Q1 2024 Stericycle Inc Earnings Call

Operator: Good day, and thank you for standing by, and welcome to the Q1 2024 Stericycle Earnings Conference Call. At this time, our participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Andrew Ellis, Senior Vice President of Finance.

Good day, and thank you for standing by and welcome to the Q1 2020 for Stericycle 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 to ask a question. During this session you will need to press star one on your telephone.

Then here an automated message a bias in your hand is raised to withdraw your question. Please press star one again.

Speaker Change: Please be advised that today's conference is being recorded I would now like to hand the conference over.

Over to your speaker today, Andrew Ellis Senior Vice President of Finance.

Andrew Ellis: Good morning, and thank you for joining Stericycle's 2024 First 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.

Andrew Ellis: Good morning, and thank you for joining Stericycle is 2024 first quarter earnings call on the call today will be Cindy Miller, our Chief Executive Officer, Janet Zelenka, Chief Financial Officer, and Chief Information Officer, and Cory White, our Chief commercial officer.

Unknown Executive: The discussion today includes four forward-looking statements that involve risks 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. 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.

Speaker Change: Discussion today includes forward looking statements that involve risks and uncertainties. When we use words, such as believes expects anticipates estimates may.

Speaker Change: <unk> will go or similar expressions, we are making forward looking statements forward looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of our management about future events and are therefore subject to risks and uncertainties.

Speaker Change: 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 within the risk factors in our filings with the U S Securities and Exchange Commission.

Unknown Executive: Factors that could cause our actual results to differ are discussed in the Safe Harbor Statement and our earnings press release and in greater detail within 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.

Speaker Change: Our past financial performance should not be considered a reliable indicator of our future performance and investors should not use historical results to anticipate future results or trends, we disclaim any obligation to update or revise any forward looking statements other than in accordance with legal and regulatory obligations.

Unknown Executive: We disclaim any obligation to update or revise any forward-looking statements other than in accordance with legal and regulatory obligations. On the call, we will discuss non-GAAP financial measures. For additional information and reconciliation to the most comparable U.S. GAAP measures, please refer to the schedules in our earnings press release, which can be found on Stericycle's investor relations website at investors.stericycle.com. The prepared comments for today's call correspond to an earnings presentation, which is also available on Stericycle's Investor Relations website.

Speaker Change: 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 that Stericycle Dot com.

Speaker Change: The prepared comments for today's call correspond to an earnings presentation, which is also available at Stericycle as Investor Relations website throughout the call. We will reference specific slides from the presentation.

Unknown Executive: Throughout the call, we will reference specific slides from the presentation. This call is being recorded, and a replay will be available approximately one hour after the end of the conference call today through May 25, 2024. A replay of the webcast will also be available on Stericycle's Investor Relations website. However, time-sensitive information provided during today's call, which is occurring on April 25, 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. I'll now turn the call over to Cindy.

Speaker Change: This call is being recorded and a replay will be available approximately one hour. After the end of the conference call today until May 25, 2020 for a replay of the webcast will also be available on Stericycle Investor Relations Web site.

Speaker Change: Time sensitive information provided during today's call, which is occurring on April 25, 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 express written consent of Stericycle is prohibited ill now turn the call over to Cindy.

Cindy J. Miller: Thank you, Andrew. Good morning, everyone.

Cindy J. Miller: Thank you Andrew good morning, everyone.

Cindy J. Miller: On today's call, I will walk through highlights of our first quarter results. Cory and I will provide an update on our key business priorities, and Janet will discuss our financial performance. We are pleased with our first quarter results. Adjusted earnings per share was $0.57, an $0.08 improvement, and adjusted EBITDA was $116.2 million, a $4.9 million improvement over the first quarter of 2023. These improvements were driven by disciplined execution across our key priorities, and we are on track to achieve our guidance for the full year 2024.

Cindy J. Miller: On today's call I will walk through highlights of our first quarter results Corey and I will provide an update on our key business priorities and Janet will cover our financial performance.

Cindy J. Miller: We are pleased with our first quarter results adjusted earnings per share was <unk> 57.

Cindy J. Miller: An 8% improvement in adjusted EBITDA was $116 2 million, a $4 $9 million improvement over the first quarter of 2023. These.

Janet H. Zelenka: These improvements were driven by disciplined execution across our key priorities and we are on track to achieve our guidance for full year 2024.

Cindy J. Miller: First quarter revenues were in line with our internal expectations. Regulated Waste and Compliance Services organic revenues grew for the eighth consecutive quarter, mainly driven by growth in our hospital customers, which is being partially offset by a reduction in the national account footprint we serve, as we have outlined on previous earnings calls. Secure information destruction performed as expected, mainly due to year-over-year anticipated headwinds in commodity-indexed revenues in the first half of 2024, as we mentioned in our prior earnings call. I will now turn the call over to Cory to provide an update on our first new key business priority, commercial and service excellence.

Speaker Change: First quarter revenues were in line with our internal expectations regulated waste and compliance services organic revenues grew for the eighth consecutive quarter, mainly driven by growth in our hospital customers, which is being partially offset by a reduction in the national account footprint, we serve as we have outlined on previous.

Speaker Change: Earnings calls secure information.

Speaker Change: <unk> destruction performed as expected mainly due to year over year anticipated headwinds in commodity index revenues in the first half of 2024 as we mentioned in our prior earnings call I will now turn the call over to Corey to provide an update on our first new key business priority commercial and service excellence.

Cory White: Thank you, Cindy. As a reminder, the three pillars of commercial and service excellence are sales, service, and product excellence. Today, I would like to provide an update on our latest initiative in product excellence, which focuses on developing and launching enhanced solutions. We recently launched our Shred It Protect Plus service for our secure information destruction business, which provides regularly scheduled paper shredding services and bundles customizable tiers of cybersecurity and privacy awareness training.

Speaker Change: <unk>.

Corey: Thank you Cindy as a reminder, the three pillars of commercial and service excellence, our sales service and product excellence today I would like to provide an update on our latest initiative and product excellence, which focuses on developing and launching enhanced solutions.

Corey: We recently launched our shred it protect plus service for our secure information destruction business, which provides regularly scheduled paper shredding service and bundles customizable tiers of cyber security and privacy awareness training.

Cory White: This offering promotes compliance, helps maintain brand reputation, and provides predictable monthly subscription billing enabled by capabilities that were delivered with our latest ERP deployment last fall. Protect Plus aligns with ongoing customer feedback and our annual shredding data protection report, which surveys over 1,500 small business leaders and consumers. In this year's survey, more than 90% of small business leaders reported that data and information protection and compliance training is an essential security practice, yet only 15% reported that they provided employees with training.

Corey: This offering promotes compliance helps maintain brand reputation and provides predictable monthly subscription billing enabled by capabilities that were delivered with our latest ERP deployment last fall.

Corey: Protect plus aligns with ongoing customer feedback and our annual shred. It data protection report, which surveys over 1500 small business leaders and consumers.

Corey: And this year's survey more than 90% of small business leaders reported that data and information protection and compliance training are an essential security practice, yet only 15% reported that they provided employees with training.

Cory White: This differentiated product addresses this specific need in the marketplace. Protect Plus is our first subscription-based offering for secure information destruction, small and medium-sized business customers, which bundles service stops with compliance-based tools similar to our Steri-Safe offering for our regulated waste customers. Although these are early days, we have already generated approximately $2 million in annualized revenues with new customers only. I will now turn the call back to Cindy for an update on our other key business priorities.

Corey: This differentiated product addresses this specific need in the marketplace.

Corey: Protect pluses, our first subscription based offering for secure information destruction small and medium sized business customers, which bundled service stops with compliance based tools similar to our steri safe offering for our regulated waste customers.

Corey: Although early days, we have already generated approximately $2 million in annualized revenues with new customers only.

Corey: I will now turn the call back to Cindy for an update on our other key business priorities.

Cory White: Thank you, Cory. Turning to our second key business priority, operational excellence, we are focusing on driving margin expansion. First, we have completed the workforce management actions that we discussed on the February 2024 earnings call, which included targeted reductions in headcount in the fourth quarter of 2023 and first quarter of 2024, along with continued careful hiring and managing attrition that began in 2023. As a result of these actions, we are on track to realize an estimated $40 to $45 million of in-year cost savings.

Cindy J. Miller: Thank you Corey turning to our second key business priority operational excellence, we are focusing on driving margin expansion first we have completed the workforce management actions that we discussed on the February 2024 earnings call, which included targeted reductions in head count in the fourth quarter of 2023 and first quarter.

