SRCL
#Thank you, Charlie
The results for the second quarter are as follows
Global revenues were $917.7 million, an increase of 2.9% from $891.6 million in Q2 2016. Organic growth, when adjusted for the impact of foreign exchange, acquisitions, divestitures, and Manufacturing and Industrial Services was 4.1%
Domestic and Canada revenues were $737.7 million
Organic growth, when adjusted for the impact of foreign exchange and acquisitions was 5.1%
As previously discussed and expected, growth rates were adversely impacted by Manufacturing and Industrial Services
International revenues were $180.1 million
Organic revenue, when adjusted for foreign exchange, acquisitions and divestitures, declined 2.7%
As previously discussed and expected, international growth rates were adversely impacted by the exiting of certain patient transportation contracts and Manufacturing and Industrial Services
Acquisitions contributed $8.6 million to growth in the quarter and divestitures reduced revenues by $0.8 million
Gross profit was $381.8 million, or 41.6% of revenues
Adjusted SG&A excluding amortization was $198.7 million, or 21.6% of revenues
Adjusted income from operations or EBITA was $183.1 million, or 20% of revenues
Net interest expense was $23.7 million
The as reported tax rate for the quarter was 33.8%, or an adjusted rate of 37.1%
Net loss attributable to Stericycle was $148.8 million or a loss per share of $1.74 on an as reported basis, primarily due to the impact of the proposed class action settlement
Adjusted earnings per share was $1.15. Now for the balance sheet
Our covenant debt to EBITDA ratio was 3.46 at the end of the quarter
The unused portion of the revolver was approximately $676 million
In the quarter, we repurchased 175,500 shares of mandatory preferred convertible on the open market in the amount of $12.6 million
At the end of the quarter, we have authorization to purchase an additional 2.8 million shares
Year-to-date, cash from operations was $237.1 million
When adjusted for recall reimbursement and other items, cash from operations was $284.4 million
Year-to-date CapEx was $63.1 million, or 3.5% of revenues
In the quarter, our CapEx was $30 million or 3.3% of revenues
Our DSO was 63 days
I will now turn it over to <UNK>
Yeah
<UNK>, I think the way I would look at this is it's not a significant change if any at all for our capital allocation strategy
The amendments to our covenants allow the one-time add back to the EBITDA portion
So for the time period that we do not make the payment, there will be no change to our EBITDA, or our debt-to-EBITDA
In the future when we do make a cash payment, we do expect that, that will be an impact in the range of about 25 to 30 basis points
We have room currently with that EBITDA add-back under our revolver or under our debt to EBITDA covenants
And so I think that we can continue our capital allocation strategy as we've had it
We'll certainly continue to work on debt reduction
That's an important part of what we have been doing and will continue to do in the future
No pressure there, <UNK>
Let me take you through the changes to the EPS that we have
So, last quarter, our annual guidance was $4.55 to $4.75. We've kind of hit an inflection point on FX to where FX is delivered some favorability of about a penny in our guidance
But that's offset by about a penny, offset due to the divestiture of the patient transport business, those two additional contracts that we'll run until they terminate, kind of offset that
Beyond that, I think what you're going to see in the guidance here is that in the first half of the year, outside of the impact of interest and repos, the EPS associated with operations has been at about the midpoint of our guidance
Being halfway through the year, it's clear it will not be at the top end of our guidance
So we chose to bring the top end down about $0.06 to align with that
What you saw is that we held the bottom end due to the certainty of how customer base will respond in the second half of the year to the news of this settlement
So we thought that was the prudent exercise in our guidance
Going into Q3, I think the comfortable range that I would put us in is the range of about $1.13 to $1.19 with the full year 2017 EPS guidance of $4.55 to $4.69.
