Core Insights - Steris (STE) reported total revenue of $1.39 billion for the quarter ending June 2025, reflecting an increase of 8.7% [4] - The company's international revenue performance is crucial for assessing its financial resilience and growth prospects [2][9] International Revenue Breakdown - Revenue from Ireland was $22.5 million, accounting for 1.6% of total revenue, which was a surprise decline of -5.3% compared to expectations [5] - Other Foreign Revenues generated $342.9 million, constituting 24.7% of total revenue, also showing a surprise decline of -5.17% from projections [6] - The expected contributions from Ireland and Other Foreign Revenues for the ongoing fiscal quarter are projected to be $24.49 million (1.7%) and $400.87 million (28.4%), respectively [7] Full Year Projections - For the full fiscal year, total revenue is expected to reach $5.83 billion, an increase of 6.8% from the previous year [8] - The anticipated contributions from Ireland and Other Foreign Revenues for the full year are $126.76 million (2.2%) and $1.57 billion (26.9%), respectively [8] Market Context - The company's international market presence provides opportunities to mitigate domestic economic challenges while engaging with rapidly evolving economies [3] - Analysts closely monitor international revenue trends to adjust earnings forecasts, reflecting the importance of global market dynamics [10]

Part I—Financial Information [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) STERIS reported Q1 FY2026 revenues of **$1,391.1 million**, an **8.7%** increase, with net income of **$177.4 million** and **$420.0 million** in operating cash flow [Note 1: Nature of Operations and Accounting Policies](index=8&type=section&id=Note%201.%20Nature%20of%20Operations%20and%20Summary%20of%20Significant%20Accounting%20Policies) STERIS operates in Healthcare, AST, and Life Sciences segments; the Dental segment was divested and is now discontinued operations - The company operates in three reportable business segments: Healthcare, Applied Sterilization Technologies (AST), and Life Sciences[23](index=23&type=chunk) - The Dental segment was divested and its results are now presented as discontinued operations, with historical information retrospectively adjusted[23](index=23&type=chunk)[28](index=28&type=chunk)[32](index=32&type=chunk) - As of June 30, 2025, the company had remaining performance obligations of approximately **$1,824.0 million**, with about **53%** expected to be recognized as revenue within one year[36](index=36&type=chunk) [Note 2: Restructuring](index=11&type=section&id=Note%202.%20Restructuring) STERIS initiated a restructuring plan in May 2024, recording **$1.8 million** in Q1 FY2026 expenses, down from **$28.1 million** prior year - A targeted restructuring plan was adopted in May 2024, which included a strategic shift in the European Healthcare surgical business and eliminated approximately **300 positions**[39](index=39&type=chunk) Restructuring Expenses (Q1 FY2026 vs Q1 FY2025) | Expense Category | Q1 2025 (Millions) | Q1 2024 (Millions) | | :--- | :--- | :--- | | Severance and other compensation | $1.7 M | $21.5 M | | Lease and other contract termination | $0.0 M | $3.0 M | | Product rationalization | $0.0 M | $2.4 M | | Accelerated depreciation | $0.1 M | $1.3 M | | **Total Restructuring Expense** | **$1.8 M** | **$28.1 M** | [Note 3: Business Acquisitions and Divestitures](index=12&type=section&id=Note%203.%20Business%20Acquisitions%20and%20Divestitures) STERIS completed a **$15.0 million** Healthcare acquisition in Q1 FY2026 and divested its Dental segment and Controlled Environment Certification Services business - Completed a tuck-in acquisition in the Healthcare segment for approximately **$15.0 million** during Q1 FY2026[44](index=44&type=chunk) - On May 31, 2024, the company closed the sale of its Dental segment for cash consideration of **$787.5 million**, plus potential contingent payments. The results are presented as discontinued operations[47](index=47&type=chunk)[49](index=49&type=chunk) - Completed the sale of the Controlled Environment Certification Services business on April 1, 2024, recognizing a pre-tax gain of **$18.8 million** in Q1 FY2025[47](index=47&type=chunk) [Note 4: Discontinued Operations](index=14&type=section&id=Note%204.%20Discontinued%20Operations) The divested Dental segment, now a discontinued operation, generated **$63.9 million** revenue and **$5.6 million** net income in Q1 FY2025 Dental Segment Discontinued Operations (Three Months Ended June 30, 2024) | Metric | Amount (Millions) | | :--- | :--- | | Revenues | $63.9 M | | Gross Profit | $28.8 M | | Income from Operations | $15.0 M | | Pre-tax loss on sale | $(7.8) M | | **Income from discontinued operations, net of tax** | **$5.6 M** | [Note 7: Debt](index=15&type=section&id=Note%207.%20Debt) Total debt decreased to **$1,903.1 million** by June 30, 2025, primarily due to **$125.0 million** in note repayments Total Debt Composition | Debt Category | June 30, 2025 (Millions) | March 31, 2025 (Millions) | | :--- | :--- | :--- | | Short-term debt | $0.0 M | $125.0 M | | Long-term debt | $1,903.1 M | $1,918.7 M | | **Total debt** | **$1,903.1 M** | **$2,043.7 M** | [Note 9: Income Taxes](index=17&type=section&id=Note%209.