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| Statement |
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| But I think we're well positioned in the market |
| Over the last five years, this dedication has allowed us to make tremendous progress, as illustrated on Slide 11 |
| Service excellence is focused on delivering a seamless service experience through all phases of our customer life cycle which includes: one, making it easier for customers to manage their accounts through improved digital touch points with our enhanced online customer portal, including real-time waste tracking, trending benchmarking and sustainability reporting, accessing compliance training, requesting new services, making service changes and visibility to invoices; two, enhancing our customer experience by leveraging ERP-enabled tools to solve issues on first contact; and three, utilizing modern routing and tracking technology in field operations to ensure on-time waste collection and container management |
| We anticipate that digital, data and AI capabilities will help us to further deliver commercial and service excellence and efficiencies across our network and shared services |
| This initiative is expected to strengthen customer relationships and further enhance our value proposition |
| So very, very pleased with that in spite of the fact that numbers didn't necessarily look fantastic |
| And I think it just shows the resilience and the dedication of the team here at Stericycle and I think the continued commitment with the relationship with the customers that we have as they continue to depend on us |
| But I think we're well positioned to take advantage and to drive further growth, both organically as well as with some very laser, very, very specific, very deliberate tuck-in opportunities |
| We're very proud of the efforts from top line and bottom line that people fought through to really try to mitigate as much as they can, something that was as much a headwind that we faced as we did |
| So I think all of those things lend themselves to our ability to continue to lead in the marketplace to bring value to our customers and to continue to come up with solutions that they need, if you will |
| 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 |
| We continue to commercialize innovative solutions and products that drive additional revenue opportunities while fulfilling our purpose to protect the health and well-being of health care organizations, commercial businesses, and communities we serve |
| These sessions generated excitement for our enhanced compliance services and award-winning container solutions |
| In early February, we received our grade from CDP, and I'm excited to share that we achieved a B score, our highest rating since we began filing with the CDP three years ago |
| 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 2.85x; and portfolio optimization progress with the divestiture of our business in Romania |
| And I think just that, along with the improved routing capabilities and some of the things we have, those are the things that are really driving our ability to improve margins |
| I think we're very proud of our shred side of the business |
| So we're still very, very positive about the shred side of the business, especially with their efficiencies, how they're getting better, how they're adapting and learning from data |
| We're very excited about those |
| We are proud of the transformation journey we have been on and we are excited about the next generation of priorities we have outlined |
| It will be -- it will end up being about a 6% year-over-year reduction in headcount, and that's where we believe right now, we are positioned to be able to drive growth and really focus on top line and equally, if not more important, really driving bottom line opportunities |
| We've been on budget and we're very pleased with the effort that's going on there |
| Utilizing the ERP, we expect to further enhance sales excellence by gaining greater insights into sales opportunities, driving pricing intelligence, expanding market presence and enhancing sales productivity |
| This includes enhancing sales, service and product excellence to win, retain and grow strong customer relationships |
| I think we've been doing a great job with that |
| So for us, our ability to get that platform in has really -- it's a catalyst for us to be able to do more things |
| And I think there are some where we've got -- some regions where we've got a stronger presence, a bigger footprint, where we can leverage ourselves a little better than others |
| Leveraging our transformed foundation as a springboard, we are positioned for growth and excited to introduce our next generation of key business priorities |
| 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 |
| Congratulations on the strong finish to the year |
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| As a reminder, on the third quarter call, we discussed that some national customers were reducing their store footprint, which led to a contraction in their related service steps |
| In International, Secure Information Destruction organic revenues decreased $2.1 million or 8.4% compared to the fourth quarter of 2022, mainly due to lower recycling revenues and fuel and environmental surcharges |
| In North America, Secure Information Destruction organic revenues decreased $5.9 million or 3% compared to the fourth quarter of 2022 |
| Adjusted income from operations decreased 50 basis points, mainly driven by lower Secure Information Destruction commodity index revenue margin flow-through of 160 basis points, higher bad debt expense of 120 basis points and higher incentive and stock-based compensation of 110 basis points |
| Recycling paper revenues in the fourth quarter of 2023 contributed approximately 5.9% of the decline or $11.5 million due to lower sorted office paper pricing and lower tonnage |
| Excluding the impact of divestitures and foreign exchange rates, Organic revenues for Secure Information Destruction declined 3.6%, mainly due to lower commodity index revenues reflecting more than a $100 reduction in sorted office paper pricing per ton year-over-year and lower fuel and environmental surcharges |
| But on the pricing, on the -- with customers, how would you frame the competitive environment? Going back eight, 10 years ago, there was a bit of a shift where Stericycle was adversely impacted by some enhanced competitive dynamics |
| We have been -- I think some of the commodity headwinds and a few other things may mask some of the gains that we've been making |
| Compared to last year, we anticipate that the first half of 2024 will have a more challenging paper pricing year-over-year variance as the sorted office paper price per ton was above $200 on average for the first quarter of 2023 and above $185 on average for the second quarter of 2023 and the second half of 2023 pricing return to the historical average range |
| The difference was mainly related to lower income from operations of $22 million |
| Secure Information Destruction was impacted by lower commodity index revenues of almost $50 million due to lower recycling revenues and lower fuel and environmental surcharges |
| As illustrated on the bridge on Slide 9, the $0.06 year-over-year decrease was driven by $0.09 from lower Secure Information Destruction commodity index revenue flow-through, $0.07 from higher bad debt expense and $0.06 from higher incentive compensation |
| After considering 2023 adjusted litigation and severance payments, free cash flow excluding these two items was $138.5 million, which is approximately $30 million below our 2023 free cash flow guidance range of $170 million to $190 million |
| The difference was mainly related to lower income from operations of $76.4 million, as previously discussed |
| Regulated Waste and Compliance Services organic revenue growth was $71.9 million, while Secure Information Destruction organic revenues declined $15.6 million |
| The $12.2 million decline was mainly due to inflationary and supply chain costs of $25.5 million, higher incentive compensation and timing of stock-based compensation of $22.7 million and lower Secure Information Destruction commodity index revenues and the corresponding margin flow-through impact of $18.5 million |
| Janet, you said that the service stop rationalization had slowed in the fourth quarter |
| As illustrated on the bridge on Slide 17, excluding the impact from foreign exchange rates and divestitures of $0.04, the remaining $0.11 year-over-year decrease was driven by $0.19 from higher incentive and stock-based compensation, $0.15 from lower Secure Information Destruction commodity index revenues, $0.09 from higher fleet costs and $0.08 mainly from higher taxes |
| The $76.4 million decline was mainly due to change in divestiture net losses of $79 million, higher incentive compensation and timing of stock-based compensation of $22.7 million, lower Secure Information Destruction and commodity index revenues and the corresponding margin flow-through impact of $18.5 million and fleet costs of $10.5 million |
| And one thing I think that is important for -- we talked last quarter about when -- are we still facing headwinds in terms of that comparative with the RISI rate |
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