After several challenging quarters, Stericycle's (NASDAQ:SRCL) financial results finally started moving higher in the first quarter of 2018. Many factors played a role in the rebound including abating foreign exchange headwinds, solid organic growth in two key business segments, the impact of its turnaround plan, and a lower tax rate. That solid start has the company on pace to hit its full-year forecast.

Stericycle results: The raw numbers


Q1 2018

Q1 2017

Year-Over-Year Change


$895.0 million

$892.4 million


Adjusted net income

$110.1 million

$99.4 million


Adjusted EPS




Data source: Stericycle. EPS=earnings per share.

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What happened with Stericycle this quarter?

Everything came together in the first quarter:

  • Stericycle's sales improved versus the fourth-quarter of last year due mainly to more favorable foreign exchange rates. That helped the company offset a net $3.7 million decline in revenue from the impact of acquisitions and asset sales. After adjusting for these two items, revenue would have declined 0.6% versus last year.
  • The highlight of the quarter was the secure information destruction services segment where revenue rose 7.7% year over year to $219.9 million. Even after adjusting for acquisitions and currency fluctuations, organic revenue grew 3.8%.
  • Manufacturing and industrial services revenue improved 2.6% from the year-ago quarter to $85.8 million, driven by 2.2% organic growth, which is noteworthy since this has been a trouble spot for the company in recent years due to its exposure to the oil and gas sector.
  • Growth in those two segments helped offset weaker results from the regulated waste compliance services and communication and related services segments.
  • Earnings, meanwhile, jumped double digits thanks to the increase in revenue as well as the impact of lower taxes from the U.S. corprate tax cut and the initial success of the company's business transformation plan.
  • Stericycle generated $110.4 million in cash flow from operations during the quarter, which was down 34.4% year over year due in part to $22.1 million of additional expenses from its business transformation. The company allocated its cash flow in a variety of ways, including spending $28.5 million on capital expenses, reducing debt by $55.6 million, investing $15.9 million on acquisitions, paying $8.8 million in dividends to preferred investors, and repurchasing $7.4 million of preferred shares.

What management had to say

CEO Charlie Alutto commented on the quarter and the progress of the company's business transformation by stating that:

We are off to a strong start in 2018. All of our service lines delivered solid top line performance at or above plan. We also made meaningful progress executing on our Business Transformation, achieving multiple milestones across several key work streams and delivering $8.0 million in recurring Adjusted EBITDA savings for the quarter.

As the CEO notes, Stericycle is making tangible progress on its turnaround plan. That strategy should enable the company to grow its adjusted earnings per share at a 6% to 10% compound annual rate through 2022 while increasing free cash flow at an even faster pace of 10% to 14% over that timeframe.

Looking forward

Thanks to its solid progress in the first quarter, Stericycle remains on target to achieve its full-year outlook. That forecast would see revenue come in between $3.5 billion to $3.64 billion, which is about flat with last year. Meanwhile, adjusted earnings would be in the range of $4.45 to $4.85 per share this year, which would be a 7% increase at the midpoint from 2017.

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