%20Income%20Taxes) Q1 FY2026 effective tax rate rose to **23.3%** from **20.1%** due to profit mix and discrete items, with OBBBA impact under assessment - The effective tax rate for Q1 FY2026 was **23.3%**, compared to **20.1%** for Q1 FY2025, with the increase driven by geographic profit mix and discrete items[65](index=65&type=chunk) - The U.S. enacted the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, which contains substantial tax policy changes. The company is currently assessing its impact[63](index=63&type=chunk) [Note 10: Commitments and Contingencies](index=18&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) STERIS settled substantially all Illinois Ethylene Oxide litigation claims for up to **$48.2 million**, with remaining liability in accrued expenses - Entered into settlement agreements to resolve substantially all Illinois EO litigation claims for up to **$48.2 million**. The remaining liability is recorded in 'Accrued expenses and other'[77](index=77&type=chunk)[78](index=78&type=chunk) [Note 11: Business Segment Information](index=19&type=section&id=Note%2011.%20Business%20Segment%20Information) All three segments, Healthcare, AST, and Life Sciences, reported revenue growth in Q1 FY2026, with AST leading at **12.6%** Segment Revenues (Q1 FY2026 vs Q1 FY2025) | Segment | Q1 2025 Revenues (Millions) | Q1 2024 Revenues (Millions) | YoY Change | | :--- | :--- | :--- | :--- | | Healthcare | $974.7 M | $901.2 M | +8.2% | | AST | $281.2 M | $249.8 M | +12.6% | | Life Sciences | $135.2 M | $128.5 M | +5.2% | | **Total** | **$1,391.1 M** | **$1,279.5 M** | **+8.7%** | Segment Income from Operations Before Adjustments (Q1 FY2026 vs Q1 FY2025) | Segment | Q1 2025 Income (Millions) | Q1 2024 Income (Millions) | | :--- | :--- | :--- | | Healthcare | $235.5 M | $216.9 M | | AST | $136.7 M | $117.7 M | | Life Sciences | $58.7 M | $52.6 M | Revenues by Type (Q1 FY2026 vs Q1 FY2025) | Revenue Type | Q1 2025 (Millions) | Q1 2024 (Millions) | | :--- | :--- | :--- | | Capital equipment | $255.5 M | $242.2 M | | Consumables | $435.0 M | $414.1 M | | Service | $700.6 M | $623.2 M | | **Total Revenues** | **$1,391.1 M** | **$1,279.5 M** | [Note 13: Share Repurchases](index=23&type=section&id=Note%2013.%20Repurchases%20of%20Ordinary%20Shares) As of June 30, 2025, **$300.0 million** remained available under the share repurchase program, with no program repurchases in Q1 FY2026 - As of June 30, 2025, **$300.0 million** remained available under the Board-authorized share repurchase program[99](index=99&type=chunk) - No shares were repurchased under the program during the first three months of fiscal 2026. However, **0.1 million shares** were obtained for **$10.6 million** in connection with share-based compensation programs[101](index=101&type=chunk)[102](index=102&type=chunk) Consolidated Statement of Income Highlights (Q1 FY2026 vs Q1 FY2025) | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | YoY Change | | :--- | :--- | :--- | :--- | | **Total Revenues** | $1,391.1 M | $1,279.5 M | +8.7% | | **Gross Profit** | $628.0 M | $572.4 M | +9.7% | | **Income from Operations** | $246.0 M | $185.5 M | +32.6% | | **Net Income Attributable to Shareholders** | $177.4 M | $145.4 M | +22.0% | | **Diluted EPS (Total)** | $1.79 | $1.46 | +22.6% | | **Cash Dividends per Share** | $0.57 | $0.52 | +9.6% | Consolidated Balance Sheet Highlights (as of June 30, 2025) | Metric | June 30, 2025 (Millions) | March 31, 2025 (Millions) | | :--- | :--- | :--- | | **Total Assets** | $10,405.0 M | $10,146.8 M | | Cash and cash equivalents | $279.7 M | $171.7 M | | Goodwill | $4,223.1 M | $4,095.7 M | | **Total Liabilities** | $3,435.1 M | $3,531.0 M | | Total Debt (Short & Long-term) | $1,903.1 M | $2,043.7 M | | **Total Equity** | $6,969.9 M | $6,615.8 M | Consolidated Cash Flow Highlights (Q1 FY2026 vs Q1 FY2025) | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $420.0 M | $303.7 M | | Net cash (used in) provided by investing activities | $(108.5) M | $687.8 M | | Net cash used in financing activities | $(213.1) M | $(998.9) M | | **Increase (decrease) in cash** | $108.0 M | $(8.7) M | [Management's Discussion and Analysis (MD&A)](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Q1 FY2026 revenue grew **8.7%** due to volume and pricing, gross profit margin improved to **45.1%**, and free cash flow increased to **$326.5 million** [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Q1 FY2026 total revenues increased **8.7%** to **$1,391.1 million**, with gross profit margin expanding to **45.1%** and operating income rising **32.6%** Revenue Growth by Type and Geography (Q1 FY2026) | Category | YoY Change | | :--- | :--- | | **By Type** | | | Service revenues | +12.4% | | Consumable revenues | +5.0% | | Capital equipment revenues | +5.5% | | **By Geography** | | | United States | +8.3% | | Other foreign | +10.5% | - Gross profit margin increased to **45.1%** from **44.7%** due to favorable