SRCL - Earnings call transcript Q4 2017

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Operator

Good afternoon. My name is Jesse and I will be your conference operator today. At this time, I'd like to welcome everyone to the Stericycle's Fourth Quarter and Full-Year 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator President Communications Vice Investor of Koenig, and Corporate Relations. Jennifer

begin your may conference. You

Jennifer Koenig

afternoon for Thank quarter thank you. and Good you call. XXXX joining earnings fourth Stericycle's

On that Operating Officer. Executive discussion during Alutto, Financial are includes and and The the forward-looking uncertainties. call Ginnetti, statements Officer; Chief Dan risks Chief Chief Arnold, Brent today's call today involve Officer; Charlie

results the those cause Our actual are Safe be that performance permitted forward-looking extent trends. could applicable the Commission. performance statements. not revisions To earnings loss and results such trends should under Exchange commitment statements no statements. press discussed results with we forward-looking could in subsequent reliable in Harbor in U.S. described future indicator historical differ any considered and should to or our in greater investors Other in to of Securities disclose future not and the significantly Stericycle's differ actual use from Past make the to release factors anticipate a filings to detail

call, will financial non-GAAP we discuss measures. the On

Stericycle's For Relations to which comparable refer please can measures, press and the found our the additional footnote be on reconciliation GAAP to schedules release, most website. on and information earnings Investor

with correspond Finally, today is our available on Relations presentation script will website. a it Investor

So discussion. please Alutto, refer Charlie to our those slides. begin will With that

Charles Alutto

disclosures financial operational afternoon forward. and you see to transparency, this a the result like will in our and in Welcome Jennifer. call that reiterate our of and to additional we I'd available XXXX everyone an hear as feedback for are effort IR call. this website. both Thanks, to going additional conference our shareholders Also from full-year performance fourth on and earnings and providing increase detail our quarter presentation on

in leadership core solutions, today's discussion sustainability leader and increasing to our vision, driven Stericycle markets large outsource our on but our long-term position, on it and Now customers desire businesses. review and markets. is to regulations, to turning opportunities. Slide a focus Today multiple fragmented the important our first continue we on to is ageing X, grow, serve services their by population, The focus to

customer on to identify The are actions and our Company service markets continue We lines combined cross-selling taking multi-year our relationships agreements the with growth improved organization and performance. in have our market of to penetration the we billion also $XX long-term accelerate strength will global a in strengthen for long-term position opportunities. financial growing and

review agenda So with backdrop, let's call. today's that as for our a

highlight line, first strategy outlook. will and will and We by performance review will business our and QX Brent our and Dan service discuss will finally, XXXX transformation, our review our results, and the I Dan full-year

with Slide Business Transformation. start let's Now and the X

change, XXX processes, over drive acquisitions systems. for more has XXX and are to XX years are to As need and nearly clear synergies, financial position years XX business continued business we I for last a strengthen comprehensive on recognized introduced is Stericycle the undertaking to and transformation We in come. our call, applications There opportunities improve business many redundancies. for over success there reduce company-wide certainly resulted than earnings a

of investments call, We the control our In the must performance addition Slide to enhance compliance we've in the non-core outlined to that to the XXXX been business impact will a clear and all, model unfavorable Since management on performance a more competitive X. The and strategies focused has which future. on the and as shareholders needs build to In operating an remains have effort. our for determined we enhanced long-term and pressure, effectively identified business guidance. business, challenge. on our return model reconfigured our the be vision transformation our best-in-class manage assets including is that have inconsistent pricing know last also additional of we health

we've X%, over conducted expect us research to through growth EPS to we and to To help and consultants of developed execute a assessment strategic profit X% help detailed have will internal ensure value upgraded compounded diligence talent Through with to identified dedicated And project We number oversight this greater improvement established to an of us drive opportunities. accountability, customer deliver due against revenue and we adjusted teams five and enable you business growth, our plans these, of effort. experience metrics X stable shareholders an magnitude with a predictable comprehensive XX% the and enhanced Slide for work To of initiatives growth to hired the this this full we leading provides years. transformation, help understand scope and track and and overview the transformation this carry the progress. out to diagnostic of process, key of of business. an to the success. X% next

and performance service efficiency, excellence on be and will backbone to model. strategic to of key management operating system. the system one improve optimization, management will making. and ERP, and integrate The five lines include portfolio sourcing. expected rationalization, resource management, is commercial become model operational end-to-end global we transformation organizational the standardize model. excellence align enterprise all initiatives A transformation geographies of our Within We new will business operating key implementing central enterprise and indicators, Company the around performance and a business data operating planning is of of our global component the This decision our processes, performance global

evaluating we rationalize assets. portfolio a First, are to non-core

operations facilities. operations by across modernizing and Second, route network driving logistics, improving our standardizing efficiency our field we are

and Third, aligning global our around achieve and expanding model. our excellence, Fourth, to demand processes standardizing customer we achieve around services relationship service options. to to aligning will global are efficiency optimizing our we where business sales customer are the share structure, November. commercial management management. structure which and in finally excellence are organizational procure-to-pay functions improving the be began we customer, operational our and we And processes Furthermore, self-service implementing

growth on financial with to We capitalize expect and improved efficiency drive opportunities better performance. these initiatives will Stericycle enable

that significant appropriate an transformation delivers on shareholders. to return are operational business the addition to the In benefits, ensuring focused we

scene time $XXX one million. against program As deliver business than we to will of $XXX we Slide on greater XX% expect our X, investments IRR projected transformation the an are million