Corey: Of 2024, along with continued careful hiring and managing attrition that began in 2023 from these actions. We are on track to realize an estimated 40% to $45 million of in year cost savings.

Cory White: Second, the construction phase of our newest medical waste incinerator facility in McCarran, Nevada, remains on track to be completed in the second quarter of 2024, at which point we will begin the testing phase. We are also building the capability to process sorted office paper at this location and expect to begin shredding paper later this year. Third, we continue to make progress on our routing optimization initiative across both core businesses, which has been enabled by our ERP system.

Corey: Second the construction phase of our newest medical waste incinerator facility in Mccarran, Nevada remains on track to be completed in the second quarter of 2024 at which point, we will begin the testing phase. We are also building the capability to process sorted office paper at this location in <unk>.

Corey: To begin shredding paper later this year.

Corey: Third we continue to make progress on our routing optimization initiative across both core businesses, which has been enabled by our ERP in North America, reducing routes has allowed us to eliminate approximately 5% of our North America fleet, which is a reduction of about 200 vehicles over the long.

Cory White: In North America, reducing routes has allowed us to eliminate approximately 5% of our North American fleet, which is a reduction of about 200 vehicles over the last 15 months. I will now turn the call over to Janet to discuss our financial results in more detail.

Corey: Last 15 months.

Corey: I will now turn the call over to Janet to discuss our financial results in more detail. Thank you Cindy I will start by summarizing our first quarter financial results as noted on slide six revenues in the first quarter were $664 9 million.

Janet H. Zelenka: This decrease was mainly due to divestitures of $17.7 million, which was partially offset by favorable foreign exchange rates of $2.8 million and an acquisition of $0.9 million. Organic revenues in regulated waste and compliance services grew $9 million, while secure information destruction organic revenues declined $14.4 million. Secure information destruction was mainly impacted by lower commodity index revenues due to lower recycling revenues and lower fuel and environmental surcharges of $19.8 million, which were partially offset by higher service revenues of $5.4 million.

Janet H. Zelenka: Compared to $684 3 million in the first quarter of 2023.

Janet H. Zelenka: The decrease was mainly due to divestitures of $17 $7 million, which was partially offset by favorable foreign exchange rates of $2 8 million and an acquisition of zero point $9 million.

Janet H. Zelenka: <unk> revenues in regulated waste and compliance services grew $9 million, while secure information destruction organic revenues declined $14 4 million.

Janet H. Zelenka: Secure information destruction was mainly impacted by lower commodity index revenues due to lower recycling revenues and lower fuel and environmental surcharges of $19 8 million, which.

Janet H. Zelenka: Which were partially offset by higher service revenues of $5 $4 million.

Janet H. Zelenka: As noted on slide seven, regulated waste and compliance services revenues were $447.8 million, compared to $451.3 million in the first quarter of 2023. Excluding the impact of divestitures, foreign exchange rates, and an acquisition, organic revenues increased 2.1% in the first quarter. In North America, Regulated Waste and Compliance Services organic revenues increased $7.1 million, or 1.9%, mainly driven by price. Internationally, Regulated Waste and Compliance Services organic revenues increased $1.9 million, or 3%, mainly driven by price.

Janet H. Zelenka: As noted on slide seven regulated waste and compliance services revenues were $447 8 million compared to $451 3 million in the first quarter of 2023, excluding the impact of divestitures and foreign exchange rates and an acquisition organic revenues increased two 1% in the <unk>.

Janet H. Zelenka: First quarter.

Janet H. Zelenka: In North America regulated waste and compliance services organic revenues increased $7 $1 million or one 9%, mainly driven by price international regulated waste and compliance services organic revenues increased $1 $9 million or 3%, mainly driven by price.

Janet H. Zelenka: Secure Information Destruction revenues were $217.1 million, compared to $233 million in the first quarter of 2023. Excluding the impact of divestitures, foreign exchange rates, and an acquisition, organic revenues decreased 6.3%, mainly due to lower commodity index revenues, reflecting about an $80 reduction per ton in sorted office paper pricing year over year. In North America, secure information destruction organic revenues declined $12.2 million, or 6%, compared to the first quarter of 2023.

Janet H. Zelenka: Secure information destruction revenues were $217 1 million compared to $233 million in the first quarter of 2023, excluding the impact of divestitures and foreign exchange rates and an acquisition organic revenues decreased six 3%, mainly due to lower commodity index revenues.

Janet H. Zelenka: Reflecting about an $80 reduction per ton and sorted office paper pricing year over year.

Janet H. Zelenka: In North America secure information destruction organic revenues declined $12 2 million or 6% compared to the first quarter of 2023 in the first quarter recycling paper revenues were down approximately 7% or $14 $3 million due to lower <unk> rates affecting sorted office.

Janet H. Zelenka: In the first quarter, recycling paper revenues were down approximately 7%, or $14.3 million, due to lower RISI rates affecting sorted office paper pricing and lower tonnage. As a reminder, when sorted office paper prices are below $192 a ton, we are able to offset approximately 60% of the reduction in paper prices with our recycling recovery surcharge.

Janet H. Zelenka: For pricing and lower tonnage, we continued to see headwinds in service stops with our national customers driven by recent losses of mostly low margin stopped with existing customers and site closures in the quarter service revenues were up approximately 1% or $2 $1 million, mainly driven by the recycling recover.

Janet H. Zelenka: <unk> surcharge as a reminder, when sorted office paper prices are below a $192 a ton we are able to offset approximately 60% of the reduction in paper prices with our recycling recovery surcharge looking year over year, we were able to offset approximately 40% of the reduction is the average for that.

Janet H. Zelenka: Looking year-over-year, we were able to offset approximately 40% of the reduction, as the average sorted office paper price in the first quarter of 2023 was over $220 a ton. However, our international secure information destruction organic revenues decreased $2.2 million or 8.4% compared to the first quarter of 2023, mainly due to lower commodity index revenues. Income from operations in the first quarter was $38.9 million, compared to $40 million in the first quarter of 2023.

Janet H. Zelenka: Office paper price in the first quarter of 2023 with over $220 a ton.

Janet H. Zelenka: Our international secure information destruction organic revenues decreased $2 2 million or eight 4% compared to the first quarter 2023, mainly due to lower commodity index revenues, Inc.

Janet H. Zelenka: Income from operations in the first quarter was $38 9 million compared to $40 million in the first quarter of 2023.

Janet H. Zelenka: The $1.1 million decrease was mainly due to lower Secure Information Destruction Commodity Index revenues and the corresponding margin flow through impact of $11.9 million, higher adjusting items of $6.9 million, and higher bad debt expense of $3.8 million, mainly due to a lower first quarter of 2023 bad debt expense level as a result of improved North America Secure Information Destruction collection. These decreases were partially offset by cost savings and margin flow through $14.8 million and lower incentive and stock-based compensation of $5.5 million.

Janet H. Zelenka: The $1 $1 million decrease was mainly due to lower secure information destruction commodity index revenues and the corresponding margin flow through impact of $11 $9 million higher adjusting items of $6 9 million and higher bad debt expense of $3 8 million, mainly due to a lower first quarter of 2000.

Janet H. Zelenka: 23, bad debt expense level as a result of improved North America secure information destruction collections. These decreases were partially offset by cost savings and margin flow through of $14 8 million and lower incentive and stock based compensation of $5 5 million.

Janet H. Zelenka: Net income was $13.1 million, or $0.14 diluted earnings per share, compared to $11.2 million, or $0.12 diluted earnings per share, in the first quarter of 2023. The $1.9 million increase was mainly due to lower interest expense of $2 million, partially offset by lower income from operations, as I just explained. Cash from operations for the three months ended March 31, 2024 was an outflow of $54.5 million compared to an inflow of $49.5 million in the same period in 2023.

Janet H. Zelenka: Net income was $13 1 million or 14 diluted earnings per share compared to $11 2 million or <unk> 12 diluted earnings per share in the first quarter of 2023, the $1 $9 million increase was mainly due to lower interest expense of $2 million, partially offset by lower income from operations.

Janet H. Zelenka: As I just explained.

Janet H. Zelenka: Cash from operations for the three months ended March 31, 2024 was an outflow of $54 5 million compared to an inflow of $49 5 million in the same period of 2023 the.