pricing (**+130 bps**) and productivity (**+70 bps**), partially offset by inflation (**-80 bps**) and tariff costs (**-70 bps**)[165](index=165&type=chunk) - Total operating expenses decreased by **1.3%**, mainly because restructuring expenses fell to **$1.8 million** from **$25.7 million** in the prior-year quarter[166](index=166&type=chunk) - Interest expense decreased by **$14.5 million** YoY due to lower outstanding debt principal[171](index=171&type=chunk)[172](index=172&type=chunk) [Business Segment Results](index=36&type=section&id=Business%20Segment%20Results%20of%20Operations) All segments reported revenue growth in Q1 FY2026, with AST leading at **12.6%** and achieving the highest operating margin of **48.6%** Segment Performance (Q1 FY2026) | Segment | Revenue Growth (As Reported) | Constant Currency Organic Growth | Operating Margin | | :--- | :--- | :--- | :--- | | Healthcare | 8.2% | 7.6% | 24.2% | | AST | 12.6% | 10.2% | 48.6% | | Life Sciences | 5.2% | 4.2% | 43.5% | - The Healthcare segment's backlog increased to **$403.5 million** from **$362.0 million** a year ago[186](index=186&type=chunk) - The Life Sciences segment's backlog grew significantly to **$111.0 million** from **$72.2 million** a year ago[189](index=189&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Q1 FY2026 operating cash flow increased to **$420.0 million**, free cash flow rose to **$326.5 million**, and the debt-to-total capital ratio improved to **21.5%** Key Liquidity Metrics | Metric | Q1 FY2026 (Millions) | Q1 FY2025 (Millions) | | :--- | :--- | :--- | | Net cash from operating activities | $420.0 M | $303.7 M | | Free cash flow | $326.5 M | $195.7 M | | Debt-to-total capital ratio (end of period) | 21.5% | 26.7% | - Financing activities included a **$125.0 million** repayment of Private Placement Senior Notes and **$56.2 million** in cash dividends paid to shareholders[196](index=196&type=chunk)[203](index=203&type=chunk) [Market Risk Disclosures](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk exposures, including interest rate, currency, and commodity risks, remained materially unchanged since March 31, 2025 - Exposures to market risks have not changed materially since the fiscal year-end (March 31, 2025)[217](index=217&type=chunk) - As of June 30, 2025, the company held foreign currency forward contracts to manage currency risk and commodity swap contracts to hedge the price of **0.4 million pounds** of nickel[219](index=219&type=chunk)[220](index=220&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[221](index=221&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[222](index=222&type=chunk) Part II—Other Information [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings information, including the Illinois Ethylene Oxide litigation settlement, is detailed in Note 10 of the financial statements - Information on legal proceedings is provided in Note 10 to the consolidated financial statements, titled "Commitments and Contingencies"[225](index=225&type=chunk) [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported since the Annual Report on Form 10-K for the fiscal year ended March 31, 2025 - The company's risk factors are detailed in its Annual Report on Form 10-K for the fiscal year ended March 31, 2025[226](index=226&type=chunk) [Issuer Purchases of Equity Securities](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20or%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) As of June 30, 2025, **$300.0 million** remained for share repurchases, with no program repurchases in Q1 FY2026, though shares were obtained for compensation - The company's share repurchase program, authorized on May 3, 2023, has **$300.0 million** remaining as of June 30, 2025[227](index=227&type=chunk) - No shares were repurchased under the publicly announced plan during the first quarter of fiscal 2026[228](index=228&type=chunk)[229](index=229&type=chunk)

Financial Data and Key Metrics Changes - Total reported revenue grew by 9% in the first quarter, with constant currency organic revenue increasing by 8% driven by volume and a 230 basis point price increase [7][9] - Gross margin increased by 20 basis points to 45.3%, while EBIT margin rose by 50 basis points to 22.8% of revenue compared to the previous year [8][9] - Adjusted earnings per diluted share improved by 15% to $2.34, with net income from continuing operations at $231.2 million [9][10] - Free cash flow for the fiscal year 2026 was reported at $327 million, with an increase in outlook for free cash flow raised to $820 million [10][18] Business Line Data and Key Metrics Changes - In the Healthcare segment, constant currency organic revenue grew by 8%, with capital equipment revenue increasing by 6% and service revenue growing by 13% [14] - The AST segment saw a 10% growth in constant currency organic revenue, with services growing by 12% and EBIT margins increasing by 150 basis points to 48.6% [15] - Life Sciences group reported a 4% increase in constant currency organic revenue, driven by an 8% growth in consumables [16] Market Data and Key Metrics Changes - The backlog for