Core Insights - Sotera Health Company (SHC) is showing potential as a technical investment due to reaching a key support level and experiencing a "golden cross" where the 50-day simple moving average crossed above the 200-day simple moving average, indicating a possible bullish breakout [1] Technical Analysis - A golden cross consists of three stages: a downtrend that bottoms out, a shorter moving average crossing above a longer moving average, and continued upward momentum in stock prices [2] - The occurrence of a golden cross suggests a positive trend reversal, contrasting with a death cross which indicates potential bearish movement [2] Performance Metrics - Over the past four weeks, SHC has experienced a significant gain of 35.1%, and currently holds a 3 (Hold) rating on the Zacks Rank, suggesting the stock may be on the verge of a breakout [3] - Recent earnings expectations have improved, with two upward revisions and no downward changes in estimates over the past 60 days, further supporting the bullish outlook [3] Investment Consideration - Given the important technical indicators and positive earnings estimate movements, SHC is recommended for inclusion on investors' watchlists [5]

FORM 10-Q [Registrant Information](index=1&type=section&id=Registrant%20Information) This report is the quarterly report for Sotera Health Company as of June 30, 2025, with the company incorporated in Delaware and listed on The Nasdaq Stock Market under ticker SHC - Company Name: **SOTERA HEALTH COMPANY**[2](index=2&type=chunk) - Place of Incorporation: **Delaware**[5](index=5&type=chunk) Securities Registered Information | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, $0.01 par value per share | SHC | The Nasdaq Stock Market LLC | [Filing Status](index=1&type=section&id=Filing%20Status) The company has filed all required reports in the past 12 months, complied with filing requirements for the past 90 days, and is designated as a "large accelerated filer" - All required reports filed: **Yes**[3](index=3&type=chunk) - All interactive data files submitted: **Yes**[3](index=3&type=chunk) - Filer Category: **Large Accelerated Filer**[4](index=4&type=chunk) [Shares Outstanding](index=1&type=section&id=Shares%20Outstanding) As of July 29, 2025, the number of common shares outstanding was 284,046,606 - Common shares outstanding as of July 29, 2025: **284,046,606 shares**[4](index=4&type=chunk) [TABLE OF CONTENTS](index=3&type=section&id=TABLE%20OF%20CONTENTS) [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=4&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This report contains forward-looking statements involving known and unknown risks, uncertainties, and other important factors that could cause actual results to differ materially from historical results or forward-looking statements, including risks related to EO and Co-60 supply disruptions, foreign currency fluctuations, environmental health and safety regulations, legal proceedings, regulatory compliance, market competition, inflation, supply chain disruptions, international business, cybersecurity incidents, M&A integration, internal controls, intellectual property, data privacy, profitability, goodwill impairment, unionization, and debt leverage - Forward-looking statements involve known and unknown risks that could cause actual results to differ materially from expectations[8](index=8&type=chunk) - Key risk factors include EO and Co-60 supply disruptions or price increases, foreign currency fluctuations, changes in environmental health and safety regulations, EO-related legal proceedings and claims, regulatory compliance, market competition, inflation, supply chain disruptions, international business risks, cybersecurity incidents, M&A integration capabilities, internal control effectiveness, intellectual property protection, data privacy regulation compliance, future profitability, goodwill impairment, unionization, and high leverage[8](index=8&type=chunk) - The company does not undertake any obligation to publicly update forward-looking statements unless required by law[9](index=9&type=chunk) [Part I—FINANCIAL INFORMATION](index=6&type=section&id=Part%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents Sotera Health Company's unaudited consolidated financial statements as of June 30, 2025, including the Consolidated Balance Sheets, Consolidated Statements of Operations and Comprehensive Income (Loss), Consolidated Statements of Cash Flows, and Consolidated Statements of Equity, along with related notes, detailing the company's financial position, operating results, and cash flows [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were **$3,216,729 thousand**, a 4.7% increase from December 31, 2024, driven by a significant rise in cash and cash equivalents, while total liabilities slightly increased and total equity grew by 26.3% Consolidated Balance Sheets Key Data (thousands of U.S. dollars) | Indicator | June 30, 2025 | December 31, 2024 | Change (thousands of U.S. dollars) | Change (%) | | :-------------------------- | :------------- | :-------------- | :------------- | :----- | | **Assets** | | | | | | Cash and cash equivalents | 332,437 | 277,242 | 55,195 | 19.9% | | Total current assets | 608,175 | 526,037 | 82,138 | 15.6% | | Property, plant and equipment, net | 1,080,399 | 1,036,892 | 43,507 | 4.2% | | Goodwill | 1,104,502 | 1,081,073 | 23,429 | 2.2% | | **Total assets** | **3,216,729** | **3,071,648** | **145,081** | **4.7%** | | **Liabilities** | | | | | | Total current liabilities | 246,320 | 191,002 | 55,318 | 29.0% | | Long-term debt | 2,202,651 | 2,208,100 | (5,449) | (0.2%) | | **Total liabilities** | **2,705,446** | **2,666,737** | **38,709** | **1.5%** | | **Equity** | | | | | | **Total equity** | **511,283** | **404,911** | **106,372** | **26.3%** | [Consolidated Statements of Operations and Comprehensive Income (Loss)](index=8&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) For the three months ended June 30, 2025, net revenues increased by 6.4%, but net income decreased by 9.0% year-over-year; for the six months ended June 30, 2025, net revenues grew by 4.6%, but the company reported a net loss of **$5.3 million** compared to a net income of **$15.1 million** in the prior year period Consolidated Statements of Operations and Comprehensive Income (Loss) Key Data (thousands of U.S. dollars) | Indicator | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (thousands of U.S. dollars) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :------------- | :----- | | Total net revenues | 294,341 | 276,594 | 17,747 | 6.4% | | Selling, general and administrative expenses | 68,893 | 60,575 | 8,318 | 13.7% | | Illinois EO litigation settlements | 34,000 | — | 34,000 | N/A | | Net income (loss) | 7,962 | 8,754 | (792) | (9.0%) | | Basic earnings per share | 0.03 | 0.03 | 0.00 | 0.0% | | Diluted earnings per share | 0.03 | 0.03 | 0.00 | 0.0% | | Indicator | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (thousands of U.S. dollars) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :------------- | :----- | | Total net revenues | 548,864 | 524,770 | 24,094 | 4.6% | | Selling, general and administrative expenses | 131,954 | 118,784 | 13,170 | 11.1% | | Illinois EO litigation settlements | 64,943 | — | 64,943 | N/A | | Net income (loss) | (5,298) | 15,077 | (20,375) | (135.1%) | | Basic earnings per share | (0.02) | 0.05 | (0.07) | (140.0%) | | Diluted earnings per share | (0.02) | 0.05 | (0.07) | (140.0%) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, cash flow from operating activities significantly increased to **$112.9 million**, primarily due to the Georgia EO litigation settlement payment in the prior year, while cash outflows from investing and financing activities also substantially decreased, resulting in a net increase of **$55.4 million** in cash and cash equivalents Consolidated Statements of Cash Flows Key Data (thousands of U.S. dollars) | Indicator | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (thousands of U.S. dollars) | | :------------------------------------------ | :--------------------- | :--------------------- | :------------- | | Net cash provided by (used in) operating activities | 112,937 | 70,994 | 41,943 | | Net cash used in investing activities | (51,110) | (76,774) | 25,664 | | Net cash used in financing activities | (15,020) | (41,362) | 26,342 | | Effect of exchange rate changes on cash and cash equivalents | 8,600 | (6,754) | 15,354 | | Net increase (decrease) in cash and cash equivalents | 55,407 | (53,896) | 109,303 | | Cash and cash equivalents at end of period (including restricted cash) | 334,272 | 247,758 | 86,514 | - The increase in cash flow from operating activities was primarily due to the **$35.0 million** Georgia EO litigation settlement payment made in January 2024[239](index=239&type=chunk) - The decrease in cash outflow from investing activities was mainly due to a **$25.7 million** reduction in capital expenditures[240](index=240&type=chunk) - The decrease in cash outflow from financing activities was primarily due to a **$27.9 million** reduction in debt issuance costs, partially offset by a **$6.3 million** increase in term loan principal repayments[241](index=241&type=chunk) [Consolidated Statements of Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Equity) As of June 30, 2025, total equity was **$511.3 million**, an increase of **$106.4 million** from December 31, 2024, primarily driven by significant foreign currency translation gains in accumulated other comprehensive income (loss) Consolidated Statements of Equity Key Data (thousands of U.S. dollars) | Indicator | June 30, 2025 | December 31, 2024 | Change (thousands of U.S. dollars) | | :-------------------------- | :------------- | :-------------- | :------------- | | Common stock | 2,860 | 2,860 | 0 | | Treasury stock | (19,038) | (23,434) | 4,396 | | Additional paid-in capital | 1,251,089 | 1,243,778 | 7,311 | | Retained deficit | (615,340) | (610,042) | (5,298) | | Accumulated other comprehensive income (loss) | (108,288) | (208,251) | 99,963 | | **Total equity** | **511,283** | **404,911** | **106,372** | - For the six months ended June 30, 2025, foreign currency translation gains of **$101.8 million** significantly impacted accumulated other comprehensive income[23](index=23&type=chunk) [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes to the consolidated financial statements, covering key areas such as accounting policies, recent accounting standards, revenue recognition, inventories, prepaid expenses, goodwill and intangible assets, accrued liabilities, long-term debt, income taxes, employee benefits, other comprehensive income, share-based compensation, earnings per share, commitments and contingencies, financial instruments and financial risk, and segment information [1. Basis of Presentation](index=12&type=section&id=1.