Core Viewpoint - Sotera Health Company will release its financial results for the second quarter ended June 30, 2025, on August 8, 2025, before market opening, followed by a conference call to discuss the results and operating highlights [1]. Company Overview - Sotera Health is a leading global provider of end-to-end sterilization solutions and lab testing and advisory services for the healthcare industry, operating through three businesses: Sterigenics, Nordion, and Nelson Labs [3]. - The company's mission is to safeguard global health [3]. Conference Call Details - The conference call will take place at 9:00 a.m. Eastern Daylight Time on August 8, 2025, with participation options provided for both U.S. and international callers [2]. - A live webcast of the conference call will be available on the company's website, along with accompanying materials, and a replay will be accessible later that day [2].

Summary of Soterra Health Conference Call Company Overview - **Company Name**: Soterra Health - **Ticker Symbol**: SHE - **Industry**: Healthcare, specifically focused on pharma services and sterilization Key Points and Arguments Business Performance and Outlook - Soterra Health expressed a positive outlook for 2025, reaffirming guidance and reporting good execution and customer care [5][6] - The company has experienced consistent growth since 2005, despite challenges posed by the pandemic [8][9] - Supply chain dynamics and labor challenges were highlighted as significant issues during and post-COVID, but the company has stabilized its turnover and service rates [10][11] Business Segments - **Nordion Business**: Consistent performer, though subject to quarterly lumpiness due to external factors like utility maintenance schedules [14][15] - **Nelson Labs**: Experienced volatility due to COVID and labor dynamics but is now stabilizing with improved service rates and quality [17][18] - **Sterigenics**: Initially saw flat to down volumes post-COVID but is normalizing with positive trends in bioprocessing and hospital supplies [19][20][21] Supply Chain and Tariff Impact - No significant impact from tariffs was reported, although there is interest from offshore customers wanting to increase volumes in the U.S. [22][23] - The company has not seen clients needing to mitigate tariff impacts through price negotiations [24][28] Competitive Positioning - Soterra Health and its competitor Steris hold approximately 50% to 66% of the market share collectively, with smaller players struggling to comply with new regulations [46][47] - The tightening of NESHAP regulations is expected to challenge smaller players, potentially leading to market share shifts towards Soterra Health [41][42][44] Capital Allocation and Growth Strategy - The company prioritizes disciplined capital allocation, focusing on organic growth and strategic acquisitions [69][70] - Plans to invest in new facilities and enhancements, with a commitment to maintaining a CapEx of around $110 million and generating over $500 million in free cash flow by 2027 [75] Regulatory Environment - The tightening regulatory environment is seen as a net positive for Soterra Health, as it may lead to increased demand for compliance services [41][44] - The company is well-positioned to meet regulatory requirements, which could create opportunities for growth [44][45] Customer Relationships and Synergies - There is a significant overlap between the customer bases of Sterigenics and Nelson Labs, with about 70% customer overlap and 40% of Nelson Labs' business related to sterility assurance [64][65] - The company aims to improve connectivity and customer satisfaction through better integration of services [66] Financial Performance - The company anticipates margin expansion primarily driven by Nelson Labs in 2025, with stable margins expected in Sterigenics and Nordion [74][75] Additional Important Insights - The company has been proactive in addressing labor and service quality issues, which are critical for maintaining customer satisfaction [61][62] - Soterra Health is cautious about acquiring smaller facilities due to compliance costs and challenges, preferring to focus on its existing network [54][55] This summary encapsulates the key insights from the Soterra Health conference call, highlighting the company's strategic direction, market positioning, and financial outlook.

