Q4 2023 Stericycle Inc Earnings Call

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Operator: Good day, and thank you for standing by. Welcome to the fourth quarter 2023 Stericycle Earnings Conference call. At this time, all participants are in a listen-only mode.

Speaker Change: Good day, and thank you for sending by welcome to the fourth quarter 'twenty to 'twenty three stars cycle earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised.

Speaker Change: I ask a question during the session you will need to press star one on your telephone you didn't hear an automated message advising your hands race to withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now.

Operator: To withdraw your question, please press star 1-1 again. Please be advised that today's conference has been recorded. I would now like to hand the conference over to your first speaker today, Andrew Ellis, Senior Vice President of Finance. Please go ahead.

Speaker Change: I'd like to hand, the conference over to your first speaker today, Andrew Ellis Senior Vice President of Finance. Please go ahead.

Andrew Ellis: Good morning, and thank you for joining Stericycle's 2023 fourth quarter earnings call. On the call today will be Cindy Miller, our Chief Executive Officer, Janet Zelenka, our Chief Financial Officer and Chief Information Officer, and Cory White, our Chief Commercial Officer. The discussion today includes forward-looking statements that involve risk and uncertainty. When we use words such as believes, expects, anticipates, estimates, may, plan, will, goal, or similar expressions, we are making forward-looking statements.

Andrew Ellis: Good morning, and thank you for joining Stericycle as 2023 fourth quarter earnings call on the call today will be Cindy Miller, our Chief Executive Officer, Janet Zelenka, Chief Financial Officer, and Chief Information Officer at Cory White, our Chief commercial officer.

Andrew Ellis: 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.

Andrew Ellis: 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. Factors that could cause our actual results to differ are discussed in the Safe Harbor Statement in our earnings press release and in greater detail in the risk factors and 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.

Andrew Ellis: 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.

Andrew Ellis: Factors 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.

Andrew Ellis: 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.

Andrew Ellis: We disclaim any obligation to update or revise any forward-looking statement 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 Stericycle's investor relations website at investors.stericycle.com. The prepared comments for today's call correspond to an investor presentation, which is also available on Stericycle's Investor Relations website. Throughout the call, we may 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 through March 28, 2024. Replay information is available in the event section on Stericycle's investor relations website. However, time-sensitive information provided during today's call, which is occurring on February 28, 2024, may no longer be accurate at the time of the replay. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of Stericycle is prohibited.

Andrew Ellis: We disclaim any obligation to update or revise any forward looking statement 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 Stericycle Investor Relations website at investors <unk>.

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Andrew Ellis: The prepared comments for today's call correspond to an investor presentation, which is also available at Stericycle Investor Relations website throughout the call. We may reference specific slides from the presentation.

Andrew Ellis: This call is being recorded and a replay will be available approximately one hour. After the end of the conference call today until March 28, 2020 for replay information is available in the events section on fair cycles Investor Relations website.

Andrew Ellis: Time sensitive information provided during today's call, which is occurring on February 28, 2024 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.

Cindy J. Miller: I'll now turn the call over to Cindy. Thank you, Andrew, and welcome to our fourth quarter earnings call. I'd like to start off today's discussion by thanking all of our team members for their dedication to our customers and their great work throughout the year. Their commitment has been instrumental in our successful performance across all of our key business priorities. Over the last five years, this dedication has allowed us to make tremendous progress, as illustrated on slide 11. On today's call, in addition to unpacking the results for the quarter and this year, we will also unveil our next generation of key business priorities, which are focused on the next phase of growth for the company, building on the foundation we have established. I am pleased to share that our fourth-quarter results were generally in line with our expectations.

Cindy Jayne Miller: Thank you Andrew and welcome to our fourth quarter earnings call I'd like to start off today's discussion by thanking all of our team members for their dedication to our customers and their great work throughout the year. Their commitment has been instrumental in our successful performance across all of our key business priorities over the last five years. This.

<unk> has allowed us to make tremendous progress as illustrated on slide 11.

Cindy Jayne Miller: On today's call. In addition to unpacking the results for the quarter and this year. We will also unveil our next generation of key business priorities, which are focused on the next phase of growth for the company building on the foundation, we have established.

Cindy Jayne Miller: I am pleased to share that our fourth quarter results were generally in line with our expectations. Our quarterly results included regulated waste and compliance services organic revenue growth of three 1%.

Cindy J. Miller: Our quarterly results included regulated waste and compliance services organic revenue growth of 3.1 percent and an expanded gross margin by 150 basis points. We are seeing the benefits of cost savings from productivity initiatives that supported a sequential quarterly improvement in adjusted EBITDA margin of 220 basis points, a debt leverage ratio of 2.85 times, and portfolio optimization progress with the divestiture of our business in Romania.

Cindy Jayne Miller: Expanded gross margin by 150 basis points, we are seeing the benefits of cost savings from productivity initiatives that supported our sequential quarterly improvement in adjusted EBITDA margin of 220 basis points.

Cindy Jayne Miller: Net leverage ratio of 285 times and portfolio optimization progress with the divestiture of our business in Romania.

Cindy J. Miller: Throughout 2023, we continued to focus on our five key business priorities. I'll start with a recap of our accomplishments, beginning with the successful deployment of the ERP to our US regulated waste and compliance services business in September. In Europe, we made upgrades and enhancements to the Secure Information Destruction technology and made meaningful progress on planning for our regulated waste and compliance services system transformation, which kicked off in earnest with our international team members last month.

Cindy Jayne Miller: Throughout 2023, we continued to focus on our five key business priorities I'll start with a recap of our accomplishments beginning with the successful deployment of the ERP to our U S regulated waste and compliance services business in September.

Cindy Jayne Miller: In Europe, we made upgrades and enhancements to the secure information destruction technology and made meaningful progress planning for our regulated waste and compliance services system transformation, which kicked off in earnest with our international team members last month.

Cindy J. Miller: I'll now provide a brief recap of our quality of revenue achievements in 2023 across three key areas, expanding service penetration, improving customer implementation velocity, and deepening customer partnerships by developing enhanced customer solutions. We expanded our service penetration by launching cross-selling capabilities for our regulated waste and compliance services and secure information destruction sales team members in the U.S. We also expanded Secure Information Destruction Partnerships with large healthcare group purchasing organizations, which we expect will accelerate our ability to cross-sell and better penetrate the markets we serve. With regard to improving customer implementation velocity, we improved the speed to revenue by cutting in half the amount of time it takes to close a deal and begin serving and providing value to our complex hospital customers sooner. Throughout 2023, we strengthened our customer partnerships by conducting customer-focused workshops throughout North America. These sessions generated excitement for our enhanced compliance services and award-winning container solutions.

Cindy Jayne Miller: I'll now provide a brief recap of our quality of revenue achievements in 2023 across three key areas expanding service penetration improving customer implementation velocity and deepening customer partnerships by developing enhanced customer solutions.

Cindy Jayne Miller: We expanded our service penetration by launching cross selling capabilities for our regulated waste and compliance services and secure information destruction sales team members in the U S.

Cindy Jayne Miller: We also expanded secure information destruction partnerships with large healthcare group purchasing organizations, which we expect will accelerate our ability to cross sell and better penetrate the markets we serve.

Cindy Jayne Miller: With regards to improving customer implementation velocity, we improved the speed to revenue by cutting in half the amount of time it takes to close a deal and begin servicing and providing value to our complex hospital customers sooner.

Cindy Jayne Miller: 2023, we strengthened our customer partnerships by conducting customer focused workshops throughout North America.

Cindy Jayne Miller: <unk> generated excitement for our enhanced compliance services and award winning container solutions.

Cindy Jayne Miller: Our most recent customer loyalty scores reflect the high level of value our customers receive from our services. Additionally in support of our U S regulated waste and compliance services ERP deployment in September that commercial organization was focused on supporting our customers through the system transition.

Cindy J. Miller: Our most recent customer loyalty scores reflect the high level of value our customers receive from our services. Additionally, in support of our U.S. regulated Waste and Compliance Services ERP deployment in September, the commercial organization was focused on supporting our customers through the system transition. In the second quarter of last year, we achieved our goal of reducing our debt leverage below three times and have continued to maintain our debt leverage target. We have come a long way since 2019, having improved our leverage over one and a half times and reducing our debt by over one and a half billion dollars. Portfolio optimization has been a major contributor to streamlining the company and our debt reduction since 2019, as we have completed 19 divestitures and exited 10 countries. In 2023 alone, we divested eight businesses and exited six countries.

Cindy Jayne Miller: In the second quarter of last year, we achieved our goal of reducing our debt leverage below three times and have continued to maintain our debt leverage target.

Cindy Jayne Miller: We have come a long way since 2019, having improved our leverage over one five turns and reducing our debt by over $1 $5 billion.

Cindy Jayne Miller: Portfolio optimization has been a major contributor to streamlining the company and our debt reduction since 2019, as we've COVID-19 divestitures and exited 10 countries.

Cindy Jayne Miller: In 2023 alone, we divested eight businesses and exited six countries.

Cindy Jayne Miller: This helps simplify our business and will allow us to better focus our efforts on driving operational and financial performance in our core services in key markets.

Cindy Jayne Miller: Turning to operational efficiency modernization and innovation.

In 2023, we completed over 20 infrastructure upgrades, including installing five new autoclave, six new conveyance systems to new shredders and an upgraded wastewater treatment plant at one of our North America incinerator facilities.

Cindy J. Miller: This helps simplify our business and will allow us to better focus our efforts on driving operational and financial performance in our core services and key markets. Now, turning to operational efficiency, modernization, and innovation. In 2023, we completed over 20 infrastructure upgrades, including installing five new autoclaves, six new conveyance systems, two new shredders, and an upgraded wastewater treatment plant at one of our North America incinerator facilities. In the fourth quarter, we successfully expanded an Ohio facility to handle future medical waste growth.

Cindy Jayne Miller: In the fourth quarter, we successfully expanded and Ohio facility to handle future medical waste growth.

Cindy Jayne Miller: Since 2019, we have introduced improvements to more than half of our waste processing and treatment facilities in North America, including installing more than 25, New auto claims six new boilers and refurbishing more than 20 additional autoclave and boilers. We have also reduced the average age of our.

Cindy Jayne Miller: North America fleet to less than four years since 2020, as we've continued to focus on modernizing our powered and non powered units.

Cindy J. Miller: Since 2019, we have introduced improvements to more than half of our waste processing and treatment facilities in North America, including installing more than 25 new autoclaves, 6 new boilers, and refurbishing more than 20 additional autoclaves and boilers. We've also reduced the average age of our North American fleet to less than four years since 2020, as we've continued to focus on modernizing our powered and non-powered units. Our engineering and operations teams have been focused on the construction of our newest incinerator facility in McCarran, Nevada. In November, we successfully installed foundational equipment, including the incinerators and boilers.