%20Basis%20of%20Presentation) Sotera Health Company is a global leader in sterilization solutions, laboratory testing, and consulting services for the healthcare industry, operating primarily in the Americas, Europe, and Asia, with financial statements prepared under U.S. GAAP involving management estimates and assumptions across its Sterigenics, Nordion, and Nelson Labs segments - The company is a global leader in sterilization solutions, laboratory testing, and consulting services for the healthcare industry[28](index=28&type=chunk) - The company operates and reports through three segments: Sterigenics, Nordion, and Nelson Labs[29](index=29&type=chunk) - Financial statements are prepared in accordance with U.S. GAAP and involve management's estimates and assumptions[30](index=30&type=chunk)[31](index=31&type=chunk) [2. Recent Accounting Standards](index=12&type=section&id=2.%20Recent%20Accounting%20Standards) The company adopted ASU 2023-07 (Segment Reporting) in fiscal year 2024 with no material impact, while ASU 2023-09 (Income Taxes) effective in fiscal year 2025 will increase tax disclosures without affecting income tax expense, and ASU 2024-03 (Income Statement—Reporting Comprehensive Income—Disaggregation of Expenses) effective in fiscal year 2026 is expected to increase disclosures - ASU 2023-07 (Segment Reporting) has been adopted with no material impact on the consolidated financial statements and disclosures[32](index=32&type=chunk) - ASU 2023-09 (Income Taxes) will be effective for annual periods beginning after December 15, 2024, increasing tax disclosures without affecting reported income tax expense or related tax assets and liabilities[33](index=33&type=chunk) - The effective date for ASU 2024-03 (Income Statement—Reporting Comprehensive Income—Disaggregation of Expenses) has been revised to annual reporting periods beginning after December 15, 2026, and is expected to increase disclosures[34](index=34&type=chunk) [3. Revenue Recognition](index=13&type=section&id=3.%20Revenue%20Recognition) The company disclosed net revenues by timing of recognition and segment; for the three months ended June 30, 2025, total net revenues were **$294.3 million**, with **$236.2 million** recognized at a point in time and **$58.1 million** over time, while for the six months, total net revenues were **$548.9 million**, with **$438.2 million** recognized at a point in time and **$110.7 million** over time, and deferred revenue decreased to **$11.5 million** from **$15.1 million** at December 31, 2024 Net Revenues by Timing of Recognition and Segment (thousands of U.S. dollars) | (thousands of U.S. dollars) | Sterigenics | Nordion | Nelson Labs | Consolidated | | :-------------------------- | :---------- | :------ | :---------- | :----------- | | **Three Months Ended June 30, 2025** | | | | | | Point in time | 194,839 | 41,371 | — | 236,210 | | Over time | — | 1,060 | 57,071 | 58,131 | | **Total** | **194,839** | **42,431** | **57,071** | **294,341** | | **Six Months Ended June 30, 2025** | | | | | | Point in time | 364,523 | 73,671 | — | 438,194 | | Over time | — | 1,317 | 109,353 | 110,670 | | **Total** | **364,523** | **74,988** | **109,353** | **548,864** | - Deferred revenue decreased from **$15.1 million** as of December 31, 2024, to **$11.5 million** as of June 30, 2025[36](index=36&type=chunk) [4. Inventories](index=13&type=section&id=4.%20Inventories) As of June 30, 2025, the company's net inventories were **$59.9 million**, a 21.9% increase from **$49.2 million** at December 31, 2024, primarily driven by increases in raw materials and work-in-process Inventories Composition (thousands of U.S. dollars) | (thousands of U.S. dollars) | June 30, 2025 | December 31, 2024 | Change ($ thousands) | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | :--------- | | Raw materials and supplies | 48,911 | 42,408 | 6,503 | 15.3% | | Work-in-process | 3,209 | 929 | 2,280 | 245.4% | | Finished goods | 8,058 | 6,039 | 2,019 | 33.4% | | Reserve for excess and obsolete inventory | (229) | (218) | (11) | 5.0% | | **Inventories, net** | **59,949** | **49,158** | **10,791** | **21.9%** | [5. Prepaid Expenses and Other Current Assets](index=15&type=section&id=5.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) As of June 30, 2025, total prepaid expenses and other current assets were **$66.0 million**, a 29.4% increase from **$51.0 million** at December 31, 2024, primarily influenced by significant increases in customer contract assets and prepaid rent Prepaid Expenses and Other Current Assets Composition (thousands of U.S. dollars) | (thousands of U.S. dollars) | June 30, 2025 | December 31, 2024 | Change ($ thousands) | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | :--------- | | Prepaid taxes | 4,690 | 4,993 | (303) | (6.1%) | | Prepaid business insurance | 3,602 | 6,993 | (3,391) | (48.5%) | | Prepaid rent | 5,599 | 1,223 | 4,376 | 357.8% | | Customer contract assets | 28,570 | 15,213 | 13,357 | 87.8% | | Embedded derivatives | 1,339 | 2,689 | (1,350) | (50.2%) | | **Prepaid expenses and other current assets** | **66,024** | **51,031** | **14,993** | **29.4%** | [6. Goodwill and Other Intangible Assets](index=15&type=section&id=6.%20Goodwill%20and%20Other%20Intangible%20Assets) As of June 30, 2025, total goodwill was **$1,104.5 million**, an increase of **$23.4 million** from December 31, 2024, primarily due to foreign currency exchange rate changes, while amortization expense for finite-lived intangible assets decreased in both the second quarter and first half of 2025, mainly because some intangible assets were fully amortized in May 2025 Goodwill Changes (thousands of U.S. dollars) | (thousands of U.S. dollars) | Sterigenics | Nordion | Nelson Labs | Total | | :-------------------------- | :---------- | :------ | :---------- | :------ | | Goodwill at December 31, 2024 | 653,222 | 255,485 | 172,366 | 1,081,073 | | Changes due to foreign currency exchange rates | 5,884 | 13,361 | 4,184 | 23,429 | | **Goodwill at June 30, 2025** | **659,106** | **268,846** | **176,550** | **1,104,502** | Amortization Expense for Finite-Lived Intangible Assets (thousands of U.S. dollars) | Period | 2025 | 2024 | Change ($ thousands) | Change (%) | | :-------------------------- | :----- | :----- | :------------- | :----- | | Three Months Ended June 30 | 11,900 | 19,800 | (7,900) | (39.9%) | | Six Months Ended June 30 | 30,600 | 39,900 | (9,300) | (23.3%) | - The decrease in amortization expense was primarily due to certain intangible assets being fully amortized in May 2025[45](index=45&type=chunk) [7. Accrued Liabilities](index=19&type=section&id=7.%20Accrued%20Liabilities) As of June 30, 2025, total accrued liabilities were **$143.5 million**, a 58.7% increase from **$90.5 million** at December 31, 2024, primarily due to the establishment of a reserve for Illinois EO litigation settlements and an increase in professional fees Accrued Liabilities Composition (thousands of U.S. dollars) | (thousands of U.S. dollars) | June 30, 2025 | December 31, 2024 | Change ($ thousands) | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | :--------- | | Accrued employee compensation | 33,305 | 37,018 | (3,713) | (10.0%) | | Reserve for Illinois EO litigation settlements | 64,943 | — | 64,943 | N/A | | Accrued interest expense | 5,363 | 25,321 | (19,958) | (78.8%) | | Embedded derivatives | 905 | 4,098 | (3,193) | (77.9%) | | Professional fees | 27,147 | 12,572 | 14,575 | 115.9% | | **Accrued liabilities** | **143,542** | **90,463** | **53,079** | **58.7%** | [8. Long-Term Debt](index=19&type=section&id=8.%20Long-Term%20Debt) As of June 30, 2025, the company's net long-term debt was **$2,202.7 million**, a slight decrease from December 31, 2024; the company amended its revolving credit facility on April 30, 2025, increasing total borrowing capacity to **$600.0 million** and extending the maturity to April 30, 2030, and refinanced its capital structure on May 30, 2024, through a refinanced term loan and 7.375% Senior Secured Notes due 2031, while remaining in compliance with all debt covenants as of June 30, 2025 Long-Term Debt Composition (thousands of U.S. dollars) | (thousands of U.S. dollars) | June 30, 2025 | December 31, 2024 | Change ($ thousands) | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | :--------- | | Secured notes due 2031 | 746,582 | 746,293 | 289 | 0.0% | | Term loan due 2031 | 1,470,889 | 1,476,610 | (5,721) | (0.4%) | | **Long-term debt (net)** | **2,202,651** | **2,208,100** | **(5,449)** | **(0.2%)** | - On April 30, 2025, the company amended its revolving credit facility, increasing total borrowing capacity to **$600.0 million** and extending the maturity date to April 30, 2030[55](index=55&type=chunk)[243](index=243&type=chunk) - On May 30, 2024, the company refinanced its capital structure through a **$1,509.4 million** refinanced term loan and **$750.0 million** of 7.375% Senior Secured Notes due 2031[56](index=56&type=chunk)[57](index=57&type=chunk)[61](index=61&type=chunk)[245](index=245&type=chunk) - As of June 30, 2025, the company was in compliance with all covenants in its senior secured credit agreement and indentures[63](index=63&type=chunk) [9. Income Taxes](index=23&type=section&id=9.