Part I [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) For the first quarter ended March 31, 2025, Sotera Health reported a net loss of $13.3 million, a significant downturn from the $6.3 million net income in the same period of 2024, primarily due to a $30.9 million charge for an EO litigation settlement in Illinois. Total assets increased slightly to $3.10 billion. Operating activities generated $55.5 million in cash, a substantial improvement from the prior year, mainly because of a large litigation payment made in Q1 2024 that did not recur Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $554,990 | $526,037 | | **Total Assets** | **$3,097,528** | **$3,071,648** | | **Total Current Liabilities** | $225,991 | $191,002 | | **Total Liabilities** | $2,683,437 | $2,666,737 | | **Total Equity** | **$414,091** | **$404,911** | Consolidated Statement of Operations Summary (in thousands) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Total Net Revenues** | **$254,523** | **$248,176** | | Gross Profit | $135,432 | $127,115 | | Illinois EO litigation settlement | $30,943 | $0 | | (Loss) Income before income taxes | $(14,823) | $11,014 | | **Net (Loss) Income** | **$(13,260)** | **$6,323** | | **Diluted (Loss) Earnings Per Share** | **$(0.05)** | **$0.02** | Consolidated Statement of Cash Flows Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$55,521** | **$9,699** | | Net cash used in investing activities | $(19,881) | $(34,853) | | Net cash used in financing activities | $(8,087) | $(11,941) | | **Net increase (decrease) in cash** | **$27,216** | **$(38,834)** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's accounting policies and provide further information on financial statement items. Key disclosures include revenue disaggregation by segment, details on the $2.22 billion in long-term debt, specifics of the $30.9 million Illinois EO litigation settlement, and segment performance. The company operates in three segments: Sterigenics, Nordion, and Nelson Labs - The company operates and reports in three segments: Sterigenics (sterilization services), Nordion (Co-60 supply), and Nelson Labs (lab testing and advisory)[27](index=27&type=chunk) Disaggregated Net Revenues by Segment (Q1 2025 vs Q1 2024, in thousands) | Segment | Q1 2025 Revenue | Q1 2024 Revenue | | :--- | :--- | :--- | | Sterigenics | $169,684 | $166,497 | | Nordion | $32,557 | $24,007 | | Nelson Labs | $52,282 | $57,672 | | **Total** | **$254,523** | **$248,176** | - As of March 31, 2025, total long-term debt amounted to a net amount of **$2.22 billion**, primarily consisting of a **$1.47 billion** term loan and **$746 million** in secured notes, both due in 2031[47](index=47&type=chunk) - On April 3, 2025, the company entered into a binding term sheet to settle 97 EO-related claims in Illinois for a total of **$30.9 million**. This amount was accrued as a liability and recognized as an expense in Q1 2025[106](index=106&type=chunk)[108](index=108&type=chunk)[173](index=173&type=chunk) [Management's Discussion and Analysis (MD&A)](index=38&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported a 2.6% increase in Q1 2025 net revenues to $254.5 million, driven by a 41.0% surge in product revenues from Nordion due to Co-60 harvest timing. This was partially offset by a 1.1% decline in service revenues. The company recorded a net loss of $13.3 million, compared to a $6.3 million net income in Q1 2024, primarily due to a $30.9 million litigation settlement. Adjusted EBITDA, a non-GAAP measure, rose 8.8% to $121.8 million. Cash flow from operations significantly increased to $55.5 million, reflecting the non-recurrence of a $35.0 million litigation payment made in the prior-year quarter [Consolidated Results of Operations](index=38&type=section&id=Consolidated%20Results%20of%20Operations) Total net revenues for Q1 2025 increased by 2.6% to $254.5 million year-over-year. Product revenues grew 41.0% due to favorable volume and mix at Nordion, while service revenues decreased 1.1%. A significant $30.9 million charge for the Illinois EO litigation settlement led to a net loss of $13.3 million, a stark contrast to the $6.3 million net income in Q1 2024. SG&A expenses rose 8.3%, driven by increased litigation fees Q1 2025 vs Q1 2024 Performance (in thousands) | Metric | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total Net Revenues** | **$254,523** | **$248,176** | **$6,347** | **2.6%** | | Service Revenues | $223,940 | $226,481 | $(2,541) | (1.1)% | | Product Revenues | $30,583 | $21,695 | $8,888 | 41.0% | | **Net (Loss) Income** | **$(13,260)** | **$6,323** | **$(19,583)** | **(309.7)%** | | Adjusted EBITDA | $121,839 | $111,944 | $9,895 | 8.8% | - The increase in product revenues was primarily attributable to the timing of the Co-60 harvest