As a in of adjusted business partially of expect million $XX current range $XX which benefits initial offset result to our we initiatives will challenges. XXXX the in million, near-term EBITDA

expect bottom cumulative $XXX benefits of EBITDA We is adjusted XXXX. billion million grow. $X to and transformation strong to business The XXXX deliver between expected line

approximately to of an Over EBITDA the growth X% years, annual X% expect a on and adjusted five we of EPS to rate compound growth rate next annual XX%. compound to X% deliver

value in the initiatives, in deliver made milestones XX%. and the model. approximately making XXXX blueprint to transformation phases and rollout cash target create good that generating additional to In anticipate we transformation. the four the of anticipating for in the In near-term we full returns. We period, cash our the success related internationally operating beyond. Over In a the progress anticipate with we will U.S. ERP and will equivalent XXXX growth resource build the and financial on efficiency of necessary XXXX. XX% compound will of a XXXX investments transformation the to provide and XXXX This to enterprise system. for intend test flow intend focus early shareholders. our executing we the to free Slide reviews ensure system the and To-date substantial realizing value business annual planning leverage to performance enterprise finding on beginning rate the same we've timing the of management XX,

ERP investments the Our the heavily system. upfront first in investment are weighed primarily due in the the to transformation in two years,

to some on executing redefine This is near-term Stericycle will of operates. begin are We drive the and initiatives XXXX EBITDA majority effort adjusted as savings the truly transformational in financial and benefits realize in vast XXXX a XXXX and to to beyond.

portfolio. XX, a service also fit to organization all of and thorough our Now determine we're rationalize their Slide conducting on of within and geographies long-term review our our

long-term on includes margin screening investment assessment for and growth, as financial return capital such criteria improvement. Our

We ERP services at business implementation. growth, to core model our ability will infrastructure current alignment our impact also our competencies criteria the base and strategic and implications customer potential leverage for for the look including with

applied asset Secure XX patient the the make the recently divestiture number of most exit Destruction these months, business divestiture transport UK Over Africa. criteria business in our of of the portfolio Information of some included in our of past the and the UK, we industrial and decisions. This a to manufacturing South

enable be strategically We to for potential more profitability. to divestitures improve us and better position will continued evaluate future focused growth and

ERP XX. strengthen Turning compliments to The compliance further and to controls ongoing system will efforts. Slide enable us company-wide

overall and financial, We teams have our program. compliance audit legal, strengthen compliance our to expanded

controls We instituting new our come will are further monitoring will internal well compliance programs. and technology The that of our increasing procedures platforms with implementation strengthen and of policies standardization support program. the ERP information as also

disclosures. which will discuss the these efforts of our the You overview results concludes That of and of by my filings now QX our will some performance enhance in Brent transformation. periodic today see and business results line. in revenues financial include our business

Brent Arnold

Charlie. Thanks

Information Turning million, and quarter to Destruction a for also When services revenues $X.X Growth the Regulated QX contributed in each due million. were for comparison adjusted manufacturing by service the by million. decreased Compliance lines record $XXX.X and fourth Related from X.X% $XX.X related XXXX. X.X%. and Services in event quarter total quarter industrial $XXX.X million our of impacted unfavorably Services $XXX.X Slide and XXXX. to down $XXX.X follows: fourth million; were million; and and Acquisitions $XX.X our in was Services $XX.X revenues the Services XX, Industrial million QX Manufacturing revenues in challenging from Revenues Waste million; Secure communication business to divestitures in a revenues reduced Communication as

alignment of with it The tuck-in Destruction dollars and Information reduced an five the $XXX in These This $X.X with revenues one our quarter Africa. $X divesture annualized contributed in Secure the annualized in portfolio of $X.X acquisitions projected million. million quarter quarter divest we million. business six the we South in impact a In revenues approximately internationally. closed was of acquisitions by optimization U.S. revenues including strategy

As included also to Compliance we in to divestiture. X.X% due hazardous Services This continued revenue hospitals. growth waste quarter and had revenue expected retail perform had well, in Organic transportation Regulated continues partly and new accounts the Secure and services execution Related a the paper. our Information a Destruction strong in of result with of growth and quarter events. installations announced quarter. of year-over-year. additional number Communications patient access down strong was net regional both national among and X.X% the previously Services to record services and was recall Waste was This

year-over-year However, down same a to last comparison year. it on the the in our period was record quarter basis given

year. now our discuss will and hand financial was As expected greater last Manufacturing quarter down I and the for Dan, Industrial performance it to when fourth who same to compared Services will period detail. over the

Daniel Ginnetti

Brent. Thanks

Turning to our performance. Slide for XX, financial key

our EBITDA Adjusted in the recorded fell reform from due and million. $XXX.X $XXX.X at line expectations part our goodwill million adjusted This the costs. million. favorability federal of of on by including of expense offset a from $XX.X to adjustments accruals. some resulted favorable the higher to primarily of non-cash in approximately progress tax million repeat. in impact operations flow were control are fourth This includes $X.XX. due America results We remediation was part an non-cash not in following timing to was million fixed testing their international charge quarter Adjusted expected adjustments depreciation revenues GAAP our as incurred $X of collections $X quarterly of annual are cash related $XXX part was which discussed of ability. other EPS and factors. tax to not These efforts of $X.XX assets than Brent in to We impairment stronger the we recorded As and short in $X will approximately million majority accounting related and expected in EPS adjusting And items. impairment repeat. Latin internal the

including let on me transport some patient short from due Street the $X.XX. was the you business. details few a by higher operations a in For or street of costs primarily additional Slide take was of $X.XX. on from consensus at last EPS, was XX. for EPS to to costs Europe, This stranded consensus EPS $X.XX through color equivalent

