Q2 2023 Stericycle Inc Earnings Call
Hello, everyone and welcome to the Q2 2023 Stericycle earnings Conference call. My name is not yet and I'll be coordinating school today.
If you would like to ask a question. Please press star followed by one telephone keypad.
Please note it with one question and one follow up if you wish to ask another question. Please rejoin the queue.
I will now hand over at your highest Angie Ellis Vice President Investor Relations Enterprise Finance begin Angie. Please go ahead.
Good morning, and thank you for joining Stericycle as 2023 second quarter earnings call.
On the call today will be Cindy Miller, our Chief Executive Officer, and Janssen Link, our Chief Financial Officer, and Chief Information Officer.
The discussion today includes forward looking statements that involve risks and uncertainties. When we use words such as believes expects anticipates estimates may plan will goal or similar expressions. We are making forward looking statements forward looking statements are prospective in nature and are not based on historical facts.
But rather on current expectations and projections of our management about future events and are therefore subject to risks and uncertainties.
Our actual results could differ significantly from those described in such forward looking statements.
That could cause our actual results to differ are discussed in the safe Harbor statement in our earnings press release and in greater detail within the risk factors in our filings with the U S Securities and Exchange Commission.
Our past financial performance should not be considered a reliable indicator of our future performance and investors should not use historical results to anticipate future results or trends.
We disclaim any obligation to update or revise any forward looking statements other than in accordance with legal and regulatory obligations on the call. We will discuss non-GAAP financial measures for additional information and reconciliation to the most comparable U S. GAAP measures. Please refer to the schedules in our earnings press release, which can be found on spare cycles Investor Relations website.
At an investors that Stericycle dot com the prepared comments for today's call correspond to an earnings presentation, which is also available at fair cycles Investor Relations website throughout the call. We will reference specific slides from the presentation.
This call is being recorded and a replay will be available approximately one hour. After the end of the conference call today until August 24 2023.
The webcast will be available on fair cycles Investor Relations Web site.
Time sensitive information provided during today's call, which is occurring on July 27, 2023 may no longer be accurate at the time of a replay any redistribution retransmission or rebroadcast of this call in any form without the expressed written consent of Stericycle is prohibited ill now turn the call over to Cindy.
Thank you Andrew Good morning, everyone and welcome to today's call four years ago. The leadership teams set this organization on a path focused on five key business priorities, which include quality of revenue operational efficiency modernization and innovation ERP implementation portfolio optimization.
And debt reduction and leverage improvement these priorities have been our true north star through unanticipated macroeconomic and pandemic related headwinds today I'm excited to share that we've achieved our targeted debt leverage ratio of below three times ending the second quarter at two seven times.
Our lowest leverage since 2015.
This is a major milestone and reflects our consistent focus on financial discipline, the strengthening of our balance sheet and debt leverage puts us in a position to optimize our debt structure and will afford us greater investment flexibility in the future.
This quarter. We also made important progress executing on our portfolio optimization initiatives as we completed the divestiture of our operations in four countries.
<unk>, Australia, Singapore, and Korea for combined net proceeds of approximately $84 million.
Brazil, and Korea were regulated waste and compliance services businesses in Singapore, and Australia were secure information destruction businesses.
Additionally earlier this week, we divested our dental recycling business in the Netherlands, and we expect to close on the sale of our secure information destruction business in the United Arab Emirates in the third quarter.
Turning to our second quarter results, we delivered our 10th consecutive quarter of overall organic revenue growth growing two 3% with regulated waste and compliance services, increasing four 7% partially offset by.
Secure information destruction organic revenue declining two 1% as a result of lower indexed fuel and environmental surcharges.
In North America, we are encouraged by positive trends in the market with the stabilization of hospital staffing levels and the return of elective surgeries internationally, we have not observed similar improving trends, but we stand at the ready to support our customers.