schedule at the Nordion segment[165](index=165&type=chunk) - SG&A expenses increased by **$4.9 million (8.3%)**, mainly due to a **$6.3 million** rise in litigation and professional service fees related to EO sterilization facilities[171](index=171&type=chunk) [Segment Results of Operations](index=43&type=section&id=Segment%20Results%20of%20Operations) In Q1 2025, the Nordion segment was the standout performer with a 35.6% revenue increase to $32.6 million and a 61.5% surge in segment income, driven by favorable Co-60 harvest timing. Sterigenics saw modest revenue growth of 1.9% to $169.7 million due to pricing benefits. Nelson Labs experienced a 9.3% revenue decline to $52.3 million, as growth in core lab services was offset by a drop in expert advisory service revenue; however, its segment income still grew 7.0% due to lab optimization Segment Performance (Q1 2025 vs Q1 2024, in thousands) | Segment | Net Revenues Q1 2025 | % Change | Segment Income Q1 2025 | % Change | | :--- | :--- | :--- | :--- | :--- | | Sterigenics | $169,684 | 1.9% | $88,004 | 2.5% | | Nordion | $32,557 | 35.6% | $17,422 | 61.5% | | Nelson Labs | $52,282 | (9.3)% | $16,413 | 7.0% | - Nordion's strong performance was driven by volume and mix, largely attributable to a more favorable Co-60 harvest schedule[196](index=196&type=chunk)[198](index=198&type=chunk)[201](index=201&type=chunk) - Nelson Labs' revenue decreased due to a decline in expert advisory service revenue, but segment income margin improved from **26.6% to 31.4%** due to lab optimization and favorable mix in core testing services[199](index=199&type=chunk)[202](index=202&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) As of March 31, 2025, the company had $304.4 million in cash and cash equivalents. Operating activities generated $55.5 million in cash during Q1 2025, a significant increase from $9.7 million in Q1 2024, primarily because a $35.0 million Georgia EO litigation settlement was paid in the prior-year period. Capital expenditures were $19.9 million. Subsequent to the quarter end, on April 30, 2025, the company amended its Revolving Credit Facility, increasing its capacity to $600 million and extending the maturity to 2030 - Cash and cash equivalents stood at **$304.4 million** as of March 31, 2025[203](index=203&type=chunk) - Net cash from operating activities increased by **$45.8 million** year-over-year, mainly due to a **$35.0 million** payment for the Georgia EO litigation settlement in Q1 2024 that did not recur in Q1 2025[207](index=207&type=chunk) - On April 30, 2025, the company executed Amendment No. 5 to its Revolving Credit Facility, increasing total borrowing capacity to **$600.0 million** and extending the maturity date to April 30, 2030[211](index=211&type=chunk)[51](index=51&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that there have been no material changes to its market risks since the disclosures in its 2024 Form 10-K - Market risks have not materially changed for the three months ended March 31, 2025, from those described in the 2024 Form 10-K[219](index=219&type=chunk) [Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025. There were no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that as of the end of the quarter, the company's disclosure controls and procedures are effective[220](index=220&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[221](index=221&type=chunk) Part II [Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings.) The company is involved in significant legal proceedings, primarily related to Ethylene Oxide (EO) tort litigation in California, Georgia, Illinois, and New Mexico. A key development is a $30.9 million settlement agreement for 97 claims in Illinois. The company is also facing securities litigation, which was dismissed but is now under appeal, and related derivative lawsuits. Insurance coverage for these matters is being actively pursued through litigation - The company faces numerous tort lawsuits alleging injuries from EO emissions at its facilities in California, Georgia, Illinois, and New Mexico[97](index=97&type=chunk)[228](index=228&type=chunk) - A binding term sheet was entered on April 3, 2025, to resolve 97 Illinois EO claims for **$30.9 million**[106](index=106&type=chunk)[108](index=108&type=chunk) - A stockholder class action lawsuit was dismissed with prejudice in March 2025, but the plaintiffs have appealed the decision[119](index=119&type=chunk) - The company is actively pursuing insurance coverage for EO tort lawsuits through multiple legal actions, with one case resulting in a favorable **$110.2 million** judgment for defense costs, which is currently under appeal[117](index=117&type=chunk) [Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors.) The company reports that there have been no material changes from the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes from the risk factors previously described in the 2024 Form 10-K[226](index=226&type=chunk) [Other Information](index=50&type=section&id=Item%205.