some at up In costs a and a strong of QX of catch XXXX tax from to related some depreciation, non-operational C&RS. non-cash in and to In reform. in came $X.XX were quarter, the and of control our there expenses, contract, addition, U.S. energy, in of waste remediation by mix related fuel offset our $X. including covers adjusted LQ EPS growth. in policy favorability was offset the interest tax saw and SQ U.S. full-year harmonization by acceleration Slide This compliance services in installation in related not LQ results. $X.XX the and $X.XX quarter regulated partially of XX a business expected a increased large higher new shift

on Now sheet for the XX. balance Slide

at quarter. an we the the In mandatory XX,XXX $XXX.X of convertible X.X preferred At covenant of Our approximately the was the debt-to-EBITDA million. was portion the additional authorization end revolver X.XX ratio for we shares. repurchased The the purchase the shares million. quarter, unused quarter, million to of end of have $X.X

revenues, year, recall million reimbursement when cash was million from $XXX.X $XXX.X CapEx XX for DSO our from operations the items, operations was and or For and and other was was adjusted X% of cash million, days. $XXX

the the the of investment was expected facilities our company company's in As at appropriate The ratio exceed mentioned, XX, Based lenders. that business XXXX. be to mitigated December risk seeking and/or upon controls in I spending could XXXX which possible the including This our point containing number from leverage covenants company reasonably leverage credit is some transformation at it debt-to-EBITDA covenants a through relief is compliance temporary X.XX. company's threshold from debt-to-EBITDA covenants, financial can XXXX. plan,

strong lenders, in company the have past. a been supportive the relationship of with who We have our

will there We over hand have approached of XXXX options over arrangers to and invest to go in enable our Charlie future lead to us to now are continue for that will the it our fair outlook. I Stericycle. believe

Charles Alutto

Dan. Thanks

and mind Please does our statements, currently for or on for Now forward-looking on guidance these it keep guidance is known include Slide items. are future XXXX acquisitions XX. based in divestitures not our that

will be in and of providing operational guidance result $X.XX guidance million. each commonly million is our on with covenants will the better believe range more and EBITDA. the of we million and range be billion. for on focusing Manufacturing shareholders, proxy Related feedback from for the as and on Information $XXX outlook, we aligned range for compliance XXXX a only to range revenue our exchange metric Based $XXX be $XXX our the rates. This For annual flow. Destruction $XXX on of used, be lines waste cash believe million. be cash reported EBITDA Based will Communication the be as range to $X.XX will Services we $XXX million. cash billion to Services from million current using will and regulated $X.XX will revenues. be XXXX operations in the The is of service billion flow for of be to business $X.XX services worldwide Secure free foreign billion to will million in $XXX the of environment, million basis. in will Industrial on revenue an in our and We depending Services recall to adjusted the $XXX range in $XXX of current

range XX% reflective in the an count to in expect a using from of will be of million be million. of approximately to range We EPS share conversion $X.XX a will $X.XX operations of shares of $X.X cash $XXX and tax rate $XXX preferred We of to believe adjusted the million XX.X%. effective

and XXXX now $XXX cash million our million flow overview $XXX CapEx XX be expect turn to to of I'll $XXX We Dan. an free Slide guidance. million. million to between up $XXX it for assumptions provides the back will

Daniel Ginnetti

generally Thank bridge flat. would Slide We XXXX on EBITDA from guidance directional XX you. approximately On XXXX the be and anticipated would be the million provides the the $XXX results had QX the XXXX revealed call.

me Let last since highlight changed what call. the has

have anticipated will approximately XXXX. First and our results of did debt QX not command in continue expense million $X

any strengthening our focused million to revised on $XX commercial our relationships, a Next impact SQ we expect related relationships. long-term of strategy

$XX ERP prepare to a for future environment investment IT implementation. our infrastructure million in make will stabilize We and IP our legacy

for part completion plan business our transformation. business our Lastly, detailed XXXX implementation of the with

have a savings, million into timeline resulted recognized future of years. $XX of which refined the We shift in

a incorporated priorities. As from into which capital $X.XX, in recent $XX our I've of this adjusted highlighted anticipate by intend to benefit will range range expect allocation guidance on this $X.XX of the We rate will We Slide of cash XX, to XX% to the have $XX as we and million. ongoing tax benefit EPS million in the already XX.X% tax of support is operations in our the to cash utilize reform. result an

approach allocation XX, capital Turning to to will our disciplined strategy. continue to Slide we maintain a

remarks Our it we Charlie route in final we back as that for it additional our reduction well cash value. Long-term, as for enhance approach for operational before up now strong expect repurchases tuck our acquisitions allows share provide free density debt turn open will expand throughput. will and and levers to Q&A. continued I to flow shareholder

Charles Alutto

performance team answer our business open earnings Q&A. Stericycle Drive our look that to improving on experience, I for Dan. shareholder questions. and on the and long-term future transformational Thanks, updates Jesse, now to calls. customer and providing our committed Operational is financial Efficiencies progress our your to improve We line We'll forward entire Stericycle enable enhanced please transformation reiterate want returns. the

Operator

Instructions] comes Daniels [Operator question Ryan with Your William Blair. first from

Your open. line is

Ryan Daniels

Yes, guys. the question. for Thanks taking

for Let $XX with hit structure? million that is? the to EBITDA any million $XX Is it strategy. there, that initial that's a marketing Is the what because expectations your changing SQ talk Just on about pretty more start front? bit you investment of Can big kind gap? little long-term pricing color one, a me

