic revenue growth was 13.2%, with secure information destruction increasing 36.1%, and regulated waste and compliance services increasing 3.2%. The benefits of our surcharge and fee pricing initiatives that started in the first quarter and expanded in the second quarter continued to drive positive results in the third quarter. The service cost recovery fee we implemented for some North America hospital customers and the enhanced recycling recovery surcharge in North America's secure information destruction contributed approximately $9 million in revenue this quarter. Combined with the $5 million we generated from this fee and surcharge in the second quarter, we are on track to deliver the previously shared $25 million of incremental revenue this fiscal year. Turning to operational efficiency, modernization, and innovation. We believe there is great value to unlock as we continue to invest in ourselves, including investing in our physical infrastructure and network. Over the past two years, we have opened four new greenfield autoclave facilities, including two in North America and two in the UK. We have also completed 22 upgrade projects, including improvements to autoclaves, shredders, washers, and enhanced conveyance and sharps processing. Let me share some of the progress we have made from our new Stockton facility after being operational for about a year. By optimizing the location of this facility near our western US customers and executing our transportation and long haul plan, on average, we are driving approximately 20,000 fewer miles per month compared to last year, which drives cost savings and important sustainability benefits. With new facilities, we typically see productivity gains month over month, and Stockton is no exception. Overtime for Northern California has been reduced by more than 40% for the nine months ended September 30, 2022, compared to the same period in 2021. We have also achieved approximately a 4% improvement in average stops per day for the nine months ended September 30, 2022, compared to Stockton's first full quarter of operations in 2021. Let me now turn to our North America ERP deployment. In the third quarter, we successfully moved the technical code functionality for regulated waste and compliance services into our production environment. Following the completion of this milestone, we launched a pilot at the end of October for regulated waste and compliance service customers in Puerto Rico. We are early days in this regional pilot, but the system appears to be working as designed. Over the coming weeks, we will fine-tune the system and gather our learnings in anticipation of a broader regulated waste and compliance services North America ERP rollout in 2023. As a reminder, we already have over 5,000 employees using the new ERP platform today, which includes secure information destruction, finance, procurement, and other back office functions. I'll now turn the call over to Janet to review our financial results. Thank you, Cindy.