Cindy Jayne Miller: Our engineering and operations teams have been focused on the construction of our newest incinerator facility in Mccarran, Nevada.

Cindy Jayne Miller: Remember, we successfully installed foundational equipment, including the incinerators and boilers, we remain on track to complete the construction phase of the project in the first half of 2024. After construction is complete we anticipate moving into the testing phase which includes regulatory review.

Cindy Jayne Miller: Once testing is successfully completed we expect to ramp up the processing of waste with a target to achieve full production in mid 2025.

Cindy Jayne Miller: Leveraging our transformed foundation as a springboard we are positioned for growth and excited to introduce our next generation of key business priorities. These are one commercial and service excellence.

Cindy J. Miller: We remain on track to complete the construction phase of the project in the first half of 2024. After construction is complete, we anticipate moving into the testing phase, which includes regulatory review. Once testing is successfully completed, we expect to ramp up the processing of waste with a target to achieve full production in mid-2025. Leveraging our transformed foundation as a springboard, we are positioned for growth and excited to introduce our next generation of key business priorities. These are one, commercial and service excellence. 2.

Cindy Jayne Miller: Two operational excellence.

Cindy Jayne Miller: Three digital implementation.

Cindy Jayne Miller: And for strategic capital allocation.

Cindy Jayne Miller: I'll turn it over to Corey to share his thoughts on our commercial and service excellence key business priority and then I'll talk further about our other key priorities.

Corey: Thank you Cindy.

Corey: Our commercial and service excellence key business priority is focused on driving profitable revenue growth delivering a differentiated value proposition and creating a seamless customer experience. This.

Cory White: Operational Excellence, 3. Digital Implementation, And four, strategic capital allocation. I will turn it over to Cory to share his thoughts on our commercial and service excellence key business priority, and then I'll talk further about our other key priorities. Thank you, Cindy.

Corey: This includes enhancing sales service and product excellence to win retain and grow strong customer relationships.

Corey: Through our sales excellence initiative, we continue to focus on our market to quote capabilities, including quality of revenue digital marketing E Commerce and contract management.

Cory White: Our commercial and service excellence key business priority is focused on driving profitable revenue growth, delivering a differentiated value proposition, and creating a seamless customer experience. This includes enhancing sales, service, and product excellence to win, retain, and grow strong customer relationships. Through our sales excellence initiative, we continue to focus on our market to quote capabilities, including quality of revenue, digital marketing, e-commerce, and contract management. Utilizing the ERP, we expect to further enhance sales excellence by gaining greater insights into sales opportunities. Driving Pricing Intelligence, Expanding Market Presence, and Enhancing Sales Productivity. Service Excellence is focused on delivering a seamless service experience through all phases of our customer life cycle, which includes One, making it easier for customers to manage their accounts through improved digital touchpoints with our enhanced online customer portal, including Real-time Waste Tracking. Trending, Benchmarking, and Sustainability Reporting. Accessing compliance training, requesting new services, making service changes, and visibility to invoices. 2. Enhancing our customer experience by leveraging ERP-enabled tools to solve issues on first contact. And 3. Using modern routing and tracking technology in field operations to ensure on-time waste collection and container management.

Corey: Utilizing the ERP, we expect to further enhance sales excellence by gaining greater insights into sales opportunities.

Corey: Driving pricing intelligence, expanding market presence and enhancing sales productivity.

Corey: Service Excellence is focused on delivering a seamless service experience through all phases of our customer lifecycle, which includes one making it easier for customers to manage their accounts through improved digital touch points with our enhanced online customer portal, including.

Corey: Real time waste tracking trending.

Corey: Trending benchmarking and sustainability reporting.

Corey: Assessing compliance training requesting new services, making service changes and visibility to invoices.

Corey: To enhancing our customer experience by leveraging ERP enabled tools to solve issues on first contact and three utilizing modern routing and tracking technology and field operations to ensure on time waste collection and container management.

Corey: This initiative is expected to strengthen customer relationships and further enhance our value proposition.

Corey: Finally product excellence focuses on developing and launching enhanced solutions that deepen our customer partnerships support our customers' safety and sustainability goals and promote further adoption of existing products and product innovation we.

Corey: We continue to commercialize innovative solutions and products that drive additional revenue opportunities, while fulfilling our purpose to protect the health and wellbeing of healthcare organizations commercial businesses and communities we serve.

Cindy J. Miller: This initiative is expected to strengthen customer relationships and further enhance our value proposition. Finally, Product Excellence focuses on developing and launching enhanced solutions that deepen our customer partnerships, support our customers' safety and sustainability goals, and promote further adoption of existing products and Product Innovation. We continue to commercialize innovative solutions and products that drive additional revenue opportunities while fulfilling our purpose to protect the health and well-being of health care organizations, commercial businesses, and communities we serve. I'll now turn the call back to Cindy to provide an overview of the remaining three key business priorities. Thank you, Cory.

Corey: I'll now turn the call back to Cindy to provide an overview of the remaining three key business priorities.

Cindy Jayne Miller: Thank you Corey.

Cindy Jayne Miller: Turning to operational excellence. This second key business priority is focused on driving margin expansion and cash flow improvement by leveraging the following <unk>.

Cindy Jayne Miller: Our skilled and dedicated workforce focused on safety service savings and sustainability modern technologies.

Corey: New and updated equipment and infrastructure and a modernized fleet.

Corey: In 2024, we expect workforce management, and our retained businesses to drive approximately 40% to $45 million in savings.

Corey: This reflects an approximate 6% year over year structural reduction in our workforce.

Corey: Of the $40 to $45 million savings.

Cindy J. Miller: Turning to operational excellence, this second key business priority is focused on driving margin expansion and cash flow improvement by leveraging the following: A skilled and dedicated workforce focused on safety, service, savings, and sustainability; Modern technologies, new and updated equipment and infrastructure, and a modernized fleet.

Corey: Approximately $8 million in savings is expected to come from the reduction in force, we announced on our third quarter call. This reduction took place in October and resulted in approximately $3 million of severance.

Corey: Over $20 million in additional savings is expected to come from the targeted reduction in force that is occurring in the first quarter of 2024 with an estimated $5 million to $7 million in severance that we anticipate incurring in the first quarter.

Cindy J. Miller: In 2024, we expect workforce management in our retained businesses to drive approximately 40 to $45 million in savings. This reflects an approximate 6% year-over-year structural reduction in our workforce. Of the $40 to $45 million in savings, approximately $8 million in savings is expected to come from the reduction in force we announced on our third quarter call.

Corey: The balance of the cost savings is expected to come from continued careful hiring and attrition that began in 2023.

Corey: On our new digital implementation priority, we are beginning to strategically explore our next generation of capabilities using the foundation of our modern ERP system.

Corey: We anticipate that digital data and AI capabilities will help us to further deliver commercial and service excellence and efficiencies across our network and shared services.

Cindy J. Miller: This reduction took place in October and resulted in approximately $3 million of severance. Over $20 million in additional savings is expected to come from the targeted reduction in force that is occurring in the first quarter of 2024, with an estimated $5 to $7 million in severance that we anticipate occurring in the first quarter. The balance of the cost savings is expected to come from continued careful hiring and attrition that began in 2023. As part of our new digital implementation priority, we are beginning to strategically explore our next generation of capabilities using the foundation of our modern ERP systems.

Corey: The fourth and final of our next generation key business priorities is strategic capital allocation, which has the following foundational elements.

Corey: Our targeted debt leverage ratio between two five and three times.

Corey: Investments in the business to maintain and modernize our infrastructure to drive growth and efficiencies.

Corey: Portfolio optimization, including accretive tuck in acquisitions, using a disciplined acquisition and integration playbook and consideration of the potential for share repurchases.

Corey: Consistent with this strategic capital allocation priority in January we successfully completed the acquisition of a southeastern U S regulated medical waste company.

Corey: In 2020 for this business is expected to generate approximately $4 million in revenue.

Cindy J. Miller: We anticipate that digital, data, and AI capabilities will help us to further deliver commercial and service excellence and efficiencies across our network and shared services. The fourth and final of our next generation key business priorities is strategic capital allocation, which has the following foundational elements: a targeted debt leverage ratio between two and a half and three times. Investments in the business to maintain and modernize our infrastructure to drive growth and efficiency. Portfolio optimization, including accretive tuck-in acquisitions using a disciplined acquisition and integration playbook, and consideration of the potential for share repurchases. Consistent with this strategic capital allocation priority, in January, we successfully completed the acquisition of a regulated medical waste company in the Southeastern U.S.

Corey: We expect to integrate this acquisition into our new ERP technology platform in the second half of 2024.

Corey: We are proud of the transformation journey, we've been on and we are excited about the next generation of priorities. We have outlined we look forward to updating you on our progress on future calls.

Corey: I'll now turn the call over to Janet to review our financial results.

Janet H. Zelenka: Thank you Cindy I will start by summarizing our fourth quarter results.

Janet H. Zelenka: As noted on slide five revenues in the fourth quarter were $652 million compared to $674 million in the fourth quarter 2022, excluding the impact of divestitures of $28 6 million and favorable foreign exchange rates of $5 million organic revenues increased $5 $2 million.

Janet H. Zelenka: Organic revenues in regulated waste and compliance services grew $13 $2 million, while secure information destruction organic revenues declined 8 million secure information destruction was impacted by lower commodity index revenues due to lower recycling revenues and lower fuel and environmental surcharges.

Cindy J. Miller: In 2024, this business is expected to generate approximately $4 million in revenue. We expect to integrate this acquisition into our new ERP technology platform in the second half of 2024. We are proud of the transformation journey we have been on, and we are excited about the next generation of priorities we have outlined. We look forward to updating you on our progress on future calls. I'll now turn the call over to Janet to review our financial results. Thank you, Cindy.

Janet H. Zelenka: $80 million, partially offset by higher service revenues of $10 million.

Janet H. Zelenka: As noted on slide six regulated waste and compliance services revenues were $439 9 million compared to $449 3 million in the fourth quarter of 2022.

Janet H. Zelenka: I will start by summarizing our fourth quarter results. As noted on slide 5, revenues in the fourth quarter were $652 million compared to $670.4 million in the fourth quarter of 2022. Excluding the impact of divestitures of $28.6 million and favorable foreign exchange rates of $5 million, organic revenues increased $5.2 million. Organic revenues and regulated waste and compliance services grew $13.2 million, while secure information destruction organic revenues declined $8 million. Secure information destruction was impacted by lower commodity index revenues due to lower recycling revenues and lower fuel and environmental surcharges of $18 million, partially offset by higher service revenues of $10 million.