Healthcare capital equipment was reported at over $400 million, indicating strong underlying order growth of 14% [14] - Life Sciences backlog increased by over 50% to $111 million, reflecting a recovery in capital orders after a previous slowdown [16][30] Company Strategy and Development Direction - The company is focused on maintaining consistent dividend growth, announcing a 10% increase to $0.63 per quarter [10] - Management emphasized the importance of strategic oversight and financial leadership during the CFO transition, indicating a commitment to continued growth and stability [11][13] - The company is actively pursuing M&A opportunities while also considering stock buybacks to offset dilution [44][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong order growth and backlog, indicating a positive outlook for revenue despite potential challenges in the healthcare payment landscape [42][61] - The company updated its revenue growth outlook to approximately 8% to 9%, reflecting favorable currency impacts, while maintaining a constant currency organic revenue growth forecast of 6% to 7% [17][18] - Management acknowledged the complexities in the bioprocessing market but noted a return to normal volume trajectories [28][30] Other Important Information - The company is experiencing increased costs related to employee healthcare benefits due to higher utilization rates [38] - The effective tax rate for the quarter was reported at 23.5%, with no anticipated changes [18] Q&A Session Summary Question: Revised tariff estimate details - The increase in tariff expectations was driven by higher tariffs on metals and changes in EU tariffs [22] Question: Maintaining organic expectations for AST - The conservative outlook is due to potential fluctuations in manufacturing positions from customers [24] Question: Update on bioprocessing market - Recent volumes have been consistent, indicating a return to normal trajectories [28] Question: Life Sciences segment backlog increase - The increase is attributed to a recovery from previous capital order slowdowns [30] Question: Comments on low temp sterilization market - The company has not seen a slowdown and feels confident in its market position [35] Question: Employee healthcare costs - Increased costs are primarily due to higher utilization of employee healthcare benefits [38] Question: Capital demand environment and order growth - Strong orders in both healthcare and life sciences sectors contribute to confidence in revenue guidance [42] Question: Future cash allocation strategies - The company remains open to M&A opportunities while also considering stock buybacks [44][46] Question: Impact of regulatory changes on EO facilities - The company did not apply for regulatory relief as it has already met compliance standards [56] Question: Hospital outlook and OB3 impact - Management views the situation as a payment reimbursement issue rather than a demand issue [61] Question: FX impact on profitability - The company is largely operationally hedged against FX impacts [63]

Financial Data and Key Metrics Changes - Total reported revenue grew by 9% in the first quarter, with constant currency organic revenue increasing by 8% driven by volume and a 30 basis points price increase [6][7] - Gross margin increased by 20 basis points to 45.3%, while EBIT margin rose by 50 basis points to 22.8% of revenue compared to the previous year [7] - Net income from continuing operations was $231.2 million, and adjusted earnings per diluted share improved by 15% to $2.34 [7][8] - Free cash flow for the fiscal year 2026 was reported at $327 million, with a strong start driven by increased earnings and improvements in working capital [8] Business Line Data and Key Metrics Changes - In the Healthcare segment, constant currency organic revenue grew by 8%, with capital equipment revenue increasing by 6% and service revenue growing by 13% [13] - The AST segment saw a 10% growth in constant currency organic revenue, with services growing by 12% and EBIT margins increasing by 150 basis points to 48.6% [14] - Life Sciences group experienced a 4% increase in constant currency organic revenue, driven by an 8% growth in consumables [15] Market Data and Key Metrics Changes - The company reported a backlog of over $400 million in Healthcare capital equipment, indicating strong underlying order growth of 14% [13] - Life Sciences backlog increased by over 50% to $111 million, reflecting a recovery in capital orders after a previous slowdown [15] Company Strategy and Development Direction - The company is focused on maintaining consistent dividend growth, announcing a 10% increase to $0.63 per quarter [8] - Management emphasized the importance of strategic oversight and financial leadership during the CFO transition, indicating confidence in the company's future direction [10][12] - The company is actively pursuing M&A opportunities while also considering stock buybacks to offset dilution [43][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong order growth and backlog, indicating a positive outlook for revenue guidance despite external