Our infrastructure modernization efforts, including existing and additional future treatment capacity and strategically placed geographic areas will allow us to support growth in our customer base, turning to our operational efficiency modernization and innovation priority, our multi phase journey to construct.
Test and ramp up processing of regulated medical waste in the Mccarran, Nevada incinerator continues to progress through the construction phase.
Based on our current timeline, we expect the construction phase of the project to be completed in the first half of 2024 subject to successfully achieving critical milestones equipment deliveries and passing quality inspections. After.
After construction is complete we will move into the testing phase, which includes regulatory review.
Once testing is successfully completed we will be able to ramp up the processing of waste and eventually move into full production in.
In addition to Mccarran, we have 20 other infrastructure projects underway, including several autoclave and incinerator improvement project with many of these upgrade projects expected to be finalized in the third quarter of 2023.
Like many logistics companies, we are experiencing higher fleet costs, including repairs maintenance and vehicle return fees. We expect to continue to manage these higher costs through other savings and productivity opportunities such as our fleet modernization initiatives.
At quarter end, we had received almost 80% of our outstanding fleet orders and we anticipate receiving the remaining vehicles by late summer.
Leap modernization helps drive fuel savings and driver productivity.
Moving to the ERP, we expect to deploy U S regulated waste and compliance services on the platform in the third quarter subject to successfully achieving the remaining go no go decision point over.
Over the next several weeks approximately 5000 team members will be involved in preparing for and launching the system.
As I turn the call over to Janet to review, our financial results I am pleased to share that our first half financial performance came in line with our full year guidance as <unk> explained.
Thank you Cindy I will start by summarizing our second quarter results as noted on slide five revenues in the second quarter were $669 5 million compared to $679 8 million in the second quarter of 2022, excluding the net impact of divestitures of two.
$4 million and unfavorable foreign exchange rates of $1 2 million organic revenues increased $14 9 million.
Of this increase regulated waste and compliance services organic revenue growth was $19 7 million, while secure information destruction organic revenues declined $4 8 million as noted on slide six regulated waste and compliance services revenues were $444 7 million compared to 448.
One 4 million in the second quarter 2022, excluding the impact of divestitures and foreign exchange rates organic revenues increased four 7% in the second quarter.
In North America regulated waste and compliance services organic revenues increased $16 8 million or.
Or four 8%, mainly driven by our three pricing levers, which include pricing in existing contracts, new customer pricing and surcharges and fees we are.
We're also pleased with the year over year positive growth in core medical waste collected which contributed to roughly a third of the organic revenue growth.
Minton strikes throughout Europe in the case of the United Kingdom. It was recently reported that the Nhs's medical procedures backlog has increased over 200% since 2022 more than $7 4 million patients needing medical procedures.
<unk> information destruction revenues were $224 8 million compared to $231 4 million in the second quarter of 2022, excluding the impact of foreign exchange rates organic revenue decreased two 1% in North America secure information destruction organic revenues declined $3 3 million or one.
6% compared to the second quarter of 2022, mainly due to the decline in fuel surcharges in the second quarter recycling paper revenues were down approximately 4% or $8 1 million.
Due to lower Sop paper pricing and lower tonnage the lower <unk> recycling revenue was mostly offset by our recycling recovery surcharge, mainly due to the change in the rate table beginning in June 2022 service revenue was up approximately two 4% or $4 9 million.
Mainly driven by pricing levers, which includes the expansion of the recycling recovery surcharge.
As a reminder, we have been working to add Sop surcharges to customer service contracts as we continue to renew contracts and win new business. These surcharges are now included an approximately 60% of North America customer contracts and are anticipated to offset approximately 60% of paper price.
<unk> at current rates are.
Our service revenue growth was partially offset by lower index fuel and environmental surcharges, which have declined as fuel prices have come down year over year.
And international secure information destruction organic revenues decreased $1 5 million or five 4% compared to the second quarter of 2022, mainly due to lower recycling revenue and fuel and environmental surcharges.