Janet H. Zelenka: Excluding the impact of foreign exchange rates and divestitures organic revenues for regulated waste and compliance services increased three 1% North America regulated waste and compliance services organic revenues grew $10 1 million or two 8%, mainly driven by our three pricing.

Janet H. Zelenka: Average, which include pricing in existing contracts, new customer pricing and surcharges and fees.

Janet H. Zelenka: International regulated waste and compliance services organic revenues grew $3 1 million or.

Janet H. Zelenka: Or five 1% in the fourth quarter, mainly driven by pricing.

Janet H. Zelenka: Secure information destruction revenues were $212 1 million.

Janet H. Zelenka: Compared to $221 1 million in the fourth quarter of 2022, excluding the impact of divestitures and foreign exchange rates organic revenues for secure information destruction declined three 6%, mainly due to lower commodity index revenues, reflecting more than a 100 dollar reduction in sorted office.

Janet H. Zelenka: As noted on slide 6, regulated waste and compliance services revenues were $439.9 million compared to $449.3 million in the fourth quarter of 2022. Excluding the impact of foreign exchange rates and divestitures, organic revenues for regulated waste and compliance services increased 3.1 percent. North America regulated waste and compliance services organic revenues grew $10.1 million, or 2.8 percent, mainly driven by our three pricing levers, which include pricing in existing contracts, new customer pricing, and surcharges and fees. International regulated waste and compliance services organic revenues grew $3.1 million, or 5.1%, in the fourth quarter, mainly driven by pricing. Secure information destruction revenues were $212.1 million compared to $221.1 million in the fourth quarter of 2022. Excluding the impact of divestitures and foreign exchange rates, organic revenues for secure information destruction declined 3.6 percent, mainly due to lower commodity index revenues reflecting more than a $100 reduction in sorted office paper pricing per ton year over year and lower fuel and environmental surcharges. In North America, secure information destruction organic revenues decreased $5.9 million, or 3%, compared to the fourth quarter of 2022.

Janet H. Zelenka: Per pricing per ton year over year, and lower fuel and environmental surcharges.

Janet H. Zelenka: In North America secure information destruction organic revenues decreased $5 9 million or 3% compared to the fourth quarter of 2022 recycling paper revenues in the fourth quarter of 2023 contributed approximately five 9% of the decline or $11 5 million.

Janet H. Zelenka: Due to lower sorted office paper pricing and lower tonnage service revenues contributed approximately two 9% of growth or $5 $6 million due to pricing, partially offset by lower fuel and environmental surcharges approximately 50% of the lower sorted office.

Janet H. Zelenka: Paper recycling revenue was offset by a recycling recovery surcharge, which is reflected in service revenue as a reminder, on the third quarter call. We discussed some national customers were reducing their store footprint, which led to a contraction in their related service stops this contraction.

Janet H. Zelenka: But at a slower pace in the fourth quarter and.

Janet H. Zelenka: In international secure information destruction organic revenues decreased $2 1 million or eight 4% compared to the fourth quarter of 2022, mainly due to lower recycling revenues and fuel and environmental surcharges.

Janet H. Zelenka: Income from operations in the fourth quarter was $37 1 million compared to $59 1 million in the fourth quarter of last year. There were $22 million decrease was mainly due to the following a gain on a divestiture in 2022 of $15 6 million lower secure information destruction.

Janet H. Zelenka: Recycling paper revenues in the fourth quarter of 2023 contributed approximately 5.9% of the decline, or $11.5 million due to lower sorted office paper pricing and lower tonnage. Service revenues contributed approximately 2.9% of growth, or $5.6 million due to pricing, partially offset by lower fuel and environmental surcharges. Approximately 50% of the lower sorted office paper recycling revenue was offset by a recycling recovery surcharge, which is reflected in service revenue. As a reminder, on the third quarter call, we discussed that some national customers were reducing their store footprint, which led to a contraction in their related service stops. This contraction continued at a slower pace in the fourth quarter.

Janet H. Zelenka: Structuring commodity index revenue margin flow through of $10 2 million higher bad debt expense of $8 1 million, mainly due to a lower fourth quarter of 2022 bad debt expense level. As a result of improved North America secure information destruction collections and higher incentive and stock.

Janet H. Zelenka: Based compensation expense of seven 1 million in 2023.

Janet H. Zelenka: These items were partially offset by margin flow through of $18 9 million, including cost savings from productivity initiatives.

Janet H. Zelenka: Net income was $14 9 million or <unk> 16 diluted earnings per share compared to $31 8 million or <unk> 35 diluted earnings per share in the fourth quarter of last year. The difference was mainly related to lower income from operations of $22 million.

Janet H. Zelenka: In international, secure information destruction organic revenues decreased $2.1 million, or 8.4%, compared to the fourth quarter of 2022, mainly due to lower recycling revenues and fuel and environmental surcharges. Income from operations in the fourth quarter was $37.1 million compared to $59.1 million in the fourth quarter of last year. The $22 million decrease was mainly due to the following, a gain on a divestiture in 2022 of $15.6 million, lower secure information destruction commodity index revenue margin flow through of $10.2 million, higher bad debt expense of $8.1 million, mainly due to a lower fourth quarter of 2022 bad debt expense level as a result of improved North America secure information destruction collections and higher incentive and stock-based compensation expense of $7.1 million in 2023. These Net income was $14.9 million, or $0.16 diluted earnings per share, compared to $31.8 million, or $0.35 diluted earnings per share, in the fourth quarter of last year. The difference was mainly related to lower income from operations of $22 million.

Janet H. Zelenka: Cash flow from operations for the year ending December 31, 2023 was $243 $3 million compared to $200 2 million for 2022 as shown on slide eight the year over year increase of $43 $1 million was mainly driven by lower F. CPA.

Janet H. Zelenka: Settlement payments of $72 8 million and lower annual incentive compensation payments of $22 3 million, which were partially offset by accounts receivables net of deferred revenues of $68 5 million.

Janet H. Zelenka: Adjusted income from operations was $84 $5 million or 13% as a percentage of revenues compared to $90 6 million or 13, 5% as a percentage of revenues in the fourth quarter of last year adjusted income from operations decreased 50 basis points, mainly driven by lower <unk>.

Janet H. Zelenka: Secure information destruction commodity index revenue margin flow through of 160 basis points higher bad debt expense of 120 basis points and higher incentive and stock based compensation of 110 basis points.

Janet H. Zelenka: These were partially offset by margin flow through of 340 basis points, including cost savings from productivity initiatives and margin expansion through portfolio optimization.

Janet H. Zelenka: Cash flow from operations for the year ending December 31, 2023 was $243.3 million compared to $200.2 million for 2022. As shown on slide 8, the year-over-year increase of $43.1 million was mainly driven by lower FCPA settlement payments of $72.8 million and lower annual incentive compensation payments of $22.3 million, which were partially offset by accounts receivables net of deferred revenues of $68.5 million. Adjusted income from operations was $84.5 million, or 13% as a percentage of revenues compared to $90.6 million, or 13.5% as a percentage of revenues in the fourth quarter of last year. Adjusted income from operations decreased 50 basis points, mainly driven by lower secure information destruction commodity index revenue margin flow through of 160 basis points, higher bad debt expense of 120 basis points, and higher incentive and stock-based compensation of 110 basis points. These were partially offset by margin flow-through of 340 basis points, including cost savings from productivity initiatives and margin expansion through portfolio optimization. Adjusted diluted earnings per share was $0.54 compared to $0.60 in the fourth quarter of 2022.

Janet H. Zelenka: Adjusted diluted earnings per share was <unk> 54, compared to <unk> 60 in the fourth quarter 2022 as illustrated on the bridge on slide nine the 6% year over year decrease was driven by <unk> <unk> from lower secure information destruction commodity index revenue flow through seven.

Janet H. Zelenka: From higher bad debt expense and <unk> <unk> from higher incentive compensation. These were partially offset by 16 of margin flow through capital expenditures for 2023 were $131 3 million compared to $132 2 million for 2022.

Janet H. Zelenka: Free cash flow for 2023 was $112 million compared to $68 million in 2022 as noted on slide eight the year over year increase of $44 million was mainly driven by higher operating cash of $43 1 million.

Janet H. Zelenka: After considering 2023 adjusted litigation and severance payments free cash flow. Excluding these two items was $138 $5 million, which is approximately.

Janet H. Zelenka: <unk> $30 million below our 2023 free cash flow guidance range of $170 million to $190 million. This difference is mainly driven by the timing of U S regulated waste customer billings due to the ERP implementation as we are holding and reworking some invoices for our largest customers to ensure.

Janet H. Zelenka: Accuracy.

Janet H. Zelenka: Turning to the full year 2023 results in slide 14 revenues were $2 $66 billion compared to $2 $7 billion in 2022, excluding the impact of divestitures of $101 6 million and unfavorable foreign exchange rates of zero point $1 million organic revenues increase.

Janet H. Zelenka: As illustrated on the bridge on slide nine, the $0.06 year-over-year decrease was driven by $0.09 from lower Secure Information Destruction Commodity Index revenue flow-through, $0.07 from higher bad debt expense, and $0.06 from higher incentive compensation. These were partially offset by $0.16 of margin flow-through. Capital expenditures for 2023 were $131.3 million compared to $132.2 million for 2022.

Janet H. Zelenka: <unk> $56 3 million or two 2% when 2023 and 2022 results are normalized to exclude the revenues from divested businesses revenues were approximately $2 $63 billion in 2023 compared to $2 $5 7 billion in 2022 regular.

Janet H. Zelenka: <unk> waste and compliance services organic revenue growth was $71 9 million, while secure information destruction organic revenues declined $15 6 million secure information destruction was impacted by lower commodity index revenues of almost $50 million due to lower recycling revenues and lower fuel and <unk>.

Janet H. Zelenka: Free cash flow for 2023 was $112 million compared to $68 million in 2022. As noted on slide 8, the year-over-year increase of $44 million was mainly driven by higher operating cash of $43.1 million. After considering 2023 adjusted litigation and severance payments, free cash flow excluding these two items was $138.5 million, which is approximately $30 million below our 2023 free cash flow guidance range of $170 to $190 million. This difference is mainly driven by the timing of U.S. regulated waste customer billings due to the ERP implementation, as we are holding and reworking some invoices for our largest customers to ensure access. Turning to the full year 2023 results, on slide 14, revenues were $2.66 billion compared to $2.7 billion in 2022.

Janet H. Zelenka: Environmental surcharges.

Janet H. Zelenka: When considering secure information destruction as organic revenue growth over a two year compounded annual growth rate. It grew six 6% since 2021.

Janet H. Zelenka: Income from operations for the year ended December 31, 2023 was $77 3 million compared to $153 $7 million in 2022.