%20Income%20Taxes) The company estimates quarterly income tax expense based on the annual effective income tax rate; for the three and six months ended June 30, 2025, the difference between income tax expense and the statutory rate was primarily due to valuation allowances for interest expense deductibility limitations, foreign rate differences, and current period permanent tax differences, partially offset by state income tax benefits - Income tax expense is estimated based on the annual effective income tax rate[69](index=69&type=chunk) - The difference between income tax expense and the statutory rate is primarily influenced by valuation allowances for interest expense deductibility limitations, foreign rate differences, and current period permanent tax differences, partially offset by state income tax benefits[70](index=70&type=chunk) [10. Employee Benefits](index=23&type=section&id=10.%20Employee%20Benefits) The company offers various post-retirement benefit plans in certain non-U.S. countries, including Nordion's defined benefit and defined contribution pension plans, retirement compensation arrangements, and extended healthcare plans for retirees; for the three and six months ended June 30, 2025, net periodic benefits for defined benefit pension plans were negative, primarily due to expected returns on plan assets, while other benefit plans had lower net periodic benefit costs - The company provides defined benefit and defined contribution pension plans, along with other post-retirement benefit plans, in certain non-U.S. countries, primarily Nordion[71](index=71&type=chunk) Net Periodic Benefit for Defined Benefit Pension Plans (thousands of U.S. dollars) | (thousands of U.S. dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Service cost | 125 | 142 | 245 | 287 | | Interest cost | 2,393 | 2,612 | 4,701 | 5,263 | | Expected return on plan assets | (3,996) | (3,961) | (7,848) | (7,980) | | **Net periodic benefit** | **(1,478)** | **(1,207)** | **(2,902)** | **(2,430)** | - The Nordion pension plan currently has no funding requirements as it has an ongoing solvency surplus under Canadian federal regulations[74](index=74&type=chunk) [11. Other Comprehensive Income (Loss)](index=24&type=section&id=11.%20Other%20Comprehensive%20Income%20(Loss)) As of June 30, 2025, the accumulated other comprehensive income (loss) balance was **($108.3) million**, a significant improvement from **($208.3) million** at December 31, 2024, primarily benefiting from **$101.8 million** in foreign currency translation gains, partially offset by losses on interest rate derivatives Changes in Accumulated Other Comprehensive Income (Loss) (thousands of U.S. dollars) | (thousands of U.S. dollars) | Defined Benefit Plans | Foreign Currency Translation | Interest Rate Derivatives | Total | | :-------------------------- | :-------------------- | :--------------------------- | :------------------------ | :------ | | **Beginning balance – January 1, 2025** | **1,165** | **(209,666)** | **250** | **(208,251)** | | Net current-period other comprehensive income (loss) | 81 | 101,777 | (1,895) | 99,963 | | **Ending balance – June 30, 2025** | **1,246** | **(107,889)** | **(1,645)** | **(108,288)** | - Foreign currency translation generated a net gain of **$101.8 million** in the first half of 2025, which was the primary driver for the improvement in accumulated other comprehensive income (loss)[78](index=78&type=chunk) [12. Share-Based Compensation](index=26&type=section&id=12.%20Share-Based%20Compensation) The company provides share-based compensation to employees and directors through pre-IPO awards and the 2020 Omnibus Incentive Plan; for the three months ended June 30, 2025, share-based compensation expense was **$8.0 million**, and for six months, it was **$14.9 million**, a decrease from the prior year, with stock options, restricted stock units (RSUs), and performance stock units (PSUs) being the primary forms of incentive Share-Based Compensation Expense (thousands of U.S. dollars) | Period | 2025 | 2024 | Change ($ thousands) | Change (%) | | :-------------------------- | :----- | :----- | :------------- | :----- | | Three Months Ended June 30 | 8,000 | 9,800 | (1,800) | (18.4%) | | Six Months Ended June 30 | 14,900 | 18,100 | (3,200) | (17.7%) | - As of June 30, 2025, unvested pre-IPO Class B-1 restricted shares totaled **1,895 shares**[85](index=85&type=chunk) - As of June 30, 2025, **8,278,249 stock options** were outstanding, with **6.9 million** vested and exercisable[88](index=88&type=chunk) - As of June 30, 2025, unvested RSUs totaled **2,933,436** and unvested PSUs totaled **865,256**[89](index=89&type=chunk)[91](index=91&type=chunk) [13. Earnings (Loss) Per Share](index=29&type=section&id=13.%20Earnings%20(Loss)%20Per%20Share) For the three months ended June 30, 2025, basic and diluted earnings per share were both **$0.03**, consistent with the prior year; however, for the six months ended June 30, 2025, the company reported a basic and diluted loss per share of **$0.02**, compared to earnings per share of **$0.05** in the prior year, primarily due to the current period's net loss Earnings (Loss) Per Share Data | (in thousands of U.S. dollars and share amounts (except per share amounts)) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income (loss) | 7,962 | 8,754 | (5,298) | 15,077 | | Net income (loss) attributable to Sotera Health Company common shareholders | 7,961 | 8,747 | (5,298) | 15,044 | | Weighted-average common shares outstanding - basic | 283,933 | 282,894 | 283,747 | 282,403 | | Weighted-average common shares outstanding - diluted | 285,756 | 284,541 | 283,747 | 284,264 | | Net income (loss) per common share attributable to Sotera Health Company common shareholders - basic | 0.03 | 0.03 | (0.02) | 0.05 | | Net income (loss) per common share attributable to Sotera Health Company common shareholders - diluted | 0.03 | 0.03 | (0.02) | 0.05 | - Due to the company's net loss for the six months ended June 30, 2025, the dilutive effect of potential common shares was excluded from diluted earnings per share calculations as they were anti-dilutive[97](index=97&type=chunk) [14. Commitments and Contingencies](index=30&type=section&id=14.%20Commitments%20and%20Contingencies) The company faces multiple legal proceedings and contingencies, primarily involving ethylene oxide (EO) tort litigation, environmental liability insurance coverage, and securities litigation; the company has reached two settlement agreements for Illinois EO litigation totaling **$64.9 million**, while EO litigation in Georgia and New Mexico remains ongoing, and the company is actively seeking additional insurance coverage and vigorously defending securities litigation - The company faces multiple EO tort litigations involving facilities in California, Georgia, Illinois, and New Mexico[101](index=101&type=chunk)[102](index=102&type=chunk)[104](index=104&type=chunk)[108](index=108&type=chunk)[113](index=113&type=chunk) - The company has reached two settlement agreements for EO litigation related to its Willowbrook, Illinois facility: an agreement on April 3, 2025, to pay **$30.9 million** to resolve 97 claims, and an agreement on July 23, 2025, to pay **$34.0 million** to resolve 129 claims[109](index=109&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) - EO litigation in Georgia and New Mexico remains ongoing, and the company believes it is unlikely to incur losses through trial and any necessary appeals in the remaining or future EO cases[105](index=105&type=chunk)[107](index=107&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - The company is seeking additional insurance coverage for legal fees and settlement amounts related to EO tort litigation, but the outcome is uncertain[117](index=117&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk) - The company faces securities litigation and shareholder derivative lawsuits, but the Ohio District Court has dismissed the securities class action, and the company plans to vigorously defend all related litigation[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) [15. Financial Instruments and Financial Risk](index=33&type=section&id=15.