%20Other%20Information.) On April 30, 2025, the company amended its Revolving Credit Facility (Amendment No. 5), increasing the commitment by $176.2 million and extending the maturity date to April 30, 2030. Additionally, the company disclosed that no directors or officers adopted or terminated Rule 10b5-1 trading plans during the first quarter of 2025 - On April 30, 2025, the company entered into Amendment No. 5 to its Revolving Credit Facility, which increased commitments by **$176.2 million** and extended the maturity to April 30, 2030[227](index=227&type=chunk) - During Q1 2025, no directors or officers adopted or terminated any Rule 10b5-1 trading plans[230](index=230&type=chunk)

Core Insights - Sotera Health Company (SHC) reported revenue of $254.52 million for Q1 2025, marking a year-over-year increase of 2.6% and exceeding the Zacks Consensus Estimate by 3.63% [1] - The earnings per share (EPS) for the same quarter was $0.14, up from $0.13 a year ago, representing a surprise of 16.67% over the consensus estimate of $0.12 [1] Revenue Performance - Sterigenics generated net revenues of $169.68 million, slightly below the average estimate of $169.72 million, reflecting a year-over-year increase of 1.9% [4] - Nelson Labs reported net revenues of $52.28 million, exceeding the average estimate of $51.17 million, but showing a year-over-year decline of 9.4% [4] - Nordion achieved net revenues of $32.56 million, significantly surpassing the average estimate of $22.93 million, with a year-over-year increase of 35.6% [4] Segment Income - Sterigenics reported segment income of $88 million, slightly above the average estimate of $87.92 million [4] - Nelson Labs had segment income of $16.41 million, exceeding the average estimate of $14.20 million [4] - Nordion's segment income was $17.42 million, compared to the average estimate of $10.41 million [4] Stock Performance - Shares of Sotera Health have remained unchanged over the past month, while the Zacks S&P 500 composite experienced a decline of 0.7% [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Core Viewpoint - Sotera Health Company reported quarterly earnings of $0.14 per share, exceeding the Zacks Consensus Estimate of $0.12 per share, and showing a slight increase from $0.13 per share a year ago, indicating a 16.67% earnings surprise [1][2] Financial Performance - The company posted revenues of $254.52 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 3.63%, compared to $248.18 million in the same quarter last year [2] - Over the last four quarters, Sotera Health has exceeded consensus EPS estimates two times and topped consensus revenue estimates three times [2] Stock Performance - Sotera Health shares have declined approximately 15.9% since the beginning of the year, while the S&P 500 has decreased by 5.3% [3] - The current Zacks Rank for Sotera Health is 3 (Hold), indicating expected performance in line with the market in the near future [6] Future Outlook - The consensus EPS estimate for the upcoming quarter is $0.19 on revenues of $283.2 million, and for the current fiscal year, it is $0.75 on revenues of $1.13 billion [7] - The outlook for the Medical Services industry, where Sotera Health operates, is currently in the top 28% of over 250 Zacks industries, suggesting a favorable environment for stock performance [8]

Financial Data and Key Metrics Changes - Total company revenues increased by 2.6% to $255 million, or 4.4% on a constant currency basis compared to Q1 2024 [6][13] - Adjusted EBITDA increased by 8.8% to $122 million, equating to an 11.2% growth rate on a constant currency basis [6][14] - Adjusted EPS improved to $0.14, a $0.01 increase versus the same period last year [6][15] - Net loss on a GAAP basis was $13 million, or $0.05 per diluted share, compared to a net income of $6 million, or $0.02 per diluted share in Q1 2024 [15] Business Line Data and Key Metrics Changes - **Sterigenics**: Revenue grew by 1.9% to $170 million, or 3.9% on a constant currency basis, with a segment income increase of 2.5% to $88 million [16] - **Nordion**: Revenue surged by 36% to $33 million, or 40.6% on a constant currency basis, with segment income increasing approximately 62% to $17.4 million [16][17] - **Nelson Labs**: Revenue declined by 9.3% to $52 million, but segment income increased by 7% to $60 million, driven by favorable volume and mix from improved core lab testing [18] Market Data and Key Metrics Changes - The Sterigenics segment operates in a $4.5 billion sterilization service addressable market, benefiting from trends such