challenges [41] - The company updated its revenue growth outlook to approximately 8% to 9%, reflecting favorable currency impacts, while maintaining a constant currency organic revenue growth forecast of 6% to 7% [16] - Management acknowledged the challenges posed by increased tariffs and healthcare costs but remained optimistic about the overall demand in the healthcare sector [17][36] Other Important Information - The company has a strong cash position, with plans to continue building cash reserves while managing debt effectively [46] - The effective tax rate for the quarter was reported at 23.5%, with no anticipated changes [17] Q&A Session Summary Question: Revised tariff estimate details - The increase in tariff expectations was driven by higher tariffs on metals and changes in EU tariffs, leading to an overall increase in tariff exposure [22] Question: Maintaining organic growth expectations for AST - Management indicated that the decision to maintain the 6% to 7% organic growth expectation is based on conservatism despite a strong start [24] Question: Update on bioprocessing market - The bioprocessing market has shown consistent volume over the last few months, indicating a return to normal trajectory [28] Question: Life Sciences segment backlog increase - The increase in backlog is attributed to a recovery in capital orders following a previous slowdown, with strong order intake expected [30] Question: Competitive landscape regarding low temp sterilization - Management expressed confidence in their position and did not observe any slowdown in their operations despite competitor concerns [34] Question: Employee healthcare benefit costs - The increase in costs is primarily due to higher utilization of employee healthcare benefits, with premiums increasing slightly [37] Question: Capital demand environment and order growth - Strong orders in both Healthcare and Life Sciences sectors contribute positively to revenue guidance, with no observed slowdown [41] Question: M&A activity and cash allocation - The company remains active in M&A discussions and plans to continue building cash reserves while considering stock buybacks [43][46] Question: Impact of regulatory changes on EO facilities - The company did not apply for regulatory relief as they are already compliant, and the competitive impact is expected to be minimal [56] Question: Hospital outlook and OB3 impact - Management views the challenges as payment reimbursement issues rather than demand issues, with no observed pullback in procedure volumes [63] Question: FX impact on profitability - The company is largely operationally hedged against FX impacts, with minimal effects on profitability [66] Question: ASC build-out in the US - The relocation of procedures to ASCs is seen as beneficial for capital business, requiring proper training and compliance programs [72]

Core Insights - STERIS plc (STE) reported first-quarter fiscal 2026 adjusted earnings per share (EPS) of $2.34, reflecting a 15.3% increase year-over-year and surpassing the Zacks Consensus Estimate by 0.9% [1][10] - The company's GAAP EPS was $1.79, marking a 27% increase from the previous year's $1.41 [1] Revenue Performance - Total revenues from continuing operations reached $1.39 billion, an 8.6% year-over-year increase, although this figure missed the Zacks Consensus Estimate by 2.4% [3][10] - Organic revenues at constant exchange rate (CER) rose by 8% year-over-year [3] Segment Analysis - **Healthcare Segment**: Revenues increased by 8% year-over-year to $974.7 million, driven by a 5% rise in consumable revenues, a 13% increase in service revenues, and a 6% improvement in capital equipment revenues [4] - **Applied Sterilization Technologies (AST)**: Revenues improved by 13% to $281.2 million, with service revenues growing by 12% and capital equipment revenues surging by 46% [5] - **Life Sciences Segment**: Revenues increased by 5% to $135.2 million, supported by an 8% rise in consumable revenues [6] Margin and Expense Analysis - Gross profit for the quarter was $628 million, up 9.7% year-over-year, with a gross margin expansion of 41 basis points to 45.1% despite a 7.9% increase in the cost of revenues [7] - Selling, general and administrative expenses rose by 5.4% to $353.8 million, while research and development expenses increased by 3.1% to $26.4 million [8] Financial Position - Cash and cash equivalents at the end of the first quarter stood at $279.7 million, up from $171.7 million at the end of fiscal 2025 [11] - Net cash flow from operating activities was $420 million compared to $303.7 million in the previous year [12] Guidance - STERIS raised its fiscal 2026 revenue growth guidance to 8-9%, up from the previous 6-7% projection, with an adjusted EPS forecast of $9.90-$10.15 [10][13] - The Zacks Consensus Estimate for revenues is pegged at $5.83 billion, indicating a 6.8% growth from fiscal 2025 [13] Overall Assessment - The company ended the first quarter of fiscal 2026 positively, with both earnings and revenues exceeding estimates across all business segments [14]

