Stericycle, Inc.( SRCL Quick Quote SRCL - Free Report) have gained 1.5% since it reported its second-quarter 2020 results on Aug 6, outperforming 0.2% growth of the industry it belongs to.
The outperformance can be attributed to the company’s better-than-expected second-quarter 2020 results and debt-reduction by using the net proceeds from a divestiture.
Adjusted earnings per share of 46 cents beat the Zacks Consensus Estimate by 84% and revenues of $598.2 million beat the consensus mark by 3.3%.
During the reported quarter, Stericycle reduced net debt by almost $514 million through net proceeds from the sale of the Domestic Environmental Solutions business of $427.7 million and cash flow from operations. This lowered the company’s adjusted debt-to-EBITDA leverage ratio to 3.89.
Notably, earnings fell 17.9% year over year, owing to an unfavorable impact of 11 cents from divestitures and foreign-exchange rates, 4 cents from lower revenue flow and 3 cents from higher adjusted tax rate. These were partially offset by a benefit of 8 cents from lower interest expense.
Total revenues declined 29.3% year over year on a reported basis. The downfall was due to divestitures that hurt revenues by $149.6 million, and foreign-exchange rates that impacted revenues by $9.9 million. Revenues were down $89.4 million on an organic basisdue to the COVID-19 pandemic.
Concurrent with the earnings release, the company also announced that it has completed the sale of its operations in Argentina on Aug 3, 2020 for nearly $3.9 million. This marked the seventh divestiture by Stericycle in the last 18 months.
Let’s delve deeper into the numbers.
Revenues by Service
Regulated Waste and Compliance Services revenues declined 24.4% year over year on a reported basis and 0.3% organically to $418.1 million. The segment contributed 70% to total revenues.
Secure Information Destruction revenues declined 33.5% year over year on a reported basis and 33.6% organically to $152.5 million. The segment contributed 25% to total revenues.
Communication and Related Services revenues fell 56.3% year over year on a reported basis and 17.1% organically to $27.6 million. The segment contributed 5% to total revenues.
Revenues by Geography
Revenues from North America were $491.3 million, down 30.1% year over year on a reported basis and 10.4% organically. The region contributed 82% to total revenues.
International revenues of $106.9 million fell 25.2% year over year on a reported basis and 11.6% organically. The region contributed 18% to total revenues.
Adjusted gross profit in the reported quarter amounted to $236.5 million compared with $304.8 million in the year-ago quarter. Adjusted gross profit margin was 39.5%, up from 36% in the prior-year quarter.
Adjusted operating income was $85.3 million compared with $105.6 million in the year-ago quarter. Adjusted operating income margin was 14.3%, up from 12.5% in the prior-year quarter.
Adjusted EBITDA was $113.7 million compared with $137.7 million in the year-ago quarter. Adjusted EBITDA margin was 19%, up from 16.3% in the prior-year quarter.
Balance Sheet & Cash Flow
Stericycle exited second-quarter 2020 with cash and cash equivalents of $42 million compared with $36 million at the end of the prior quarter. Long-term debt was $1.99 billion compared with $2.51 billion at the end of the prior quarter.
The company generated $125.2 million of net cash from operating activities and capex was $35 million in the quarter. Free cash flow of $90.2 million was generated in the reported quarter.
Currently, Stericycle carries a Zacks Rank #3 (Hold). You can see
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