Janet H. Zelenka: The year-over-year decrease of $104 million was mainly due to an increase in accounts receivable, net of deferred revenues of $63.1 million due to expected billing and collection delays from the regulated waste ERP launch in September 2023, higher annual incentive plan payments of $17.1 million, and other net working capital changes of $23.8 million. In the beginning of the first quarter, we experienced a continuation of accounts receivable trends that we discussed on the fourth quarter call.

Janet H. Zelenka: The year over year decrease of $104 million was mainly due to an increase in accounts receivable net of deferred revenues of $63 1 million due to expected billing and collection delays from the regulated waste ERP launch in September 2023, higher annual incentive plan payments of $17 1 million.

Janet H. Zelenka: And other net working capital changes of $23 8 million.

Janet H. Zelenka: In the beginning of the first quarter, we experienced a continuation of accounts receivable trends that we discussed on the fourth quarter call. As a reminder, these trends were mainly driven by the timing of U S regulated waste customer billings and collections due to the ERP implementation as we held some invoices for our largest customers to ensure accuracy or me complex cut.

Janet H. Zelenka: As a reminder, these trends were mainly driven by the timing of U.S. regulated waste customer billings and collections due to the ERP implementation, as we held some invoices for our largest customers to ensure accuracy or meet complex customer invoicing requirements. Beginning in March, accounts receivable balances started to stabilize, and we started to see improvement in collections in April.

Janet H. Zelenka: <unk> invoicing requirements bigger.

Janet H. Zelenka: Beginning in March accounts receivable balance has started to stabilize and we started to see improvement in collections in April.

Janet H. Zelenka: Adjusted income from operations was $90.5 million, or 13.6% as a percentage of revenues, up from $84.7 million, or 12.4% as a percentage of revenues in the first quarter of 2023. Adjusted income from operations increased 120 basis points as a percentage of revenues, mainly due to cost savings and margin flow-through of 230 basis points. This increase was partially offset by lower Secure Information Destruction Commodity Index revenues and the corresponding margins flow-through impact of 180 basis points and higher bad debt expense of 60 basis points, as explained.

Janet H. Zelenka: Adjusted income from operations was $90 5 million or 13, 6% as a percentage of revenues up from $84 7 million or 12, 4% as a percentage of revenues in the first quarter of 2023 adjusted income from operations increased to 120 basis points as a percentage of revenues mainly.

Janet H. Zelenka: Due to cost savings and margin flow through of 230 basis points, lower incentive and stock based compensation of 80 basis points and the impact of divesting lower margin businesses of 40 basis points.

Janet H. Zelenka: This increase was partially offset by lower secure information destruction commodity index revenues and the corresponding margin flow through impact of 180 basis points and higher bad debt expense of 60 basis points as explained.

Janet H. Zelenka: As noted on slide 10, adjusted diluted earnings per share was 57 cents compared to 49 cents in the first quarter of 2023. Excluding the positive impacts from divesting lower margin businesses of one cent, the remaining seven cent year over year increase was driven by one cent cost savings and margin flow through of 11 cents. 2.

Janet H. Zelenka: As noted on slide 10, adjusted diluted earnings per share was <unk> 57, compared to <unk> 49 in the first quarter of 2023, excluding the positive impact from divesting lower margin businesses of one <unk>.

Janet H. Zelenka: The remaining 7% year over year increase was driven by one cost savings and margin flow through of 11.

Cindy J. Miller: Lower taxes, interest, and other costs of 4 cents, and 3. Lower incentive and stock-based compensation of 4 cents. These were partially offset by lower Secure Information Destruction Commodity Index revenues of $0.09 and lower bad debt expense of $0.03. Capital expenditures for the three months ended March 31, 2024 were $43.1 million, compared to $36.4 million for the same period last year. Pre-cash flow for the first quarter was an outflow of $97.6 million compared to an inflow of $13.1 million in the same period of 2023.

Janet H. Zelenka: Two lower taxes interest and other <unk>.

Janet H. Zelenka: And three lower incentive and stock based compensation of <unk>.

Janet H. Zelenka: These were partially offset by lower secure information destruction commodity index revenues at <unk> and lower bad debt expense of <unk>.

Janet H. Zelenka: Capital expenditures for the three months ended March 31, 2024 were $43 1 million compared to $36 4 million for the same period last year.

Janet H. Zelenka: Free cash flow for the first quarter was an outflow of $97 $6 million compared to an inflow of $13 1 million in the same period of 2023 as noted on slide nine the year over year decline of approximately $110 $7 million was mainly due to lower cash from operations of 104.

Cindy J. Miller: As noted on slide 9, the year-over-year decline of approximately $110.7 million was mainly due to lower cash from operations of $104 million and higher capital expenditures of $6.7 million. As mentioned on the fourth quarter call and in line with our expectations, we expected a significant amount of cash in the first quarter as it includes our annual incentive compensation payouts, the semi-annual debt interest payments, and the timing of accounts receivable collections. As shown on slide 11, at the end of the first quarter, our credit agreement-defined debt leverage ratio was 3.51 times and aligned with our expectations.

Janet H. Zelenka: And higher capital expenditures of $6 $7 million.

Janet H. Zelenka: As mentioned on the fourth quarter call and in line with our expectations. We expected a use of cash in the first quarter as it includes our annual incentive compensation payouts that semi annual debt interest payments and the timing of accounts receivable collections.

Janet H. Zelenka: As shown on slide 11 at the end of the first quarter, our credit agreement defined debt leverage ratio was 351 times and aligned with our expectations. The amended credit agreement allows for certain cash add backs when calculating the credit agreement defined debt leverage ratio with $50 million as such add backs that expired at the end of.

Cindy J. Miller: The amended credit agreement allows for certain cash ad backs when calculating the credit agreement-defined debt leverage ratio, with $50 million of such ad backs that expired at the end of 2023. Expiration of these ad backs, which was anticipated, increased the credit agreement-defined debt leverage ratio by approximately 30 points in the first quarter of 2024. We expect to return to our long-term range two and a half to three times later this year. I will now turn the call back.

Janet H. Zelenka: 2023 exploration of these add backs, which was anticipated increase the credit agreement defined debt leverage ratio by approximately 30 points in the first quarter of 2024, we expect to return to our long term range of two five to three times later this year I will now turn the call back to Cindy.

Cindy J. Miller: Thank you Janet I wanted to Stericycle as core values is that we embrace diversity and inclusion aligning with this core value I'm very excited to share that we were recently recognized by Newsweek as one of Americas greatest workplaces for diversity and for women. We received the highest rating for offering a diverse and inclusive work environment.

Operator: Thank you, Janet. One of Stericycle's core values is that we embrace diversity and inclusion. Aligning with this core value, I'm very excited to share that we were recently recognized by Newsweek as one of America's greatest workplaces for diversity and for women. We received the highest rating for offering a diverse and inclusive work environment and celebrating the role that diversity plays in driving creativity, innovation, and organizational success. As always, I'd like to thank our customers, team members, and the communities we serve, and our shareholders for their continued trust in having Stericycle protect what matters. Operator, please open the line for questions. And thank you.

Janet H. Zelenka: Celebrating the role that diversity plays in driving creativity innovation and organizational success.

Janet H. Zelenka: I'd like to thank our customers team members and the communities, we serve and our shareholders for their continued trust and having stericycle protect what matters operator. Please open the line for Q&A.

Speaker Change: And thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby we compile the Q&A roster and we ask that you limit yourself to two questions and one follow up again thats two questions and one follow up one.

Operator: And thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by.

Janet H. Zelenka: Moment for our first question.

Janet H. Zelenka: Okay.

Operator: We've compiled a Q&A roster, and we ask that you limit yourself to two questions and one follow-up. Again, that's two questions and one follow-up. One moment for our first question. And our first question comes from Sean Dodge from RBC Capital Markets. Your line is now open.

Janet H. Zelenka: And our first question comes from Sean Dodge from RBC capital markets. Your line is now open.

Sean Wilfred Dodge: Yes, thanks, good morning.

Sean Wilfred Dodge: On the full year EBITDA guidance.

Sean Wilfred Dodge: Sydney, You said you completed the head count reduction tracking toward that $40 to $45 million or in your cost savings you targeted.

Sean Wilfred Dodge: The other cost actions you need to take to get the rest of the way to the guidance the other $15 million to $20 million give or take.

Sean Wilfred Dodge: Yeah, thanks. Good morning.