Loss from operations in the second quarter was $24 million compared to income from operations of $38 1 million in the second quarter of 2020 to $62 $1 million decrease was mainly due to 2023 net divestiture losses of $54 2 million higher incentive and stock based compensation of nine.
$7 million and higher fleet costs of $4 9 million, partially offset by lower bad debt expense of $8 9 million. Although we saw decline in fuel cost at roughly mirrored the decline in fuel and environmental surcharges.
Net loss was $49 5 million or <unk> 54 diluted loss per share compared to net income of $10 5 million or 11 diluted earnings per share in the second quarter of 2000 $20 million to $60 million decrease was mainly due to lower income from operations was $62 1 million as I just explained cash.
Flow from operations for the six months ended June 32023, with an inflow of $154 9 million compared to an outflow of $18 4 million in the same period of 2022 the year over year increase of $173 3 million was mainly driven by lower F. CPA settlement payments of 60.
$7 6 million accounts.
Accounts receivable improvements of $52 1 million, mainly due to an improvement in days sales outstanding.
Higher cash generated from operating income of $23 3 million lower annual incentive compensation payments of $22 3 million and other working capital improvements of $8 million.
Adjusted income from operations was $76 million or 11, 4% as a percentage of revenues down from $82 million or 12, 1% as a percentage of revenues in the second quarter of 2022.
Adjusted income from operations decreased 70 basis points as a percentage of revenues due to the following one higher incentive and stock based compensation of 150 basis points and to higher fleet costs of 70 basis points. These were partially offset by lower bad debt expense of 130 basis points.
As noted on slide eight adjusted diluted earnings per share was <unk> 43, compared to <unk> 48 in the second quarter 2022, excluding the impact from divestitures and foreign exchange rates of one <unk>.
The remaining 4% year over year decline was driven by one higher incentive and stock based compensation of eight cents as noted on the fourth quarter 2022 earnings call, we expected to incur higher year over year cost in this area, which began in the second quarter and to higher fleet costs of course.
These were partially offset by lower bad debt expense of seven and lower tax expense of <unk>.
Capital expenditures for the six months ended June 32023 were $63 $7 million compared to $70 million for the same period last year.
Free cash flow for the six months ended June 30 of 2023 with an inflow of $91 2 million compared to an outflow of $88 4 million in the same period of 2022 as noted on slide nine the year over year improvement of $179 $6 million was mainly due to higher cash flow from operations of 170.
$3 3 million.
Our second quarter DSO as reported was 55 days compared to a DSO of 64 days in the second quarter 2022.
The difference was mainly driven by the timing of North America secure information destruction customer billing and collections in the prior year.
As shown on slide 10 at the end of the second quarter, our credit agreement declined debt leverage ratio was two seven times. Additionally, we reduced our net debt by $174 4 million in the second quarter to approximately $1 $2 8 billion.
Ascending noted we divested our Brazil Republic of Korea, Australia, and Singapore businesses for net proceeds of approximately $84 million. These proceeds were used to pay down our term loan by $50 million with the remainder applied to our revolver.
These divested entities contributed approximately $56 million in revenue in 2022, and approximately $20 million in revenue prior to divestiture in 2023.
On slide 11, we have removed the divested revenue from our 2022 baseline revenue.
The divestitures generated a nominal amount of adjusted EBITDA in 2022 and were expected to contribute approximately $5 million and adjusted EBITDA in 2023 with a planned improvement in the second half of 2023. The majority of the anticipated $5 million reduction in adjusted EBITDA is expected to be offset by lower interest.
Expense to using divestiture proceeds to pay down debt.
Additionally, as of June 30th we approved plans to divest our dental recycling business in the Netherlands, which was sold earlier this week and our secure information destruction joint ventures in the United Arab Emirates, which is expected to close in the third quarter, resulting in a second quarter pre tax charges of $1 $5 million that.
