Executive Summary

Q4 2023 delivered mixed results: revenue declined 2.7% year over year to $652.0M (driven by divestitures and SID commodity/surcharge headwinds), while adjusted EPS was $0.54; GAAP EPS was $0.16 . Versus third party street expectations, SRCL posted an EPS beat and a small revenue miss (EPS $0.54 vs $0.47; revenue $652.0M vs $657.5M) — S&P Global consensus was unavailable; see Estimates Context for details .
Execution positives: RWCS organic growth of 3.1% in Q4, 150 bps improvement in gross margin, and adjusted EBITDA margin expansion sequentially to 16.9% as cost initiatives flowed through .
Headwinds: SID organic revenues fell 3.6% on lower commodity indexed revenues and lower fuel/environmental surcharges; bad debt expense rose year over year, and prior-year divestiture gains created tough compares for operating income .
2024 setup: Management is executing workforce actions expected to drive $35M+ of in-year savings; call commentary targeted 3%–5% organic revenue growth, ~14% adjusted EBITDA growth, and adjusted EPS of $2.20–$2.50 for 2024 (Street sources; company 8-K did not include guidance) .
Potential stock catalysts: sustained RWCS growth and cost-savings realization versus ongoing SID commodity/surcharge headwinds; progress on ERP-enabled efficiencies and the McCarran incinerator ramp discussed on the call .

What Went Well and What Went Wrong

What Went Well

RWCS organic revenue growth remained resilient at 3.1% in Q4; total company organic revenue growth was +0.9% despite divestiture headwinds .
Gross margin expanded 150 bps year over year in Q4; adjusted EBITDA margin improved sequentially to 16.9% (Q4) from 14.8% (Q3), reflecting cost savings and portfolio optimization .
Management execution and tone: “We plan to harness a streamlined workforce, modern technology, updated facilities, and a refreshed fleet, which we expect will drive growth in top line and profitability,” said CEO Cindy Miller .

What Went Wrong

SID organic revenues declined 3.6% in Q4 due to lower commodity indexed revenues and lower fuel/environmental surcharges; this pressured margins and EPS .
GAAP income from operations fell to $37.1M (from $59.1M) on prior-year divestiture gains, lower SID commodity margin flow-through, higher bad debt, and higher incentive/stock comp .
Adjusted income from operations and adjusted EPS declined year over year (to $84.5M and $0.54, respectively) as commodity and incentive compensation headwinds outweighed cost savings .

Financial Results

Headline results vs prior quarters (chronological: Q2 → Q3 → Q4)

Metric	Q2 2023	Q3 2023	Q4 2023
Revenue ($USD Millions)	$669.5	$653.5	$652.0
GAAP Diluted EPS ($)	$(0.54)	$0.02	$0.16
Adjusted Diluted EPS ($)	$0.43	$0.43	$0.54
Gross Profit Margin % (GAAP)	37.5%	37.6%	39.4%
Adjusted EBITDA ($M)	$102.0	$96.4	$110.3
Adjusted EBITDA Margin %	15.2%	14.8%	16.9%
Adjusted Income from Operations ($M)	$76.0	$70.3	$84.5
Adjusted Op Margin %	11.4%	10.8%	13.0%

Q4’23 actuals vs Street estimates

Note: S&P Global consensus was unavailable (GetEstimates mapping error). Third-party sources indicate the following for context.

Metric	Actual (Q4 2023)	Consensus	Delta
Revenue ($USD Millions)	$652.0	$657.5 (Zacks/Nasdaq)	-$5.5M (miss)
Adjusted EPS ($)	$0.54	$0.47 (Zacks/Nasdaq)	+$0.07 (beat)

Segment/service and geography (Q4 YoY)

Segment/Service	Q4 2022 Revenue ($M)	Q4 2023 Revenue ($M)	YoY %	Organic Growth %
Regulated Waste & Compliance Services (RWCS)	$449.3	$439.9	(2.1)%	3.1%
Secure Information Destruction (SID)	$221.1	$212.1	(4.1)%	(3.6)%
Total	$670.4	$652.0	(2.7)%	0.9%

Geography	Q4 2022 Revenue ($M)	Q4 2023 Revenue ($M)	YoY %	Organic Growth %
North America RWCS	$371.3	$371.3	0.0%	2.8%
North America SID	$194.6	$188.8	(3.0)%	(3.0)%
Total North America	$565.9	$560.1	(1.0)%	0.8%
International RWCS	$78.0	$68.6	(12.1)%	5.1%
International SID	$26.5	$23.3	(12.1)%	(8.4)%
Total International	$104.5	$91.9	(12.1)%	1.3%

KPIs and other items

KPI	Q4 2023	Q4 2022 / Prior	Notes
Organic revenue growth (Total)	0.9%	n/a	Excludes divestitures and FX
Adjusted EPS ($)	$0.54	$0.60	Down $0.06 YoY; commodity and bad debt headwinds
Adjusted EBITDA ($M)	$110.3	$117.6	Down YoY; sequentially up vs Q3
Cash from operations (FY)	$243.3M	$200.2M	+$43.1M YoY; lower FCPA payments/incentive comp
Free cash flow (FY)	$112.0M	$68.0M	+$44.0M YoY
GAAP effective tax rate (Q4)	27.1%	15.7%	Higher YoY
Adjusted effective tax rate (Q4)	26.4%	19.8%	Higher YoY

Guidance Changes

Note: Company’s Q4 8-K did not include formal 2024 guidance ranges. Management commentary on the call and trade press outlined 2024 expectations; shown below as “Current Guidance.” No prior guidance to compare from Q3. Workforce savings were disclosed in the release.

