Executive Summary

Q2 2023 headline results: Revenue $669.5M (-1.5% y/y); GAAP diluted EPS $(0.54) driven by $54.2M divestiture losses; Adjusted diluted EPS $0.43 (vs $0.48 y/y) .
Against estimates: Revenue missed (consensus ~$683.5–$683.8M) and adjusted EPS missed ($0.43 vs $0.49), primarily on higher incentive & stock comp and higher fleet costs, partly offset by lower bad debt expense (management detail) .
Strategic progress: Portfolio optimization (exits in Brazil, Korea, Australia, Singapore) and leverage reduction to 2.70x, the lowest since 2015; ERP go‑live for U.S. RWCS remained on track for Q3; full‑year 2023 guidance reaffirmed .
Mix dynamics: RWCS organic +4.7% y/y; SID organic −2.1% y/y; divestitures (−$24.0M) and minor FX (−$1.2M) offset organic growth (+$14.9M) .

What Went Well and What Went Wrong

What Went Well
- Deleveraging and cash generation trajectory: Credit agreement leverage down to 2.70x; YTD operating cash flow $154.9M vs $(18.4)M LY; YTD free cash flow $91.2M vs $(88.4)M LY .
- RWCS organic growth resilience: RWCS organic growth +4.7% y/y in Q2; North America RWCS organic +4.8% y/y .
- Execution on portfolio optimization with divestitures across four countries to reshape international footprint and simplify operations .
- CEO tone on priorities: “We achieved our key business priority of lowering our debt leverage ratio below 3.0X… made significant progress in executing our portfolio optimization… on track to deploy the ERP to U.S. RWCS in the third quarter.” (Cindy J. Miller, CEO) .
What Went Wrong
- Headline misses vs consensus: Revenue ($669.5M) below ~$683.5–$683.8M; adjusted EPS $0.43 below $0.49 .
- Profitability pressure: Adjusted operating margin 11.4% (−70 bps y/y) and adjusted EBITDA margin 15.2% (−80 bps y/y) on higher incentive/stock comp (+150 bps) and higher fleet costs (+70 bps), partially offset by lower bad debt (−130 bps) .
- SID softness: SID organic −2.1% y/y; International revenues −6.2% y/y as divestitures weighed; GAAP loss from operations $(24.0)M, largely from $54.2M divestiture losses .

Financial Results

Performance vs prior year and prior quarter

Metric	Q2 2022	Q1 2023	Q2 2023
Revenue ($M)	$679.8	$684.3	$669.5
GAAP Diluted EPS ($)	$0.11	$0.12	$(0.54)
Adjusted Diluted EPS ($)	$0.48	$0.49	$0.43
Gross Margin (%)	38.3%	38.1%	37.5%
Adjusted Operating Margin (%)	12.1%	12.4%	11.4%
Adjusted EBITDA Margin (%)	16.0%	16.3%	15.2%

Vs estimates (consensus from third‑party publications; S&P Global tool unavailable)

Metric	Consensus Q2 2023	Actual Q2 2023	Surprise
Revenue ($M)	~$683.5–$683.8	$669.5	−2% (miss)
Adjusted EPS ($)	$0.49	$0.43	−$0.06 (miss)

Segment and service mix (Q2 2023 vs Q2 2022)

Segment/Service	Q2 2022 ($M)	Q2 2023 ($M)	YoY %	Notes
RWCS – Total	$448.4	$444.7	−0.8%	Organic +4.7%; divestitures −5.1%; FX −0.1%
SID – Total	$231.4	$224.8	−2.9%	Organic −2.1%; FX −0.4%
North America Total	$568.6	$565.2	−0.6%	Organic +2.4%; divestitures −2.7%; FX −0.3%
International Total	$111.2	$104.3	−6.2%	Organic +1.4%; divestitures −7.9%

KPIs and cash flow

KPI	H1 2022	H1 2023
Cash from Operations ($M)	$(18.4)	$154.9
Free Cash Flow ($M)	$(88.4)	$91.2
Capital Expenditures ($M)	$70.0	$63.7
Credit Agreement Debt Leverage (x)	—	2.70x

Drivers and deltas (management detail)

Organic growth +2.3% ($+14.9M) offset by divestitures ($−24.0M) and FX ($−1.2M) .
Adjusted op margin −70 bps y/y mainly from higher incentive/stock comp (−150 bps) and fleet costs (−70 bps) offset by lower bad debt (+130 bps) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
FY 2023 Outlook	FY 2023	Not disclosed in press release	Reaffirmed FY 2023 guidance; specific ranges not disclosed in press release	Maintained
ERP Deployment	2023	U.S. RWCS ERP planned in 2023 (prior commentary)	On track to deploy ERP to U.S. RWCS in Q3 2023	Maintained
Leverage Target	2023	Below 3.0x targeted	Achieved 2.70x in Q2; lowest since 2015	Achieved/Improved

Note: The Q2 2023 press release reaffirmed guidance but did not quantify ranges; no numeric updates were provided in the text of the 8‑K exhibit .