Dental recycling business contributed approximately $2 million in revenue in 2022 and nominal adjusted EBITDA, while the joint venture is accounted for as an equity investment.
Our results for the first six months of the year were aligned with our full year 2023 guidance as shown on slide 11, our guidance ranges remain the same.
As we look to complete construction on the new incinerator in Nevada, which is about a third of our planned 2020 for capital expenditures, we may pull forward cash outlays from 2024 into the fourth quarter of 2023 based on timing of equipment deliveries. If this occurs we anticipate that it would put us in the higher end of our 2023 capital expenditure.
<unk> guidance range of $125 million to $145 million.
Which we anticipate would have a minimal impact on overall free cash flow due to projected working capital improvements.
Regarding our free cash flow guidance. It excludes other adjusted litigation items, which we anticipate may be paid in the third and fourth quarters. It paid this year they would reduce free cash flow by approximately $25 million to $30 million I will now turn the call back to Cindy.
Thank you Janet the second quarter continues to highlight the strength of our teams ability to execute against our key business priorities, while maintaining our ability to achieve our full year guidance. Our team is excited to build on our momentum of our key business priorities as we look forward to the deployment of the ERP to our U S.
<unk> waste and compliance services business in the third quarter.
As always I'd like to thank our customers team members and the communities, we serve and our shareholders for their continued trust and having stericycle protect what matters operator. Please open the line for Q&A.
Thank you if you would like to ask a question. Please press star followed by one telephone keypad.
Switchover a question. Please press star followed by Chase.
When the paying to ask a question please NGL side lately.
Please note we will take one question and one follow up if you wish to ask another question. Please rejoin the queue.
Our first question today, because he is Sean Dodge of RBC capital markets. Sean. Please go ahead. Your line is open.
Yes, thanks, good morning, and congratulations on the great progress with the leverage ratio.
Thanks.
The ERP Cindy.
Yes, you said you expect to have.
The U S.
Regulated waste systems, all transitioned over it sounds like September .
We think about the potential for disruption to the business from this.
All of this goes well by the time, we get to October .
Big risks with that pretty much behind you at that point.
Yes, I think.
Very insightful, Sean a couple of things that we will have when we get ready to to share an update in October .
We'll have gone through a billing cycle or more will be able to do some comparisons to make sure that.
We're on track in terms of trends in any of the data that we can analyze so I think those are very big ones and then I think after that you still have the nuances of.
Do you all.
How has it gone with all the handhelds out the operations and how are all the scales transmitting all the material.
And the data that we need to keep track of for regulatory and compliance reasons. So there's a myriad of things I just mentioned to kind of very simple buckets, but I think we're going to get a really good feel because what you've talked about was disruption and in terms of disruption automatically we're going to look at making sure number one are we servicing customers.
When we should be.
Our customer is taken care of and then number three number three is as the revenue flowing through and are we seeing it in terms of our billing process. So I think I think that that Q3 report, we will be able to give some pretty good insight.
Yeah.
Okay, Great and then.
On the margins and all the pricing actions you have taken over the last couple of years the service recovery fee. The shifting of the SLP table are those all now fully reflected in what we're seeing here in Q2 or are there more levers you pull in or some lagged benefits still out there for me I guess as we think about margins into the back half is there any more lift.
We expect to get from these pricing actions on a on a sequential basis.
I think I think the lift that we've gotten is pretty much.
At steady state I think we would look to <unk> to provide additional lift.
If we saw conditions worsen if anything else had happened.
I think we are seeing some relief in portions of the business where costs are becoming more I want to say normalized however.
As we called out in an area like fleet, we are still seeing cost pressures being up with reference to maintenance vehicle repairs. When we returned any of our rental vehicles the fees for returning.
Those vehicles have been have been increased quite a bit so for us I think we stay pretty close to it I don't foresee anything else that would be added in terms of any changes. However, all of those are dictated by what we see in the marketplace and I know.