Metric	Period	Previous Guidance	Current Guidance	Change
Organic revenue growth	FY 2024	n/a	3%–5% on normalized ~$2.63B base	New
Adjusted EBITDA growth	FY 2024	n/a	~14% YoY growth	New
Adjusted EPS	FY 2024	n/a	$2.20–$2.50	New
Workforce management cost savings	FY 2024	n/a	$35M+ (company release); CEO cited ongoing workforce reduction actions on the call	New

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q4 2023)	Trend
ERP deployment	Q3: Successfully deployed ERP in U.S. RWCS; supported RWCS growth . Q2: On track to deploy in Q3 .	Continued focus on ERP platform as enabler for efficiency and growth .	Improving execution
SID commodity exposure	Q3: Lower sorted office paper and surcharges drove SID declines . Q2: Commodity/surcharge headwinds noted .	SID organic down 3.6% on lower commodity indexed revenues and lower surcharges .	Persistent headwind
Workforce and cost savings	Q3: Cost efficiencies cited . Q2: SG&A discipline; leverage ratio improved .	Workforce actions to drive $35M+ in 2024 savings; structural 6% workforce reduction referenced in trade press .	Positive tailwind
Portfolio optimization/divestitures	Q3: Exits (Netherlands dental recycling, UAE JV; Romania in Oct.) . Q2: Multiple country exits, ~$84M proceeds; divestiture losses impacted GAAP .	2023 included eight divestitures; international RWCS/SID revenues down YoY reflecting portfolio changes .	Lapping headwinds
Capacity/infrastructure	Q3: Operational improvements; no specific facility milestone . Q2: N/A.	Call/trade press discussed McCarran incinerator construction progress and testing timeline into 2024 .	Building capacity
Digital/AI	Q2/Q3: ERP/system modernization emphasized .	Exploring AI to improve efficiencies across network/shared services (call summary) .	Emerging focus
Regulatory/legal	Q2/Q3: FCPA monitor and litigation/settlement costs impacted SG&A .	Continued non-GAAP add-backs related to regulatory and legal matters .	Normalizing but present

Management Commentary

CEO (press release): “We plan to harness a streamlined workforce, modern technology, updated facilities, and a refreshed fleet, which we expect will drive growth in top line and profitability.” — Cindy J. Miller, President & CEO .
CFO (call prepared remarks, summary): Reinforced drivers of YoY adjusted EPS change and laid out 2024 outlook; 2023 adjusted EPS of $1.89 reflected incentive comp, SID commodity pressure, taxes, partially offset by margin flow-through; management then framed 2024 growth targets on revenue, EBITDA and EPS on the call .

Q&A Highlights

Analysts focused on 2024 guidance drivers (organic growth, EBITDA expansion, EPS range) and the sustainability of cost savings; management discussed workforce actions and operational efficiencies underpinning targets .
Questions on SID commodity exposure and surcharge dynamics persisted; management reiterated expectations for ongoing pressure in the first half with mitigation via cost actions and portfolio focus (per call summaries) .
Capital and operations: management addressed progress and timeline for the McCarran incinerator as a capacity/efficiency lever (trade press coverage of call) .

Estimates Context

S&P Global (Capital IQ) consensus data was unavailable due to a mapping issue.
Third-party sources indicate: Adjusted EPS $0.54 vs $0.47 consensus (+$0.07 beat), revenue $652.0M vs $657.5M consensus (~$5.5M miss) . Results summaries similarly noted an EPS beat and modest revenue miss .

Key Takeaways for Investors

Mix and margin: RWCS growth and cost efficiencies are offsetting SID commodity headwinds; sequential margin expansion in Q4 suggests cost programs are taking hold .
2024 bridge: Hitting 3%–5% organic growth and ~14% adjusted EBITDA growth requires continued RWCS momentum and delivery of $35M+ workforce savings; monitor cadence of savings realization and any ERP-related productivity unlocks .
SID volatility: Commodity indexed revenue and surcharges remain a swing factor for SID; despite mitigation, this is likely to continue influencing EPS variability near term .
Portfolio/lapping: International revenue declines largely reflect deliberate exits; as divestiture headwinds roll off, underlying organic growth profile should be clearer, particularly in North America .
Cash and de-leveraging: FY23 free cash flow improved to $112M, aided by lower FCPA payments; continued FCF improvement would enhance balance sheet flexibility for targeted tuck-ins and capex .
Watch milestones: Workforce savings execution, McCarran incinerator progress, SID commodity trends, and ERP-driven service/commercial excellence are the near-term narrative drivers .

STERICYCLE INC (SRCL)·Q4 2023 Earnings Summary