Brent Arnold

Brent. Really done point in to I then one. last to account over pilots long-term also the really is the we're for and initiatives with making on But and that really with improving our to marketing our we'll had And to strategy the analytics reduce being annual take as we're going Hey, going our or team contact the of in Of manager dedicated churn marketplace. those be some and three the managers account key a those as finally, with say investments out relationships as serve five the rolling be learnings initiatives expanding additional the well will we're first be reduce three price long-term. discounting. strengthening we're an customers specific focused that our of that customer quarters. effort we've With I'll to segments long-term number single the increase SQ our Stericycle. completed limit business customers customer going in we've on the based brand This our Ryan. promote work for would some we've is multiple data that and

results will come business. our While they we all near-term confident improve strengthen these investments the performance impact the and our with of long-term are initiatives are an relationships help

Ryan Daniels

in still is to then that. on we're this out adjusted at to for million done results? just in to And a achieve that to my of $XX as chunk Thanks can looking Okay. XXXX, anticipated much benefits about Thanks. at those going good point year benefits the million follow-up you've continue ensure X%. it's monitor those based visible How pretty forward the already $XX overall have you in EBITDA the of kind going are what how and there that to EBITDA

Charles Alutto

entire We $XX teams Yes, where only of transformation restructuring tracking update as give with We'll business but that line have in on through that million the all we're of progress to the has XXXX $XX in not initiative. through calls associated go the on to Ryan, under some did the earliest the have savings but November. entire great question. $XX excellence dedicated we we million of that the organizational $XX work streams and the do we a sight and been accomplished

Operator

Your Gary Bisbee next RBC Capital. question with comes from

open. is line Your

Gary Bisbee

start I'll evening. I Where too, lot be guess good to keep tough it my a best. to can there guys, try Hey, but

you CAGRs to Day. a start and growing I based in from the - mean XXXX challenge growth from guess just that what XXXX. calculated would for then visibility off for into those get given obviously this suppose the you I bottom of the ago Investor there. XX to calling do I target you're a ones to grow the your long-term phase? sense deliver updating continued gave I ability Thanks. am guess in When trying declines So in Are the months I expect

Charles Alutto

has We well, CAGR a we the divestiture five-year we the look business will the our that see from in still pressure over period. tables impact discount the SQ lead business well the over decline look anticipated next team some on is the portfolio. it feel XXXX challenges as this assets. of entire short-term the honestly see the Yes, for are grow on the of obviously over CAGR we can certainly Secure we RWCS as do business start growing Information revenue we when we CNRS you continued entire from the on Gary a parts Destruction have XXXX in on CAGR and forward that's Services. the with is at year guidance when We the Certain gave

Daniel Ginnetti

ramp our in from shared that is saw see you cared XXXX see some and European savings graph up EPM modest the to implement those as we in as you'll really the the entire begin you for saving a savings Gray begin And services me system, as those earlier year. XXXX XXXX with to over well of it that does as

Gary Bisbee

didn't. initiatives, to that including clear be may from around you're but be just cost be you fourth to guess a you to those follow-up what how that would about out be to correct? so out Is to want there Is those couple in you're the it adjusted there might past are any that transformation the I And get you savings? are adjusted the and are change versus as facing like of historically adjusting I you things thinking the And the then that seem savings out of part adjusted quarter deliver results. the adjusted you clear,

Charles Alutto

realizing the to. Yes, that cost the answer be we we've two is first, it That of and will as the in I majority frequency again correct. part back that savings $XXX the which there. within million one $XXX the discussed question million captured question that just to begin will going cadence

we really The adjusted second things of with the do has that to from a some approach. question theme

in release all transformation but And saw business. well took you the exactly and taking holistic will in will footnotes We we're XX-K you of over see of what and to there really give a in just a in so five be the improve the thematic more things of approach. look we aspects more this think approach I One more press business hope spirit disclosure financial our out. more the we'll items, transparency as backing and I we're years, adjusting our not you down with in changed

so And putting follow year able each you be there. should to us each what on that and are quarter along items we in with

I certainly there, think you're track good of along coming these see business but save. with you'll numbers with some on down, seeing to some that progress be transformation it able and capturing to the number

Gary Bisbee

in is we and improvement a The bit. appreciate Thank release noted the definitely it quite you.

Charles Alutto

you. Thank

Operator

You comes from next with Schneeberger Oppenheimer. question Scott

is line Your open.

Scott Schneeberger

obviously kind And of and questions, urgency if of revenue, provided years lot. divestitures CAGR of understand to the going with to that I'm just before doubling Gary's elaborate up want revenue EBITDA divestitures? so transformation, occur the in next as the please sense happen, the I a could clearly on five following well, getting what then because business Thank I you're what the with you is but get the the Thanks that's this the you. on to

Charles Alutto

Yes.

not being aspects the look urgency first, Secure the divestitures pillars South in divestiture there Information business discussed business to we've is most all Destruction contemplate at So beyond this does four of on sense and Certainly a of transformation Africa. the our recently we've any discussed. that already what

to implement with do that committed or service question. the We are a are we system and energy Scott, that whatever years diligently. - And in sure sorry there want able to it us, we to ERP was and working second be time that I over to part geographies we our lines to to, takes so make will make that two sure think And whatever that. - be

Scott Schneeberger

Yes.

and these that. getting on and that, to answered really implemented that, obviously, be think ERP working to done - divestitures you on just I Just going you before have want you're just towards

Charles Alutto

Yes.

the views asset, if put when into think will at implication one the you Scott, platform. hold the at service the non-financial a look of a we how them is the the make portfolio. rationalization that so of the we'll ERP, And towards on use we criteria of geography look in I line one there, that ERP criteria the on or that implemented in to we that's as one hard be certainly we of new decision evaluating