%20Financial%20Instruments%20and%20Financial%20Risk) The company uses interest rate derivatives to manage interest rate risk on floating-rate debt and forward foreign currency contracts to manage foreign currency exchange rate risk; as of June 30, 2025, interest rate swaps had a notional amount of **$800.0 million**, and foreign currency forward contracts had a notional amount of **$42.5 million**, while the company also faces customer credit risk and regularly assesses the collectibility of accounts receivable, with fair values of financial assets and liabilities primarily determined through observable market inputs (Level 2) - The company uses interest rate derivatives, such as interest rate swaps, to manage interest rate risk on floating-rate debt and forward foreign currency contracts to manage foreign currency exchange rate risk[127](index=127&type=chunk)[131](index=131&type=chunk) Notional Amounts and Fair Values of Derivative Instruments (thousands of U.S. dollars) | (in U.S. Dollars; notional in millions, fair value in thousands) | Notional Amount | Fair Value Derivative Assets | Fair Value Derivative Liabilities | | :------------------------------------------------------------- | :-------------- | :--------------------------- | :------------------------------ | | **As of June 30, 2025** | | | | | Interest rate swaps | 800.0 | 200 | 2,289 | | Foreign currency forward contracts | 42.5 | 595 | — | | Embedded derivatives | 211.7 | 1,339 | 905 | | **Total** | **1,054.2** | **2,134** | **3,194** | - The company faces customer credit risk, with net accounts receivable of **$136.6 million** and an allowance for doubtful accounts of **$2.3 million** as of June 30, 2025[15](index=15&type=chunk)[138](index=138&type=chunk) - The fair values of financial instruments are primarily determined using Level 2 observable market inputs, such as interest rate and yield curves and foreign currency forward curves[143](index=143&type=chunk)[146](index=146&type=chunk) [16. Segment Information](index=38&type=section&id=16.%20Segment%20Information) The company has three reportable segments: Sterigenics (sterilization services), Nordion (cobalt-60 supply), and Nelson Labs (laboratory testing and consulting services); for the three months ended June 30, 2025, Sterigenics net revenues grew by 10.5%, Nordion by 2.9%, and Nelson Labs decreased by 3.3%, while for the six months, Sterigenics net revenues grew by 6.3%, Nordion by 14.9%, and Nelson Labs decreased by 6.3%, with all segment revenues and income influenced by pricing, volume/mix, and foreign currency exchange rate changes - The company has three reportable segments: Sterigenics, which provides terminal sterilization and irradiation services; Nordion, which supplies cobalt-60 and gamma irradiation systems; and Nelson Labs, which offers microbiology and analytical chemistry testing and consulting services[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) Segment Net Revenues (thousands of U.S. dollars) | (thousands of U.S. dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (thousands of U.S. dollars) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :------------- | :----- | | Sterigenics | 194,839 | 176,354 | 18,485 | 10.5% | | Nordion | 42,431 | 41,244 | 1,187 | 2.9% | | Nelson Labs | 57,071 | 58,996 | (1,925) | (3.3%) | | (thousands of U.S. dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (thousands of U.S. dollars) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :------------- | :----- | | Sterigenics | 364,523 | 342,851 | 21,672 | 6.3% | | Nordion | 74,988 | 65,251 | 9,737 | 14.9% | | Nelson Labs | 109,353 | 116,668 | (7,315) | (6.3%) | Segment Income (thousands of U.S. dollars) | (thousands of U.S. dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (thousands of U.S. dollars) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :------------- | :----- | | Sterigenics | 107,745 | 96,778 | 10,967 | 11.3% | | Nordion | 23,477 | 23,420 | 57 | 0.2% | | Nelson Labs | 19,513 | 17,137 | 2,376 | 13.9% | | (thousands of U.S. dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (thousands of U.S. dollars) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :------------- | :----- | | Sterigenics | 195,749 | 182,596 | 13,153 | 7.2% | | Nordion | 40,899 | 34,205 | 6,694 | 19.6% | | Nelson Labs | 35,926 | 32,478 | 3,448 | 10.6% | Segment Capital Expenditures (thousands of U.S. dollars) | (thousands of U.S. dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (thousands of U.S. dollars) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :------------- | :----- | | Sterigenics | 36,501 | 53,798 | (17,297) | (32.2%) | | Nordion | 10,058 | 19,463 | (9,405) | (48.3%) | | Nelson Labs | 4,588 | 3,550 | 1,038 | 29.2% | | **Total capital expenditures** | **51,147** | **76,811** | **(25,664)** | **(33.4%)** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's detailed discussion and analysis of the company's financial condition and operating results, covering consolidated performance, non-GAAP financial measures, segment results, and liquidity and capital resources for the three and six months ended June 30, 2025; overall net revenues increased, but net income (net loss for six months) was impacted by factors such as Illinois EO litigation settlements, with the company emphasizing its leadership in healthcare sterilization and laboratory services [OVERVIEW](index=43&type=section&id=OVERVIEW) Sotera Health Company is a global leader in healthcare sterilization solutions, laboratory testing, and consulting services, committed to "Safeguarding Global Health," providing end-to-end sterilization and microbiology and analytical laboratory testing services to ensure the safety of medical, pharmaceutical, and food products, operating through its Sterigenics, Nordion, and Nelson Labs segments, with the combination of Sterigenics and Nordion making it the only vertically integrated global gamma sterilization provider - The company is a global leader in healthcare sterilization solutions, laboratory testing, and consulting services, with a mission to "Safeguard Global Health"[164](index=164&type=chunk) - The company provides end-to-end sterilization and microbiology and analytical laboratory testing services to ensure the safety of medical, pharmaceutical, and food products[164](index=164&type=chunk) - The combination of Sterigenics and Nordion makes the company the only vertically integrated global gamma sterilization provider[164](index=164&type=chunk) [CONSOLIDATED RESULTS OF OPERATIONS](index=43&type=section&id=CONSOLIDATED%20RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's consolidated operating results for the three and six months ended June 30, 2025; for the three months, total net revenues increased by 6.4%, but net income decreased by 9.0%, while for the six months, total net revenues increased by 4.6%, but the company reported a net loss, primarily impacted by Illinois EO litigation settlements and foreign exchange losses [Three Months Ended June 30, 2025 as compared to Three Months Ended June 30, 2024](index=43&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20as%20compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) For the three months ended June 30, 2025, total net revenues increased by 6.4% to **$294.3 million**, with service revenues up 8.2% and product revenues down 4.5%; total cost of revenues increased by 3.2%, and selling, general and administrative expenses rose by 13.7%, mainly due to increased professional service fees related to EO litigation, resulting in a 9.0% decrease in net income to **$8.0 million**, though Adjusted Net Income and Adjusted EBITDA both increased Consolidated Results of Operations Summary (thousands of U.S. dollars) | (thousands of U.S. dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (thousands of U.S. dollars) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :------------- | :----- | | Total net revenues | 294,341 | 276,594 | 17,747 | 6.4% | | Total cost of revenues | 127,720 | 123,803 | 3,917 | 3.2% | | Net income | 7,962 | 8,754 | (792) | (9.0%) | | Adjusted Net Income | 56,062 | 55,187 | 875 | 1.6% | | Adjusted EBITDA | 150,735 | 137,335 | 13,400 | 9.8% | - Service revenues increased by **8.2%** to **$257.2 million**, primarily driven by improved volume/mix at Sterigenics and Nordion, and volume/mix in Nelson Labs' core laboratory testing services[170](index=170&type=chunk) - Product revenues decreased by **4.5%** to **$37.1 million**, primarily due to lower cobalt-60 revenues in the Nordion segment, impacted by reactor harvest schedules[171](index=171&type=chunk) - Selling, general and administrative expenses increased by **13.7%**, primarily due to a **$6.2 million** increase in litigation and other professional service fees related to EO sterilization facilities[176](index=176&type=chunk) - Amortization expense for intangible assets decreased by **39.7%**, primarily because certain intangible assets were fully amortized in May 2025[177](index=177&type=chunk) - Illinois EO litigation settlement expenses amounted to **$34.0 million**[178](index=178&type=chunk) [Six Months Ended June 30, 2025 as compared to Six Months Ended June 30, 2024](index=47&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20as%20compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) For the six months ended June 30, 2025, total net revenues increased by 4.6% to **$548.9 million**, with service revenues up 3.7% and product revenues up 11.8%; total cost of revenues increased by 0.8%, and selling, general and administrative expenses rose by 11.1%, mainly due to increased professional service fees related to EO litigation, resulting in a net loss of **$5.3 million** compared to a net income of **$15.1 million** in the prior year, primarily due to **$64.9 million** in Illinois EO litigation settlements Consolidated Results of Operations Summary (thousands of U.S. dollars) | (thousands of U.S. dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (thousands of U.S. dollars) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :------------- | :----- | | Total net revenues | 548,864 | 524,770 | 24,094 | 4.6% | | Total cost of revenues | 246,811 | 244,864 | 1,947 | 0.8% | | Net (loss) income | (5,298) | 15,077 | (20,375) | (135.1%) | | Adjusted Net Income | 95,106 | 90,816 | 4,290 | 4.7% | | Adjusted EBITDA | 272,574 | 249,279 | 23,295 | 9.3% | - Service revenues increased by **3.7%** to **$481.2 million**, primarily driven by favorable pricing at Sterigenics and Nelson Labs, favorable volume/mix at Sterigenics and Nordion, and volume/mix in Nelson Labs' core laboratory testing services[191](index=191&type=chunk) - Product revenues increased by **11.8%** to **$67.7 million**, primarily driven by favorable volume/mix and