Thank you
I think where we stood at the quarter, we're really only about a couple million off of what we had anticipated in the quarter
So, we're still pretty close on guidance and really when you look at why we moved it out, it's just to assume that level through the balance of the year
So we feel pretty good so far on the cadence, but again, as we said, predicting cadence post a settlement is something we wanted to just be cautious about
From a guidance perspective, as you know, we came out of the year a little bit hot
We've studied that trend and we've kind of monitored how it behaves
We look to historical and I think what we felt is that early victory – we didn't want to raise guidance, because we saw the likelihood of it coming back to its 10 year average, which you're seeing what's happening
So I think what we anticipate in the back half of the year is that, it moves within the guidance range that we gave you
We shared paper being between $147 to $167. It's now come into the range and I think within the full year, the total number will be within our guidance range
Yeah, thanks, <UNK>
Certainly not on the back burner
No matter how full our hands are, it's an important part
As we previously discussed, we're right now in a design and evaluation phase of our needs for an ERP system
This will likely take us through the balance of the year to fully and adequately analyze what single system would fit Stericycle's environment
We'll keep you updated as we have in the initiative as it progresses in with the intent to really have a decision by the end of the year
So it certainly is 2018 and beyond event
It's a big decision and we're thoroughly reviewing it and we'll communicate as we progress
But it's forefront in our mind
It's a couple of things, <UNK>
One of the things Charlie said is while we have a nice rebound, Q1 to Q2 in the M&I business, we didn't rebound as far as we had hoped
And so we took down guidance a little bit in that area
Second thing is that, as we talked about the cadence at which we're experiencing price concessions in the SQ market, a little bit higher by a couple million dollars of what we anticipated in Q2, and we estimate that that level will continue through the balance of the year
So those are the really two things we're bringing it down
<UNK> <UNK> - Macquarie Capital (USA), Inc
Thank you so much
Yeah
The six acquisitions, four of them were in the United States
There were two regulated medical waste acquisitions and two Secure Information Destruction
And then we did two internationally and both of those were regulated medical waste
Yeah
So, I think that you're really asking for two things here
One is, how do we do according to the guidance and really how do we – or will there be a change in guidance going forward
So, really compared to the guidance that we gave last quarter, which was 42.5% or approximately in that range, we saw as we spoke of slightly more SQ pricing, but we also saw some strength in growth in our LQ market, which does come in a little less than our average
And that combined to be about 20 basis points difference from our guidance
Well, we saw very good growth in M&I
It was a little less than what we anticipated, and that was about 20 basis points off as well
Our international revenues, partly due to the deferred revenue adjustment that we did, was another 20 basis points
And then we gave you some aggressive growth quarter-over-quarter
And while I think, we did a good job of growing that, we achieved about 35 basis points
That was about 30 less than what we had guided to, partly due to some higher cost in the business
So, we came in at 41.6%
What I would point to though is, our company is about some puts and takes and where we focus our energy
If you take that story through to the EBITA, we guided to a 20% and we achieved a 20%
So, operationally, we're very pleased with all the groups coming together, we achieved our target there
I think, going forward, I would put you at an EBITA for next quarter, at about 20.2% moving to about a 20.5% or slightly they are under for the year
If you want to go down to the gross margin level, I think, Q3, roughly is in the range of about a 42.2% moving up to about a 42.5% and then for SG&A, at about 22% even for both Q3 and full year
The 42.5% is for the full year
Yeah
For interest expense, using approximately $100 million is the right number
From FX, as I mentioned earlier, it's an interesting period of time
Certainly when you're looking backwards, we still have some headwinds in our year-over-year comparison
However, we saw very small favorability, Q1 to Q2, but we gave you $11 million on the revenue line going forward based off current rates
So, what we don't do is predict foreign exchange
We give you guidance based on the last known rate
So we'll continue to moderate that and adjust our numbers accordingly going forward
I think we raised guidance by about $12 million due to its outpacing
I think the favorability at least to our guidance was – within the number, I think what you saw is on our EPS guidance going forward built into that, there's about $0.04 favorability to our EPS guidance directly from the ComSol and Related Services business
