Coronavirus-related closures hurt financial performance for TerraCycle US last year, but increased profitability in the company’s Zero Waste Boxes business helped buffer the impacts.
Trenton, N.J.-headquartered TerraCycle US recently reported net sales of $25 million for 2020, down 9% from 2019. The company’s income before income taxes was $4 million, down 10% from 2019, and its net income was $2.9 million, down 10%.
TerraCycle US is the U.S. subsidiary of global company TerraCycle. The company’s recently filed financial report applies only to TerraCycle US, not the parent company.
The U.S. subsidiary runs mail-in recycling programs for brand owners, sells postage-paid recycling boxes to consumers, charges for collection of regulated wastes and markets recovered commodities (mostly plastics) for recycling into various products.
The following are details on financial performance in each of by TerraCycle US’s revenue-generating business segments:
Sponsored Waste Programs: Brand owners pay TerraCycle US to establish and operate nationwide collection programs for those companies’ products and/or packaging.
- Net sales: $10.5 million
- Sales change from 2019: +12%
- Income (before taxes): $3.3 million
- Income change from 2019: -13%
Zero Waste Boxes: Consumers and businesses purchase postage-paid boxes and mail products to TerraCycle US for recycling.
- Net sales: $7.5 million
- Sales change from 2019: +22%
- Income (before taxes): $1.8 million
- Income change from 2019: +45%
Regulated Waste: This division helps consumers recycle streams such as fluorescent lamps, bulbs, batteries, scrap electronics, organic waste, medical waste and others.
- Net sales: $6.1 million
- Sales change from 2019: -11%
- Income (before taxes): -$373,000
- Income change from 2019: Down from $58,000, or -743%
Material Sales: This division generates revenue by selling recovered commodities (mostly plastics) collected through the Sponsored Waste and Zero Waste Boxes programs to manufacturers. The recycled plastic pellets often go into plastic lumber or containers.
- Net sales: $1.4 million
- Sales change from 2019: -76%
- Income (before taxes): -$1.1 million
- Income change from 2019: Worsened from -$377,000, or -181%
Lines of business affected by COVID-19
According to the company’s annual financial report, the pandemic was largely responsible for steeper losses in the Material Sales business last year. In that business, income before income tax was a negative $1.1 million, which was worse than the negative $373,000 reported the year prior.
To explain the decrease, TerraCycle noted that, in 2019, it was able to run Walmart’s car seat recycling program, which generated substantial revenue for the Material Sales division. But that collection event didn’t happen last year.
“The negative business impact of the Covid-19 pandemic affected our ability to sell large retail take-back programs (such as the successful Wal-Mart car seat recycling program), as a large percentage of the division’s revenue from 2019 was not repeated in 2020, as retailers tended to focus more on essential sales programs during the pandemic,” according to the financial filing.
Additionally, widespread office closures reduced the regulated waste TerraCycle collected and managed. Regulated waste includes lamps, bulbs, batteries, scrap electronics and medical waste and more. As a result, the Regulated Waste business went from being a slight money maker in 2019 to a money loser in 2020.
“The largest impact on the company was the decrease in Regulated Waste sales during the office closures,” according to the report. “With offices reopening, we anticipate that may change in the second half of 2021. Further, to adapt during this period, the company focused more on longer-term sales/fixed revenue versus short-term variable collection revenue.”
The 2020 financial performance would have been worse had it not been for double-digit growth in the Zero Waste Boxes program.
Brand-sponsored waste programs, the company’s biggest money maker, also saw a notable revenue bump. TerraCycle US ran national recycling programs for over 100 brands as of the end of 2020. Over 30 were launched during the course of 2020.
Other details from the filing
TerraCycle also noted that a few of its top customers in the Materials Sales business last year were plastics reclaimer and trader Akshar Plastics, global brand owners Procter & Gamble and Unilever, and stormwater drainage products manufacturer Hydroblox.
TerraCycle US noted that the Materials Sales division sold recycled plastic furniture made from snack packaging to Vail Resorts last year.
In terms of investments in the company, TerraCycle US reported that the gross proceeds from its January 2018-September 2020 stock offering totaled nearly $16.5 million (it’s required to publicly disclose its financial performance because of that stock offering). Most of the money raised will go toward acquiring other companies and revenue streams, according to TerraCycle US.
Lastly, the company received a Paycheck Protection Program (PPP) loan from the U.S. Small Business Administration valued at $838,000 (Resource Recycling, Inc. received PPP loans in 2020 and 2021). TerraCycle US was one of thousands of recycling industry companies to receive PPP loans, which are forgiven if the money is spent on certain allowable expenses. On March 30, 2021, TerraCycle US received notice that the full value of its PPP loan had been forgiven.
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