Just raise yesterday.
So we'll.
We will see.
That drives anything else just as the latest update Sean.
Sean just so you know the last time, we changed the.
The scarf fee the regulated waste.
In October of last year, and then the last adjustments that we've made on the recycling surcharge was March of this year, just just as a reference point.
Moving forward, but.
Don't see anything else at this time.
Yeah.
Thank you and our next question goes to David Manthey of David. Please go ahead. Your line is open.
Yes. Thank you good morning.
First question related to the question that was just asked after the inefficiencies that you experienced with the ERP.
ERP rollout it would be factored in any type of disruption or any efficiencies or anything in our WCS in the current 2023 guidance that you've given us.
Yes.
So thank you for the question David the guidance that we put out for the year reflected that we were going to go through this.
And so that meant that we weren't going to be able to drive significant productivity improvements in the second half of the year as our WCS in the our WCS space as they will actually be taken offer training, they're actually doing that now and that will ramp up in this quarter for the go live.
Secure information destruction will continue to drive operational efficiencies, but that will be offset by what we planned for this.
Productivity, if you will from putting an ERP in and I think you can see that our guidance and outlook for the year is pretty reasonable and that is reflected in the sales growth as well. So the short answer is yes, we plan for some of that.
Okay. Thank you for that and then Janet.
Further based on the free cash flow guidance, you've given us in the past.
You sort of given us some thoughts around the magnitude of operating margin improvement that you ultimately might expect in the business.
Can you give us an idea of what you might be thinking about in year. One. After this you come out the other side.
Again based on the opportunity that you see out there Blue Sky. In addition to the experience that you had in sort of the cadence of improvement coming out of the site the improvement.
Trajectory after you implemented the ERP, there or any thoughts you can give us on that.
So we still remain committed to our long term guidance, which included the 13% to 70% of adjusted EPS.
NPS improvement that we addressed.
That is reflected in improved margin improvement and what will happen is secure information destruction continues we'll get momentum into next year as they continued to find opportunities to using the platform to generate productivity improvements from fleet to route to idle time to all the measures.
That we can see while our WCS will learn the platform and then it will start probably towards the second half of the year to be able to leverage it. So the advantage of sequencing. The two businesses as one can keep moving and driving on the improvements while the other is taking on the new work and learning it and.
Then can move into driving improvement.
Thank you our next question Betsy Scott Schneeberger of Oppenheimer. Please go ahead. Your line is open.
Thanks very much.
And I'll echo the congratulations on reducing the.
The financial leverage you mentioned I think it was Netherlands, and United Arab Emirates divestitures in the quarter could you just give us an update on where you are on the portfolio.
Portfolio optimization process it.
It seems like Youre announcing a few each quarter now.
They don't sound too material in size.
Just curious how much more meaningful.
Proceeds perhaps can be can be derived there.
Yeah. This is Scott great question portfolio optimization remains one of our key priorities.
I think we've got about 17, well the dental business will be 18 divestitures in the last little bit the joint venture and the UAE.
We will be if you will 19, although certainly different than the others, because it's a joint venture, but but in essence kind of kind of pulling out of business pulling out of operations, but along that same time period, we've had an acquisition too.
So for US I think if you take a look at the discipline that we've had fiscally in terms of improving the balance sheet.
You take a look at the <unk>.
The position that we're in in terms of overall debt.
Portfolio optimization for us continues to be looking at markets, where we believe we have the opportunity to grow at the margins that we believe.
Company that of our size and the value that we can bring would be meaningful so I think the.
The long answer that I gave you is really in portfolio optimization, we continue to look from a divestiture perspective as well as.
Potential acquisition perspective, as we've done before and we'll see where that leads.
Thanks, I appreciate that.
Thank you and the next question goes to <unk> of <unk> Securities. Please go ahead. Your line is open.
Yes. Good morning. This is Jack Wilson on for Tobey Sommer.