Scott Schneeberger

on could guidance you Thanks overall my curious you And guys. quarterly slip Great. cadence at might this as preach the you be or cadence also and think on in how and if with covenants at danger compliance - the XXXX about actually when that? follow-up, on Thanks. areas that then end, just of the the

Charles Alutto

number think cadence, a Sure, see have I you as to in the then QX it be far the as important QX. into a of most would and build remember recovery typically seasonality bit

$X.XX, year You have the for guidance EPS $X.XX.

probably a bit a and we it take up then in in and thereafter, think to from in little step next start to out going up coming I then have the more than QX and and growth. is that QX QX QX $X $X further static to QX, in call, QX, on guidance in $X.XX, provide the QX, at ratably We'll rational to be $X.XX. a more range you of

Scott Schneeberger

Thanks. on I covenants touching if just the And could…? then

Charles Alutto

it's the through that difficult this expenses leader relationship could modeled we them. What predict, we very because very are are and so contemplated is covenants, they the reasonably share and arrangers. possible there as come have and lenders tell business to could In would obviously we yes, that, so time, have is we to that the strong fees, very exceed year our out we we points that to as with have transformation, have I that and including on you that these with certain in a out stand some believe the difficult chunks in I legal we - that things reached if mentioned we

our me it years be last share strong for in to the the debt $XXX inappropriate you this, our We while that to and two generated obligation. service million we flow. appropriate As company kind debt paid discuss have are nearly of plan, would I over would evaluating - very free cash ability

we've So after them. reached

think that the along a us come invest a come up business, with lenders. will to as can on further that I we allow our little in fair continue more to we get to plan is with that

Daniel Ginnetti

Scott, be be on million paid that, that just to of to when have think the - that is just we of the know take, I but And will $XXX the no that. There legal actually is paid, really when settlement out. add step update million the other $XXX will thing the of don't actually there's uncertainty

Scott Schneeberger

guys. it Thanks, helpful. Appreciate

Daniel Ginnetti

Thanks.

Operator

question comes next Manthey Your from David Baird. with

Your line is open.

David Manthey

help that XX maybe say above average million Guys, annually, if Slide guess down overall average Where and imply we greater a you about it's the When does you gray going Am incremental be I to $XXX million little be more anticipate correctly? it. you. XXXX hit XXXX that. number, $XX in when hitting you're would level line I that I at could understand that comes to thinking $XXX just even look significantly than the have though to million detail? me that benefit, and to then guess it I you curve Think that is the

Charles Alutto

million - will as of business we of we But five see in $X the $XX in will that benefit, go gray and It anticipated enjoy XXXX. up The bar cumulative is that why the that some which will that bending billion there. have and that's million incremental some savings have we cumulative transformation, never the agree as early in year is green with the we million shared over all to the $XX to year which XXXX, will we we range with $XXX bar to into time. you, expect savings graph, period opportunity continue the be business think the effect I will is down. be of carry steps

Daniel Ginnetti

of comes a the savings loaded. David, then out significant part And that's of ERP the why and implementation the backend

we efficiency office what the that's functions, So see an unleashed optimizations. operational of our back

We after initiatives vast savings before in some XXXX. in in implemented comes that, the the will but get majority

David Manthey

is to so trying to in anticipating But I like don't line figure anywhere this million you're just line out $XX magnitude look is a doesn't XXXX that $X is it graph? the XXXX that million, billion gray is I'm close. how understand in what read million. million green to $XXX in just the just $XXX to couple $XX XXXX and

Charles Alutto

Yes, I it the best of The look as EBITDA representation think that's But is XXXX cumulative. $XXX first cumulative think is on that represented if - the I line saying and well. what you green that's million savings.

Daniel Ginnetti

would you so as effect. million see say that you $XX compounded add year then more that and more incrementally to the first and million, an in as see would Dave, year and same million after and create you've year $XX that, $XX that incremental

David Manthey

Okay.

Daniel Ginnetti

savings the we to at - not indicate that point of any It's back meant we any area. are getting

David Manthey

you and on M&A just the wondering moving especially stop program capital your talked later? pick Why given a a car while that's allocating million that And bit right it a you're thank seems acquisitions $XX challenges up looks fix All allocate capital you. as it not like follow-up, million for then XXXX changing little that the here. in just helpful, organization like I'm why allocation in to $XX it about. you'd tires you

Charles Alutto

tuck-in focus Yes, I'll small is this a I take certainly that our David. good only very up fill on return. acquisitions, mean

Daniel Ginnetti

can after or But time ERP add or acquisitions We're during team we U.S. much certainly complexity the of market. are that of Shred-it of slower tuck-in the to there international deals a them really You're or that's of But not or transformation business right. risk going small medical more take mature any especially in historically. the the still in line. any initiatives some going of amount in delay had waste our

with we on care service that acquisitions new have you side of see complexity acquisitions of respect the I any the of the lines. So down to and think especially

Charles Alutto

chose not acquisitions they Dave, as also that in only well. remember that EBITDA remember comes - with everything

up the can that's us and $X come end does to dilutive delever. to million generate we return it amount opportunity help us strictly and EBITDA as up that is the on So transformer actually the that not EBITDA dollar on and for a execute that with that to

David Manthey

All right, thank you.

Charles Alutto

Thanks Dave.

Operator

from comes Hoffman with question next You Michael Stifel.

Your line is open.