Earnings Call Themes & Trends

Topic	Q4 2022 (Prev−2)	Q1 2023 (Prev−1)	Q2 2023 (Current)	Trend
Pricing/Inflation	Op income improved on 2022 pricing levers; inflationary vehicle/wage/utility costs still a headwind	Adjusted margin +350 bps y/y on pricing flow‑through and lower SG&A/bad debt	Adjusted margins compressed y/y on higher incentive/stock comp and fleet costs, partly offset by lower bad debt	Mixed: pricing benefits earlier; cost headwinds in Q2
Portfolio Optimization	Divested Communication Solutions; gains recognized	Divested Brazil; continued optimization	Exited Brazil, Korea, Australia, Singapore; net divestiture losses impacted GAAP EPS	Accelerating exits; near‑term GAAP noise
ERP Program	Ongoing system modernization (non‑GAAP adjustments)	ERP program spend continues; progress noted	“On track to deploy ERP to U.S. RWCS in Q3”	Execution milestone approaching
Leverage/Liquidity	Leverage down to 3.28x at YE22	Leverage reduced to 3.05x at Q1	Leverage reduced to 2.70x at Q2	Improving steadily
SID & SOP/Commodity	SID organic +12.2% in Q4’22; commodity tailwinds discussed	SID organic +11.8%	SID organic −2.1% and below estimates; segment underperformed in Q2	Softness emerged in Q2
Regulatory/Litigation	FCPA settlement accruals in 2022; ongoing compliance costs	Lower bad debt and improved DSO; compliance items continue	Lower bad debt aids P&L; legal/regulatory items continue as adjustments –	Normalizing but still present

Management Commentary

Strategic priorities and execution: “We achieved our key business priority of lowering our debt leverage ratio below 3.0X and to the lowest level since 2015. We also made significant progress in executing our portfolio optimization by exiting businesses in four countries and we remain on track to deploy the ERP to U.S. RWCS in the third quarter… Our first half financial performance came in line with our full‑year 2023 guidance, which we are reaffirming.” — Cindy J. Miller, President & CEO .
Profitability drivers and headwinds: Adjusted margin down primarily due to higher incentive and stock‑based compensation and higher fleet costs; partially offset by lower bad debt expense .
Segment performance: RWCS organic growth remained solid; SID declined; International weighed by divestitures .

Q&A Highlights

We attempted to retrieve the full Q2 2023 earnings call transcript from two archived sources but encountered a document retrieval error in the tool; external transcript links were identified but full text was not retrievable via tools for citation. Key items emphasized in prepared remarks included reaffirmed FY23 guidance, ERP Q3 go‑live, leverage improvement, and portfolio optimization .

Estimates Context

Consensus comparison (non‑S&P sources due to S&P tool mapping unavailability): Revenue consensus ~$683.5–$683.8M vs actual $669.5M (−2% miss); Adjusted EPS consensus $0.49 vs actual $0.43 (miss) .
S&P Global consensus was unavailable via the estimates tool for SRCL during this analysis; where used, third‑party published consensus served as proxy with source citations above.

Key Takeaways for Investors

Near‑term: The quarter was a modest negative surprise on both revenue and adjusted EPS as SID underperformed and cost items (incentive/stock comp, fleet) weighed on margins; expect near‑term estimate recalibration toward lower SID and slightly lower margins unless Q3 cost cadence eases .
Medium‑term: Balance sheet strengthening continues (2.70x), improving financial flexibility; ERP go‑live in U.S. RWCS could unlock process efficiencies and support mix‑driven margin expansion after stabilization .
Portfolio simplification: Continued international exits reduce complexity but create GAAP volatility; focus on underlying adjusted trends and cash generation to assess core health .
Cash inflection: YTD operating cash flow and free cash flow improved sharply vs prior year, aided by lower FCPA payments, AR improvements (DSO), and moderated capex—supports deleveraging and potential selective reinvestment .
Watch items into 2H: SID volumes/pricing/commodity dynamics (SOP), fleet/transport inflation trajectory, ERP transition risk in Q3 deployment, and any incremental regulatory/litigation costs that flow through adjustments –.

Appendix – Additional Data Details

Components of revenue change in Q2 2023: Organic +$14.9M; Divestitures −$24.0M; FX −$1.2M (net −$10.3M y/y) .
Adjusted EPS bridge (y/y): Ex divestiture/FX impact of $0.01, the $0.04 decline was driven by higher incentive/stock comp (−$0.08) and higher fleet costs (−$0.04), partly offset by lower bad debt (+$0.07) and lower tax expense (+$0.01) .

Sources: Stericycle Q2 2023 8‑K/Press Release, financial statements and reconciliations –; Q1 2023 and Q4 2022 8‑Ks for trend context – –; third‑party consensus/estimate context (Zacks/Nasdaq, TipRanks) where S&P Global data was unavailable .

STERICYCLE INC (SRCL)·Q2 2023 Earnings Summary