Investor Presentation. July 15, 2015

Transcription

1 Stericycle s Acquisition of Shred-it International Investor Presentation July 15, 2015

2 Forward Looking Statements Safe Harbor Statement: This presentation may contain forward-looking statements that involve risks and uncertainties, some of which are beyond our control (for example, general economic and market conditions). Our actual results could differ significantly from the results described in the forward-looking statements. Factors that could cause such differences include changes in governmental regulation of the collection, transportation, treatment and disposal of regulated waste, increases in transportation and other operating costs, the level of governmental enforcement of regulations governing regulated waste collection and treatment, our ability to execute our acquisition strategy and to integrate acquired businesses, competition and demand for services in the regulated waste industry, political, economic and currency risks related to our foreign operations, impairments of goodwill or other indefinite-lived intangibles, exposure to environmental liabilities, and compliance with existing and future legal and regulatory requirements, as well as other factors described in our filings with the U.S. Securities and Exchange Commission, including our most recently filed Annual Report on Form 10-K. As a result, past financial performance should not be considered a reliable indicator of future performance, and investors should not use historical trends to anticipate future results or trends. We make no commitment to disclose any subsequent revisions to forward-looking statements. 2

3 Today s Presenters Charles Alutto CEO Brent Arnold COO Daniel Ginnetti CFO 3

4 Agenda Review compelling strategic benefits and business alignment of Shred-it acquisition Discuss similarities of the secure information destruction industry to Stericycle Highlight meaningful expansion of Stericycle s market opportunity Review competitive advantages of Shred-it business that position Stericycle for continued growth Share transaction details and accretive financial impact Address questions 4

5 Compelling Strategic Fit Shred-it offers a significant strategic benefit and is a strong fit within Stericycle s portfolio: Industry leader in a highly complementary service line Regulatory and compliance driven business (e.g. liability and chain of custody) Similar and exciting growth pattern (e.g. strong organic growth, acquisitions and international expansion) Similar go-to-market strategies (e.g. nature of sale, pricing logic, long-term contractual service, and heavy focus on small customers) Route-based business (e.g. route density) Overlapping regional footprints (e.g. North America, Europe) Creates Unique Growth Opportunities for Stericycle and Shred-it 5

6 Acquisition Strategic Rationale Enhances Stericycle s portfolio of solutions and provides excellent opportunities for continued growth Broadens Stericycle and Shred-it engagement opportunities with customers Cross-selling opportunities in healthcare, retail and professional services segments New customer segments and relationships for both Shred-it and Stericycle Substantially expands Stericycle s operational infrastructure and capitalizes on route-based logistics expertise Footprint of 200 locations in 15 countries with 5,400 worldwide team members Corporate fleet size of over 2,400 trucks Significant excess capacity with 57 plant-based shredders allows for growth without significant capital investment Provides operational synergies stemming from Stericycle s core competencies Leverages Stericycle s business model fundamentals with a focus on small, loyal customers as the foundation for growth Creates a new and exciting platform in a highly fragmented sector; Stericycle is a proven integrator having successfully completed over 400 acquisitions since 1993 Expanded Capabilities Will Drive Growth and Shareholder Value 6

7 Similar Business Models Stericycle Shred-it Compliance Driven Recurring Revenue Multi-Year Contracts SQ Focus Route-Based Business Low Capital Requirement 7

8 Shred-it Service Overview Secure Information Destruction Service (~83% of revenue) Shredded Paper Recycling Customer location with secure locked containers Uniformed, security trained personnel collect materials to destroy on a regular schedule Off-site Trucks On-site Trucks Materials are securely transported to a plant to shred off-site Materials are destroyed on the truck at customer location Plant or Location for shredding and/or baling Secure Chain of Custody Shredded materials sold to paper brokers 8

9 Attractive Market Fundamentals Secure information destruction services represents a large domestic and global market Unvended market presents significant growth opportunity Regulated industry with increasing focus (FACTA, HIPAA, PIPEDA) Highly fragmented industry Global Market Size = $13.4B (US$ in billions) North America = $4.0B (US$ in billions) Emerging Markets 49% North America 30% Established Markets 21% Unvended 62% Shred-it 15% Competitors 23% Source: Independent market analysis 9

10 Meaningful Increase in Addressable Market Opportunity Shred-it Stericycle Combined $32.9 billion New Market Opportunity Stericycle 11% $13.4 billion $19.5 billion On-site Management and Other Competitors 89% Shred-it Will Increase Stericycle s Total Addressable Market by Nearly 70% 10

11 Shred-it Competitive Advantages Global Leader Large global footprint with a leading position in key markets Preeminent brand in the industry - synonymous with secure information destruction Large and highly trained sales force Attractive Business Model Strong customer value proposition Recurring revenue with multi-year contracts Diversified customer base with 95% SQ Proven Financial Performance and Operating Leverage Strong and increasing margins High free cash flow generation Ability to drive margin expansion with continued revenue growth Significant Growth Opportunities Proven organic growth strategy Attractive platform for strategic acquisitions International markets present a compelling growth opportunity 11

12 Shred-it Financial Overview Annual Revenue of $726 million LTM March 2015 Pro Forma EBITDA of $231 million LTM March 2015 Pro Forma including future planned synergies of $52 million EBITDA margin of 24.7% Fully synergized at 31.8% Revenue Breakdown By Business Mix Other 1% Recycling 16% By Geography Canada 10% Secure Information Destruction 83% United States 75% ROW 15% 12

13 Transaction Summary Purchase Price Financial Benefit Management $2.3 billion gross purchase price $2.15 billion purchase price net of $150 million expected tax benefits Represents a 9.3x LTM March 2015 pro forma operating EBITDA giving effect to expected tax benefits and when all synergies from recent acquisitions being fully recognized (excluding any synergies Stericycle expects) Anticipated to be accretive to Cash EPS by at least 10% in 2016 and in the mid-to-high teens in 2018 Combined company expected to generate in excess of $1 billion in EBITDA in 2016 Existing Shred-it management team will remain in place Operational headquarters to remain in Oakville, Ontario, Canada Closing 3-4 months from date of signing Subject to regulatory approvals and other customary closing conditions 13

14 Synergy Opportunities Previous Acquisition Synergies* $52 Million Remaining Reduction in SG&A expense Optimization of truck utilization Optimization of plant utilization Leveraging scale Stericycle Expected Cost Synergies $20-30 Million by 2018 Improvements in route density Cross-utilization of fleet Facility optimization SG&A efficiencies Sharing best practices Potential for Revenue Synergies Over Time *Shred-it completed the acquisition of the Cintas document destruction business of which approximately $73 million of run-rate synergies were identified. 14

15 Acquisition Financing Committed financing from Bank of America Merrill Lynch and Goldman, Sachs & Co. Financed through a combination of cash and debt of $1.7 billion and up to $700 million in an equity or equity-linked offering The financing structure provides Stericycle the ability to rapidly de-lever back to the 2-3x Debt /EBITDA level by 2017 Structure also allows for future financial flexibility and continued execution of Stericycle s M&A and capital allocation strategies Stericycle is Committed to Maintaining an Investment Grade Rating 15

16 Summary Acquisition of the market leader in secure information destruction Leverages Stericycle s compliance expertise and core competencies in logistics Offers new growth opportunities for Stericycle Anticipated to be accretive to Cash EPS by at least 10% in 2016 and in the mid-to-high teens in 2018 Expected cost synergies of $20-30 million by 2018 with the potential for revenue synergies over time 16