Michael Hoffman

going I'm this to question. unless thanks have do idea Hi my ask the for I taking guys, I how multilayered question. no

the me are…? your numbers Can quite us So blue Slide bars, XX. let expectations somewhat you with absolute the for start tell

Charles Alutto

Yes, the which is to $XXX the million. is the of blue $XXX bar costs initiative, the million

Michael Hoffman

it us XXXX? it year? XXXX, tell it What's XXXX? XXXX? it what's Yes, but so in in by in in What's What's

Daniel Ginnetti

capture can press that step was sure as and really the on anticipating making a XXXX, if sure that going that the next release how think effectively is In happens that look to move you it detailed plan. related we're that about we can transformation. and the this based the and I you in in $XXX on make Yes, according on that we're the to to of at gave possible see to we spend we you XXXX even guidance implementation be million quarter to section meant directional, directly outlook to be everything it's on certainly business a trends delivered about

Charles Alutto

front we intended to system. majority if the and XXXX go loaded of back the prepared has XXXX, as it a think prepare my so obviously I We've implementation ERP of remarks. it been XXXX you for

Michael Hoffman

remaining spread three So and XX last to years. the over XXX XX the XXX to then

Charles Alutto

yes, the XXXX XXXX. exact initiative and is fully now realize Yes, the nothing spend we'll rate, at get but back to by really we that's

Michael Hoffman

million delta There finished And Okay. versus What's the waste you price? or midpoint million that million? the how $XX is in $XX $XX SQ guidance. million remaining $XX of is $XX it medical regulated rounding sitting between of

Charles Alutto

the the and the million SQ $XX of XXXX. the is during transport delta exist of the majority Yes, the had in from the of other we that and patient is transport patient prices business contracts UK the divesture

headwind delta is there add The like was something in on Michael exchange other million on a $XX that foreign XXXX. thing and

Operator

from Sean Jefferies. next Dodge question Your comes from

line open. is Your

Sean Dodge

thanks. Hi,

you would included I com-sol an and be going be. potentially like considered entirety point or what how maybe M&I significant at the you of of you do your may Charlie sense things us could of expensive footprint. portfolio are international to be exiting to this a So guess looking you be at non-strategic the consider back portion there give rationalization idea the or optimization. or big can curtailing a of

Charles Alutto

have Sean the their financial look give through what respect strategic South in as on at were specific a let [indiscernible] line about at and by not Destruction and it for grow divestiture or Secure businesses a only with decided that was you that Dave we little the a the but limited those divest think of factors with certainly to the our opportunity through and Africa continued they me local required come I to Information given maybe rollout South as Destruction mean you update non-core. regulations above additional if take prior to good included equity grow that point to that fact me be government and let look to growth I South partner what criteria, continue to and if Africa you we business I in talk South this Africa of to business. that given this African did going not was to Yes, at decision to the all I've think there would us be and Secure flavor an beyond. to we services core Information

business. patient you would the that business think to hey, one easy transport be I think about that that of say, an non-core certainly was

between our really link UK operating For creating won't we function. the M&I in an and

look at that. So we will to continue

it will or a the to before we risk the We earlier said of to system. if look launch could business of ERP won't lens, we implications the would as circle the implemented ERP in delay think the also we decision make transformation through it create going we we at

Sean Dodge

Sure.

of over M&A, on that deploying any there, that a cash target buybacks benefits underlying range guide balance quick from may generate does timeframe growth? include any Okay. you the that that driven know expect repayment get the be but growth debt any on or X% And the long-term kind does the the I then to assumptions. inclusive or one sheet to you Is XX% any EPS

Daniel Ginnetti

is guidance. seller repurchase range reduction to to when with look $X.XX continue anything EPS shares XXXX mandatory as you include we and preferred take in XXXX at to there if think I Yes, the you guidance build respect the share of repurchase our advantage or long Debt the doesn't is acquisitions. plan look at the for of

Sean Dodge

Okay. Understood. Thank you.

Daniel Ginnetti

accelerated Other are - cash that for compound beyond not free free it's annual using included in rate. growth levels cash

Sean Dodge

All right. Thank you.

Daniel Ginnetti

Sean. Thanks

Operator

Hamzah Macquarie with from Capital. next question Your comes Mazari

is open. line Your

Unidentified Analyst

is your how Hi, Hamzah. you headwinds? trending for give this relative an prior is waste medical in on guidance pricing XXX [indiscernible] update filling above to Can us million

Daniel Ginnetti

SQ Galen XXXX, SQ an Yes, we imply XXXX. about which XXXX our in year. for for year. got remember We and better the We million still than we still in amount be discounting $XX the that, slightly be impact let anticipate million we'd about in have to that actually would at me in in about $XXX discounting million came the for that additional $XX do million guidance $XX is that

Unidentified Analyst

the the you that. some you of highly nature And a follow-up landscape, do? other - Thanks the that's are Okay. about sense the mentioned Can is, the have you for I the you competitive regulated specifically business in. that then guys us question for changing of give in work compliance earlier how

Charles Alutto

Yes.

and comply. for I that think a said down of sell, we in SQ on the and is always our to I around we're service making Obviously, and the it some been our ourselves that the always premium both don't necessarily changing. We've price for we've landscaping marketplace. that easier customers which that's work Obviously, are markets our see discounting competitive the and related there's business. regulated been taking a highly that compliance change. in we customers significant is to

a health health of that so factors think the marketplace has the place consolidation I care market. it's in in there, our care lot in pressures

I think market the So if necessarily has changed. changed, that has no competitive

think I our or think more when gotten business, I about waste think you hazardous that has competitive. M&I

some capacity that's I marketplace M&I, especially I think and has we think when we large customer the do with And that about in extra the think accounts. to now. in it see project volume

change competitive think to I but where there seeing more we're M&I long-term greater in pivot in convenience, market, value shift the the what us, a or more do means a for the so I M&I provides smaller - customers, I been business. think services think been has think I and our medium I that has and that's see