Cindy J. Miller: On the full year EBITDA guidance, Cindy, you said you completed the headcount reduction, tracking toward the $40 to $45 million of in-year cost savings you targeted. The other cost actions you need to take to get the rest of the way to that guidance, the other $15 to $20 million, give or take, are those facility and transportation enhancements? I think you mentioned some routing and fleet reduction. Are those part of that $40 to $45 separate?

Sydney: Are those the facility and transportation enhancements I think you mentioned some routing and fleet reductions are those part of that 40% to 45 or a separate I guess, maybe can you just give us a little bit more detail on what specifically needs to be done in the year and how far along you are on on all of that yeah, No Shawn thanks for the question.

Speaker Change: Yes, you are correct. So we've got some savings from last year. We've got then the the reduction enforced that happened this year at the end of February so.

Speaker Change: For us we are leaning into the continuation of route rebalancing and I think the team is making great progress where there are there are small, but mighty team for sure.

Cindy J. Miller: I guess maybe you can just give us a little bit more detail on what specifically else needs to be done in the year and how far along you are on all of that.

Speaker Change: We are leaning into productivity gains that we've seen we are we upgraded about 20 facilities last year everything from conveyance to new autoclave and quite a bit of of other capital expenditure investment those things are yielding good results in terms of.

Cindy J. Miller: Yeah, no, Sean, thanks for the question. Yes, you're correct.

Cindy J. Miller: So we've got some savings from last year. We've also got the reduction in force that happened this year at the end of February. So for us, we are leaning into the continuation of route rebalancing, and I think the team's making great progress. They're a small but mighty team, for sure.

Speaker Change: The equipment, saying up running longer which which reduces the amount of time that we've got to have folks actually handling materials or our staffing them. So that always working remember there is also a part to this in terms of careful hiring and attrition as well, we're being very disciplined in terms of of replacements.

Cindy J. Miller: We are leaning into productivity gains that we've seen. We upgraded about 20 facilities last year, everything from conveyance to new autoclaves and quite a bit of other capital expenditure investment. Those things are yielding good results in terms of the equipment staying up and running longer, which reduces the amount of time that we've got to have folks actually handling materials or staffing them so that everything is working. Remember, there's also a part to this in terms of careful hiring and attrition as well.

Speaker Change: And a lot of the things to make sure that we keep a keen eye on the reduction in forces that we've already had so I think it's a combination of all those initiatives.

Speaker Change: I'm very confident that we are on track.

Speaker Change: We're certainly trending towards towards the plan that we've laid out and I think the team is doing a great job.

Speaker Change: Okay, Great and then on.

Speaker Change: The free cash flow Janet I know you mentioned some impact from accounts receivable in the ERP.

Cindy J. Miller: We're being very disciplined in terms of replacements and a lot of things to make sure that we keep a keen eye on the reduction in forces that we've already had. So I think it's a combination of all those initiatives. I'm very confident that we are on track. We're certainly trending toward the plan that we had laid out, and I think the team is doing a great job.

Janet H. Zelenka: Can you just unpack that a little bit more for us what's happening there and then you said it looks like it's starting to stabilize as of April are we at the point now where we should start to see that begin to reverse and then just in context of your full year guidance.

Speaker Change: The 210 to 265 is this going to be pretty Q4 or back half weighted or with this stabilizing and reversing should free cash be pretty ratable over the next few quarters, Yes, I'll start I think youll start to see it improve in the second quarter. We are starting to see momentum in those cash collections remaining notes are focused on.

Janet H. Zelenka: Okay, great. And then on the free cash flow, Janet, I know you mentioned some impact from accounts receivable and the ERP. Can you just unpack that a little bit more for us? What's happening there?

Speaker Change: Our largest customers that are most complex for most of our customers, we bill about $120 million a month in our WCS in North America and most of that's coming in this is intended to pay and just getting the bills right highly complex over thousands of invoices to be processed over a lot of systems for our customers.

Janet H. Zelenka: And then you said it looks like it's starting to stabilize as of April. Are we at the point now where we should start to see that begin to reverse? And then just in context of your full year guidance, the 210 to 265, is this going to be pretty Q4 or back half weighted, or with this stabilizing and reversing? Should free cash be pretty ratable over the next few quarters?

Speaker Change: So we're very encouraged by the momentum we're seeing I think that will continue into the second quarter, a bit, but we intend to flip into positive cash flow as the as the year progresses and are confident in our guidance because we know that is money to be paid and we had predicted that when we were looking at the cash outflow that I said, we would have in the first.

Janet H. Zelenka: Yeah, I think you will start to see it improve in the second quarter. We are starting to see momentum in those cash collections. Those are focused on our largest customers that are the most complex. For most of our customers, we bill about $120 million a month in RWCS in North America, and most of that's coming in. This is intent to pay and just getting the bills right. Highly complex, with thousands of invoices to be processed over a lot of systems for our customers.

Speaker Change: Quarter that would continue to go into Q1 and actually internally, we did better on our cash flow then than we had thought.

Speaker Change: Okay, great. Thanks again.

Speaker Change: Thanks, Sean.

Speaker Change: And thank you.

Speaker Change: Yeah.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from David Manthey from Baird. Your line is now open.

David John Manthey: Hi, good morning, everyone.

David John Manthey: Good morning first question is I'm, hoping you can outline some of the business problems or processes that you've been able to either solve or improve with the new ERP system. So far and what key projects are next on the timeline and associated with that Jim that you talked about the 11.

Janet H. Zelenka: So we're very encouraged by the momentum we're seeing. I think that will continue into the second quarter a bit, but we intend to flip into positive cash flow as the year progresses and are confident in our guidance because we know that it's money to be paid. And we predicted that when we were looking at the cash outflow that I said we would have in the first quarter, that would continue into Q1. And actually, internally, we did better on our cash flow than we had thought.

Jim: Cost savings and margin flow through.

Jim: Are you expecting that to accelerate decelerate or remain at constant levels in quarters ahead.

Jim: Great.

David John Manthey: Dave.

Dave: Great to hear you I appreciate the questions. So I think the ERP is done if we look at it two ways certainly it solves problems, but then it also gives us additional capabilities. We didn't have so it's almost as if you know what can you fix and then what does it open up as an opportunity for you. So in terms of problems anytime you get.

Sean Wilfred Dodge: Okay, great. Thanks again.

Operator: And one moment for our next question. And our next question comes from David Manthey from Bayard. Your line is now open.

David John Manthey: Hi, good morning, everyone. My first question is, I'm hoping you can outline some of the business problems or processes that you've been able to either solve or improve with the new ERP system so far and what key projects are next on the timeline. And associated with that, Janet, you talked about the 11 cents of cost savings and margin flow through. Are you expecting that to accelerate, decelerate, or remain at constant levels in the quarters?

Dave: Morning report, if you will putting in simple terms from in our WCS side right now that they are on the same platform as shred with dispatching routing.

Dave: Capabilities to know productivity levels to understand stopped counts.

Dave: During the day to be able to shift and make changes I don't want to say on the fly, but certainly as customers have different needs.

Cindy J. Miller: Great. Dave, great to hear from you. Appreciate the questions.

Dave: We are early days on the ERP side or on the regulated side, but I think our operators are really leaning into the technology. So for us better routing anytime you can turn around and take 200 vehicles.

Cindy J. Miller: So I think the ERP has done, we look at it in two ways. Certainly, it solves problems, but then it also gives us additional capabilities we didn't have. So it's almost as if, you know, what can you fix, and then what does it open up as an opportunity for you? So in terms of problems, anytime you get a morning report, if you will, putting it in simple terms, from an RWCS side, right now that they are on the same platform as SHRED with dispatching routing capabilities to know productivity levels, to understand stop counts, you know, during a day to be I don't want to say on the fly, but certainly, customers have different needs.

Dave: Off the street continued to do the work.

Dave: Just having it routed better all the miles that you've run less fuel everything those are those are some of the problems. If you will call or I would just say the inefficiencies that we're solving for.

Dave: And then but if you take a look at solutions right now.

Dave: As we morph into let's say the commercial side and the excellence, we just launched protect plus.

Dave: We're looking at and understanding our customers better. We are we are looking at how we can leverage penetrate cross sell do things better all of that is coming to light because we're no longer manual. So for me I think it is early days in terms of what what the ERP is is giving us but pretty much anything that we're coming out with right now.

Cindy J. Miller: We are in the early days on the ERP side or on the regulated side, but I think our operators are really leaning into the technology. So for us, better routing, anytime you can turn around and take two hundred vehicles off the street, continue to do the work, just having it routed better, all the miles that you run last, the fuel, everything, those are some of the problems, if you will call, or I would just say the inefficiencies that we're solving for.

