Executive Summary

Q3 2023 revenue declined 5.3% year over year to $653.5M as Secure Information Destruction (SID) faced ~$30M commodity-indexed revenue headwinds; RWCS organic revenue grew 4.1% despite ERP go-live .
GAAP diluted EPS was $0.02; adjusted diluted EPS was $0.43, down from $0.65 in Q3 2022, driven primarily by lower SID commodity-indexed revenues and higher incentive/stock comp .
Free cash flow for the nine months ended Sept 30, 2023 improved to $91.1M from a $(62.9)M outflow in the prior-year period, supported by stronger operating cash flow and lower FCPA payments .
Portfolio optimization continued with divestitures in the Netherlands (dental recycling) and UAE SID JV in Q3 and Romania RW in October; management highlighted cost efficiencies mitigating ~$30M headwinds and affirmed longer-term outlook following ERP deployment .
Wall Street consensus (S&P Global) for Q3 2023 EPS and revenue was unavailable via the estimates tool; we therefore cannot determine beats/misses versus consensus (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

ERP successfully deployed to U.S. RWCS; management emphasized that “the success of both our ERP implementation and our on-going continuous improvement efforts supports our longer-term outlook” .
RWCS organic revenue grew 4.1% year over year in Q3 during the ERP deployment period, with North America RWCS organic growth at 3.9% .
Free cash flow for the nine months improved by $154.0M year over year, to a $91.1M inflow, driven by $150.2M higher cash from operations (lower FCPA payments, better AR collections, lower incentive comp) .

What Went Wrong

SID organic revenue fell 11.6% year over year in Q3, largely due to lower sorted office paper (RISI) pricing and fuel/environmental surcharges; total SID revenue declined 11.9% .
Income from operations fell to $24.2M from $50.6M a year ago, impacted by SID commodity-indexed revenue loss and higher incentive/stock comp; GAAP EPS dropped to $0.02 vs. $0.30 last year .
Adjusted EBITDA margin compressed to 14.8% from 17.3% year over year, reflecting margin flow-through impacts from commodity pricing and surcharges despite cost savings and lower bad debt .

Financial Results

Quarterly performance vs. prior quarters and prior year

Metric	Q1 2023	Q2 2023	Q3 2023
Revenue ($USD Millions)	$684.3	$669.5	$653.5
GAAP Diluted EPS ($)	$0.12	$(0.54)	$0.02
Adjusted Diluted EPS ($)	$0.49	$0.43	$0.43
Gross Profit Margin % (GAAP)	38.1%	37.5%	37.6%
Adjusted EBITDA Margin %	16.3%	15.2%	14.8%
Adjusted Income from Operations Margin %	12.4%	11.4%	10.8%

Note: We did not have access to S&P Global consensus for Q3 2023; beats/misses vs consensus cannot be determined (S&P Global data unavailable).

Segment and service breakdown (Q3 2023 vs. Q3 2022)

Metric	Q3 2022	Q3 2023
Total Revenues ($MM)	$690.3	$653.5
RWCS Revenues ($MM)	$447.8	$439.9
SID Revenues ($MM)	$242.5	$213.6
North America Total ($MM)	$584.8	$557.1
International Total ($MM)	$105.5	$96.4

Components of revenue change (Q3 2023)

Component	Q3 2023
Organic Growth ($MM)	$(10.5)
Divestitures ($MM)	$(32.4)
Foreign Exchange ($MM)	$6.1
Total Change ($MM)	$(36.8)

KPIs and cash metrics

KPI	Q1 2023	Q2 2023	Q3 2023
Cash from Operations ($MM, cumulative period shown)	$49.5 (3M)	$154.9 (6M)	$193.3 (9M)
Free Cash Flow ($MM, cumulative period shown)	$13.1 (3M)	$91.2 (6M)	$91.1 (9M)
Capital Expenditures ($MM, cumulative period shown)	$36.4 (3M)	$63.7 (6M)	$102.2 (9M)
Adjusted Effective Tax Rate (quarter)	29.5%	28.5%	25.1%
Credit Agreement Leverage Ratio (disclosed)	3.05x (Dec 31, 2022 → reduced)	2.70x (Q2 disclosure)	—
Cash and Equivalents ($MM)	$60.0 (Mar 31, 2023)	$30.7 (Jun 30, 2023)	$29.7 (Sep 30, 2023)
Current Portion of Long-term Debt ($MM)	$16.2	$15.6	$15.8
Long-term Debt, net ($MM)	$1,486.5	$1,293.7	$1,297.0

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Full-year 2023 (overall)	FY 2023	Reaffirmed full-year 2023 guidance (no numeric detail in press release)	No quantitative guidance provided in Q3 press release	Not specified

Note: The Q3 2023 press release did not include numeric guidance updates; Q2 press release stated reaffirmation of FY2023 guidance without numeric details .