Core Insights - Steris reported Q1 FY2026 earnings, showing solid year-over-year growth but falling short of analyst expectations for both revenue and adjusted EPS [1][2] - Revenue (GAAP) was $1,391.1 million, below the estimate of $1,447.8 million, while adjusted EPS was $2.34 compared to the consensus estimate of $2.47 [1][2] - Increased tariffs and higher employee benefit costs offset foreign currency gains, leading to an unchanged adjusted earnings outlook despite a raised revenue forecast [1][9] Financial Performance - Non-GAAP EPS for Q1 FY26 was $2.34, a 15.3% increase from $2.03 in Q1 FY25 [2] - GAAP revenue increased by 8.7% year-over-year, from $1,279.5 million in Q1 FY25 to $1,391.1 million [2] - Free cash flow (non-GAAP) rose by 66.8% to $326.5 million compared to $195.7 million in Q1 FY25 [2] Segment Performance - The Healthcare segment generated $974.7 million in revenue, an 8.2% increase from $901.2 million in Q1 FY25 [2][5] - The Applied Sterilization Technologies (AST) segment saw a 12.6% revenue increase, driven by a 12% growth in services and a 46% increase in capital equipment sales [5] - Life Sciences revenue grew by 5.2%, supported by a 53.8% rise in backlog compared to Q1 FY25, indicating strong future demand [5] Operational Developments - Income from operations (GAAP) increased by 32.6% year-over-year, driven by higher pricing and operational productivity [6] - Cash flow from operations rose to $420.0 million, a 38% increase from $303.7 million in Q1 FY25 [6] - Inventory increased by $59.9 million, indicating investments for future growth [6] Strategic Focus - Steris is focusing on expanding its service business and managing global supply chain challenges [4] - The company emphasizes compliance with healthcare regulations and innovation in sterilization technologies [4] - Management raised the revenue growth forecast for FY2026 from 6-7% to 8-9%, driven by favorable foreign currency shifts [9] Cost Challenges - Tariff-related costs are projected to rise from $30 million to $45 million annually, impacting profitability [7] - Labor and employee healthcare costs continue to increase, affecting overall margins [7] - R&D expenses increased to $26.4 million, reflecting ongoing investment in future offerings [7]

Company Performance - Steris reported quarterly earnings of $2.34 per share, exceeding the Zacks Consensus Estimate of $2.32 per share, and up from $2.03 per share a year ago, representing an earnings surprise of +0.86% [1] - The company posted revenues of $1.39 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 2.36%, compared to $1.28 billion in the same quarter last year [2] - Over the last four quarters, Steris has surpassed consensus EPS estimates three times and topped consensus revenue estimates once [2] Future Outlook - The immediate price movement of Steris shares will depend on management's commentary during the earnings call and the company's earnings outlook [3][4] - The current consensus EPS estimate for the upcoming quarter is $2.39 on revenues of $1.41 billion, and for the current fiscal year, it is $10.12 on revenues of $5.83 billion [7] Industry Context - The Medical - Instruments industry, to which Steris belongs, is currently ranked in the bottom 41% of over 250 Zacks industries, indicating potential challenges ahead [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Steris's stock performance [5][6]

[Executive Summary & Q1 FY26 Performance](index=1&type=section&id=Executive%20Summary%20%26%20Q1%20FY26%20Performance) [Overall Financial Performance (Q1 FY26)](index=1&type=section&id=Overall%20Financial%20Performance%20(Q1%20FY26)) STERIS began fiscal 2026 with strong performance, reporting a 9% revenue increase to $1.4 billion and exceeding adjusted EPS expectations **Total Company First Quarter Results from Continuing Operations:** | Metric | Q1 FY26 (2025) | Q1 FY25 (2024) | YoY Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1.4 billion | $1.3 billion | +9% | | Constant Currency Organic Revenue Growth | 8% | N/A | N/A | | Net Income | $177.4 million | $139.8 million | +26.9% | | Diluted EPS | $1.79 | $1.41 | +26.9% | | Adjusted Net Income | $231.2 million | $201.7 million | +14.6% | | Adjusted Diluted EPS | $2.34 | $2.03 | +15.3% | - CEO Dan Carestio stated, "We are pleased with a strong start to fiscal 2026. Our performance exceeded expectations and margins improved nicely, despite tariff headwinds. Revenue also benefited from favorable foreign currency during the quarter, which we anticipate will continue throughout the fiscal year."