Janet H. Zelenka: The $76 4 million dollar decline was mainly due to change in divestiture net losses of $79 million higher incentive compensation and timing of stock based compensation of $22 7 million lower secure information destruction commodity index revenues and the corresponding margin flow through.

Janet H. Zelenka: Impact of $18 5 million and fleet costs of $10 5 million.

Janet H. Zelenka: These were partially offset by margin flow through of $41 2 million, mainly from cost savings from productivity initiatives and lower bad debt expense of $7 1 million.

Janet H. Zelenka: Excluding the impact of divestitures of $101.6 million and unfavorable foreign exchange rates of $0.1 million, organic revenues increased $56.3 million, or 2.2%. When 2023 and 2022 results are normalized to exclude the revenues from divested businesses, revenues were approximately $2.63 billion in 2023 compared to $2.57 billion in 2022. Regulated Waste and Compliance Services organic revenue growth was $71.9 million, while Secure Information Destruction organic revenues declined $15.6 million. Secure Information Destruction was impacted by lower Commodity Index revenues of almost $50 million due to lower recycling revenues and lower fuel and environmental surcharges.

Janet H. Zelenka: Net loss for 2023 was $21 $4 million or 23 diluted loss per share compared with net income of $56 million or <unk> 61 diluted earnings per share in 2022. The difference was mainly related to lower income from operations of $76 4 million as previously.

Janet H. Zelenka: <unk> discussed.

Janet H. Zelenka: Adjusted EBITDA was $420 million in 2023 compared to $432 $2 million in 2020 to the $12 2 million dollar decline was mainly due to inflationary and supply chain costs of $25 5 million higher incentive compensation and timing of stock based.

Janet H. Zelenka: Compensation of $22 7 million and lower secure information destruction commodity index revenues and the corresponding margin flow through impact of $18 5 million. These were partially offset by margin flow through of $51 1 million and lower bad debt expense of $7 1 million in 2010.

Janet H. Zelenka: When considering secure information destruction's organic revenue growth over a two-year compounded annual growth rate, it grew 6.6% since 2021. Income from operations for the year ended December 31, 2023 was $77.3 million compared to $153.7 million in 2022. The $76.4 million decline was mainly due to change in divestiture net losses of $79 million, higher incentive compensation and timing of stock-based compensation of $22.7 million, lower Secure Information Destruction Commodity Index revenues and the corresponding margin flow-through impact of $18.5 million, and fleet costs of $10.5 million. These were partially offset by margin flow through of $41.2 million, mainly from cost savings from productivity initiatives and lower bad debt expense of $7.1 million. The net loss for 2023 was $21.4 million or $0.23 diluted loss per share compared with net income of $56 million or $0.61 diluted earnings per share in 2022. The difference was mainly related to lower income from operations of $76.4 million, as previously discussed.

Janet H. Zelenka: Three divested businesses generated a nominal amount of adjusted EBITDA 102023 results are normalized to exclude results from divested businesses 2023, adjusted EBITDA would still have been approximately $420 million.

Janet H. Zelenka: Adjusted diluted earnings per share was $1 89 in 2023 compared to $2 <unk> in 2022 as illustrated on the bridge on slide 17, excluding the impact from foreign exchange rates and divestitures of for the remaining 11% year over year deal.

Janet H. Zelenka: Greece was driven by 19 from higher incentive and stock based compensation 15 from lower secure information destruction commodity index revenues <unk> <unk> from higher fleet costs and eight mainly from higher taxes. These were partially offset by 34 tenths from margin flow through.

Janet H. Zelenka: And <unk> <unk> from lower bad debt expense.

Janet H. Zelenka: We'll now turn to our 2024 guidance, which includes forward looking statements as contemplated in our safe Harbor statement as referenced at the opening of this call.

Janet H. Zelenka: Our guidance is shown on slide 18 and is as follows.

Janet H. Zelenka: One we expect to grow organic revenues, 3% to 5% on a normalized revenue base of $2 $63 billion.

Janet H. Zelenka: Two we expect adjusted earnings per share of $2 20 to $2 50.

Janet H. Zelenka: This assumes approximately a 14% growth in adjusted EBITDA on a 2023 normalized adjusted EBITDA base of $420 million.

Janet H. Zelenka: Adjusted EBIT out was $420 million in 2023 compared to $432.2 million in 2022. The $12.2 million decline was mainly due to inflationary and supply chain costs of $25.5 million, higher incentive compensation and timing of stock-based compensation of $22.7 million, and lower Secure Information Destruction Commodity Index revenues and the corresponding margin flow-through impact of $18.5 million. These were partially offset by margin flow-through of $51.1 million and lower bad debt expense of $7.1 million.

Janet H. Zelenka: As shown on slide 19, this margin growth rate anticipates revenue margin flow through of approximately 4% cost of revenue efficiencies and cost reductions of approximately 9%, mainly driven by our workforce management actions and operational initiatives and selling.

Janet H. Zelenka: General and administrative efficiencies and cost reductions of approximately 4%, mainly driven by our workforce management actions.

Janet H. Zelenka: These are expected to be partially offset by commodity impacts of 3% mainly associated with sorted office paper pricing, which assumes a range of 125 to $140 a ton and fuel estimates for 2024 from the U S energy information administration compared to last year.

Janet H. Zelenka: In 2023, divested businesses generated a nominal amount of adjusted EBIT out. However, when 2023 results are normalized to exclude results from divested businesses, adjusted EBIT out would still have been approximately $420 million. Adjusted diluted earnings per share was $1.89 in 2023 compared to $2.04 in 2022. As illustrated on the bridge on slide 17, excluding the impact of foreign exchange rates and divestitures of $0.04, the remaining $0.11 year-over-year decrease was driven by $0.19 from higher incentive and stock-based compensation, $0.15 from lower Secure Information Destruction Commodity Index revenues, $0.09 from higher fleet costs, and $0.08 mainly from These were partially offset by $0.34 from margin flow through and $0.06 from lower bad debt expenses.

Janet H. Zelenka: We anticipate that the first half of 2024, we will have a more challenging paper pricing year over year variance as the sorted office paper price per ton was above $200 on average for the first quarter of 2023 and above $185 on average for the second quarter of 2023 in the second half of 2023.

Janet H. Zelenka: And returned to their historical average range three as noted on slide 20, we expect to generate free cash flow of $210 million to $265 million, excluding additional interest payments due to redeeming the $600 million bond with proceeds from the revolver and severance payments.

Janet H. Zelenka: Leading these two cash outlays, we anticipate an adjusted EBITDA to free cash flow conversion rate of 44% to 55% in 2024.

Janet H. Zelenka: Severance payments in 2024 are expected to be approximately $5 million to $7 million.

Janet H. Zelenka: The additional in year interest cash payments from redeeming the bonds and higher interest rates are expected to be 14% to $90 million.

Janet H. Zelenka: I will now turn to our 2024 guidance, which includes forward-looking statements as contemplated in our Safe Harbor Statement as referenced at the opening of this call. Our guidance is shown on slide 18 and is as follows. One, we expect to grow organic revenues 3% to 5% on a normalized revenue base of $2.63 billion. Two, we expect adjusted earnings per share of $2.20 to $2.50.

Janet H. Zelenka: When we redeem the bond interest payments will shift from being semi annual bond payments to monthly revolver interest cash payments.

Janet H. Zelenka: And four we expect capital expenditures of $140 million to $160 million.

Janet H. Zelenka: Regarding the timing of free cash flow generation through 2024, we anticipate the first quarter to be a use of cash as it includes our annual incentive compensation payouts that semi annual debt interest payments and the timing of accounts receivable collections because of the heavier utilization of cash.

Janet H. Zelenka: This assumes approximately a 14% growth in adjusted EBITDA on a 2023 normalized adjusted EBITDA base of $420 million. As shown on slide 19, this margin growth rate anticipates revenue margin flow through of approximately 4%, cost of revenue efficiencies and cost reductions of approximately 9% mainly driven by our workforce management actions and operational initiatives, and selling general and administrative efficiencies and cost reductions of approximately 4% mainly driven by our workforce management actions. These are expected to be partially upset by commodity impacts of 3%, mainly associated with sorted office paper pricing, which assumes a range of $125 to $140 a ton, and fuel estimates for 2024 from the U.S. Energy Information Administration.

Janet H. Zelenka: In the first quarter, we anticipate that our first quarter debt leverage ratio will be above three times and then as anticipated to return to our debt leverage ratio range of two five to three times in 2024, I will now turn the call back to Cindy.

Cindy Jayne Miller: Thank you Janet our focus on ESG and sustainability as an ongoing pursuit, which we actively incorporate into our everyday practices and into our strategic business plans in.

Cindy Jayne Miller: In early February we received our grade from CDP and I'm excited to share that we achieved a b score our highest rating since we began filing with the CDP three years ago.

Janet H. Zelenka: This follows on the heels of four recent awards on diversity and sustainability that recognize the continued maturation of our organization.

Janet H. Zelenka: With that I'd like to thank our customers team members the communities we serve.

Janet H. Zelenka: Compared to last year, we anticipate that the first half of 2024 will have a more challenging paper pricing year-over-year variance, as the sorted office paper price per ton was above $200 on average for the first quarter of 2023 and above $185 on average for the second quarter of 2023, and the second half of 2023 pricing returned to the historical average range. As noted on slide 20, we expect to generate free cash flow of $210 to $265 million excluding additional interest payments due to redeeming the $600 million bond with proceeds from the revolver and severance payments. Excluding these two cash outlays, we anticipate an adjusted EBITDA to free cash flow conversion rate of 44 to 55% in 2024. Severance payments in 2024 are expected to be approximately $5 to $7 million. The additional in-year interest cash payments from redeeming the bond and higher interest rates are expected to be $14 to $19 million.

Speaker Change: And our shareholders for their continued trust and having stericycle protect what matters operator, please open the line for Q&A.

Speaker Change: Thank you and at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced please limit yourself to one question and one follow up and toward drawing a question. Please press star one again, please stand by with some part of the Q&A roster one moment for our first question.

Janet H. Zelenka: Yes.

Janet H. Zelenka: Our first question comes from the line of Sean Dodge from RBC capital markets. Your line is open.

Sean Dodge: Thanks, Congratulations on the strong finish to the year.

Sean Dodge: On the guidance and specifically on the bridge I think Super helpful that you all provided us so thank you for that.

Sean Dodge: On the cost of revenue efficiencies it looks like half of that driven by workforce reductions and half from operational strategic initiatives.

Speaker Change: Cindy you mentioned a lot of things in your prepared remarks can you give us a couple of examples of what the operational and strategic initiatives are new for 2024, and what are those expected to contribute.