Dave: It is really where we're morphing from the Braun stage I used to talk about we're doing an awful lot because we're muscling through we're now finally, combining the brand with some brain in the brain is more just the information we're getting unable to use.

Cindy J. Miller: But if you take a look at solutions, right now, as we morph into, let's say, the commercial side and excellence, we just launched Protect Plus. We're looking at understanding our customers better. We are looking at how we can leverage, penetrate, cross-sell, and do things better. All of that is coming to light because we're no longer manual. So for me, I think it is early days in terms of what the ERP is giving us, but pretty much anything that we're coming out with right now, it is really, we're morphing from the brash stage.

Dave: And harness from from the ERP, so more to come there and quite frankly for us to have reaffirmed long range guidance, a good bit of us getting better with that is built into that.

Dave: And then in terms of the momentum on what we're seeing remember we just completed the head count reduction in Q1. So most of the savings are not in Q1, and we're just going to see momentum on that build on the 40% to 45 in year cost savings that we're going to have David for that for the year. We also are going to see.

Cindy J. Miller: I used to talk about, you know, we're doing an awful lot because we're muscling through. But we're now finally combining the brawn with some brains, and the brain is more just the information we're getting and able to use and harness from the ERP. So more to come there, and quite frankly, for us to have reaffirmed long-range guidance, a good bit of us getting better with that is built

Dave: And SG&A and others because that is what key driver for us but there is also continued route rebalancing most of that it's been in secure information destruction. We have some momentum that we can build over this year and next and in applying the <unk> WCS and data has been key for us to see insights that we have never seen before and our WCS.

Janet H. Zelenka: And then in terms of the momentum on what we're seeing, remember we just completed the head count reduction in Q1, so most of the savings are not in Q1. And we're going to see momentum on that build on the 40 to 45 in-year cost savings that we're going to have, David, for the year. We also are going to see that in, you know, SG&A and others because that is, you know, a key driver for us.

Dave: Which are important I just want to point out the margin flow through from <unk> from the headwinds that we're seeing in first quarter. The heaviest headwinds we have year over year on the commodity index revenue related to the Ritchie rates was heaviest in the first quarter, what see some in the second quarter and then that will also mitigate as well.

Janet H. Zelenka: But there is also continued route rebalancing, and most of that has been in secure information destruction. You know, we have some momentum that we can build over this year and next in applying the RWCS, and data has been key for us to see insights that we have never seen before in RWCS, which are important. I just want to point out that margin flow-through from SID, from the headwinds that we're seeing in the first quarter, the heaviest headwinds we have year over year on the commodity index revenue related to the RISI rates were heaviest in the first quarter. We'll see some in the second quarter, and then that will also mitigate, creating margin flow-through in the second half of the year.

Dave: Creating margin flow through in the second half of the year.

Dave: Okay.

Speaker Change: That's a lot of great information. Thank you for that and then just a quick one on this protect plus offering.

Speaker Change: How important is this going to be I don't want to overstate it but.

Speaker Change: And secondarily when you used to breakout SKU med waste it was higher operating margin than overall and given that it sounds like you are catering to SMB customer here.

Speaker Change: Is it right to assume that protect plus operating margins would be higher than the corporate average.

Speaker Change: I'll, let Janet kind of address maybe the margin discussion but for us.

David John Manthey: Okay, that's a lot of great information. Thank you for that. And then just a quick one on this Protect Plus offering. How important is this going to be? I don't want to overstate it, but and secondarily, when you used to break out SQ med waste, it had a higher operating margin than overall, and given that it sounds like you're catering to a SMB customer here, is it right to assume that Protect Plus operating margins would be higher than the corporate average?

Speaker Change: Corey Corey talked about protect plus.

Janet H. Zelenka: And for Us.

Speaker Change: Have you been a follower for a long time anytime you take a look and you compare this to what we're doing in in Steri safe and being able to provide a similar service really to that to that niche market that small and medium business owner, who doesn't have a training department. They don't have compliance departments. They don't have an awful lot of the resources that the big companies have.

Cindy J. Miller: I'll let Janet kind of address maybe the margin discussion. But for us, we're, you know, Cory. Cory talked about Protect Plus. And for us, Dave, you've been a follower for a long time.

Speaker Change: For us it has been or our customer base and our WCS really appreciates the expertise we provide to them at their fingertips.

Speaker Change: And this is our venture into that on the shred side, because because with all the cyber all the information all the all the technical things around keeping information secure that's extremely important to them.

Cindy J. Miller: Any time you take a look and compare this to what we're doing at SteriSafe and being able to provide a similar service to that to that niche market, that small and medium business owner who doesn't have a training department, they don't have compliance departments, they don't have an awful lot of the resources that the big companies have, For us, it has been our, our customer base in RWCS really appreciates the expertise we provide to them at their fingertips.

Speaker Change: So for us.

Speaker Change: This is allowing US right now and I think Corey I think it was I think Corey had mentioned that it is just with new customers at this moment, where we're providing them that subscription service.

Speaker Change: Which takes them away from the transactional engagement, that's with us and really builds the value build the connectivity and I think bill to the customer stickiness, because certainly where we're I think what we have is something that our competitors than anybody else the big and the small really aren't offering and in terms of margin yes.

Cindy J. Miller: And this is our venture into that on the shred side because, because with all the cyber, all the information, all the technical things around keeping information secure, that's extremely important to them. Because certainly, we're, I think what we have is something that our competitors and anybody else, the big and the small, really aren't offering.

Speaker Change: Inherently your small and medium business customers have a.

Speaker Change: A better margin profile than your largest customers and it has a stability to the margin right now 100% of secure information destruction as transactional by its very nature and I'd just like to point out this was a subscription based capability.

Janet H. Zelenka: And in terms of margin, yes, inherently, your small and medium business customers have a better margin profile than your largest customers, and it adds stability to the margin.

Janet H. Zelenka: Right now, 100% of secure information destruction is transactional by its very nature. And I'd just like to point out that this was a – the subscription-based capability was put into place when we went to the ERP for RWCS just last fall. So we didn't have the capability in the system to offer subscription-based services to our SID customers. So this is a capability-enabled offering that also provides the stability and revenue flow-through in the long run as a potential, just like we do with our independent customers in RWCS, where about 90% of that revenue, I think, is subscription-based. So it's an early day, so you're right not to overstate it.

Speaker Change: Was put into place when we went to the ERP for our WCS just last fall. So we didn't have the capability in the system to offer subscription base to our.

Speaker Change: <unk>. So this is a capability enabled offering that also provides us stability and revenue flow through in the long run as a potential just like we do with our independent customers in our WCS, which about 90% of that revenue I think is about subscription base.

Speaker Change: So it sounds great.

Speaker Change: Yes, it's an early date, so you're right not to overstate it but it is encouraging and as an example of the capabilities enabled by the ERP.

Speaker Change: Yeah. It's interesting thank you very much.

David John Manthey: Yeah, it's interesting. Thank you very much.

Speaker Change: Thanks, Dave.

Speaker Change: And thank you.

Operator: In one moment for our next question, and our next question comes from Scott Schneeberger from Oppenheimer and Company. Your line is now open.

Speaker Change: And one moment for our next question.

Speaker Change: And our next question comes from Scott Schneeberger from Oppenheimer <unk> Company. Your line is now open.

Scott Andrew Schneeberger: Thanks very much. Good morning, everyone.

Speaker Change: Yeah.

Scott Andrew Schneeberger: I'll pick up on that last question. Protect Plus sounds very interesting as a new offering. Maybe a three-part question in this. First one would be, Janet, will the collections on the subscription base be at the top of the month as opposed to after the fact, which I believe is the way you do StereoSafe, and please correct me if not.

Scott Andrew Schneeberger: Thanks, very much good morning, everyone I'll pick up on that last question.

Scott Andrew Schneeberger: It is very protect it sounds very interesting as a new offering.

Scott Andrew Schneeberger: Like three part question in this.

Scott Andrew Schneeberger: First one would be.

Speaker Change: With the collections on the subscription based be at.

Speaker Change: At the top of the month as opposed to after the fact, which I believe is the way you do Steri safe and please correct me if not.

