Stericycle, Inc.

Good day and thank you for standing by. Welcome to the fourth quarter 2023's Third Cycle Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during a session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded I would now like to hand the conference over to your first speaker today, Andrew Ellis, Senior Vice President of Finance. Please go ahead.

Good morning, and thank you for joining StairCycle's 2023 Fourth Quarter Earnings Call. On the call today will be Cindy Miller, our Chief Executive Officer, Janet Zelenka, our Chief Financial Officer and Chief Information Officer, and Corey White, our Chief Commercial 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 the safe harbor statement in our earnings press release and 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 statement other than in accordance with legal and regulatory obligations. On the call, we'll 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 investor 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 March 28th, 2024. Replay information is available in the event section on Stericycle's Investor Relations website. Time-sensitive information provided during today's call, which is occurring on February 28th, 2024, 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, and welcome to our fourth quarter earnings call. I'd like to start off today's discussion by thanking all of our team members for their dedication to our customers and their great work throughout the year. Their commitment has been instrumental in our successful performance across all of our key business priorities. Over the last five years, this dedication has allowed us to make tremendous progress as illustrated on slide 11. On today's call, in addition to unpacking the results for the quarter and this year, we will also unveil our next generation of key business priorities, which are focused on the next phase of growth for the company, building on the foundation we have established. I am pleased to share that our fourth quarter results were generally in line with our expectations. Our quarterly results included regulated waste and compliance services organic revenue growth of 3.1%, expanded gross margin by 150 basis points. We are seeing the benefits of cost savings from productivity initiatives that supported a sequential quarterly improvement in adjusted EBITDA margin of 220 basis points, debt leverage ratio of 2.85 times, and portfolio optimization progress with the divestiture of our business in Romania. Throughout 2023, we continued to focus on our five key business priorities. I'll start with a recap of our accomplishments, beginning with the successful deployment of the ERP to our U.S. regulated waste and compliance services business in September. In Europe, we made upgrades and enhancements to the secure information destruction technology and made meaningful progress planning for our regulated waste and compliance services system transformation, which kicked off in earnest with our international team members last month. I'll now provide a brief recap of our quality of revenue achievements in 2023 across three key areas, expanding service penetration, improving customer implementation velocity, and deepening customer partnerships by developing enhanced customer solutions. We expanded our service penetration by launching cross-selling capabilities for our regulated waste and compliance services and secure information destruction sales team members in the U.S. We also expanded secure information destruction partnerships with large healthcare group purchasing organizations, which we expect will accelerate our ability to cross-sell and better penetrate the markets we serve. With regards to improving customer implementation velocity, we improved the speed to revenue by cutting in half the amount of time it takes to close a deal and begin servicing and providing value to our complex hospital customers sooner. Throughout 2023, we strengthened our customer partnerships by conducting customer-focused workshops throughout North America. These sessions generated excitement for our enhanced compliance services and award-winning container solutions. Our most recent customer loyalty scores reflect the high level of value our customers receive from our services. Additionally, in support of our U.S. regulated waste and compliance services ERP deployment in September, the commercial organization was focused on supporting our customers through the system transition. In the second quarter of last year, we achieved our goal of reducing our debt leverage below three times and have continued to maintain our debt leverage target. We have come a long way since 2019, having improved our leverage over one and a half turns and reducing our debt by over one and a half billion dollars. Portfolio optimization has been a major contributor to streamlining the company and our debt reduction since 2019, as we have completed 19 divestitures and exited 10 countries. In 2023 alone, we divested eight businesses and exited six countries. This helps simplify our business and will allow us to better focus our efforts on driving operational and financial performance in our core services in key markets. Turning to operational efficiency, modernization, and innovation. In 2023, we completed over 20 infrastructure upgrades, including installing five new autoclaves, six new conveyance systems, two new shredders, and an upgraded wastewater treatment plant at one of our North America incinerator facilities. In the fourth quarter, we successfully expanded an Ohio facility to handle future medical waste growth. Since 2019, we have introduced improvements to more than half of our waste processing and treatment facilities in North America, including installing more than 25 new autoclaves, six new boilers, and refurbishing more than 20 additional autoclaves and boilers. We have also reduced the average age of our North America fleet to less than four years since 2020, as we've continued to focus on modernizing our powered and non-powered units. Our engineering and operations teams have been focused on the construction of our newest incinerator facility in McCarran, Nevada. In November, we successfully installed foundational equipment, including the incinerators and boilers. We remain on track to complete the construction phase of the project in the first half of 2024. After construction is complete, we anticipate moving into the testing phase, which includes regulatory review. Once testing is successfully completed, we expect to ramp up the processing of waste with a target to achieve full production in mid 2025. Leveraging our transformed foundation as a springboard, we are positioned for growth and excited to introduce our next generation of key business priorities. These are, one, commercial and service excellence, two, operational excellence, Three, digital implementation. And four, strategic capital allocation. I will turn it over to Corey to share his thoughts on our commercial and service excellence key business priority, and then I'll talk further about our other key priorities.