Unidentified Analyst

Charlie. Okay. Thanks

Charles Alutto

you. Thank

Operator

Your Steinke next Kevin Barrington question with Research. comes from

is open. line Your

Kevin Steinke

afternoon. Good

share specifically the ERP $XXX could to investment is don't I chose are So of that much you you the integrator system million then of million and total you of know the if to how able $XXX to who for system the And business implementation? that transformation, be? going share in is

Daniel Ginnetti

Yes.

allowed me fact questions of number on that a for asking there. to thank out In hop that it you because back were

million. to for to capital $XXX million put share $XXX of the want third So all, first a that that I about $XXX expenditures. of million is we out, that

Michael, show in to so what about There up. will response that utilized and XXXX, up show our there that adjusting that's adjusting on directly into that it $XX we business Dave's CapEx on to items I assets be consulted this these we spend to being really just for year to is was be was you transformation. And million the never goes will question $XX that once in is The the have - will begins million, first of type in that talked and That million. had $XX depreciated, we results. the team never The the have in work capital will now capital the go CapEx. mean and about about about

$XXX $XXX directly $XXX go of to is million We ERP. SAP, about related which or million million $XXX did cloud answer to You say latest your should beyond Kevin, platform, XXXX, then expect about to million to in select $XX the that S-X HANA with down the in question, that. And moving million so and to is XXXX about based.

to a the in two, and could we so system at week we far integrator, final not or are you but I today. unfortunately that of As stages thought share as negotiation about

Kevin Steinke

making you following And I in of pricing appropriately. on No the and they to wondering problem. curious helpful. currently offerings some just XXXX, strengthening account which and them potential the better use customers that they million there very see those added have one and dedicated relationships investments the Okay. That's with the managers sure educating Stericycle up all was maybe by if about simply the pressure alleviate $XX about is SQ component

then on your you help it pressure pricing does and SQ also So helps maybe base? to customer the that cross-selling maybe alleviate

Charles Alutto

Kevin, the it you were in sounds meeting. like

You're exactly right.

Shred-it single very account and goal you're As accounts works our of of business a groups, in familiar national our like and account across groups we've that effectively just very our regional one the enabled that really of the to with sales advisor match and manager our services. lot group, got to hospital relationships to managers as is model with, said their pieces you it understand needs our the us compliance with by contact customer doing serve of customer which needs, better with and trusted point allows us build that their the that

So model. traditionally has of with more our transactional been a up-sell and cross-sell

it churn. shift areas, pilot show so not making that And all our a And really more we're and in It this - but in within reduce it SQ. helps it reduce again areas helped time, discounting created expenses takes customers. to time interim have The is, you left higher well period as takes for to of up-sell build It platform right. that up-sell. those in challenge relationships and that subset as

So again we're very excited about the long-term potential.

a the for It's we I take think will right us at of benefits on there. to same way. it with matter the get time just see you're

Kevin Steinke

questions. taking the for thanks Okay,

Charles Alutto

you. Thank

Operator

comes Ro Sachs. Isaac question next with Your from Goldman

Your line is open.

Isaac Ro

want your of how that indicate XXXX contracting would over kind you course to has customers kind think specific of And I'm topic? what's behave with into future year? that baked outlook there for afternoon, on little been will surprising regard the with curious a question what's have the touch question. business on Thanks in The regulated settlement to I'm anything the curious out bit ways questions start briefly current for around gone going a and prior I as notices Good the taking environment. guys. the of on guidance

Daniel Ginnetti

Yes, actually opt out December the period notifications out November passed They now so and that and period time to, is members passed, and over settlement. as the object went you is to in class the went out. alluded the

So in discounting. noticeable anything call not or did volume see we

to before, a XXXX. change go million little of better what As changed I than discounting. in $XXX range both that hasn't get have our out, range step, we we'll in go slightly think the In view be far is next actually we We and discounting to and into do million the increase million $XX our we that in in did SQ upside the the information said next performance. of obviously when guidance in the obviously guidance as respect not has an would see XXXX, with and and we $XX included forecasted checks have plan discounting calls the do in as we as time on with still the guidance we had could that downside forward

really to the checks notifications it's fact. even note settlement, remain contractor with on, with however, with out I going going the important think in that our

far impact far as there. notifications - didn't we So any question major as direct or see the

Isaac Ro

also organic and guys on then CAGR the much is that that said the the and said M&A include to a just clarification does years number slide slides, effective a was you you maybe if I be revenue to that I provided XX. to slide That's rates, helpful. some X% guiding the or guidance meant December And X% five an it then over if how I of that so in but on FX could you're think current think the in

rate guidance? you're please exchange using So what Thank that clarify for you.

Daniel Ginnetti

growth acquisitions. Yes, we're using so with the today and as CAGR foreign on growth not does of include any current It's exchange. to respect organic

Isaac Ro

thank guys. Got you it,

Daniel Ginnetti

Thanks Isaac.

Operator

from Michael Hoffman Stifel. with comes question next Your

Your is open. line

Michael Hoffman

SQ ask year-over-year I'll question, you make Okay, growth it the the the What to in in underlying of take fourth this quarter? out the medical waste? was quarter rest last if

Charles Alutto

get exclude It's When the the divestiture, to the didn't this to We grew and RWCS to the number give puts of negative difficult patient Michael. a SQ out the me not with on you at we the let business. we back takes you business. - transfer result of X.X, SQ

Michael Hoffman

Okay, so okay. that's

Charles Alutto

I sure over to just want have number. just you clear make right that we're comparing, So the and

number the rents and was that was organic patient look had But it. growth. organic to If is do to quarter, you move X.X%. in RWCS transport an easy you negative exits growth the if It for account you rate QX the X.X% at which negative that divestiture,

Michael Hoffman

Right.

us XQ same that? the So to growth number same - on questions, us get you that for back gave answer to so in a the answer - the X% you can the to

Charles Alutto

Yes.