Janet H. Zelenka: When we redeem the bond, interest payments will shift from being semi-annual bond payments to monthly revolver interest cash payments. And four, we expect capital expenditures of $140 to $160 million. Regarding the timing of free cash flow generation through 2024, we anticipate the first quarter to be a use of cash as it includes our annual incentive compensation payouts, the semi-annual debt interest payments, and the timing of accounts receivable collections. Because of the heavier utilization of cash in the first quarter, we anticipate that our first quarter debt leverage ratio will be above three times and then is anticipated to return to our debt leverage ratio range of two and a half to three I will now turn the call back. Thank you, Janet.

Cindy Jayne Miller: Yes, I think.

Cindy Jayne Miller: Sean Thanks for the question.

Speaker Change: <unk> tried to be quite thorough with the bridges. We know there's always a lot of moving parts in and wanted to make sure that we make it as is is.

Cindy Jayne Miller: As easy as we can.

Speaker Change: Yes, Youre right.

Cindy Jayne Miller: As we're moving into 2024, we're now driving into the efficiencies. We're pivoting from the transformation the transformation phase and I think really moving into now delivering on <unk>.

Cindy Jayne Miller: Delivering on plans executing to plan is doing the things we need to do if youll recall.

Cindy Jayne Miller: She has been on from an operational perspective, they've been on the ERP platform for quite some time and right now we really are gaining efficiencies there we've got a workforce that's familiar with the handhelds.

Cindy Jayne Miller: We've got dispatchers that are very familiar with with dispatching routing.

Cindy J. Miller: Our focus on ESG and sustainability is an ongoing pursuit, which we actively incorporate into our everyday practices and into our strategic business plans. In early February, we received our grade from CDP, and I'm excited to share that we achieved a B score, our highest rating since we began filing with CDP three years ago. This follows on the heels of four recent awards for diversity and sustainability that recognize the continued maturation of our organization. With that, I'd like to thank our customers, team members, the communities we serve, and our shareholders for their continued trust in having Stericycle protect what matters. Operator, please open the line for Q&A. Thank you. And at this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for a name to be announced.

Cindy Jayne Miller: And really making some gains and what we're going to lean into for 2024 is youll recall, we just put the regulated side of the business on the ERP in Q4 of last year and they're starting to.

Cindy Jayne Miller: Develop a similar rhythm not quite as advanced certainly.

Cindy Jayne Miller: We're still working through some things, but you did catch catch on that pool on that whole risk piece.

Cindy Jayne Miller: We took a reduction enforce this quarter.

Cindy Jayne Miller: And we're going to lean into some of those efficiencies that I just talked about in the second half. The other thing Sean is when you talk about the amount of facilities and upgrades and equipment and modernization that we've done just in the work environments in which our people work as you lean into those things, whether it's convenience whether it's <unk>.

Cindy Jayne Miller: Resetting of building in terms of making work flow better when you do those things along with standardizing some of the containers and a lot of the things that we do those.

Cindy Jayne Miller: Those are the productivity initiatives that we're leaning into so some are new.

Cindy Jayne Miller: Some are a continuation and I think just that along with the improved routing capabilities and some of the things. We have those are the things that are really driving our ability to improve margins. Thanks for that question.

Operator: Please limit yourself to one question and one follow-up. And to withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. One moment for our first question. Our first question will come from Sean Dodge from RBC Capital Markets. Your line is, Thanks. Congratulations on the strong finish to the year. On the guidance and specifically on the bridge, I think it is super helpful that you all provided this.

Speaker Change: Okay, Great and then just quickly on <unk>.

Cindy Jayne Miller: Janet you said that the service staff rationalization it slowed in the fourth quarter.

Cindy Jayne Miller: Are you seeing any evidence as we continued into this year.

Cindy Jayne Miller: And it stabilizes the continuing to taper.

Janet H. Zelenka: It's still only the national accounts, where youre seeing that or are you seeing that in other parts of Europe.

Sean Wilfred Dodge: So thank you for that. On the cost of revenue efficiencies, it looks like half of that is driven by workforce reductions and half from operational strategic initiatives. Cindy, you mentioned a lot of things in your prepared remarks. Can you give us a couple of examples of what the operational strategic initiatives are, what's new for 2024, and what are those expected to contribute?

Janet H. Zelenka: Given your base as well.

Janet H. Zelenka: Sean I'll start thanks for that question of Janet as anything else you'd like to add I think we're very proud of our shred side of the business to have faced the the level the headwind of a difference of $100 a ton pretty much for the year.

Janet H. Zelenka: Certainly for the second half of the year to a face that and still continued.

Janet H. Zelenka: To have the opportunity to to service our customers are there still is demand for the service I think speaks volumes for us is.

Cindy J. Miller: Yeah, I think Sean, thanks for the question. And we did try to be quite thorough with, We know there's always a lot of moving parts. Transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: We like to talk about the fact that if you. If you look at the actual growth of the business over the last two years. So for since 2021 and 'twenty two in comparison with 23, we've seen a $6 six year over year over that two year comparison growth.

Cindy J. Miller: As we're moving into, for We're Now Driving, pivoting from the transformation phase, and I think really moving into now delivering on plans, executing plans, doing the things we need to do. If you'll recall, now Shred's been on, from an operational perspective, they've been on the ERP platform for quite some time, and right now, we really are. We've got a workforce that's familiar with the handhelds, we've got dispatchers that are very familiar with dispatching, routing, and really making some gains. And what we're going to lean into for 2024 is, you'll recall, we just put the regulated side of the business on the ERP. For more information, visit www. FEMA.gov, and they're starting to develop a similar rhythm.

Speaker Change: And for me that speaks that there is still demand for the business and you are correct.

Speaker Change: We are seeing it is the national footprint. It is that retail space anytime you take those big customers and they reduce I'll just throw out an average number this isn't specific but if you go from having 8000 stores they get serviced.

Speaker Change: Either every week or every other week and now you reduce them to 6000 and you take a few of those types of of retail spaces that see that contraction, we feel that we have.

Speaker Change: Not lost customers as a matter of fact, we continue to grow with customers, but we feel it in terms of both the stop the service fee as well as the paper.

Speaker Change: That wasn't generated so we're still very very positive about the shred side of the business, especially with their efficiencies, how theyre getting better how they're adapting and learning from data. So they play a very integral role in our continued growth. Thanks for that question.

Cindy J. Miller: Not quite as advanced. Certainly, we're still working through it. But you did catch that whole, whole rip.

Speaker Change: Thank you one moment our next question.

Speaker Change: Okay.

Cindy J. Miller: We took a reduction in force this quarter, and we are going to lean into some of those that I just talked about in the second half. The other thing, Sean, is when you talk about the amount of facility, Those are the productivity initiatives that we're leaning into. So some are new, some are a continuation, and I think just that, along with the improved routing capabilities. Those are the things that are really driving our ability. Thanks for that. Okay, great.

Speaker Change: Our next question comes from the line of Dave Manthey Lee from Baird. Your line is open.

Speaker Change: Thank you good morning, everyone.

Speaker Change: My first question is regarding the next generation key business priorities as you outlined them Cindy they seem to all pretty much be centered around technology tools.

Speaker Change: Are there additional investments required for plug ins to your ERP or does that functionality already exists within your instance beforehand.

Sean Wilfred Dodge: And then just quickly on SID, Janet, you said that the service stop rationalization had slowed in the fourth quarter. Are you seeing any evidence that it has continued into this year? Has it stabilized?

Cindy Jayne Miller: That's a great question, Dave we're very excited about those I think many of them do it's now time to lean into the effort and energy in the money quite frankly that we invested in with our current ERP platform So for us.

Cindy J. Miller: Is it continuing to taper? And is it still only the national accounts where you're seeing that? Or have you seen that in other parts of your, excuse me, your base as well?

Cindy Jayne Miller: I think if you were as we look further into the digital implementation for US right now I think commercial and service excellence and then the operational excellence, that's us taking us diving into what we have and getting better at what we do.

Cindy J. Miller: Yeah, Sean, I'll start. Thanks for that question. If Janet has anything else she'd like to add, I think we're very proud of our Shred side of things, to have faced the level, the head..., of a difference of $100 a ton, pretty much for the..., you know, certainly for the second half. To have faced that and still continued, you know, to have the opportunity to service our customers; there still is demand for the service. I think what speaks volumes for us is that, we like to talk about the fact that, over the last two years, So since 2021, we've seen a 6.6 year-over-year growth, and for me, that shows that there's still demand for the business, and you are correct. What we are seeing is national demand. It is that retail.

Cindy Jayne Miller: When you look at the digital implementation and we talk about where else can we deploy more digital kind of streamlined engagement potentially with customers or some of these other things or are we look at AI. Those are those are things that we're developing and looking at but but to your point, we don't see major technology.

Cindy Jayne Miller: Investment required for for harnessing any of that.

Speaker Change: That's great to hear.

Speaker Change: Second on the paper side.

Speaker Change: Could you give us a figure for the tonnage in 2023 and what is your expectation for 2004.

Speaker Change: As we're thinking about it.

Cindy J. Miller: You know, anytime you take those big customers and they drop, you know, I'll just throw out an average number. You go from having 8,000 stores that get serviced either every week or every other week, and now you reduce them to 6,000. You take a few of those types of retail spaces that see that contraction. We feel that.

Speaker Change: Typical formula there, which is I think it used to be you experienced about 40% of the downside below $1 92 per ton.

Speaker Change: Is that the same or have you moved the needle on that formula Yeah, I'll start with that one the table is pretty much. The same right now the good news is right now were seeing paper.

Speaker Change: In its 15 year average it's anywhere from 140 to 160 it bounces in between there is you know you followed I think probably as closely if not more so than than most Dave you and your team.

Cindy J. Miller: We've not lost customers. As a matter of fact, we continue to grow with customers, but we feel it in terms of both the stop, the service fee, as well as the paper that wasn't generated. How they're getting better, how they're adapting and learning from data. So, they play a very integral role in...

Speaker Change: Yes. It is.

Speaker Change: It's now rationalized and I think gotten far more stable in terms of predictability.

Operator: Thank you. Thank you. One moment for our next question. Our next question comes from Dave Manthey from Baird. Your line is open. Thank you. Good morning, everyone. My first question is regarding the next generation key business priorities, as you outlined them, Cindy. They seem to all pretty much be centered around technology tools. Um, are there additional investments required for plugins to your ERP, or does that functionality already exist within your instance of 4Head?

Speaker Change: So we we are looking at at that as kind of being a non entity, but that.

Speaker Change: The sliding scale that we do have that is the protection for it and yes. You are correct. The scale has stayed the same with 192 being the top and around that I think the bottom of the floor goes to about 85 somewhere around in there I'm not I'm not quite sure I'd have to check on that on the floor for you.

David John Manthey: Yeah, no, that's a great question, Dave. We're very excited about that. I think many of them do.

Speaker Change: And then Janet I think has got the.

Speaker Change: That's for the tons of paper.