pricing in the Nordion segment[194](index=194&type=chunk) - Selling, general and administrative expenses increased by **11.1%**, primarily due to a **$14.3 million** increase in litigation and other professional service fees related to EO sterilization facilities[199](index=199&type=chunk) - Illinois EO litigation settlement expenses totaled **$64.9 million**, comprising **$30.9 million** from the April 3 agreement and **$34.0 million** from the July 23 agreement[201](index=201&type=chunk)[202](index=202&type=chunk) [NON-GAAP FINANCIAL MEASURES](index=50&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) The company uses Adjusted Net Income and Adjusted EBITDA as primary non-GAAP financial measures to assess operating performance, excluding non-cash and non-recurring items such as amortization, share-based compensation, loss on debt refinancing, foreign currency fluctuations, business optimization expenses, EO litigation-related expenses, asset retirement obligation accretion, and income tax impacts, to better evaluate core operational performance; for the three months ended June 30, 2025, Adjusted Net Income was **$56.1 million** and Adjusted EBITDA was **$150.7 million**, while for the six months, Adjusted Net Income was **$95.1 million** and Adjusted EBITDA was **$272.6 million** - Adjusted Net Income is defined as net income excluding amortization and certain other adjustments[211](index=211&type=chunk) - Adjusted EBITDA is defined as Adjusted Net Income excluding interest expense, depreciation, and the income tax provision applicable to Adjusted Net Income[211](index=211&type=chunk) - These non-GAAP measures are used to evaluate operating performance by excluding non-cash and non-recurring items, providing a more complete understanding of the business[212](index=212&type=chunk) Reconciliation of Non-GAAP Financial Measures to GAAP Net Income (Loss) (thousands of U.S. dollars) | (thousands of U.S. dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income (loss) | 7,962 | 8,754 | (5,298) | 15,077 | | Amortization of intangible assets | 11,924 | 19,755 | 30,598 | 39,879 | | Share-based compensation | 8,149 | 10,206 | 15,418 | 18,863 | | Loss on refinancing of debt | 80 | 23,400 | 80 | 24,090 | | Illinois EO litigation settlements | 34,000 | — | 64,943 | — | | **Adjusted Net Income** | **56,062** | **55,187** | **95,106** | **90,816** | | Interest expense, net | 40,651 | 40,388 | 81,527 | 82,159 | | Depreciation | 23,024 | 20,075 | 45,084 | 40,381 | | Income tax provision applicable to Adjusted Net Income | 30,998 | 21,685 | 50,857 | 35,923 | | **Adjusted EBITDA** | **150,735** | **137,335** | **272,574** | **249,279** | [SEGMENT RESULTS OF OPERATIONS](index=53&type=section&id=SEGMENT%20RESULTS%20OF%20OPERATIONS) This section details the operating results of the company's three reportable segments (Sterigenics, Nordion, and Nelson Labs); for the three months ended June 30, 2025, Sterigenics achieved double-digit growth in both net revenues and segment income, and Nelson Labs also saw significant segment income growth, while for the six months, Nordion showed the most significant growth in net revenues and segment income, with Sterigenics and Nelson Labs also growing, though Nelson Labs' net revenues decreased [Our Segments](index=53&type=section&id=Our%20Segments) The company operates through three segments: Sterigenics, providing terminal sterilization and irradiation services; Nordion, supplying cobalt-60 and gamma irradiation systems; and Nelson Labs, offering microbiology and analytical chemistry testing and consulting services, with Nordion's sales model potentially fluctuating quarterly due to regulatory and logistical requirements and cobalt-60 harvest schedules - Sterigenics provides terminal sterilization and irradiation services, including gamma irradiation, EO processing, and E-beam irradiation[217](index=217&type=chunk) - Nordion is a global leading supplier of cobalt-60 and gamma irradiation systems, with its sales model potentially experiencing quarterly fluctuations due to regulatory, logistical, and cobalt-60 harvest schedules[218](index=218&type=chunk)[219](index=219&type=chunk) - Nelson Labs provides microbiology and analytical chemistry testing and consulting services[220](index=220&type=chunk) [Segment Results for the Three Months Ended June 30, 2025 and 2024](index=53&type=section&id=Segment%20Results%20for%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) For the three months ended June 30, 2025, Sterigenics net revenues increased by 10.5% to **$194.8 million**, and segment income grew by 11.3% to **$107.7 million**, primarily driven by volume/mix and pricing; Nordion net revenues increased by 2.9% to **$42.4 million**, and segment income grew by 0.2% to **$23.5 million**; Nelson Labs net revenues decreased by 3.3% to **$57.1 million**, but segment income increased by 13.9% to **$19.5 million**, mainly due to improved volume/mix, laboratory optimization, and favorable pricing Segment Net Revenues and Segment Income (thousands of U.S. dollars) | (thousands of U.S. dollars) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (thousands of U.S. dollars) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :------------- | :----- | | **Net Revenues** | | | | | | Sterigenics | 194,839 | 176,354 | 18,485 | 10.5% | | Nordion | 42,431 | 41,244 | 1,187 | 2.9% | | Nelson Labs | 57,071 | 58,996 | (1,925) | (3.3%) | | **Segment Income** | | | | | | Sterigenics | 107,745 | 96,778 | 10,967 | 11.3% | | Nordion | 23,477 | 23,420 | 57 | 0.2% | | Nelson Labs | 19,513 | 17,137 | 2,376 | 13.9% | - Sterigenics' revenue growth reflects a **6.0%** improvement in volume and mix, along with favorable impacts from pricing and foreign currency exchange rates[222](index=222&type=chunk) - Nelson Labs' net revenue decrease was due to lower expert advisory services revenue, partially offset by growth in core laboratory testing services, favorable pricing, and foreign currency exchange rate changes[224](index=224&type=chunk) [Segment Results for the Six Months Ended June 30, 2025 and 2024](index=55&type=section&id=Segment%20Results%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) For the six months ended June 30, 2025, Sterigenics net revenues increased by 6.3% to **$364.5 million**, and segment income grew by 7.2% to **$195.7 million**; Nordion net revenues increased by 14.9% to **$75.0 million**, and segment income grew by 19.6% to **$40.9 million**, primarily driven by cobalt-60 volume/mix and pricing; Nelson Labs net revenues decreased by 6.3% to **$109.4 million**, but segment income increased by 10.6% to **$35.9 million**, mainly due to improved volume/mix, laboratory optimization, and favorable pricing Segment Net Revenues and Segment Income (thousands of U.S. dollars) | (thousands of U.S. dollars) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (thousands of U.S. dollars) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :------------- | :----- | | **Net Revenues** | | | | | | Sterigenics | 364,523 | 342,851 | 21,672 | 6.3% | | Nordion | 74,988 | 65,251 | 9,737 | 14.9% | | Nelson Labs | 109,353 | 116,668 | (7,315) | (6.3%) | | **Segment Income** | | | | | | Sterigenics | 195,749 | 182,596 | 13,153 | 7.2% | | Nordion | 40,899 | 34,205 | 6,694 | 19.6% | | Nelson Labs | 35,926 | 32,478 | 3,448 | 10.6% | - Nordion's revenue growth was primarily driven by a **15.0%** increase in volume and mix, and a **1.8%** favorable impact from pricing[230](index=230&type=chunk) - Nelson Labs' net revenue decrease was due to lower expert advisory services revenue, partially offset by growth in core laboratory testing services and favorable pricing[231](index=231&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=56&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company primarily obtains liquidity through cash flow from operating activities and credit financing; as of June 30, 2025, cash and cash equivalents were **$332.4 million**, an increase of **$55.2 million** from year-end 2024, and the company expects existing liquidity to be sufficient to meet operations, debt service, capital expenditures, and litigation costs for the next 12 months, with no outstanding borrowings under the revolving credit facility and **$585.8 million** available as of June 30, 2025, while capital expenditures decreased in the first half of 2025 - The company's primary sources of liquidity are cash flow from operating activities and credit financing[235](index=235&type=chunk) - As of June 30, 2025, cash and cash equivalents were **$332.4 million**, an increase of **$55.2 million** from December 31, 2024[235](index=235&type=chunk) - The company expects existing liquidity to be sufficient to meet operations, debt service, capital expenditures, and litigation costs for the next 12 months[236](index=236&type=chunk) - As of June 30, 2025, there were no outstanding borrowings under the revolving credit facility, with **$585.8 million** available[247](index=247&type=chunk) Capital Expenditures (thousands of U.S. dollars) | Period | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (thousands of U.S. dollars) | Change (%) | | :--- | :--------------------- | :--------------------- | :------------- | :----- | | Capital expenditures | 51,100 | 76,800 | (25,700) | (33.5%) | [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=58&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) The preparation of consolidated financial statements requires management to make judgments, estimates, and assumptions; there have been no material changes in critical accounting policies, management estimates, or accounting policies since the year ended December 31, 2024 - The preparation of consolidated financial statements involves management's judgments, estimates, and assumptions about future uncertainties[248](index=248&type=chunk) - There have been no material changes in critical accounting policies, management estimates, or accounting policies since the year ended December 31, 2024[249](index=249&type=chunk) [NEW ACCOUNTING PRONOUNCEMENTS](index=58&type=section&id=NEW%20ACCOUNTING%20PRONOUNCEMENTS) This section refers to the description of recent accounting standards applicable to the company's business as detailed in Note 2 to the consolidated financial statements - For detailed information on new accounting pronouncements, please refer to Note 2 to the consolidated financial statements[250](index=250&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) For the three and six months ended June 30, 2025, there have been no material changes in the market risks faced by the company compared to those described in the 2024 Form 10-K - As of June 30, 2025, for the three and six months then ended, there have been no material changes in market risks[251](index=251&type=chunk) [Item 4. Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's management assessed the effectiveness of disclosure controls and procedures, concluding they were effective as of June 30, 2025, with no material changes in internal control during the quarter [Evaluation of Disclosure Controls and Procedures](index=58&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) The company's management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of disclosure controls and procedures, concluding they were effective as of June 30, 2025 - As of June 30, 2025, the company's disclosure controls and procedures were effective, providing reasonable assurance that required information is recorded, processed, summarized, and reported on a timely basis[252](index=252&type=chunk) [Changes in Internal Control](index=59&type=section&id=Changes%20in%20Internal%20Control) For the three months ended June 30, 2025, there were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, internal control - For the three months ended June 30, 2025, there were no material changes in internal control[253](index=253&type=chunk) [Part II—OTHER INFORMATION](index=60&type=section&id=Part%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings.) The company faces various legal proceedings, including ethylene oxide (EO) related tort litigation, environmental liability insurance coverage, and securities litigation, with detailed information disclosed and incorporated by reference in Note 14 to the consolidated financial statements - The legal proceedings faced by the company include ethylene oxide tort litigation (California, Georgia, Illinois, and New Mexico), environmental liability insurance coverage, and Sotera Health Company securities litigation and related matters[256](index=256&type=chunk)[260](index=260&type=chunk) - Detailed information on these legal proceedings is disclosed in Note 14 to the consolidated financial statements[256](index=256&type=chunk) [Item 1A. Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors.) There have been no material changes in the risk factors described in the 2024 Form 10-K - There have been no material changes in the risk factors described in the 2024 Form 10-K[258](index=258&type=chunk) [Item 5. Other Information](index=60&type=section&id=Item%205.%20Other%20Information) For the three months ended June 30, 2025, no trading plans intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) were adopted or terminated by the company's directors or officers - For the three months ended June 30, 2025, no Rule 10b5-1 trading plans were adopted or terminated by the company's directors or officers[259](index=259&type=chunk) [Item 6. Exhibits](index=61&type=section&id=Item%206.%20Exhibits.) This report lists the exhibits filed, furnished, or incorporated by reference as part of the quarterly report, including credit agreement amendments, executive certifications, and XBRL files - Exhibits include credit agreement amendments, CEO and CFO certifications, and Inline XBRL files[262](index=262&type=chunk) [SIGNATURES](index=62&type=section&id=SIGNATURES)

Core Insights - Sotera Health Company (SHC) reported revenue of $294.34 million for the quarter ended June 2025, reflecting a year-over-year increase of 6.4% [1] - The earnings per share (EPS) for the quarter was $0.20, up from $0.19 in the same quarter last year, exceeding the consensus EPS estimate of $0.17 by 17.65% [1] - The reported revenue surpassed the Zacks Consensus Estimate of $276.08 million, resulting in a surprise of 6.61% [1] Financial Performance Metrics - Sotera Health's segment revenues included Sterigenics at $194.84 million, exceeding the average estimate of $184.48 million by 10.5% year-over-year [4] - Nelson Labs reported revenues of $57.07 million, slightly above the average estimate of $56.73 million, but down 3.3% year-over-year [4] - Nordion's revenues were $42.43 million, surpassing the average estimate of $34.95 million with a year-over-year increase of 2.9% [4] Segment Income Analysis - Segment income for Sterigenics was reported at $107.75 million, exceeding the average estimate of $100.36 million [4] - Nelson Labs achieved segment income of $19.51 million, above the estimated $17.53 million [4] - Nordion's segment income was $23.48 million, significantly higher than the average estimate of $18.62 million [4] Stock Performance - Shares of Sotera Health have declined by 5.6% over the past month, contrasting with the Zacks S&P 500 composite's increase of 1.9% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Financial Data and Key Metrics Changes - The company reported a 6.4% increase in total revenues to $294 million for Q2 2025 compared to Q2 2024, with a 9.8% increase in adjusted EBITDA to $151 million [11][12] - Adjusted EPS improved to $0.20, an increase of $0.01 from Q2 2024 [12] - The net leverage ratio improved to 3.5 times from 3.7 times in 2024, indicating progress towards the long-term goal of 2 to 3 times [16][21] Business Line Data and Key Metrics Changes - Sterigenics experienced a 10.5% year-over-year revenue growth, driven by increased customer demand and strong volume performance [5][13] - Nordion's revenue increased by 2.9% to $42 million, with a segment income margin decrease of 145 basis points to 55.3% due to supplier mix timing [14] - Nelson Labs reported a revenue of $57 million, a decline of 3.3%, but segment income increased by 13.9% to $20 million, with margin expansion driven by core lab testing volume improvements [15] Market Data and Key Metrics Changes - The company raised its 2025 revenue growth outlook to a range of 4.5% to 6% from the previous 4% to 6% [7][18] - The foreign currency impact is now expected to be neutral for the full year, compared to previous assumptions of a headwind [17] - Nearly 60% of full-year revenue is expected to occur in the second half of the year, with Q4 2025 revenue anticipated to decline mid-teens compared to Q4 2024 due to Cobalt 60 shipment timing [18] Company Strategy and Development Direction - The company continues to invest in its businesses to support organic growth and reduce leverage, reinforcing its commitment to disciplined financial management [5][21] - The focus remains on enhancing core lab testing and optimizing operations to improve margins, particularly in Nelson Labs [19][66] - The company is well-positioned to capitalize on opportunities arising from changes in customer supply chains due to tariff adjustments [52][56] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the outlook for the rest of the year, highlighting strong execution and customer care [99] - The company is not seeing significant destocking in the market and expects continued volume growth across multiple categories [88] - Management remains cautious about potential maintenance-related downtime impacting growth in the second half of the year [62][92] Other Important Information - The effective tax rate applicable to adjusted net income is projected to be in the range of 31.5% to 33.5%, reflecting recent U.S. tax law changes [20] - Capital expenditures for 2025 are now expected to be in the range of $170 million to $180 million, down from a previous outlook of $190 million to $210 million [20][21] Q&A Session Summary Question: Did you see any sort of pull forward dynamic in Sterigenics? - Management indicated that there was no material pull forward due to tariffs, and volumes were progressing as expected [25] Question: Can you parse out the performance between medtech and bioprocessing? - Management noted that both segments performed well, with bioprocessing showing significant growth supported by facility expansions [28] Question: What are the drivers of margin improvement in Nelson Labs? - Management attributed margin improvement to labor productivity optimization, favorable service mix, and consistent pricing [35] Question: How do you view the competitive implications of the updated ETO regulations? - Management feels well-positioned and plans to continue investing in compliance and emissions controls [38] Question: What is the expected growth rate for Nelson Labs in 2026? - Management refrained from providing specific guidance for 2026 but emphasized a focus on core lab volume growth [65]

Safeguarding Global Health® Second-Quarter 2025 Earnings Results August 8, 2025 © 2025 Sotera Health Company | All Rights Reserved. Cautionary Note Regarding Forward-Looking Statements and Non-GAAP Financial Measures Unless expressly indicated or the context requires otherwise, the terms "Sotera Health," "Company," "we," "us," and "our" in this document refer to Sotera Health Company, a Delaware corporation, and, where appropriate, its subsidiaries on a consolidated basis. This release contains forward- loo ...