Scott Andrew Schneeberger: Number two on this is, if you could just add more for you, Cindy, a progress update on Express and Priority Pickup Services for Secure Information. That was an initiative you rolled out a couple of years ago. Just curious how that's progressing as you're clearly looking to innovate in the destruction business. And lastly, on this topic, should we expect any innovation? You've had the ERP in place for Sid for over a year, so we're seeing this innovation from you. Should we expect innovation with regard to regulated waste in a matter of time, particularly with regard to the top line?

Speaker Change: Number two in this is if you could just add probably more for you Cindy a progress update on express and priority pick up services for secure information that was an initiative we rolled out a couple of years ago. Just curious on how that's progressing as you're as you're clearly looking to innovate in.

Speaker Change: And the destruction business and lastly on this topic.

Speaker Change: Should we expect any innovation this.

Speaker Change: This is you have the ERP in place for over a year. So we're seeing this innovation from you should we expect innovation with regard to regulated waste and in a matter of time, particularly with regard to the top line. Thank you.

Janet H. Zelenka: Thank you.

Janet H. Zelenka: So I'll take the first question on collections. So, yes, you are right.

Speaker Change: So I'll take the first question on collections. So yes, you are right, we do bill in advance and for the subscription billing and our WCS. So various do question were also asked to going for credit cards with protect plus as well or.

Janet H. Zelenka: We do bill in advance and for the subscription billing and RWCS, so this is a very astute question. We're also going for credit cards with Protect Plus as well or, you know, billing by ACH. So that is a cash flow improvement and versus the transactional, you do it, and then you bill. So it is another win for this particular product. And then I'll turn it over to Cindy for the express and priority.

Speaker Change: Billing by AC H, so that that is a cash flow improvement and versus the transactional you do it and then you bill. So it is another win for this particular product.

Speaker Change: And I'll turn it over to Cindy for the express some priority sure.

Cindy J. Miller: Sure, absolutely, the express and the priority continue to go on very well. We've got teams that are selling it. I think that's a good thing.

Cindy J. Miller: Absolutely the expressed or the priority continues.

Cindy J. Miller: Continues along very well we've got the teams that are selling it I think.

Cindy J. Miller: I think.

Cindy J. Miller: It's amazing how many folks really want this on-demand culture. That priority purge really fits right into that, matching that demand. So I think we've got some positive things going on there. And then, Cory, I would say the short answer to your last question: is there innovation coming with RWCS that's unleashed by the ERP? Cory can answer that, and I know we won't say anything prematurely, but, Cory? Yeah, I think, great question, Scott.

Cindy J. Miller: That's a drive it it's amazing how many folks.

Cindy J. Miller: Really one thing this on demand culture.

Cindy J. Miller: You know that that that priority purge really fits right into that matching that demand. So I think I think we've got some positive things going on there.

Cindy J. Miller: And then.

Cindy J. Miller: Corey I would say the short answer to your last question is there innovation coming with our WCS its unleashed by the by.

Cindy J. Miller: By the ERP.

Cindy J. Miller: He can answer that and I know, we wont, we wont, we wont see anything prematurely, but Corey I think great question, Scott I think ultimately we're excited about the capabilities there and I think it's safe to assume we will continue to see innovation, we've talked in the past about obviously.

Cory White: I think ultimately we're excited about the capabilities there, and I think it's safe to assume we'll continue to see innovation. We've talked in the past about, obviously, new containers and some innovation we're doing there, so that will continue. We've talked about new sites and facilities, but I think the big unlock there is data. We've talked about this in past earnings calls. I think the really exciting thing for us, especially as we move into more sustainability-targeted innovations, the data is really unlocking opportunities for us to really see some innovation in the way we present data, the way we target opportunities for savings for our customers, but more importantly, to give better insights into benchmarking waste streams, areas of opportunity to drive recycling capabilities, things like that that I think are going to be unlocked, again, from this new ERP technology. So more to They're early days, but we're excited about the innovation pipeline that continues.

Cindy J. Miller: <unk> and some innovation we're doing there so that will continue we've talked about new sites and facilities, but I.

Cindy J. Miller: I think the big unlock there is data and we've talked about this in past earnings calls I think the really exciting thing for us, especially as we move into more sustainability targeted innovations.

Cindy J. Miller: The data is really unlocking opportunities for us too.

Cindy J. Miller: Really see some innovation on the way we present data.

Cindy J. Miller: The way, we target opportunities for for savings for our customers, but more importantly to give better insight into benchmarking waste streams areas of opportunity to drive a recycling capabilities things like that that are that I think are going to be unlocks again from this new ERP technology. So more to come there early days, but we're excited about.

Scott Andrew Schneeberger: Thanks. I appreciate that, everyone. I know I got a three-for-one on the first one, but I would like to ask a second question.

Cindy J. Miller: The innovation pipeline that continues to grow.

Speaker Change: Thanks, I appreciate that everyone I know I did a three for one on the first one but I would like to ask exactly what your second question.

Scott Andrew Schneeberger: Thanks. And again, Cindy, probably for you primarily, just how is the pricing environment across both major segments and in destruction, more on the service as opposed to the newspaper? But just curious, are you able to cover more than inflationary pressure? And how assertive are you across both segments?

Speaker Change: Thanks.

Speaker Change: Sydney, probably for you primarily just.

Speaker Change: How is the pricing environment across both major segments.

Speaker Change: And then in destruction more on the service as opposed to.

Speaker Change: We use paper, but just curious are.

Speaker Change: Are you able to.

Cindy J. Miller: Thanks. You know, I think that's a great question, Scott. And another thing, I think.

Speaker Change: To cover more than inflationary pressure.

Speaker Change: And how are <unk>.

Speaker Change: Are you in across both segments. Thanks.

Cindy J. Miller: You know, I think that's a great question, Scott. And another thing, I think, just internally, that the ERP has really afforded us the opportunity to stay current, to be more engaged, and to be able to be more adaptive and flexible as we see those things. So for me, I think overall, pricing. I don't see there being any major pushback from customers. And quite frankly, I think most companies like Stericycle from, I think, January of 2022, when inflation hit 9%, had their opportunities to go back and forth with reference to negotiations on, hey, you know, where the price should be.

Speaker Change: I think that's a great question, Scott and another thing I think.

Speaker Change: Just internally that the ERP has really afforded us the opportunity to stay current to be more engaged to to be able to be more adaptive and flexible as we see those things. So for me I think overall pricing.

Speaker Change: I don't see there being any major pushback from customers and quite frankly, I think I think we most companies like stair cycle from I think January of 2022, when inflation hit 9% had their opportunities to go back and forth with reference to negotiations on hey, where should price P. I think for us right now.

Cindy J. Miller: I think for us right now, I think we're in a very steady rhythm. And I think, you know, we're looking to continue with, whether it's CPIs or those types of things as we move forward. But I see stability. I think maybe what you're really driving at is, you know, are we seeing any problems with that? For me, I see more stability. I see our ability on both sides of the business to be able to extract the value that we expect for the services that we provide.

Speaker Change: I think we're in a very steady rhythm.

Speaker Change: And I think you know, we're looking to continue with whether it's <unk> or those types of things as we move forward, but I see stability I think I think maybe what you're really driving at is is.

Speaker Change: Or are we seeing any problems with it for me I see more stability I see.

Speaker Change: Our ability on both sides of the business to be able to to extract the value that we expect for the services that we provide.

Speaker Change: Great. Thanks.

Speaker Change: And thank you.

Operator: And one moment for our next question, and our next question comes from Tobey Sommer from Truist Securities. Your line is now open.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Tobey Sommer from <unk> Securities. Your line is now open.

Tobey O'Brien Sommer: Hey, good morning. This is Jasper Wibbaum for Tobey. For the U.S. regulated waste business, I'm just curious if you could stratify the growth trends you're seeing between the large and small quantity generators, as well as what competitive behavior looks like on price from some of the smaller players in the market. Thanks.

Speaker Change: Hey, Good morning, this is Jeff Birnbaum for Tobey.

Jeff Birnbaum: For the U S regulated waste business I'm, just curious if you could stratify the growth trends, you're seeing between the large and small quantity generators.

Jeff Birnbaum: As well as what competitive behavior looks like on price from some of the smaller players in the market.

Cindy J. Miller: Yeah, good question. I think for us, that large quantity generator is really our, you know; we call it our hospital group, if you will. Some of these hospital networks have grown quite large. I think when you take a look at the growth, it is really very interesting. We're pleased with what we're seeing in terms of volume, which looks like it's returning. I think there will be more to come as the year unfolds. We're encouraged by what we're seeing.