We back will get that. to you on

Daniel Ginnetti

that I'm sorry to back you on get Michael. we We'll did not…

Michael Hoffman

Charlie, then more Okay. I got And two ask… don't

Charles Alutto

No, fine. it's

Michael Hoffman

FX RMW, XXXX? revenue So year-over-year for what's was it your you assumption $XX for said what the since number whole million is it for of in FX,

Daniel Ginnetti

and Secure $XX million is regulated $X Destruction. M&I, business of XXXX in and and then happens that we in services, is have FX impact our compliance million million which in waste million The Information total in $X favorable $XX

Charles Alutto

depending where there exactly. in the It's world on are

Michael Hoffman

Yes.

we off which going you did was the the other being water Okay. would And makes and shows to then there? flat out you fall on have going XXX, million to thought be it miss, that XXXX slide up then what way I be XXX, progressions. like based a so the to thought was what $XX dealing what is you we comes go XXXX at are over the

Daniel Ginnetti

take will kind through EBITDA the you bridging are QX we compared you be asking our to and I - that's where of that we for. would think EPS Michael is really thought to in I Yes. for what that,

Michael Hoffman

Yes.

Daniel Ginnetti

That to itself was non-cash We some about did. QX combined initially So and will basis control also and did XXX you of headwind. up XX.X%. a catch that thought adjusted speak Michael work already the be about we EBITDA to acceleration the remediation that related points depreciation

then You the SCS favorability And of going EBITA you install Europe energy as we stranded point talk I'm and EBITDA remember LQ points and saw you vast will repeat. about the Remember, EBITA. was last guidance results of cost some from be we in regarding headwind. forward. will going the basis QX patient GNRs. for solid from that about to XX saw and the We XX that to LQ speaking of to That next and the SQ, then XX.X% some build out going got pressures and contract, higher had we majority of forward including and cost and That points of new you Michael XX to mix year I'm basis not to giving transportation. a business basis fuel large of

Michael Hoffman

assumes benefit work Okay. those lastly, XXX all of And then to in you XXX guidance doing. that of the are $XX current million from

Daniel Ginnetti

and It lot I know contemplated you, there in it guidance in headwinds absorbed want that QX. of of the the was that share remember and gave that's business to directional does I a get in - in Michael, we going is kinds with to some

we of paying as not you One know and which in ended is, we XXXX bonuses. underperformed that

XXXX going once in, million of offset - the know there. have bonuses you have an a do - that comp back expected to you $XX sorry So we We've is already continuation that we we XXXX, pricing of now few you have the of and other SQ of top continuation a impact, that out waterfall have items on in broke table. that the then

Michael Hoffman

Okay, thank you.

Charles Alutto

Thanks.

Operator

the next line question from Your RBC comes Instructions] [Operator Gary Bisbee of from Capital.

Your open. line is

Gary Bisbee

detail million from. ask I to give where What the just Can us the there? million that to What this key the exactly comes what more are Hey follow-up. $XX on categories $XX any items are you wanted - year efficiency are a driving?

Daniel Ginnetti

Yes, if that and that pillars in we optimization see presentation, to restructuring was But and talked operation talked them at pillars concluded on efficiency we'll excellence, getting which If we're back of optimization go that the that I in org number the that you we and our think sourcing. got did we in if come restructuring excellence. commercial we the two getting the of be organizational about some November. slide obviously efficiencies are one, executed that look the organizational about, rank order and the the in in That you million excellence, $XX $XX you operational please Gary to excellence November, operations I million will then was optimization. through sourcing commercial already operational we

Gary Bisbee

accomplish? need going need extensive said of hiring front. think ongoing deeper IT mention you was there the to there did there does compliance, there? a couple for number you're there you the just need a much you a any more or relative - headcount give is places can is a support But how a to some of I various SAP, for I guess bench change color need for on Charlie G&A But to corporate help us integration what in after. And Is sort a doing to

Charles Alutto

we the General that it between investments year, you've mean business. made I months. building I mean full you last we that bought last we've over the the think think now obviously, course The in, in the transformation the but I the new in dedicated of business that if XX been Chief brought Officer, the run frame. rate building seen it's the Counsel Accounting about business, a we Yes, been to the CIO bench in over it there. We've of that team XX in into

have without SAP but CIO tell a resources before fairly the significant I but that SAP, about team, right through obviously that experience, augment you only will experience. You're our already SAP ERP not has internal been we've conversion and build implementations

So last over it's it been months I it's the in building and think business. seen you've XX though the obviously now

Daniel Ginnetti

shared think shared considered of and a service that blueprinting talent at really above beyond will in certain like. true And in taking the can opportunities free what bringing XXXX we've guidance a Charlie about and, here, our today can look global what's for us up end-to-end brining road. expertise, lot help system they us that process And have saving look that to a down that

in consider any in so XXXX plan investments members like And so those seeing anticipate SG&A thoroughly because our and investments don't contemplated we've that. team are and I people surprises and

Gary Bisbee

helpful. That's Thank you, guys.

Charles Alutto

Gary. Thanks

Operator

no over turn the presenters will There this are remarks. further time. back I closing for questions the at to call

Charles Alutto

call closing Take road the In Jesse. soon. Thanks like everyone evening. see care. today's great on joining us have for a and I'd We'll thank to on

Operator

today's concludes conference call This you disconnect. now may

Stericycle (SRCL) 22 Feb 182017 Q4 Earnings call transcript