[Financial Performance Overview](index=1&type=section&id=Sotera%20Health%20Reports%20Strong%20Second-Quarter%20and%20First-Half%202025%20Results) Sotera Health reported strong Q2 and H1 2025 revenue and Adjusted EBITDA growth, despite EO settlements, leading to a raised full-year outlook [Second-Quarter 2025 Performance](index=1&type=section&id=Second-Quarter%202025%20Performance) Sotera Health reported strong top-line growth in the second quarter of 2025, with net revenues increasing by 6.4% to $294 million, and Adjusted EBITDA growing by 9.8% to $151 million, reflecting margin expansion, though GAAP net income remained flat at $8 million due to a $34 million settlement related to ethylene oxide (EO) claims Q2 2025 Key Financial Metrics (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | Constant Currency Change | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $294M | $277M | +6.4% | +6.0% | | Net Income | $8M | $9M | -11.1% | N/A | | Diluted EPS | $0.03 | $0.03 | $0.00 | N/A | | Adjusted EBITDA | $151M | $137M (approx) | +9.8% | +9.5% | | Adjusted EPS | $0.20 | $0.19 | +$0.01 | N/A | - Net income for Q2 2025 included a pending and previously disclosed settlement of approximately **$34 million** related to ethylene oxide ("EO") claims against its Sterigenics business[3](index=3&type=chunk) [First-Half 2025 Performance](index=1&type=section&id=First-Half%202025%20Performance) For the first six months of 2025, the company saw a 4.6% increase in net revenues to $549 million and Adjusted EBITDA grew 9.3% to $273 million, but a significant GAAP net loss of $5 million was recorded, compared to a $15 million net income in the prior year, primarily due to cumulative EO-related settlements totaling $65 million H1 2025 Key Financial Metrics (vs. H1 2024) | Metric | H1 2025 | H1 2024 | Change | Constant Currency Change | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $549M | $525M | +4.6% | +5.3% | | Net (Loss) / Income | ($5M) | $15M | N/A | N/A | | Diluted (Loss) / EPS | ($0.02) | $0.05 | N/A | N/A | | Adjusted EBITDA | $273M | $249M (approx) | +9.3% | +10.2% | | Adjusted EPS | $0.33 | $0.32 | +$0.01 | N/A | - The net loss for the first half of 2025 includes settlements of approximately **$31 million** and **$34 million** related to EO claims against Sterigenics[4](index=4&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) The Chairman and CEO, Michael B. Petras, Jr., highlighted strong performance, attributing over 6% top-line growth to robust volume at Sterigenics, noting nearly 10% Adjusted EBITDA growth and significant margin expansion at Nelson Labs, and expressing confidence by raising the full-year outlook for revenue, Adjusted EBITDA, and Adjusted EPS - Management credited the strong quarterly results to robust volume performance at the Sterigenics segment[5](index=5&type=chunk) - Adjusted EBITDA margin expanded by approximately **160 basis points** for the company, driven by an improvement of over **500 basis points** at Nelson Labs[5](index=5&type=chunk) - Reflecting confidence in continued execution, the company raised its full-year outlook for revenue, Adjusted EBITDA, and Adjusted EPS[7](index=7&type=chunk) [Business Segment Review](index=2&type=section&id=Second-Quarter%20and%20First-Half%202025%20Review%20by%20Business%20Segment) Segment review shows Sterigenics and Nordion revenue growth, while Nelson Labs experienced revenue decline but improved segment income [Sterigenics](index=2&type=section&id=Sterigenics) The Sterigenics segment delivered strong results, with second-quarter revenues growing 10.5% to $195 million, driven by favorable volume, mix, and pricing, and segment income increasing by 11.3% to $108 million, while for the first half, revenues grew 6.3% and segment income grew 7.2% Sterigenics Performance (Q2 & H1 2025) | Period | Net Revenues | YoY Growth | Constant Currency Growth | Segment Income | YoY Growth | | :--- | :--- | :--- | :--- | :--- | :--- | | Q2 2025 | $195M | +10.5% | +10.0% | $108M | +11.3% | | H1 2025 | $365M | +6.3% | +7.1% | $196M | +7.2% | - Quarterly growth was primarily driven by favorable volume and mix, pricing, and foreign currency exchange rates, though segment income was partially offset by inflation[8](index=8&type=chunk) [Nordion](index=2&type=section&id=Nordion) Nordion's second-quarter revenues increased by 2.9% to $42 million, with segment income remaining flat at $23 million, while the first half of the year showed stronger performance, with revenues up 14.9% and segment income up 19.6%, driven by favorable pricing, volume, and mix Nordion Performance (Q2 & H1 2025) | Period | Net Revenues | YoY Growth | Constant Currency Growth | Segment Income | YoY Growth | | :--- | :--- | :--- | :--- | :--- | :--- | | Q2 2025 | $42M | +2.9% | +3.4% | $23M | +0.2% | | H1 2025 | $75M | +14.9% | +16.8% | $41M | +19.6% | - Quarterly revenue growth was driven by favorable pricing, volume, and mix, however, the segment income margin decreased due to supplier mix[10](index=10&type=chunk) [Nelson Labs](index=2&type=section&id=Nelson%20Labs) Nelson Labs experienced a 3.3% decline in second-quarter revenues to $57 million, attributed to a drop in expert advisory services that offset gains in core lab testing, but despite the revenue dip, segment income grew significantly by 13.9% to $20 million, thanks to volume and mix improvements, lab optimization, and favorable pricing Nelson Labs Performance (Q2 & H1 2025) | Period | Net Revenues | YoY Growth | Constant Currency Growth | Segment Income | YoY Growth | | :--- | :--- | :--- | :--- | :--- | :--- | | Q2 2025 | $57M | -3.3% | -4.4% | $20M | +13.9% | | H1 2025 | $109M | -6.3% | -6.4% | $36M | +10.6% | - The quarterly revenue decline was driven by a decrease in expert advisory services, which was partially offset by improvements in core lab testing services and favorable pricing[12](index=12&type=chunk) - Segment income and margin increased due to volume and mix improvements, lab optimization, and favorable pricing[12](index=12&type=chunk) [Financial Position and Outlook](index=2&type=section&id=Financial%20Position%20and%20Outlook) The company maintained stable debt, improved its Net Leverage Ratio, and updated its full-year 2025 guidance [Balance Sheet and Liquidity](index=2&type=section&id=Balance%20Sheet%20and%20Liquidity) As of June 30, 2025, Sotera Health maintained a stable total debt level of $2.3 billion while increasing its cash position to $332 million, improving its Net Leverage Ratio to 3.5x from 3.7x at the end of 2024, and having full availability of its $600 million revolving credit facility Key Balance Sheet and Liquidity Metrics | Metric | As of June 30, 2025 | As of Dec 31, 2024 | | :--- | :--- | :--- | | Total Debt | $2.3B | $2.3B | | Unrestricted Cash | $332M | $277M | | Net Leverage Ratio | 3.5x | 3.7x | - The company had no outstanding balance on its **$600 million** revolving credit facility as of June 30, 2025[13](index=13&type=chunk) [Updated Full-Year 2025 Outlook](index=3&type=section&id=2025%20Outlook%20Update) The company raised its full-year 2025 guidance across several key metrics, with the outlook for constant currency net revenue growth raised to 4.5%-6.0%, Adjusted EBITDA growth increased to 6.0%-7.5%, and the Adjusted EPS range significantly lifted to $0.75-$0.82, while the capital expenditures forecast was lowered Full-Year 2025 Guidance Update | Metric | New Outlook | Previous Outlook | | :--- | :--- | :--- | | Net Revenues Growth (Constant Currency) | 4.5% - 6.0% | 4.0% - 6.0% | | Adjusted EBITDA Growth (Constant Currency) | 6.0% - 7.5% | 4.5% - 6.5% | | Adjusted EPS | $0.75 - $0.82 | $0.70 - $0.76 | | Interest Expense | $155M - $165M | Unchanged | | Tax Rate (Adjusted) | 31.5% - 33.5% | 33% - 35% | | Capital Expenditures | $170M - $180M | $190M - $210M | [Financial Statements](index=7&type=section&id=Financial%20Statements) Financial statements detail revenue growth, EO settlements impacting net income, increased operating cash flow, and a stable balance sheet [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) The consolidated statement of operations shows a 6.4% revenue increase for Q2 2025 to $294.3 million, with gross profit rising to $166.6 million from $152.8 million year-over-year, however, a $34 million charge for Illinois EO litigation settlements led to a slight decrease in net income to $8.0 million, and for the first half, revenues grew 4.6%, but EO settlements of $64.9 million resulted in a net loss of $5.3 million Selected Income Statement Data (in thousands) | Line Item | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total net revenues | $294,341 | $276,594 | $548,864 | $524,770 | | Gross profit | $166,621 | $152,791 | $302,053 | $279,906 | | Illinois EO litigation settlements | $34,000 | $0 | $64,943 | $0 | | Net income (loss) | $7,962 | $8,754 | $(5,298) | $15,077 | [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2025, reflects total assets of $3.22 billion, an increase from $3.07 billion at year-end 2024, driven by a rise in cash and cash equivalents to $334 million, while total liabilities increased slightly to $2.71 billion, and long-term debt remained stable at $2.2 billion Selected Balance Sheet Data (in thousands) | Line Item | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $334,272 | $278,865 | | Total current assets | $608,175 | $526,037 | | Total assets | $3,216,729 | $3,071,648 | | Long-term debt, less current portion | $2,202,651 | $2,208,100 | | Total liabilities | $2,705,446 | $2,666,737 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, net cash provided by operating activities significantly increased to $112.9 million from $71.0 million in the prior-year period, driven by favorable changes in operating assets and liabilities, while net cash used in investing activities decreased due to lower purchases of property, plant, and equipment, and the company ended the period with a net increase in cash of $55.4 million Cash Flow Summary - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $112,937 | $70,994 | | Net cash used in investing activities | $(51,110) | $(76,774) | | Net cash used in financing activities | $(15,020) | $(41,362) | | Net increase (decrease) in cash | $55,407 | $(53,896) | [Non-GAAP Financial Measures](index=11&type=section&id=Non-GAAP%20Financial%20Measures) This section reconciles GAAP net income to Adjusted EBITDA and details Net Debt and the improved Net Leverage Ratio [Reconciliation of Net Income to Adjusted EBITDA](index=11&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) The company's reconciliation from GAAP Net Income to non-GAAP Adjusted EBITDA highlights several significant adjustments, with key add-backs to the $8.0 million net income for Q2 2025 including $34.0 million for EO litigation settlements, $11.9 million in amortization, and $8.1 million in share-based compensation, ultimately resulting in an Adjusted EBITDA of $150.7 million Key Adjustments from Net Income to Adjusted EBITDA - Q2 2025 (in thousands) | Line Item | Amount | | :--- | :--- | | Net income | $7,962 | | **Add back:** | | | Illinois EO litigation settlements | $34,000 | | Professional services relating to EO | $14,035 | | Amortization of intangible assets | $11,924 | | Share-based compensation | $8,149 | | **Adjusted Net Income** | **$56,062** | | **Add back:** | | | Interest expense, net | $40,651 | | Depreciation | $23,024 | | Income tax provision (Adjusted) | $30,998 | | **Adjusted EBITDA** | **$150,735** | [Net Debt and Net Leverage Ratio](index=12&type=section&id=Net%20Debt%20and%20Net%20Leverage%20Ratio) The company calculates its Net Leverage Ratio by dividing Net Debt by the trailing twelve months (TTM) Adjusted EBITDA, with total debt of $2.32 billion as of June 30, 2025, resulting in Net Debt of $1.98 billion after deducting cash of $332 million, and an improved Net Leverage Ratio of 3.5x with a TTM Adjusted EBITDA of $571.9 million Net Leverage Ratio Calculation (as of June 30, 2025) | Metric | Amount (in thousands) | | :--- | :--- | | Total Debt | $2,316,128 | | Less: cash and cash equivalents | $(332,437) | | **Net Debt** | **$1,983,691** | | TTM Adjusted EBITDA | $571,869 | | **Net Leverage Ratio** | **3.5x** |

Core Insights - Sotera Health Company reported a 6.4% increase in net revenues for Q2 2025, reaching $294 million compared to $277 million in Q2 2024, with a constant currency increase of 6.0% [2][6] - The company experienced a net income of $8 million, or $0.03 per diluted share, which includes a pending settlement of approximately $34 million related to ethylene oxide claims [2][3] - Adjusted EBITDA for Q2 2025 rose by 9.8% to $151 million, with an adjusted earnings per diluted share of $0.20, an increase of $0.01 from the previous year [2][6] Financial Performance - For the first half of 2025, net revenues increased by 4.6% to $549 million, compared to $525 million in the same period of 2024, with a constant currency increase of 5.3% [3][6] - The company reported a net loss of $5 million for the first half of 2025, which includes settlements of approximately $31 million and $34 million related to ethylene oxide claims [3][6] - Adjusted EBITDA for the first half of 2025 increased by 9.3% to $273 million, with adjusted EPS rising by $0.01 to $0.33 compared to the first half of 2024 [3][6] Business Segment Performance - Sterigenics segment revenues grew by 10.5% to $195 million in Q2 2025, with segment income increasing by 11.3% to $108 million [5] - Nordion's net revenues increased by 2.9% to $42 million in Q2 2025, with segment income slightly rising to $23 million [8] - Nelson Labs experienced a 3.3% decrease in net revenues to $57 million in Q2 2025, but segment income increased by 13.9% to $20 million [10] Outlook and Guidance - The company raised its full-year 2025 revenue outlook to a growth range of 4.5% - 6.0% from a previous range of 4.0% - 6.0% [6][14] - Adjusted EBITDA growth outlook was also raised to 6.0% - 7.5% from 4.5% - 6.5% [6][14] - The expected tax rate applicable to adjusted net income improved to a range of 31.5% - 33.5% from 33% - 35% [14] Balance Sheet and Liquidity - As of June 30, 2025, Sotera Health had total debt of $2.3 billion and unrestricted cash of $332 million, compared to $2.3 billion in total debt and $277 million in cash at the end of 2024 [12] - The company's net leverage ratio improved to 3.5x as of Q2 2025, down from 3.7x at the end of 2024 [12][14]

Shaftesbury Capital (SHC) H1 2025 Earnings Call July 29, 2025 03:30 AM ET Company ParticipantsIan Hawksworth - CEO & Executive DirectorSitul Jobanputra - CFO & DirectorNone - ExecutiveConference Call ParticipantsMatthew Saperia - Research AnalystZachary Gauge - Equity Research AnalystRobert Jones - Operations Oversight AnalystIan HawksworthI've got the thumbs up from the back of the room, which means the telephones are online. So I think we can kick off. Good morning. Thank you all for coming. I know you've ...

Financial Data and Key Metrics Changes - The company reported a 3% increase in valuation to GBP 5,200,000,000, driven by a 2.9% increase in estimated rental value (ERV) with stable valuation yields [5][6][14] - Net tangible assets (NTA) increased by 3.3%, resulting in a total accounting return of 4.2% for the period, aligning with medium-term targets [6][13] - Rental income rose by 8%, with underlying earnings up 16% for the half year [6][12] Business Line Data and Key Metrics Changes - Gross rents increased to GBP 98,700,000, reflecting an 8.2% like-for-like growth due to successful leasing and asset management [10] - The company achieved commercial lettings and renewals 10% ahead of ERV and 24% ahead of previous passing rents [10] - The portfolio vacancy rate is low at 2.5%, indicating strong demand across all sectors [19] Market Data and Key Metrics Changes - The West End remains a premier destination, attracting approximately 200 million visitors annually, contributing to high occupancy and reliable cash flows [5] - Customer sales are estimated to be 30% higher in nominal terms compared to 2019 levels, significantly outpacing ERVs [14] Company Strategy and Development Direction - The company aims for 5% to 7% rental growth in the medium term, with stable yields expected to deliver accounting returns of 8% to 10% [27] - The strategy includes enhancing liquidity to pursue accretive investment opportunities and maintaining a strong balance sheet [15][27] - The partnership with the Norwegian Sovereign Wealth Fund highlights the attractiveness of the Covent Garden portfolio and future growth potential [4][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the West End's performance despite macroeconomic challenges, citing high footfall and low vacancy rates [26] - The company anticipates continued strong demand for its properties, supported by a robust leasing pipeline and active management strategies [26][27] Other Important Information - The company completed GBP 55,000,000 in acquisitions during the period and disposed of approximately GBP 12,000,000 worth of assets [25] - The market value of the portfolio under management increased by 3.1% like-for-like, with net debt reduced from GBP 1,400,000,000 to GBP 800,000,000 [13][14] Q&A Session Summary Question: Importance of Charlotte Tilbury's addition to Carnaby - Management highlighted the positive response from tenants and the potential for Charlotte Tilbury to enhance the re-tenanting momentum in Carnaby, contributing to future rental growth [30][31] Question: Like-for-like rental growth and retail market performance - Management noted that the retail market is strong, and the marginally negative performance in like-for-like rental growth should not overshadow the overall positive demand in the West End [34][36] Question: Plans for refinancing and interest rates - Management indicated plans to repay the exchangeable bond next year and mentioned that the private placements are accessible, with expectations of favorable financing conditions [37][39] Question: Reversionary potential and tenant profitability - Management explained that the embedded reversionary potential is the difference between passing rent and ERV, and they are confident in capturing this reversion as leases come due [42][46] Question: Balance sheet leverage and reinvestment opportunities - Management stated that they aim to maintain net debt to EBITDA well below 10%, with current levels at 6%, allowing for flexibility in reinvestment opportunities [44][55]

2025 Interim Results 29 July 2025 Delivering income and value growth Successful first half of the year Strong financial performance and enhanced flexibility Delivering income and value growth Confidence in our prospects 2025 Interim Results 2 Successful first half of the Significant growth potential across our portfolio year Option 1 Strong operating and financial performance Growth in earnings, dividends, valuation and NTA Introduction of long-term, private capital Confidence in London's West End – Well-po ...