as an aging population and increased healthcare spending [7] - Nordion's revenue was positively impacted by the shift of Cobalt 60 shipments from Q2 to Q1, affecting second quarter revenues but leaving the full year outlook unchanged [7] Company Strategy and Development Direction - The company aims for revenue growth in the range of 4% to 6% and adjusted EBITDA growth of 4.5% to 6.5% on a constant currency basis for 2025 [9][20] - Focus areas include excellence in customer service, growth in key markets, operational excellence to enhance free cash flow, and disciplined capital deployment [26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding volume improvements in Sterigenics and Nelson Labs, with strong customer survey results indicating positive trends [34][45] - The company does not expect current tariff policies to materially impact its business, with 85% of total revenue being service-based [9][21] Other Important Information - The company has $715 million in available liquidity, including over $300 million in unrestricted cash [19] - Capital expenditures for 2025 are projected to be between $190 million and $210 million, with a goal of generating $500 million to $600 million in free cash flow over the next three years [24][25] Q&A Session Summary Question: Impact of tariffs on the business - Management is confident that current regulations will not have a material impact, particularly regarding cobalt shipments from Canada [30] Question: Volume recovery in Sterigenics and Nelson Labs - Management is optimistic about continued volume improvements, supported by strong customer relationships and survey results [34][45] Question: Nelson Labs margin trends - Management highlighted that new regulations and increased sterilization volumes are driving margin improvements [39] Question: Legal strategy and ongoing cases - Management is confident in their defense strategy and believes they can prove their compliance and safety in court [48][50] Question: Cross-selling initiatives between Nelson and Sterigenics - Management noted ongoing incentives for cross-selling and positive customer responses to integrated services [51][54] Question: Pricing dynamics in Sterigenics - Management indicated that pricing remains stable, with ongoing discussions with customers about value and pricing adjustments [76][78]

Financial Data and Key Metrics Changes - Total company revenues increased by 2.6% to $255 million, or 4.4% on a constant currency basis compared to Q1 2024 [5][13] - Adjusted EBITDA increased by 8.8% to $122 million, equating to an 11.2% growth rate on a constant currency basis [5][15] - Adjusted EPS improved to $0.14 per share, a $0.01 increase versus Q1 2024 [5][16] - Net loss on a GAAP basis was $13 million, or $0.05 per diluted share, compared to a net income of $6 million, or $0.02 per diluted share in Q1 2024 [15][16] Business Line Data and Key Metrics Changes - **Sterigenics**: Revenue grew by 1.9% to $170 million, or 3.9% on a constant currency basis, with segment income increasing by 2.5% to $88 million [17][18] - **Nordion**: Revenue surged by 36% to $33 million, or 40.6% on a constant currency basis, with segment income increasing approximately 62% to $17.4 million [18][19] - **Nelson Labs**: Revenue declined by 9.3% to $52 million, but segment income increased by 7% to $60 million, driven by favorable volume and mix from improved core lab testing [20][21] Market Data and Key Metrics Changes - The company operates in a $4.5 billion sterilization service addressable market, with positive trends driven by an aging population, healthcare spending, product innovation, and stringent regulatory requirements [6] - The foreign currency presented a headwind of 180 basis points for the quarter, most pronounced in the Canadian-based Nordion business [13] Company Strategy and Development Direction - The company aims for revenue growth in the range of 4% to 6% and adjusted EBITDA growth of 4.5% to 6.5% on a constant currency basis for 2025 [9][22] - The strategic focus includes excellence in customer service, winning in growth markets, driving operational excellence, and disciplined capital deployment [28] - The company plans to prioritize organic growth and deleveraging, along with opportunistic M&A [26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the recovery of Sterigenics and noted that volumes are expected to improve throughout the year [34][46] - The company does not anticipate current tariff policies to have a material impact on its business, with 85% of total revenue being service revenue [9][23] - Management reaffirmed the outlook for 2025, indicating that the foreign exchange headwind has improved compared to previous estimates [22] Other Important Information - The company has $715 million of available