Stericycle, Inc.

Hello everyone and welcome to the Q2 2023 Stericycle Earnings Conference Call. My name is Nadia and I'll be coordinating the call today. If you would like to ask a question, please press star, fill it by one on your telephone keypad. Please note we will have one question and one follow-up. If you wish to ask another question, please rejoin the queue. I will now hand over to your host, Andrew Ellis, Vice President, Investor Relations, Enterprise Finance to begin. Andrew, please go ahead.

Good morning, and thank you for joining Stericycle's 2023 Second 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 prospective 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 the safe harbor statement and our earnings press release in greater detail within the risk factors and 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 statements 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 U.S. 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 calls correspond to an earnings presentation, which is also available at StairCycle's investor relations website. Throughout the call, we will 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 August 24th, 2023. A replay of the webcast will be available on StairCycle's investor relations website. Time-sensitive information provided during today's call, which is occurring on July 27th, 2023, may no longer be accurate at the time of a replay. Any redistribution, transmission, or rebroadcast of this call in any form without the express written consent of Ceracycle is prohibited. I'll now turn the call over to Cindy.

Thank you, Andrew. Good morning, everyone, and welcome to today's call. Four years ago, the leadership team set this organization on a path focused on five key business priorities, which include quality of revenue, operational efficiency, modernization, and innovation, ERP implementation, portfolio optimization, and debt reduction and leverage improvement. These priorities have been our true north star through unanticipated macroeconomic and pandemic-related headwinds. Today, I'm excited to share that we have achieved our targeted debt leverage ratio of below three times, ending the second quarter at 2.7 times. our lowest leverage since 2015. This is a major milestone and reflects our consistent focus on financial discipline. The strengthening of our balance sheet and debt leverage puts us in a position to optimize our debt structure and will afford us greater investment flexibility in the future. This quarter, we also made important progress executing on our portfolio optimization initiative as we completed the divestiture of our operations in four countries, Brazil, Australia, Singapore, and Korea, for combined net proceeds of approximately $84 million. Brazil and Korea were regulated waste and compliance services businesses, and Singapore and Australia were secure information destruction businesses. Additionally, earlier this week we divested our dental recycling business in the Netherlands, and we expect to close on the sale of our secure information destruction business in the United Arab Emirates in the third quarter. Turning to our second quarter results, we delivered our 10th consecutive quarter of overall organic revenue growth, growing 2.3%, with regulated waste and compliance services increasing 4.7%, partially offset by secure information destruction organic revenue declining 2.1% as a result of lower indexed fuel and environmental surcharges. In North America, we are encouraged by positive trends in the market, with the stabilization of hospital staffing levels and the return of elective surgeries. Internationally, we have not observed similar improving trends, but we stand at the ready to support our customers. Our infrastructure modernization efforts, including existing and additional future treatment capacity in strategically placed geographic areas, will allow us to support growth in our customer base. Turning to our operational efficiency, modernization, and innovation priority, our multi-phase journey to construct, test, and ramp up processing of regulated medical waste in the McCarran Nevada incinerator continues to progress through the construction phase. Based on our current timeline, we expect the construction phase of the project to be completed in the first half of 2024, subject to successfully achieving critical milestones equipment deliveries, and passing quality inspections. After construction is complete, we will move into the testing phase, which includes regulatory review. Once testing is successfully completed, we will be able to ramp up the processing of waste and eventually move into full production. In addition to McCarran, we have 20 other infrastructure projects underway, including several autoclave and incinerator improvement projects, with many of these upgrade projects expected to be finalized in the third quarter of 2023. Like many logistics companies, we are experiencing higher fleet costs, including repairs, maintenance, and vehicle return fees. We expect to continue to manage these higher costs through other savings and productivity opportunities, such as our fleet modernization initiative. At quarter end, we had received almost 80% of our outstanding fleet orders, and we anticipate receiving the remaining vehicles by late summer. Fleet modernization helps drive fuel savings and driver productivity. Moving to the ERP, we expect to deploy U.S. regulated waste and compliance services on the platform in the third quarter. subject to successfully achieving the remaining go, no-go decision point. Over the next several weeks, approximately 5,000 team members will be involved in preparing for and launching the system. As I turn the call over to Janet to review our financial results, I'm pleased to share that our first half financial performance came in line with our full-year guidance, as she'll explain.