Earnings Call Themes & Trends

(We were unable to retrieve the Q3 2023 earnings call transcript due to a database inconsistency. Themes below reflect press release disclosures across Q1–Q3 2023.)

Topic	Q1 2023 (previous)	Q2 2023 (previous)	Q3 2023 (current)	Trend
ERP deployment	In progress; consulting/professional fees in SG&A	On track to deploy to U.S. RWCS in Q3; SG&A includes ERP fees	ERP successfully deployed to U.S. RWCS; supports longer-term outlook	Positive execution milestone
RWCS performance	RWCS organic +5.0%; total RWCS $451.3M	RWCS organic +4.7%; RWCS $444.7M	RWCS organic +4.1%; RWCS $439.9M	Steady organic growth despite ERP
SID/Commodity exposure	SID organic +11.8% (Q1 benefiting pricing/volume)	SID organic −2.1%; commodity pricing pressure emerging	SID organic −11.6%; ~$30M commodity-indexed revenue headwind	Deterioration vs. Q1; significant headwind in Q3
Portfolio optimization/divestitures	Divested container manufacturing ops (loss $5.0M)	Divested Brazil, Korea, Australia, Singapore (~$84M proceeds; losses $54.2M)	Divested Netherlands dental recycling and UAE SID JV in Q3; Romania exit in Oct; divestiture losses year-to-date $63.4M	Continued pruning of international footprint
Free cash flow and leverage	FCF improved to $13.1M (Q1); leverage ratio reduced to 3.05x	FCF $91.2M (6M); leverage ratio down to 2.70x	FCF $91.1M (9M); continued cash flow strength	Sustained cash generation

Management Commentary

“In the quarter, our team members successfully deployed the ERP to the U.S. regulated waste business and RWCS revenue grew in a period of the ERP deployment. Additionally, we drove cost efficiencies that helped mitigate headwinds of about $30 million in commodity indexed revenues impacting the business.” — Cindy J. Miller, President & CEO (Q3 2023) .
“In the second quarter, we achieved our key business priority of lowering our debt leverage ratio below 3.0X and to the lowest level since 2015… We remain on track to deploy the ERP to U.S. RWCS in the third quarter.” — Cindy J. Miller (Q2 2023) .
“Our first quarter performance is in line with achieving our 2023 guidance as we saw solid performance and improvement across all of our key business priorities.” — Cindy J. Miller (Q1 2023) .

Q&A Highlights

We were unable to access the Q3 2023 earnings call transcript due to a database inconsistency, so Q&A specifics and any guidance clarifications from the call could not be analyzed. Commentary above reflects press release disclosures .

Estimates Context

S&P Global (Capital IQ) consensus estimates for Q3 2023 EPS and revenue were unavailable via our estimates tool for SRCL. As a result, we cannot assess beats/misses vs. Wall Street consensus (S&P Global data unavailable).

Key Takeaways for Investors

RWCS resilience: Organic growth of 4.1% in Q3 during ERP deployment suggests core regulated waste fundamentals are intact, and ERP deployment is an operational milestone that can enable efficiencies over time .
SID headwinds: SID is the swing factor; normalized paper pricing and surcharge recovery are critical for margin stabilization. The ~$30M commodity-indexed revenue headwind materially compressed profitability in Q3 .
Cash flow improving: Nine-month FCF of $91.1M and stronger OCF driven by lower FCPA payments and improved collections provide balance sheet flexibility while portfolio optimization continues .
Portfolio streamlining: International exits (Netherlands, UAE JV, Romania, etc.) reduce complexity and refocus resources; expect near-term divestiture losses but potentially cleaner earnings base longer term .
Watch near-term catalysts: Paper commodity trends (RISI), fuel/environmental surcharge recovery, and ERP stabilization in U.S. RWCS; any updated quantitative guidance post-ERP will be important for estimate revisions .
Tactical trading: Without consensus data, directional read is negative on margins due to SID, offset by improving cash flow. Stabilization in commodity prices could support margin recovery; ongoing cost discipline is a partial mitigant .

STERICYCLE INC (SRCL)·Q3 2023 Earnings Summary