liquidity, including over $300 million of unrestricted cash [21] - Capital expenditures for Q1 2025 totaled $20 million, with expectations for full-year capital expenditures in the range of $190 million to $210 million [21][26] Q&A Session Summary Question: Impact of tariffs on the business - Management expressed confidence that current regulations will not have a material impact on the company, particularly regarding cobalt shipments from Canada to the U.S. [31][32] Question: Volume recovery in Sterigenics and Nelson - Management noted optimism regarding volume improvements in both Sterigenics and Nelson Labs, supported by strong customer survey results [34][35] Question: Nelson Labs margin trends - Management highlighted that new regulations and product spend are driving improvements in margins, with expectations for continued growth throughout the year [40][41] Question: Legal strategy and ongoing cases - Management stated confidence in their legal strategy and ability to defend against claims, emphasizing the importance of scientific evidence [50][52] Question: Cross-selling initiatives between Nelson and Sterigenics - Management confirmed ongoing incentives for cross-selling and noted positive customer responses to integrated services [53][55] Question: Pricing levels and customer pushback - Management indicated that pricing for Sterigenics remains consistent with long-term targets, with ongoing discussions with customers about value delivery [75][78]

Financial Performance - Net Revenues increased by 2.6% to $255 million, or 4.4% on a constant currency basis[39, 34] - Adjusted EBITDA increased by 8.8% to $122 million, or 11.2% on a constant currency basis[39, 34] - Adjusted EBITDA margin expanded by 276 basis points to 47.9%[34, 39] - Adjusted EPS increased by $0.01 to $0.14[34, 39] Segment Performance - Sterigenics revenue increased by 1.9% to $170 million, with a segment income increase of 2.5%[43] - Nordion revenue increased by 35.6% to $33 million, with a segment income increase of 61.5%[47] - Nelson Labs revenue decreased by 9.3% to $52 million, but segment income increased by 7.0%[51] Liquidity and Capital Deployment - Strong liquidity position of $715 million as of March 31, 2025, with no outstanding borrowings on the revolving line of credit[36, 55] - Net Leverage Ratio improved to 3.6x as of March 31, 2025[36, 57] - Completed $176 million upsize of the revolving line of credit and extended the facility to April 2030[36, 61] 2025 Outlook - The company expects Net Revenues to increase by 4.0% to 6.0%[64] - The company expects Adjusted EBITDA to increase by 4.5% to 6.5%[64]

[Financial & Operational Highlights](index=1&type=section&id=Sotera%20Health%20Reports%20First-Quarter%202025%20Results) [Q1 2025 Overall Performance](index=1&type=section&id=Q1%202025%20Overall%20Performance) Sotera Health reported Q1 2025 net revenues of $255M (+2.6%) and Adjusted EBITDA of $122M (+8.8%), despite a $13M net loss from a $31M litigation settlement | Financial Metric | Q1 2025 ($M) | Q1 2024 ($M) | Change | Constant Currency Change | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $255M | $248M | +2.6% | +4.4% | | Net (Loss) Income | ($13M) | $6M | - | - | | Diluted (Loss) EPS | ($0.05) | $0.02 | - | - | | Adjusted EBITDA | $122M | $112M (approx) | +8.8% | +11.2% | | Adjusted EPS | $0.14 | $0.13 | +$0.01 | - | - The **net loss of $13 million** was directly impacted by a pending and previously disclosed settlement of approximately **$31 million** related to ethylene oxide ("EO") claims against the Sterigenics segment[3](index=3&type=chunk) - The company's Chairman and CEO, Michael B. Petras, Jr., highlighted the solid start to the year, emphasizing **mid-single-digit revenue growth** and **strong double-digit Adjusted EBITDA growth** on a constant currency basis[4](index=4&type=chunk) [Business Segment Performance](index=1&type=section&id=First-Quarter%20Review%20by%20Business%20Segment) Q1 2025 segment performance was mixed, with Nordion revenue surging 35.6%, Sterigenics growing 1.9%, and Nelson Labs revenue declining 9.3% despite improved segment income | Segment | Q1 2025 Revenue ($M) | Q1 2024 Revenue ($M) | % Change | Q1 2025 Segment Income ($M) | Q1 2024 Segment Income ($M) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sterigenics | $170M | $166.5M | +1.9% | $88M | $85.8M | +2.5% | | Nordion | $33M | $24.0M | +35.6% | $17M | $10.8M | +61.5% | | Nelson Labs | $52M | $57.7M | -9.3% | $16M | $15.3M | +7.0% | [Sterigenics](index=1&type=section&id=Sterigenics) - Net revenues increased by **1.9% to $170 million** (**3.9%** on a constant currency basis), primarily driven by favorable pricing which was partially offset by unfavorable foreign currency exchange rates[5](index=5&type=chunk) - Segment income grew **2.5% to $88 