Cindy J. Miller: It's now time to lean into the effort and energy and the money, quite frankly, that we invested in with our current ERP platform. So for us, I think if you were, as we look further into the digital implementation for us, right now, I think commercial and service excellence and then operational excellence. That's us taking us, diving into what we have, and getting better at what we do. When you look at the digital implementation, and we talk about where else can we deploy a more digital kind of streamlined engagement, potentially with customers or some of these other things, or we look at AI, those are things that we're developing and looking at, but to your point, we don't see a major technology investment required to harness AI.

Speaker Change: Year over year, Yes, and we also have that in the 10-K day and thanks for being on the call today. After divestitures normalize the the tons were 453000 versus 500000, the year before and 9% for tons of sorted office paper. So we did see some decline not not unanticipated.

Speaker Change: <unk> given the contraction in stops which reflects the paper that we talked about in the national system and that I also wanted to point out in our in our guidance range for <unk>, we assume between 125 to 140 <unk>.

Speaker Change: There's a ton that seems to be a good run rate for what the business is doing today. It is in the sweet spot of that recycling recovery surcharge range, where it recovers you know about two thirds of any fluctuation that we see.

Speaker Change: And the bottom end of the range of the indexes around $77.

Speaker Change: Thank you one moment our next question.

Cindy J. Miller: That's great to hear. Second, on the paper side. Could you give us a figure for the tonnage in 2023, and what is your expectation for 2024? And as we're thinking about the typical formula there, which is, I think it used to be, you experienced about 40% of the downside below 192 per ton. Is that the same, or have you moved the needle on that formula? Yeah, I'll start with that one. The table is pretty much the same. Right now, the good news is, right now we're seeing paper at its 15 year average. It's anywhere from, you know, 140 to 160.

Speaker Change: Our next question comes from the line of Michael Hoffman from Stifel. Your line is open.

Michael E. Hoffman: Good morning, and thanks for taking the questions. So on.

Michael E. Hoffman: The opportunity to drive operating leverage at the gross margin line.

Michael E. Hoffman: You've talked a lot about this convergence of manual processes as a result of the ERP. So what you have shared with us the initial $40 million to $45 million.

Michael E. Hoffman: What percentage of that opportunity or recapturing.

Michael E. Hoffman: So of the 40% to $45 million that is the increase remain over $20 million that is due to the targeted workforce reduction. So I would say about 50% of it is on things that we've already taken in action. The rest of the margin improvement that we're referring to there is on efficiencies route optimization to all kinds of things we.

David John Manthey: It bounces in and out between there, as you know, you follow it probably as closely, if not more so, than most, Dave. So yeah, it's now rationalized and I think it's gotten far more stable. So, we are looking at that as kind of being a non-entity, but the sliding scale that we do have, that is the protection for it, and yes, you are correct, the scale has stayed the same with 192 being the top, and around that... The floor goes to about 85, somewhere around there.

Michael E. Hoffman: Leverage on a modernized fleet, a modernized facilities and a modernized system.

Speaker Change: So I did a bad job of asking the question.

Michael E. Hoffman: Theres a certain amount of head count that's been tied to doing manual processes are you done with this reservoir is there more to come that's what I was trying to get at.

Janet H. Zelenka: I'm not quite sure. I'd have to check on that on the floor. And then Janet, I think, has got the stats for the tons. Thank you for being on the call today. After divestitures normalized, the tons were $400,000.

Speaker Change: Sorry, sorry, Michael.

Michael E. Hoffman: Yes.

Speaker Change: We had if you recall, we had a we had a smaller risks in October of last year.

Speaker Change: And then we are in the process of executing one right now in first quarter of this year.

Speaker Change: It'll be it'll end up being about a 6%.

Janet H. Zelenka: So we, given the contraption. The Bulletproof Executive 2013, I also wanted to point out, in our guidance range for SOP pipe, we assume that... be a good run rate for what the business is doing today and is in the sweet spot of that recycling recovery surcharge range where it recovers... about two-thirds of any. The bottom end of the range of the...

Speaker Change: Year over year reduction in head count and that's.

Speaker Change: That's where we believe right now we are positioned to be able to drive growth and really focus on them on top line and equally if not more important really driving bottom line opportunity. So that's a I don't we don't foresee anything else and.

Speaker Change: We also leveraged attrition and careful hiring and we'll continue to do that through the year, but in terms of an action as Cindy said, we don't anticipate any more this year.

Speaker Change: Right, Okay and then.

Janet H. Zelenka: Thank you. One moment for our next question. Our next question will come from the line of Michael E. Hoffman from C4. Your line is open. Good morning, and thanks for taking the question. So on...

Speaker Change: If I take the outlook for the combination of the three long term care drug for three to five of the top line through 2017 as EBITDA in the 50% or better in free cash.

Michael Edward Hoffman: The opportunity to drive operating leverage at the gross margin line. You've talked a lot about this convergence of manual processes as a result of the ERP. So, what you have shared with us, this initial 40 to 45 million. What percentage of that opportunity are we capturing? So, out of the 40 to 45 million?

Speaker Change: How do I sort of put together this year's guidance.

Speaker Change: In into.

Speaker Change: A couple of things one.

Speaker Change: As the top line, mostly about price or are we starting to get new customer adds stop ads.

Speaker Change: Operating leverage that you're talking about.

Speaker Change: Is it.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: How much can we expect incrementally from here from asset utilization and that sort of portfolio.

Cindy J. Miller: Part of it is on things that we've already... The rest of them are on route optimizations, all kinds of things we can leverage on a modern. So, I did a bad job of asking the question.

Speaker Change: Yeah.

Speaker Change: It was talked about under the digital in the revised plan and then the cash conversion is coming under the plan. So what has to happen to adjust the cash conversion.

Michael Edward Hoffman: There's a certain amount of headcount that's been tied to doing manual processes. Are you done with this RIF, or is there more to come? That's what I was trying to get at. What percent of the opportunity? Sorry, Michael.

Speaker Change: So.

Speaker Change: Four questions into one so I do too.

Speaker Change: Fine Michael So for those listening I'm going to go to slide 18, 19, and 20 on this so the 3% to 5% is balanced.

Cindy J. Miller: Yes, we had, if you recall, we had a smaller RIF in October of last year. And then we are in the process of executing one right now. Transcripts by Transcription Outsourcing, LLC, headcount, and that's where we believe right now we are positioned to be able. And we also leveraged and Careful Hire. But in terms of an, Okay.

Speaker Change: We expect volume and price to be part of our right and that's an organic revenue growth only to it does not include the opportunity for tuck in acquisitions, nor the tuck in acquisition, we mentioned on the call. So that's pure organic in terms of the so where we're getting the drivers of the about 14% adjusted EBITDA growth rate that.

Speaker Change: Lines are adjusted EBITDA EPS range is what we talked about largely within our control with a significant amount already executed as we drive efficiencies leveraging all the things I mentioned the free cash flow. If you go to the slide 20, and you look at that our adjusted free cash flow range is around 40 to 50.

Michael Edward Hoffman: And then, If I take the outlook, the combination of the three long-term outlooks, the three to five, the top line, 13 to 17, a 50% or better in free cash. So how do I sort of put together this year's guidance into... A couple things. One is the top line, mostly about price, are we starting to get new customer ads, and stop ads is the operating leverage that you're talking about. How much can we expect incrementally from here from asset utilization, that sort of portfolio that was talked about under the digital and the revised plan? And then the cash conversion is coming under the plan. So what has to happen to adjust the cash conversion? I'm trying to pack four questions into one, so I'll do two. Yeah, no, that's fine, Michael.

Speaker Change: Person on a pure basis. However, when we were looking at the long term range, we had not contemplated the severance payments and wouldn't wouldn't normally do that and we also have a shift in our interest rate payments due to the mature maturation of the bonding going to 12 month payments in the year versus the normal payments of the bonds that is a onetime.

Speaker Change: So we thought we'd mentioned that as well and then when you take those out you're you're in about.

Speaker Change: 50% range on your free cash flow when Youre looking at the normal operations of the business for 2024.

Speaker Change: I think I answered all your questions Michael If I didn't go ahead and say one more thing and then we'll go to the experts.

Speaker Change: Thank you and then one more.

Speaker Change: <unk> for our next question Alright.

Speaker Change: Yes.

Janet H. Zelenka: So I'm going to, for those listening, I'm going to go to slides 18, 19, and 20 on this. So the three to five percent is balanced. We expect volume and price to be part of our, and that's organic revenue growth only, so it does not include the... Thank you. Thank you, leveraging all the Free Cash Flow. If you go to slide 20 and look at that, our adjusted free cash flow range is around 40 to 50 percent on a pure basis. However, when we were looking at the long-term range, we had not contemplated severance payments, and, you know, it wouldn't normally do that.

Speaker Change: Okay.

Speaker Change: Our next question comes from the line of Scott Schneeberger from Oppenheimer. Your line is open.

Scott Schneeberger: Thanks, very much good morning all.

Scott Schneeberger: I'd like to start just following up on on pricing it sounds like Janet it's it's.

Scott Schneeberger: The long term guidance for revenue organically as half price half volume how is the pricing environment, particularly in the regulated waste segment our U S.

Scott Schneeberger: Longer term contracts they roll off you've been through an inflationary environment.

Scott Schneeberger: And still kind of on the tail end it seems.

Scott Schneeberger: How how is your ability to be getting pricing now.

Scott Schneeberger: For both of you.

Speaker Change: Yes, I think Scott Great question, good to hear from you.

Janet H. Zelenka: And we also have a shift in our interest rate payments due to the maturation of the bond and going to 12-month payments in the year versus the normal payments of the bonds. That is a one-time effect, so we thought we'd mention that as well. And then when you take those out, you're in about the 50 percent range on your free cash flow when you're looking at the normal operation. I think I've answered all your questions.

Speaker Change: We have our ability to take price in the market.

Scott Schneeberger: According to market conditions, I think we've been doing a great job with that we have been.

Speaker Change: I think I think some of the commodity headwinds and a few other things.

Scott Schneeberger: Now it may may mask some of the some of the gains that we've been making but I think I think we're well positioned in the market and right now feedback from customers, let's say on the regulated side with the new portal with the changes and the abilities in that.

Scott Andrew Schneeberger: Michael, if I haven't said it before, go ahead and say one more thing and then we'll go to the next one. I don't know. Thank you. And one moment for our next question. Our next question comes from Scott Schneeberger from Oppenheimer. Your line is open. Thanks very much. Good morning, all.

Scott Schneeberger: Kind of the visibility we've given them. There is there is an even greater level of if you will stickiness to some of the opportunities and the things that we can now do based on the fact that were on our platform. So I think all of those things lend themselves to our ability to continue to lead in the marketplace to bring value to our customers.