Thanks for taking my question can you give me a little more color around sort of the organic revenue decline in secure information destruction.
Sure I think.
One of the things that I think we need to really take a look at is.
I like to look at secure information more in terms of a first half of the year versus last year first half of the year simply because things I think have the potential to get skewed.
Last year first half it was early 2022.
Record inflation driver shortages and supply chain issues, and we were still dealing believe it or not with <unk> with 14 day quarantines. If anybody was exposed to anybody that had COVID-19 and if you recall Q1 of last year was probably one of the most difficult opt.
Operating quarters, we've ever had and when you take a transactional business that says you only get paid if you actually make a stop you have you've got some difficulties there when youre already in a driver shortage shortage to begin with and then you have a lot of drivers out based off of different CDP.
SEC rules, so as a result Q1 of this year.
<unk>.
Our secure information destruction business in North America grew 13, 4% over the prior year. So as you can see that that was a pretty big number what ended up happening in what we believe is we then accelerated started to get drivers back.
Put drivers in seats had had ramp up time to get drivers ready to go and we made up for an awful lot of those stops in Q2 of last year. So.
What we're seeing right now is the overall comparison this quarter versus last quarter.
We are showing in North America, a decline a modest decline of one 6%, but I think it's just coming off of.
That comparison, so our ability to reaffirm guidance. This year believes that the fundamentals of what we're seeing in the shred business still continues to be what we think is good so for us it's not a quarter story, we're continuing to monitor the overall business and we like the position that we're in I just would add.
Add that we also have the dynamic of a fuel surcharge.
Mostly in the shred it business and Thats fuel costs came down it worked as it should in that index came down at revenue, but cost came down in the core.
Business as well and our cost of revenue. So it sort of did what it was supposed to do at the EBIT level and were still okay. So that's a top line dynamic that doesn't filter down to the bottom line.
Thanks.
Thank you.
Thank you as a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad. It will take one question and one follow up if you wish to ask another question. Please rejoin the queue.
Our next question back to you Brian Butler of Stifel. Brian . Please go ahead. Your line is open.
Hi, good morning, Thanks for taking my questions.
Yes, good morning, Brian .
<unk>.
First question just on the Street.
Information destruction business did the stops increase and are you seeing a meaningful shift between on site shred versus.
Offside.
Yes, I think onsite versus Offsite, we've been making steady progress and I think it's pretty much.
Not as much we made more progress earlier than where we are right now in terms of when when we purchased the business back in 2015, there was a tremendous amount of of shredding on a customer site, which is very difficult specialized vehicles.
A lot of vehicle issues high maintenance.
With not as much being brought back to facilities over the course of the last several years, there's been a marked effort to now the majority of the volume that we pick up is process back in our facilities as opposed to with the specialized vehicles onsite. So for me.
I think I think we're in we're in a really good position there we constantly look to improve that but I think I think that's a real good dynamic for us and and referenced in terms of stops just remember we continue to win new business, we continue to drive.
Our sales efforts in that space.
I think unfortunately, we've got we've got two quarters with different dynamics and a transactional business for some odd comparisons.
But I think overall, we take a look internally at where we are for stops and I think I think in terms of how we are trending towards our plan.
And how that plan fits into our 3% to 5% growth organic revenue growth for the company.
We are reaffirming guidance, which means we believe we are on track.
Okay, and then just shifting back to the ERP can you remind us what the IP.
IP costs or is there any more cost to be eliminated once the ERP.
It's fully rolled out and how does that I guess.
Flow through the business over the next six.
Six to 12 months.
Yes.
Right, we are maintaining and we put into full operation, which was about $50 million to $60 million of costs that flips into our normal operating expenses in August of 2021 for the new system, while maintaining the legacy system, where with our WCS is down.
Globally.