[3](index=3&type=chunk) [Segment Performance (Q1 FY26)](index=1&type=section&id=Segment%20Performance%20(Q1%20FY26)) All three segments demonstrated revenue and operating income growth in Q1 FY26, driven by improved volume, price, and productivity [Healthcare Segment](index=1&type=section&id=Healthcare%20Segment) The Healthcare segment's revenue grew 8% to $974.7 million, driven by strong performance across service, capital equipment, and consumables **Healthcare Segment Q1 FY26 Performance:** | Metric | Q1 FY26 (2025) | Q1 FY25 (2024) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $974.7 million | $901.2 million | +8% | | Constant Currency Organic Revenue Growth | 8% | N/A | N/A | | Service Revenue Growth | 13% | N/A | N/A | | Capital Equipment Revenue Growth | 6% | N/A | N/A | | Consumable Revenue Growth | 5% | N/A | N/A | | Operating Income | $235.5 million | $216.9 million | +8.6% | - The increase in operating income was primarily due to **improved volume, price, productivity**, and the benefit of prior restructuring efforts, partially offset by tariffs and inflation[4](index=4&type=chunk) [Applied Sterilization Technologies (AST) Segment](index=1&type=section&id=Applied%20Sterilization%20Technologies%20(AST)%20Segment) AST revenue increased 13% to $281.2 million, driven by strong growth in both service and capital equipment revenue **Applied Sterilization Technologies (AST) Segment Q1 FY26 Performance:** | Metric | Q1 FY26 (2025) | Q1 FY25 (2024) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $281.2 million | $249.8 million | +13% | | Constant Currency Organic Revenue Growth | 10% | N/A | N/A | | Service Revenue Growth | 12% | N/A | N/A | | Capital Equipment Revenue Growth | 46% | N/A | N/A | | Operating Income | $136.7 million | $117.7 million | +16.1% | - The operating income increase primarily reflects **improved price and volume**, which more than offset increased energy costs and labor inflation[5](index=5&type=chunk) [Life Sciences Segment](index=1&type=section&id=Life%20Sciences%20Segment) Life Sciences revenue grew 5% to $135.2 million, with consumables leading at 8% growth and operating income improving due to better mix and productivity **Life Sciences Segment Q1 FY26 Performance:** | Metric | Q1 FY26 (2025) | Q1 FY25 (2024) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $135.2 million | $128.5 million | +5% | | Constant Currency Organic Revenue Growth | 4% | N/A | N/A | | Consumable Revenue Growth | 8% | N/A | N/A | | Service Revenue Growth | 3% | N/A | N/A | | Capital Equipment Revenue Growth | 1% | N/A | N/A | | Operating Income | $58.7 million | $52.6 million | +11.6% | - Operating income increased reflecting **improvement in mix, price, and productivity**[6](index=6&type=chunk) [Cash Flow Performance (Q1 FY26)](index=1&type=section&id=Cash%20Flow%20Performance%20(Q1%20FY26)) STERIS reported a significant increase in cash flow from operations and free cash flow, primarily driven by earnings growth and improved working capital **Cash Flow Performance Q1 FY26:** | Metric | Q1 FY26 (2025) | Q1 FY25 (2024) | YoY Change | | :--- | :--- | :--- | :--- | | Net Cash Provided by Operations | $420.0 million | $303.7 million | +38.3% | | Free Cash Flow | $326.5 million | $195.7 million | +66.8% | - The increase in free cash flow was driven primarily by the **growth in earnings and improved working capital**[7](index=7&type=chunk) [Company Updates & Fiscal 2026 Outlook](index=2&type=section&id=Company%20Updates%20%26%20Fiscal%202026%20Outlook) [Board of Directors Changes](index=2&type=section&id=Board%20of%20Directors%20Changes) Two board members retired and Louis Shapiro, former President and CEO of Hospital for Specialty Surgery, was elected as a new member - Dr. Jaqueline Kosecoff and Dr. Richard Steeves retired from the Board as of July 31, 2025[9](index=9&type=chunk) - **Louis Shapiro**, retired President and CEO of the Hospital for Specialty Surgery (HSS), has been elected to the Board, adding additional perspective from the healthcare industry[9](index=9&type=chunk)[10](index=10&type=chunk) [Updated Fiscal 2026 Outlook](index=2&type=section&id=Updated%20Fiscal%202026%20Outlook) The company raised its as-reported revenue growth outlook due to favorable currency, while maintaining its adjusted EPS and organic growth expectations **Revised FY26 Revenue Outlook (Continuing Operations):** | Metric | Previous Expectation | Updated Expectation | Change | | :--- | :--- | :--- | :--- | | As reported revenue increase | 6-7% | 8-9% | +2% | | Constant currency organic revenue growth | 6-7% | 6-7% | Unchanged | | Foreign Currency Favorability | N/A | ~200 basis points | New | **Revised FY26 Adjusted EPS Outlook (Continuing Operations):** | Metric | Previous Expectation | Updated Expectation | | :--- | :--- | :--- | | Adjusted EPS range | $9.90 - $10.15 | $9.90 - $10.15 | - Favorable foreign currency changes will be offset by **increased tariffs** (estimated to reduce pre-tax profit by approximately $45 million) and higher employee healthcare benefit costs, resulting in unchanged adjusted EPS[10](index=10&type=chunk) **Revised FY26 Capital Expenditures & Free Cash Flow:** | Metric | Previous Expectation | Updated Expectation | Change | | :--- | :--- | :--- | :--- | | Capital expenditures | N/A | ~$375 million | N/A | | Free cash flow | ~$770 million | ~$820 million | +$50 million | - The increase in free cash flow is due to **improvements in working capital**[11](index=11&type=chunk) [About STERIS & Investor Information](index=2&type=section&id=About%20STERIS%20%26%20Investor%20Information) [About STERIS](index=2&type=section&id=About%20STERIS) STERIS is a global provider of products and services focused on patient care