Scott Andrew Schneeberger: I'd like to start just following up on pricing. It sounds like, Janet, the long-term guidance for revenue organically is half price, half volume. How is the pricing environment, particularly in the regulated waste segment? You have longer-term contracts. They roll off.

Scott Schneeberger: And that continues to come up with solutions that they're that they need if you will.

Speaker Change: And just a quick follow up on that and then one more but.

Scott Schneeberger: On the pricing on the with customers how would you frame the competitive environment.

Scott Andrew Schneeberger: You've been through an inflationary environment and are still kind of on the tail end, it seems. How is your ability to be getting prices now? This is kind of for both of you.

Scott Schneeberger: Going back 810 years ago, there was a bit of a shift where stericycle was adversely impacted by some enhanced competitive.

Cindy J. Miller: Thanks. Yeah, I think it's got a great question. Good to hear from you.

Scott Schneeberger: Dynamics.

Scott Schneeberger: How would you how would you kind of categorize the industry now you just mentioned in that last response.

Cindy J. Miller: We're we have our ability to take price in the market. According to the market, But I think we're well positioned in the market. And right now, feedback from customers, let's say, on the regulated side, with the new portal, with the changes in the abilities and the visibility we've given them, there is an even greater level of, if you will, stickiness to some of the opportunities we can now offer, based on the fact that we're on a platform...

Speaker Change: You are a leader as we would expect but just curious how it looks competitively out there yeah I think the one thing that stayed the same in both of our businesses is that the competition is still regional.

Scott Schneeberger: So we've got some regional players that are a little stronger than others on both the shred and the regulated waste side.

Scott Andrew Schneeberger: So I think all of those things lend themselves to our ability. http://TheBusinessProfessor.com Just a quick follow-up on that and then one more, but on pricing, with customers, how would you frame the competitive environment? Going back 8, 10 years ago, there was a bit of a shift where Stericycle was adversely impacted by some enhanced competitive dynamics. How would you categorize the industry now? You just mentioned in that last response that you're a leader, as we would expect, but I was just curious how it looks competitively out there. Thanks.

Scott Schneeberger: And I think there are some where we've got some regions, where we've got a stronger presence.

Scott Schneeberger: A bigger footprint, where we can leverage ourselves a little better than others and I think all of those things now in our understanding of that are really.

Scott Schneeberger: It's really leading us now towards this potential tuck in acquisition opportunities, where we can see more in depth in the areas where competition.

Scott Schneeberger: It may or may not be there to whatever level.

Scott Schneeberger: And what's our ability to grow and to serve so I think I think it's probably the same in terms of overall, it's still a regional competition.

Cindy J. Miller: I think the one thing that has stayed the same in both of our businesses is the competition. So we've got some regional players that are a little stronger than others on both the shred and the regulated waist size. And I think there are some regions where we've got a stronger presence, a bigger footprint where we can leverage ourselves a little better than others. And I think all of those things now, in our understanding of that, are really leading us now towards this potential tuck-in acquisition opportunity, where we can see more in-depth in the areas where competition may or may not be there at whatever level, and what our ability to grow and to serve is. So I think it's probably the same in terms of overall, it's still a regional competition.

Scott Schneeberger: And it is it is different in every region, but I think we're well positioned to take it to take advantage and to drive further growth both organically as well as with some some very very laser very very specific very deliberate.

Scott Schneeberger: Tuck in opportunities.

Speaker Change: Thanks, Greg.

Speaker Change: Segue for my final question.

Greg: It sounds like you have a propensity to start doing tuck ins a little bit more actively.

Speaker Change: I kind of want you to compare and contrast that by what remains with regard to divestiture.

Speaker Change: Divestitures, which presumably what remains would still be international and obviously you have the ERP implementation internationally. This year, so tying that all together to make the question would we see net acquisition or divestiture contribution or headwind.

Cindy J. Miller: And it is it is different in every region, but I think we're well positioned to take advantage and to drive further growth both organically as well as very, very laser, very, very specific, very deliberate tucking. Thanks, and that's a great segue for my final question. It sounds like you have a propensity to start doing tuck-ins a little bit more actively.

Speaker Change: In the guide this year and and how much is there left there on the on the divestiture and on an international.

Speaker Change: Thanks Scott.

Speaker Change: Scott I think I think the good news there is.

Scott Schneeberger: Just in 2022 alone we divested of we had eight divestitures and got out of six countries. So I would probably describe.

Scott Andrew Schneeberger: I kind of want you to compare and contrast that by what remains with regard to divestitures, which presumably what remains would still be international and obviously have the ERP implementation internationally this year. So tying that all together to make the question, would we see net acquisition or a divestiture contribution or headwind in the guide this year? And how much is there left on the divestiture end on the international side?

Scott Schneeberger: The ability of folks to continue to follow the story with the puts and takes.

Speaker Change: I can tell you it won't be anything like that.

Speaker Change: We don't have eight countries left to divest up so so I think.

Speaker Change: I think overall, what we're looking at we still have portfolio optimization as a priority.

Speaker Change: We're looking to be opportunistic.

Cindy J. Miller: Yeah, Scott, I think the good news there is, you know, just in 2022 alone, we divested eight divestitures and got out of six countries. So I would probably describe the ability of folks to continue to follow the story with the puts and takes. But I can tell you, it won't be anything like that. You know, we don't have eight countries left to divest.

Speaker Change: And see.

Speaker Change: We've got great insights into the markets in which we operate.

Speaker Change: The divestitures, we've made quite frankly, <unk> 19 in the last four or five years have allowed us to really focus on driving operational and financial performance in the core markets.

Speaker Change: In our core businesses, so so I think I.

Speaker Change: I can guarantee it certainly isn't any anything like the like the bouncing ball you've seen over the last few years as right now, we're really where we have the ability to buckle down get very focused and execute to the plans that we have but it still remains.

Cindy J. Miller: So So I think, I think overall, what we're looking at, we still have portfolio optimization as a priority. We're looking to be opportunistic and see. We've got great insights into the markets in which we operate. The divestitures we've made, quite frankly, 19 in the last..., http://www.stericycleinc.com Unknown Speaker, So I think I can guarantee it certainly isn't anything like the bouncing ball. Over the last few years, as right now, we have the ability to buckle down, get very focused. But it still remains a priority simply because...

Speaker Change: It still remains a priority simply because we constantly look to be opportunistic.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Our next question comes from the line of Tobey Sommer from tourist Securities. Your line is open.

Tobey Sommer: Thanks, a follow up on a similar theme here, how do the new systems change your view of acquisitions.

Tobey Sommer: How do you view the market opportunity for Stericycle to.

Tobey Sommer: Sort of be a consolidator again, maybe in the context to that if you could share key parameters you look for in acquisitions, including valuation.

Tobey O'Brien Sommer: Thank you. One moment for our next question. Our next question comes from Tobey Sommer from Tura Securities. Your line is open.

Speaker Change: Yes, I think.

Speaker Change: I think a couple of those anytime you have.

Cindy J. Miller: Thanks. A follow-up on a similar theme here. How do the new systems change your view of acquisitions? And how do you view the market opportunity for Stericycle to sort of be a consolidator again, and maybe in the context of that, if you could share key parameters you look for in acquisitions, including valuation? Yeah, I think a couple of those.

Speaker Change: A modern technology platform like we have that is a game changer in terms of our ability to integrate integrate quicker our ability to engage with the customer base, the new customer base that would be brought on.

Speaker Change: And in a seamless manner technology is really the key is whether youre talking about topline opportunity or bottom line as you have greater visibility and insights into.

Tobey O'Brien Sommer: Anytime you have a modern technology platform like we have, that is a game changer in terms of our ability to integrate, integrate quicker, our ability to engage with the customer base, and the new customer base that would be brought on in a seamless manner. Technology is really the key, whether you're talking about top line opportunity or bottom line, as you have greater visibility and insights into all the productivity key elements. So for us, our ability to get that platform... It's really a catalyst for us to be able to do more things, but you have to combine that, Tobey. The other thing that afforded us this opportunity is the discipline that we've had financially and really just being... And we're all very focused on being able to, number one, improve the balance sheet, but then, number two, continue to operate in a manner that generates cash so that we do have an opportunity.

Speaker Change: Into all the productivity key elements.

Tobey Sommer: So for us our ability to get that platform in has really it's a catalyst for us to be able to do more things, but you have to combine that tobey. The other thing that afforded us. This opportunity is the discipline that we've had financially and really just being.

Tobey Sommer: Very focused on being able to number one improve the balance sheet, but then number two continue to operate in a manner that generates cash so that we do have an opportunity to take advantage of whatever the market presents so so I think I think for us.

Tobey Sommer: What are we looking for well as I mentioned in one of the prior answers we've got we're going to be very strategic.

Tobey Sommer: We over the course of the last few years, we've as we've put in much much more structure and discipline and standardization. We're very focused we've got a strong playbook in terms of what are the market conditions that would make us be opportunistic.

Tobey O'Brien Sommer: So, I think for us, what are we looking for? Well, as I mentioned in one of the prior answers, we're going to be very... We have a strong playbook in terms of what the market conditions that would make us operational. What does that do to our overall network? You know, what's the culture of the company? that we look at that right now makes us have the ability to do tuck-ins, not be anything like the tuck-in. That maybe some folks might be familiar with Stericycle.

Tobey Sommer: What does that do to our overall network.

Tobey Sommer: Whats the culture of the company.

Tobey Sommer: A myriad of things that we look at that right now make us.

Tobey Sommer: Have the ability to do tuck ins. However, we would we would not be anything like the tuck in engagements that may be some folks might be familiar with stericycle and from years past.

Cindy J. Miller: Thank you. How should we think about CapEx and free cash conversion over the sort of more medium to long term relative to your 24 guidance? And I'm not asking for long-term guidance, but to the extent there are knowable puts and takes in the future, you could shine a light on that. So we do actually have a long-term outlook on our free cash flow conversion rates, which is, and in terms of capital needs. Profile of Capital in the ranges that we've given in the past will not get to their Conversion rate by Thank you.

Speaker Change: Thank you.

Tobey Sommer: How should we think about capex and free cash conversion over sort of more medium to long term relative to your 24 guidance I'm not asking for long term guidance, but to the extent there are knowable puts and takes in the future that you could shine a light on that would be helpful. So we do actually have long term outlook of our free cash flow conversion rates reduced to 50 to 60.

Tobey Sommer: Per cent that we still have out there.

Tobey Sommer: And in terms of the capital needs of the business. This is a business that needs to be maintained and we see opportunity to invest in ourselves to grow. So I don't anticipate a much different profile of capital in the ranges that we've given in the past in the future we will not get to their free cash flow conversion rate by reducing capital.