And that the costs around $20 million to $30 million of legacy costs in it and some other related areas that is the cost that has the opportunity to go away. Once we're fully deployed but we also need to modernize international before we can achieve that so we're well on our path for that and we have started the work on the international today.
But it needs to come off globally before we can really turn that legacy system.
And that is factored in to our long term guidance as we thought through.
The savings that we will achieve on it cost.
Okay.
Thank you and we have a follow up question question from Scott Schneeberger of Oppenheimer. Please go ahead. Your line is open.
Thanks very much.
With.
Fleet costs being an issue here and.
Wanted to hone in on the use of rentals, a little bit what what.
<unk> of vehicles and it sounds like Youre fleeting up a bit and fleet modernizing but use of rentals, where are you now is maybe a percent of your fleet.
Do you see driving given day, and where you will have to take that goal. Thanks.
Yes.
That's pretty keen.
Good insight Scott so for us we.
We've had we've been in the rental business I think most.
<unk>.
Most of last year second half of last year, we talked an awful lot about the supply chain being far behind.
And the actual receiving of our vehicles requests really being delayed.
So as a result, you want to continue you continue to grow you continue to see organic growth you've got to be able to service your customers and rentals not just of.
Tractors, but then also trailers so you've got a rent.
In order for that growth in terms of your ability to hold on to.
Youre trailers and a lot of the other power units. So since the beginning of this year, we've really been modeling an opportunity as vehicles and the fleet orders have started to come in.
We've been this year going on some pretty massive vehicle returns. So returning those rentals that we have.
And what we have seen are some pretty high some pretty exponentially hi.
Return costs for each vehicle it used to be a set amount that was quite reasonable and in some instances we've seen it be 200% more in terms of an increase so as you return more which is a good thing because youre going to get a new vehicle order come in you're going to have a vehicle that's more.
Modernized and it's it's better equipped and designed for the job that our frontline drivers do.
However.
You do take a hit in terms of the rental. So your question is how many do we have I can tell you by the end of summer we're estimating two to have.
80% of our fleet order completed now that's a much better position than we've been in quite some time we've had.
We've been waiting on quite a few vehicles so for us I think.
We're winding down the last bit of of our rental returns.
On the trailers as well as on the power equipment.
But I think the overall fleet strategy, Sean I think.
I'm sorry, Scott the overall strategy that we have is we eventually want to even get out of the leasing business because right now.
We've talked before about our fleet strategy has been leasing I think a longer term push for us will be to a point, where we continue to be fiscally responsible have some strengthen our balance sheet. We're looking for reasons to invest as we continue to generate cash I think our long term momentum to be able to start to buy.
By some of the fleet and by the trailers.
We can.
Really take advantage of that on our balance sheet, I think thats, the future of where we'd like to get to.
Okay.
Thank you very much.
Thanks Scott.
Thank you have a follow up from Jack Wilson of <unk> Securities. Jack. Please go ahead. Your line is open.
Yes, thanks, so much.
Can you just maybe walk through a little bit of the moving parts of achieving full year EPS guidance, what's sort of the ERP system and the new fleet dynamics.
So we have a fairly stable year, but if you look at where we delivered the first half, but kind of in line with the first half guidance.
With the guidance and two in the second half this is kind of in the same boat.
The you will probably see some some uptick in the fourth quarter, just as we get through the ERP and we continue to drive productivity and shred.
<unk>.
But we are going into an ERP. So the position of being able to do a quarterly precision on what's going to happen is a little tougher, but we're really confident in the second year.
And the guidance for the full year that we put out.
Thank you.
Thank you we have no further questions I'll now hand back to Cindy for any closing comments.
Alright, Thank you not yet so for everyone listening to the call just wanted to share that as always we appreciate your interest in Stericycle and your shared excitement and our future. So thank you very much and we'll talk to you all soon.
Thank you. This now concludes today's call. Thank you all for joining you may now disconnect your lines.
Okay.
Yes.
Yes.
Yes.
Okay.