Speaker Change: Yeah. Good question I think I think for us that large quantity generator is really our we call. It our hospital group. If you will some of these hospital networks have grown quite large I think when you take a look at growth there there are.

Speaker Change: It really is very interesting we are we're pleased with what we're seeing in terms of.

Speaker Change: Volume looks like it looks like it's returning I think more to come as the year unfolds, where we're encouraged by what we're seeing.

Cindy J. Miller: It is mixed in terms of that recovery, though. In certain areas, staffing has come back and is in a little bit better shape than maybe some of the others. But for us, we're very encouraged by what we see in terms of the opportunity to grow there.

Speaker Change: It is mixed in terms of that recovery, though.

Speaker Change: Certain areas staffing has come back in and are in a little bit better shape than maybe some of the others, but for US we're very encouraged by what we see.

Speaker Change: In terms of the opportunity to grow there.

Cindy J. Miller: Thanks, and then I know there's typically a seasonal impact in the first half with tax season for Shrevet. So just kind of curious if you've seen the seasonal uplift there that you'd normally expect, and whether you've seen tonnage start to, I guess, stabilize a bit more as the return to office trend has continued. Yeah, I think I think

Speaker Change: Thanks, and then.

Speaker Change: I know there is typically a seasonal impact in the first half with tax season for shred it.

Speaker Change: So just kind of curious have you seen the seasonal uplift there that you would know.

Speaker Change: Normally expect and.

Speaker Change: Whether you've seen tonnage start to stabilize a bit more as the return to office trends continue I think I think that's a good call out.

Cindy J. Miller: Yeah, I think that's a good call-out. It is kind of a minor blip. Not everybody, as soon as they do their taxes, purges everything from seven years prior. So it isn't quite apples-to-apples.

Speaker Change: It is kind of a minor blip not everybody as soon as they do their taxes.

Speaker Change: Purge everything from from seven years. Prior so it is it isn't quite an apples to apples. The other thing I want to say with reference to Q1.

Cindy J. Miller: The other thing I want to say with reference to Q1 is that we did have some adverse weather through January. We had several power failures. We had the usual things with issues with pipes bursting and vehicles not being able to get out. And as a result, for us in the shred business, that meant transactions weren't able to happen that day, which meant we missed some revenue. So I think, all in all, those things kind of washed out as we moved through the quarter.

Speaker Change: We did see some some we did have some adverse weather in the beginning of <unk>.

Speaker Change: Through January we had several facilities with the usual things with issues with pipes bursting and vehicles not being able to get out and as a result with us on the shred business that means transactions werent able to happen that day, which means we missed some revenue.

Speaker Change: So I think all in all of those things kind of washed as we moved through the quarter.

Cindy J. Miller: So for us, as we move forward into Q2, I think the one thing we do like about this business is that it doesn't really have extreme cycles or seasonality to it. So I think we're encouraged where we are, which is why we believe we're going to continue to make guidance as originally outlined.

Speaker Change: So for us as we move forward into Q2.

Speaker Change: Yeah.

Speaker Change: I think the one thing we do like about this business is it isn't really extreme cycles or seasonality to it. So so I think we're encouraged where we are which is why we believe we're going to continue to to.

Tobey O'Brien Sommer: makes sense. Thanks for taking the questions.

Speaker Change: Make guidance as originally outlined.

Speaker Change: Makes sense, thanks for taking the questions.

Cindy J. Miller: Thanks, Toby. Thanks, Jeff.

Speaker Change: Thanks, Tobey Thanks, Jeff.

Speaker Change: And thank you.

Operator: And one moment for our next question. And our next question comes from Michael Hoffman from Stifel. Your line is now open.

Speaker Change: And one moment our next question.

Speaker Change: And our next question comes from Michael Hoffman from Stifel. Your line is now open.

Michael Edward Hoffman: So, Cindy, congratulations on being noted as a woman who inspires by WAIS 360.

Michael Edward Hoffman: So Cindy congratulations on being noted as a woman who inspires by ways through 16.

Cindy J. Miller: Michael, thank you very much. That was a very kind little public service announcement.

Michael Edward Hoffman: Michael Thank you very much.

Michael Edward Hoffman: <unk>.

Speaker Change: That was a very kind of little public service announcements.

Michael Edward Hoffman: So my questions are around growth first. In medical waste, you know, I think of you as having kind of below-30s penetration in the small, you know, what used to be called the small generator, your independent market. Cory talked about a go-to-market strategy on the fourth quarter call, so there's a why can't you get the next incremental doctor. But in the volume part of the market, my sense is you're a little underweighted relative to your hospitals and assisted living and nursing homes. So isn't that also a golden opportunity, even as we're waiting for this staffing volume recovery issue in the existing base? There's a new customer ad opportunity as well.

Speaker Change: Yes.

Speaker Change: So my questions are around growth first.

Speaker Change: Medical waste I think of you as having kind of in the low thirties penetration in the small what used to be called small generator your independent market.

Speaker Change: Corey you talked about a go to market strategy on the fourth quarter call. So there is a why can't you get the next incremental dock.

Speaker Change: But in the volume part of the market My sense is youre, a little under weighted relative to your hospitals in assisted living and nursing homes. So isn't that and also golden opportunity even as we are waiting for the staffing volume recovery issue on the existing base.

Speaker Change: There is a new customer add opportunity as well.

Cindy J. Miller: You know, Michael, it's almost as if you've been in a couple of the rooms. We do talk about that. And one of the things that I think the ERP has done for us, and quite frankly, one of the things that a stable workforce, so we are staffed accordingly, and when you reroute and you rebalance routes and you take miles out of drivers' days, it provides them with an opportunity within their territory to be more productive as you drive density within that day's worth of work.

Speaker Change: Michael it's almost as if you've been in a couple of the rooms, we do talk about that in one of the things that I think the ERP is done first and quite frankly, one of the things that a stable workforce. So we are staffed accordingly.

Speaker Change: And when you re route and you rebalance routes and you take miles out.

Speaker Change: Out of drivers days it provides them an opportunity within their territory to be more productive as you drive density within that within that.

Cindy J. Miller: So for us, when you have the opportunity to do more than just drive across town, drive to the next county, and worry about time commitments for big customers or bigger customers, when you tighten up your routes, you're afforded the opportunity to look left and right and go after different leads and go after different opportunities because you do have the appropriate staffing now to be able to provide the service that all of those customers expect. As you can imagine, when your dispatching looks more like a bowl of spaghetti, sometimes it's very difficult to look for something else in order to capture and gain that revenue. So as we continue to rebalance, we continue to really get, I think, pretty efficient. I'm pretty proud of this team, having lived in the world of efficiency for 30 years before getting here.

Speaker Change: That days worth of work so for us when you have the opportunity to.

Speaker Change: To do more than just drive across town drive to the next county, and worry about time commitments for big customers are bigger customers. When you tighten up your route to your afforded the opportunity to look left and right.

Speaker Change: And go after different leaves and go after different opportunities because you do have appropriate staffing now to be able to provide the service that all of those customers expect.

Speaker Change: As you can imagine when you're when you're dispatching looks more like a bowl of spaghetti, sometimes it's very difficult to add to look for something else in order to capture and gain that that revenue. So as we continue to rebalance and we continue to.

Speaker Change: To really.

Speaker Change: Get I think pretty efficient I'm pretty proud of this team.

Speaker Change: Having lived in the world of efficiency for 30 years before getting here.

Cindy J. Miller: I would stack the ability that our people have and the learnings that they're getting with this new technology up against many. And for us, as we do that, you're right, that's where operations improvements and engineering improvements come to the table and share with commercial that, hey, we have the opportunity to do more and be more, and then we can get more aggressive in those avenues. So I think you're only as good as the service you provide. As we get tighter and we get better with our routes, you can then open up the service to more, and I think that's the position we're putting ourselves in as we move forward.

Speaker Change: I would stack the ability that our people and the learnings that they're getting with this new technology I'd stack it up against many.

Speaker Change: And for US as we do that Youre, right, Thats, where operations improvements and engineering improvements come to the table and share with commercial that hey, we have the opportunity to do more and be more and then we can get more aggressive in those avenues. So I think.

Speaker Change: I think I think you are only as good as the service you provide as we get tighter and we get better with our with our routes. You. Can then you can then open up the service to more and I think that's finally, a position where we're putting ourselves in as we move forward.

Janet H. Zelenka: Okay, and then on the shred side... Janet, could you disaggregate for us or help us, if we strip away SOP and we strip away the CVS and Rite Aid store facility closures, are the same store elderwise stops up, so we're seeing organic growth?