Tobey O'Brien Sommer: One moment for our next question. The next question will come from the line of John Mazzoni from Wells Fargo. Your line is open. Hi, good morning.

Speaker Change: Thank you one moment for our next question.

Tobey Sommer: Our next question comes from the line of John <unk> from Wells Fargo. Your line is open.

John Peter Bonner Mazzoni: Thanks for taking my question. Maybe a quick one on Nevada McCarran. It's been very helpful to color in terms of the Completion of Instruction in the First Half of the Year and then Regulatory Review and Testing with the Ramp of Full Production in Mid-25. Could you just give us a sense of kind of some of the puts and takes there, especially around the kind of milestones and what we should be looking for and maybe once it's fully ramped, should we kind of expect that you would use the full permit or any Yeah, I think there is more to come. I think we will.

John: Hi, good morning, Thanks for taking my question.

John: Maybe a quick one on Nevada Mccarran.

John: It's been a very helpful color in terms of the kind of comps.

John: <unk> construction in the first half of the year, and then regulatory review and testing with the ramp up for production in mid 25 could you just give us a sense of kind of some of the.

Speaker Change: Puts and takes there, especially around the kind of milestones and what we should be looking for and maybe once it's fully ramped should we kind of expect that you would use the full permit or any other commentary around the volumes once ramps would be helpful. Thanks, Yeah, I think I think more to come I think we will.

Cindy J. Miller: As we move through this, we said that the whole project was going to be in four phases. So we talked about construction, which we're in, we've got testing, we've got, you know, kind of ramping up, and then full production. So for us, we see it as a steady journey. The good news for us at this point, John, is the fact that, in spite of maybe, you know, Supply Chain Issues or any types of problems with materials, we remain on track getting both of those boilers, getting the incinerator stacks and the boilers in, in terms of, you know, their positions, and getting close to being able to start the testing part of it. For us, that's a big deal. It's a milestone.

Speaker Change: As we move through this we said that the whole project was going to be in four phases. So we've talked about the construction, which we're in we've got testing, we've got kind of ramping up and in full production. So for US we see it as a steady journey. The good news for US at this point John is the fact that in spite of maybe potential supply chain issues are.

Speaker Change: Or any types of problems with materials, we remain on track getting both of those boilers or getting the incinerator stacks of the boilers in in terms of.

Speaker Change: They are positioned where.

Speaker Change: Where we are getting close to being able to start the testing part of it for us that's a big deal that's a milestone.

Cindy J. Miller: We've been on budget, and we're very pleased with the effort. So in terms of, as we move through March throughout these quarters, and we hit these different things, whether it's testing, you know, testing and ramping up and passing regulations and those types of things, I think we'll give a regular update on where we are and get a better understanding, including us, http://www.stericycleinc.com Thank you. And let me give you just a quick follow-up on CrossSell. It was helpful in terms of the acceleration of the velocity to close, but have there been any other initial proof points you can share, and maybe just how are the conversations going with customers? Yeah, no, I think the velocity, cross selling, and the engagement with customers has been great. I've got I'll, I'll let Cory White, our chief commercial officer, jump in on that as I don't know anybody who's been more engaged with customers this past. Any updates, Cory, in terms of where the customers are? Yeah, great question. It's very early days, I think, at this point.

Speaker Change: We've been on budget and we're very pleased with the effort that's going on there. So in terms of as we move March throughout these quarters and we hit these different things, whether it's testing or its testing.

Speaker Change: Testing and ramping up in passing regulations and those types of things I think will give a regular cadence in terms of where we are so that folks can get a better understanding including us as to when we'd be running some volume through there.

Speaker Change: So I think more to come there in terms of that right now I think we've.

Speaker Change: We've given you know pretty much what we can to this point.

Speaker Change: Great color. Thank you and then maybe just a quick follow up on cross sell it was helpful. In terms of the acceleration of the philosophy to close but has there been any other initial proof points you can share and maybe just how are the conversations going with customers yes.

Speaker Change: Yes, no I think I think the velocity.

Speaker Change: Selling any engagement with customers has been great I've got them.

Speaker Change: I'll I'll, let Cory White, our chief commercial officer jump in on that is I don't know anybody who's been more engaged with customers this past year than Cory so.

Cory White: Updates in Korea in terms of.

Cory White: Where the customers are yes, great. Great question very early days I think at this point more to come on this is I think you are aware that the new ERP system has provided us the opportunity for the first time to actually see.

John Peter Bonner Mazzoni: More to come on this, as I think you're aware that the new ERP system has provided us with the opportunity for the first time to actually see, more to come on that, but a lot of lessons learned in the very early days in our utilization of this added tool in our. Thank you. One moment for our next question. Thanks for joining the call. And our next question will come from Kevin Steinke from Barrington Research Associates. Your line is open. Good morning.

Speaker Change: The full spectrum of customers that are utilizing our service on both sides of the house and the overlap so very early days.

Speaker Change: In our evaluation and opportunity to drive growth.

Speaker Change: That area, but we're excited about what the data is providing from a go to market perspective, so more to come on that but.

Speaker Change: A lot of lessons learned very early days and our utilization of the ERP system. So just one added tool in our quiver.

Speaker Change: Thank you one moment our next question.

Speaker Change: Thanks, Rob for joining the call today.

Speaker Change: Next.

Speaker Change: And our next question comes from the line of Kevin Steinke from Barrington Research Associates. Your line is open hi, Kevin.

Kevin Mark Steinke: Good morning.

Kevin Mark Steinke: So I apologize if I missed this, but you gave the. What are you assuming for the impact of commodities on the adjusted EBITDA growth in 2024? What are you assuming for the commodity impact on organic revenue growth in 2024?

Kevin Mark Steinke: So I apologize if I missed this.

Speaker Change: You gave the.

Kevin Mark Steinke: Impact of commodities on the.

Kevin Mark Steinke: Adjusted EBITDA growth.

Kevin Mark Steinke: 2024.

Kevin Mark Steinke: What are you assuming for the commodity impact on organic revenue growth.

Kevin Mark Steinke: 2024, and is that baked into the.

Janet H. Zelenka: And is that baked into the three to 5% organic revenue growth target? Yes, it's baked into the three to 5% organic revenue growth target. That's basically a flow through from the top line down to the commodity impact driven mostly by fuel. Yeah, and one thing I think that is important for, we talked last quarter about when, you know, are we still facing headwinds in terms of that compared to the RISD rate? Just to let everybody know, in Q1 of 2023, from a RISD perspective, paper was still up over $200. It was about $225.

Kevin Mark Steinke: 3% to 5% organic revenue growth target, yes, it's baked into the 3% to 5% organic revenue that's basically a flow through from the top line down to the commodity impact driven mostly by the fuel surcharges in the sorted office paper grade, Yes, and one thing I think that that is important for we talked last quarter about.

Kevin Mark Steinke: When are we still facing headwinds in terms of that comparative with the reserve rate and just just to.

Kevin Mark Steinke: To let everybody know.

Kevin Mark Steinke: Q1 of 2023 from a <unk> perspective paper was still up over $200. It was about 225 Q2 of 2023 paper was around 186, so where they are right now being around $141 45.

Janet H. Zelenka: Q2 of 2023, paper was around 1, and with it right now being around 140-145, Q1 is where we see a good bit of comparison headwind, And certainly, you know, we see an opportunity. And then Q2 is, let's say, a $30 to $40 headwind. Little different, but we're confident that when we get to the second half of the year, where, if you remember, Q3 of 23, paper was averaged around $146, and Q4 is around $139 or $140. Much more normal averages for the past 15 years.

Kevin Mark Steinke: Q1 is where we see a good bit of comparison headwind, but certainly we see an opportunity to continue to grow and.

Kevin Mark Steinke: As customers still show demand and then Q2 is let's say, a 43% to $40 headwind a little different.

Kevin Mark Steinke: But we're confident that when we get to the second half of the year, where if you remember Q3 of 'twenty three paper was averaged around 146 Q.

Kevin Mark Steinke: Q4 is around $1 39, or $1 40, much more normal averages for the past 15 years, that's where we believe we.

Kevin Mark Steinke: That's where we believe we're head-to-head, pretty much even in terms of where paper is. So we see the commodity more as a first half, if you will. Okay, thanks. The reason I asked that is that, presumably, if we put commodities on an apples-to-apples basis year over year, then, you know, you'd be targeting organic revenue growth faster than three to 5%.

Kevin Mark Steinke: We're head to head pretty much even in terms of.

Kevin Mark Steinke: Where paper is so we see the commodity more as the first half if you will Q1, a little bit more than a Q2 type of situations.

Speaker Change: Okay. Thanks.

Speaker Change: The reason I ask is that.

Kevin Mark Steinke: Presumably if we put a.

Kevin Mark Steinke: Commodities on an apples to apples basis year over year than you are.

Kevin Mark Steinke: You'd be targeting organic revenue rose faster than 3% to 5%.

Cindy J. Miller: I'm going to get up to the bag. You bring up a great point. We're very proud of the efforts from top line and bottom line that people fought through to, you know, really try to mitigate as much as they could. Something that was as much a headwind that we faced as we did.

Kevin Mark Steinke: Thank you Brandy Green you bring up a great point, we're very proud of the efforts from topline and Bottomline that people thought through to two.

Kevin Mark Steinke: <unk> really tried to mitigate as much as they can something that was as much of a headwind.

Cindy J. Miller: And I think it just shows the resilience and the dedication of Stericycle and, and I think, and the customers that we have are very, very pleased with that in spite of the fact that it looks fantastic in terms of that top line, but facing that $50 million, that was a...

Kevin Mark Steinke: That we faced as we did and I think it just shows the resilience and the dedication of the of the team here at Stericycle and and I think the continued commitment with the relationship with the customers that we have.

Kevin Mark Steinke: They continue to depend on us so very very pleased with that in spite of the fact that.

Kevin Mark Steinke: Numbers didn't necessarily.

Kevin Mark Steinke: Look fantastic.

Kevin Mark Steinke: Okay, thank you. I'll turn it back over. Thanks, Kevin. Thank you. I'm not showing any further questions at this time. I would now like to turn it back to Cindy for any closing remarks. Thank you, Victor. So to everyone listening on this call, we appreciate your interest in Stericycle and your shared excitement for our future. Thank you all. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day. Thanks for watching!

Kevin Mark Steinke: In terms of that topline, but facing that $50 million that was a that's a big deal for the group.

Speaker Change: Okay. Thank you I'll turn it back over.

Speaker Change: Thanks, Kevin.

Speaker Change: Thank you I'm not showing any further questions at this time I would now like to turn it back to Cindy for any closing remarks. Thank you Victor so to everyone listening on this call. We appreciate your interest in Stericycle and you shared excitement for our future. Thank you all very much.

Speaker Change: Yes.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect everyone have a great day.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.