million**, with favorable pricing being the main driver, though partially offset by inflation and currency impacts[5](index=5&type=chunk)[7](index=7&type=chunk) [Nordion](index=2&type=section&id=Nordion) - Net revenues surged by **35.6% to $33 million** (**40.6%** on a constant currency basis), mainly attributed to volume and mix, largely due to the timing of reactor harvest schedules[8](index=8&type=chunk) - Segment income increased significantly by **61.5% to $17 million**, driven by the higher volume and mix[8](index=8&type=chunk)[9](index=9&type=chunk) [Nelson Labs](index=2&type=section&id=Nelson%20Labs) - Net revenues decreased by **9.3% to $52 million** (**8.6%** on a constant currency basis), caused by lower expert advisory service revenue, which offset favorable pricing and improvements in core lab testing[10](index=10&type=chunk) - Despite the revenue drop, segment income rose by **7.0% to $16 million**, achieved through favorable pricing, improved volume and mix in core lab services, and lab optimization efforts[10](index=10&type=chunk)[11](index=11&type=chunk) [Financial Position and Outlook](index=2&type=section&id=Financial%20Position%20and%20Outlook) [Balance Sheet and Liquidity](index=2&type=section&id=Balance%20Sheet%20and%20Liquidity) As of March 31, 2025, Sotera Health maintained $2.3 billion total debt, increased cash to $304 million, improved Net Leverage to 3.6x, and expanded its revolving credit facility to $600 million | Metric | As of Mar 31, 2025 ($) | As of Dec 31, 2024 ($) | | :--- | :--- | :--- | | Total Debt | $2.3 billion | $2.3 billion | | Cash and Cash Equivalents | $304 million | $277 million | | Net Leverage Ratio | 3.6x | 3.7x | - The company had **no balance outstanding** on its revolving credit facility as of March 31, 2025[12](index=12&type=chunk) - On April 30, 2025, the company increased its revolving credit facility by **$176 million to a total of $600 million** and extended its maturity to April 2030[12](index=12&type=chunk) [Full-Year 2025 Outlook](index=2&type=section&id=Reaffirming%202025%20Outlook) The company reaffirmed its full-year 2025 guidance, projecting 4.0-6.0% net revenue growth and 4.5-6.5% Adjusted EBITDA growth (constant currency), with Adjusted EPS maintained at $0.70-$0.76 | 2025 Outlook Metric | Range/Value | | :--- | :--- | | Net Revenues Growth (Constant Currency) | 4.0% to 6.0% | | Adjusted EBITDA Growth (Constant Currency) | 4.5% to 6.5% | | Adjusted EPS | $0.70 to $0.76 | | Interest Expense | $155M to $165M | | Tax Rate (Adjusted) | 33.0% to 35.0% | | Capital Expenditures | $190M to $210M | - The company updated its foreign currency headwind assumptions for 2025, reducing the expected negative impact on net revenues to approx. **1.25%** (from 2.25%) and on Adjusted EBITDA to approx. **1.50%** (from 2.50%)[14](index=14&type=chunk) [Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2025 total net revenues reached $254.5 million, but a $30.9 million EO litigation settlement led to a net loss of $13.3 million, or ($0.05) per diluted share | (in thousands $) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total net revenues | $254,523 | $248,176 | | Gross profit | $135,432 | $127,115 | | Illinois EO litigation settlement | $30,943 | $0 | | (Loss) income before income taxes | ($14,823) | $11,014 | | Net (loss) income | ($13,260) | $6,323 | | Diluted (Loss) Earnings per share | ($0.05) | $0.02 | [Segment Data](index=8&type=section&id=Segment%20Data) Total segment income for Q1 2025 increased to $121.8 million, with Sterigenics contributing $88.0 million, Nordion $17.4 million, and Nelson Labs $16.4 million, reflecting a $30.9 million litigation settlement adjustment | Segment Income (in thousands $) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Sterigenics | $88,004 | $85,818 | | Nordion | $17,422 | $10,785 | | Nelson Labs | $16,413 | $15,341 | | **Total segment income** | **$121,839** | **$111,944** | [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were $3.10 billion, total liabilities $2.68 billion, with cash increasing to $306.1 million and long-term debt remaining stable | (in thousands $) | As of Mar 31, 2025 | As of Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $306,081 | $278,865 | | Total current assets | $554,990 | $526,037 | | Total assets | $3,097,528 | $3,071,648 | | Total current liabilities | $225,991 | $191,002 | | Long-term debt, less current portion | $2,205,355 | $2,208,100 | | Total liabilities | $2,683,437 | $2,666,737 | | Total equity | $414,091 | $404,911 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 net cash from operating activities significantly increased to $55.5 million, while net cash used in investing activities decreased to $19.9 million due to lower capital expenditures | (in thousands $) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $55,521 | $9,699 | | Net cash used in investing activities | ($19,881) | ($34,853) | | Net cash used in financing activities | ($8,087) | ($11,941) | | Net increase (decrease) in cash | $27,216 | ($38,834) | [Non-GAAP Financial Measures Reconciliation](index=11&type=section&id=Non-GAAP%20Financial%20Measures) [Reconciliation of Net Income to Adjusted EBITDA and Adjusted EPS](index=11&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA%20and%20Adjusted%20EPS) Q1 2025 GAAP net loss of $13.3 million reconciled to Adjusted Net Income of $39.0 million and Adjusted EBITDA of $121.8 million, resulting in an Adjusted EPS of $0.14 | Reconciliation to Adjusted EBITDA (Q1 2025, in thousands $) | Amount | | :--- | :--- | | Net (loss) income | ($13,260) | | Add: Amortization of intangible assets | $18,674 | | Add: Illinois EO litigation settlement | $30,943 | | Add: Professional services relating to EO facilities | $12,328 | | Add: Interest expense, net | $40,876 | | Add: Depreciation | $22,060 | | Add: Income tax provision applicable to Adjusted Net Income | $19,859 | | Other Adjustments | $2,201 | | **Adjusted EBITDA** | **$121,839** | - Adjusted Net Income for Q1 2025 was **$39.0 million**, leading to an Adjusted Diluted EPS of **$0.14**, compared to **$35.6 million** and **$0.13**, respectively, in Q1 2024[39](index=39&type=chunk) [Net Debt and Net Leverage Ratio Calculation](index=12&type=section&id=Net%20Debt%20and%20Net%20Leverage%20Ratio%20Calculation) As of March 31, 2025, total debt was $2.32 billion, resulting in Net Debt of $2.01 billion after cash, and an improved Net Leverage Ratio of 3.6x | (in thousands $, except Net Leverage) | As of Mar 31, 2025 | As of Dec 31, 2024 | | :--- | :--- | :--- | | Total Debt | $2,317,421 | $2,321,112 | | Less: cash and cash equivalents | ($304,390) | ($277,242) | | **Net Debt** | **$2,013,031** | **$2,043,870** | | LTM Adjusted EBITDA | $558,469 | $548,574 | | **Net Leverage** | **3.6x** | **3.7x** | [LTM Adjusted EBITDA Reconciliation](index=13&type=section&id=LTM%20Adjusted%20EBITDA%20Reconciliation) For the twelve months ended March 31, 2025, net income of $24.8 million reconciled to an Adjusted EBITDA of $558.5 million, resulting in an LTM Adjusted EBITDA Margin of 50.5% | (in thousands $) | Twelve months ended Mar 31, 2025 | | :--- | :--- | | Net income | $24,815 | | Adjusted Net Income | $201,914 | | Interest expense, net | $163,796 | | Depreciation | $84,174 | | Income tax provision applicable to Adjusted Net Income | $108,585 | | **Adjusted EBITDA** | **$558,469** |

Core Insights - Sotera Health Company reported a 2.6% increase in net revenues for Q1 2025, reaching $255 million compared to $248 million in Q1 2024, with a 4.4% increase on a constant currency basis [2][9] - The company experienced a net loss of $13 million, or $0.05 per diluted share, due to a pending settlement of approximately $31 million related to ethylene oxide claims, contrasting with a net income of $6 million, or $0.02 per diluted share, in Q1 2024 [2][9] - Adjusted EBITDA for Q1 2025 rose by 8.8% to $122 million, or 11.2% on a constant currency basis, with an Adjusted EPS of $0.14, an increase of $0.01 from Q1 2024 [2][9] Financial Performance - The Sterigenics segment reported net revenues of $170 million, a 1.9% increase compared to Q1 2024, with segment income rising by 2.5% to $88 million [4][5] - Nordion segment revenues surged by 35.6% to $33 million, with segment income increasing by 61.5% to $17 million, driven by volume and mix changes [6][7] - Nelson Labs saw a decrease in net revenues to $52 million, down 9.3% from Q1 2024, although segment income increased by 7.0% to $16 million due to favorable pricing in core lab testing services [10][11] Balance Sheet and Liquidity - As of March 31, 2025, Sotera Health had total debt of $2.3 billion and cash and cash equivalents of $304 million, compared to $2.3 billion in debt and $277 million in cash at the end of 2024 [12] - The company's Net Leverage Ratio improved to 3.6x from 3.7x as of December 31, 2024, indicating better financial health [12][44] - An amendment to the revolving credit facility increased its size by $176 million to a total of $600 million, extending the maturity date to April 2030 [13] 2025 Outlook - The company reaffirmed its 2025 outlook, projecting net revenue growth of 4.0% to 6.0% and Adjusted EBITDA growth of 4.5% to 6.5%, both on a constant currency basis [9][16] - Foreign currency headwinds are expected to impact net revenues and Adjusted EBITDA by approximately 1.25% and 1.50%, respectively, based on average March 2025 exchange rates [16] - The anticipated Adjusted EPS for 2025 is projected to be in the range of $0.70 to $0.76, with capital expenditures estimated between $190 million and $210 million [16]