Speaker Change: Okay, and then on the shred side.

Speaker Change: Janet could you disaggregate for us or help us push strip away, so P and we strip away the <unk>.

Speaker Change: Cvs and Rite aid site facility closures were where same store otherwise stops up so we're seeing organic growth.

Janet H. Zelenka: So if you take away what's going on with the national footprint and Good to Call Out, we're seeing encouraging signs on the rest of the small-medium business and what's going on there. And really, it's a commodity issue as well, as you well know, and if you strip out globally all the commodity-based revenue, just look at service revenue is up about 3% globally and about 2.9% in North America.

Speaker Change: So if you take away, what's going on with the national footprint and good to call out we're seeing encouraging signs in there on the rest of the small medium business and.

Speaker Change: And what's going on there and it really it's a really commodity.

Speaker Change: Issue as well as as you well know and if you strip out a globally all.

Speaker Change: All the commodity based revenue just look at service revenue was up about two 3% globally and about two 9% North America.

Janet H. Zelenka: Terrific. You know, just so we don't get your top line wrong. If you knew that the current S&P price was the price for the whole quarter, what's our headwind year over year?

Speaker Change: Terrific.

Speaker Change: And then.

Speaker Change: Just so we don't get your topline wrong if.

Speaker Change: If you gave if you knew the current S&P prices the price for the whole quarter, what's our headwind year over year.

Janet H. Zelenka: Yeah, so significant headwind for the year. I think we're looking at I'm trying to get the number right here. It's like 18 million or something like that. It's a big number.

Speaker Change: Yes, so significant headwind for the year I think we're looking at.

Speaker Change: I'm trying to get the number break here.

Speaker Change: It's like $18 million or something like it's a big number that was headwinds or youre looking for the headwinds Q1 over Q1.

Janet H. Zelenka: That was the headwinds. Are you looking for the headwinds Q1 over Q1? Well, you told us in one Q, I have that data because you gave it to us, but there's going to be another headwind. It's just supposed to be smaller in Q2. Right, there is more in Q2, but it's significantly less than what it was in Q1. If you just look at paper pricing year over year, it starts to mitigate in the comparison, and then it ceases to be a headwind in the second half of the year.

Speaker Change: Well, you told us and one at <unk> I have that data because if you gave it to us but there is going to be another headwind is supposed to be smaller in Q2, it's more in Q2, it's less than what it was in Q1 significantly. If you just look at the paper pricing year over year. It starts to mitigate in the comparison and then it ceases to be.

Speaker Change: A headwind in the second half of the year.

Janet H. Zelenka: So, $10 million? Yeah, it's actually in the around the $5 million range, our best guess for the second quarter of what we see year over year.

Speaker Change: So $10 million.

Speaker Change: It's actually in the around the $5 million range is our best guess for the second quarter of what we pay year over year and then it gets to be a non issue in the second half of it.

Michael Edward Hoffman: And then it gets to be a non-issue in the second half. Right. And I squeeze in one last one.

Speaker Change: Great.

Cindy J. Miller: Cindy, about a couple of years ago, I asked you this question about whether you could go from transaction-based to service-based. Now I understand why you were so enthusiastic because it was going to be in the ERP. Five years out, what do you think the mix looks like?

Speaker Change: I'm going to squeeze one last one but a couple of years ago. I asked you. This question about could you go from transaction based to service space. So now I understand why you were sort of enthusiastic because it was going to be in the ERP.

Speaker Change: Five years out what do you think the mix looks like.

Speaker Change: I think I think just as as as Jim had mentioned if you take a look and our best bellwether is our steri safe on the regulated side, we've got a large customer base in terms of independent which would be the equivalent to the small and medium businesses on the shred side. So for US if you take a look at.

Cindy J. Miller: Yeah, I think just as Janet had mentioned, if you take a look at our best Bellwether, SteriSafe on the regulated side, we've got a large customer base in terms of independent, which would be the equivalent to the small and medium businesses on the shred side. So for us, if you take a look at about 90 percent of that independent is in that subscription base, I think for us, it at least puts a target out there for us to work towards.

Speaker Change: 90% of that.

Speaker Change: That independent is is in that subscription base I think for us or at least put a target out there for us to work towards so I don't I don't know exactly what it'll be but I know what it turned into and what we've matured on the regulated side. So I think I think we've challenged ourselves internally that we know what the <unk>.

Cindy J. Miller: So I don't know exactly what it'll be, but I know what it turned into and what we've matured on the regulated side. So I think we've challenged ourselves internally to know what's possible. And certainly, different businesses, different needs, but for us, we think there's great upside there, and that's what we're going to continue to work towards.

Speaker Change: Possible and certainly different businesses different needs, but for US we think there's great upside there and that's what we're going to continue to work towards.

Michael Edward Hoffman: All right, thanks, and congratulations again.

Speaker Change: Alright, Thanks, and congratulations again, thank you. Thank you.

Operator: Thank you. And thank you. And if you would like,

Operator: And thank you. And if you would like to ask a question, that is star 11. Again, if you'd like to ask a question, that is star 11. And one moment for our next question. And our next question comes from Kevin Steinke from Barrington Research Associates. Your line is now open.

Speaker Change: And thank you and if you would like to ask a question that is star one one again, if you'd like to ask a question star one one and one moment our next question.

Speaker Change: And our next question comes from Kevin Spanky from.

Kevin Mark Steinke: Barrington Research Associates. Your line is now open.

Kevin Mark Steinke: Thank you. So just again, following up on the Protect Plus offering, you mentioned the 2 million contribution from new customers only. Does that imply that you have not yet begun to cross-sell it to existing customers, which, you know, presumably is a large opportunity for penetration, you know, as you referenced there with the high levels of stereosafe penetration that you've achieved? That's exactly right.

Kevin Mark Steinke: Thank you. So just again following up on the protect plus offering you mentioned the $2 million contribution from new customers only does that imply that.

Kevin Mark Steinke: You have not yet begun to cross sell to existing customers, which <unk>.

Speaker Change: Presumably as.

Kevin Mark Steinke: A large opportunity for penetration as you referenced there with.

Speaker Change: The high levels of us there so penetration that you've achieved.

Cindy J. Miller: That's exactly right, Kevin. It's been focused on new customers only. We expect more opportunities to arise as we go throughout the year, but we've started with only new contracts.

Speaker Change: That's exactly right Kevin.

Speaker Change: <unk> been focused on new customers only we expect.

Speaker Change: More opportunity to manifest as we go throughout the year, but we started with with only new contracts.

Cindy J. Miller: Okay, do you have a sense as to when the timing is when you might start to ramp up the cross-sell for Protect Plus to existing customers?

Kevin Mark Steinke: Okay.

Kevin Mark Steinke: Sensors that timing is when you might start to ramp up the cross sell.

Kevin Mark Steinke: Through protect plus to existing customers.

Cindy J. Miller: Yeah, that will obviously happen over the course of the next few years as contracts come up, we'll have the opportunity to write them on the new Protect Plus offering, and so it will continue to trickle throughout the rest of this year and in the years to come.

Kevin Mark Steinke: Yes.

Kevin Mark Steinke: Will.

Kevin Mark Steinke: Obviously over the course of the next few years as contracts come up we will have the opportunity to write them on the new protect plus offering.

Kevin Mark Steinke: And so it will it will continue to trickle throughout the rest of this year and in the years to come.

Kevin Mark Steinke: Okay, understood. Thank you for taking the questions.

Speaker Change: Okay understood. Thank you for taking the questions. Thanks, Kevin.

Kevin Mark Steinke: And thank you. And I am showing no further questions. I would now like to turn the call back over to Cindy Miller for closing remarks.

Kevin Mark Steinke: Thank you and I'm showing no further questions I would now like to turn the call back over to Cindy Miller for closing remarks.

Cindy J. Miller: Thank you, Justin, and to everyone listening on this call; we appreciate your interest in Stericycle and your shared excitement for our future. Thank you all very much.

Cindy J. Miller: Thank you Justin and to everyone listening on this call. We appreciate your interest in Stericycle and your shared excitement for our future. Thank you all very much.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Cindy J. Miller: Yeah.

Kevin Mark Steinke: Okay.

Kevin Mark Steinke: [music].

Kevin Mark Steinke: Okay.

Kevin Mark Steinke: Yes.

Kevin Mark Steinke: [music].