and infection prevention to create a healthier and safer world - STERIS is a leading global provider of products and services that support patient care with an emphasis on **infection prevention**[14](index=14&type=chunk) - The company's mission is to "HELP OUR CUSTOMERS CREATE A HEALTHIER AND SAFER WORLD by providing innovative healthcare and life science products and services around the globe"[14](index=14&type=chunk) [Conference Call Information](index=2&type=section&id=Conference%20Call%20Information) Management will host a conference call on August 7, 2025, at 9:00 a.m. ET to discuss results, with replay options available - A conference call will be hosted on **August 7, 2025, at 9:00 a.m. ET**[12](index=12&type=chunk) - The conference call can be accessed at www.steris-ir.com or via phone (US: 1-833-535-2199, International: 1-412-902-6776)[12](index=12&type=chunk) - A replay will be available starting 12:00 p.m. ET on August 7, 2025, at www.steris-ir.com or via phone (Access Code: 2889488)[13](index=13&type=chunk) [Financial Statements & Supplemental Data](index=5&type=section&id=Financial%20Statements%20%26%20Supplemental%20Data) [Consolidated Condensed Statements of Operations](index=5&type=section&id=Consolidated%20Condensed%20Statements%20of%20Operations) The statement shows significant year-over-year improvements in gross profit, income from operations, and net income from continuing operations **Consolidated Condensed Statements of Operations (in millions, except per share data):** | Metric | Q1 FY26 (2025) | Q1 FY25 (2024) | YoY Change | | :--- | :--- | :--- | :--- | | Revenues | $1,391.1 | $1,279.5 | +8.7% | | Gross profit | $628.0 | $572.4 | +9.7% | | Income from operations | $246.0 | $185.5 | +32.6% | | Income from continuing operations, net of income tax | $178.0 | $139.9 | +27.2% | | Net income attributable to shareholders | $177.4 | $145.4 | +22.0% | | Diluted EPS - Continuing Operations | $1.79 | $1.41 | +26.9% | | Cash dividends declared per share | $0.57 | $0.52 | +9.6% | [Consolidated Condensed Balance Sheets](index=6&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) Total assets increased, driven by higher cash, fixed assets, and goodwill, while total liabilities saw a slight decrease **Consolidated Condensed Balance Sheets (in millions):** | Metric | June 30, 2025 | March 31, 2025 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $279.7 | $171.7 | +$108.0 | | Total current assets | $2,057.8 | $2,000.8 | +$57.0 | | Property, plant, and equipment, net | $2,054.8 | $1,956.5 | +$98.3 | | Goodwill | $4,223.1 | $4,095.7 | +$127.4 | | Total assets | $10,405.0 | $10,146.8 | +$258.2 | | Total current liabilities | $926.6 | $1,022.2 | -$95.6 | | Long-term indebtedness | $1,903.1 | $1,918.7 | -$15.6 | | Total equity | $6,969.9 | $6,615.8 | +$354.1 | | Total liabilities and equity | $10,405.0 | $10,146.8 | +$258.2 | [Consolidated Condensed Statements of Cash Flows](index=8&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows) The company shows a substantial increase in net cash from operating activities and free cash flow compared to the prior year **Consolidated Condensed Statements of Cash Flows (in millions):** | Metric | Q1 FY26 (2025) | Q1 FY25 (2024) | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $420.0 | $303.7 | +$116.3 | | Net cash (used in) provided by investing activities | $(108.5) | $687.8 | -$796.3 | | Net cash used in financing activities | $(213.1) | $(998.9) | +$785.8 | | Increase (decrease) in cash and cash equivalents | $108.0 | $(8.7) | +$116.7 | | Free Cash Flow | $326.5 | $195.7 | +$130.8 | - The significant change in investing activities is primarily due to **proceeds from the sale of businesses** in the prior year ($809.6 million in Q1 FY25)[28](index=28&type=chunk) [Segment Financial Data](index=7&type=section&id=Segment%20Financial%20Data) This section provides a detailed breakdown of revenues and operating income, highlighting growth across all three business segments **Segment Data (in millions):** | Segment | Q1 FY26 (2025) Revenues | Q1 FY25 (2024) Revenues | YoY Revenue Change | Q1 FY26 (2025) Op. Income | Q1 FY25 (2024) Op. Income | YoY Op. Income Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Healthcare | $974.7 | $901.2 | +8.2% | $235.5 | $216.9 | +8.6% | | AST | $281.2 | $249.8 | +12.6% | $136.7 | $117.7 | +16.1% | | Life Sciences | $135.2 | $128.5 | +5.2% | $58.7 | $52.6 | +11.6% | | Corporate Operating Loss | $(114.0) | $(101.8) | -12.0% | N/A | N/A | N/A | | Total revenues | $1,391.1 | $1,279.5 | +8.7% | N/A | N/A | N/A | | Total income from operations before adjustments | $316.9 | $285.4 | +11.0% | N/A | N/A | N/A | [Unaudited Supplemental Financial Data](index=12&type=section&id=Unaudited%20Supplemental%20Financial%20Data) Supplemental data provides a breakdown of revenues by product type and geography, along with backlog and income tax rate details **Total Company Revenues - Continuing Operations (Q1 FY26 vs Q1 FY25):** | Revenue Type (in millions) | FY26 Q1 | FY25 Q1 | YoY Change | | :--- | :--- | :--- | :--- | | Consumables | $435.0 | $414.1 | +5.0% | | Service | $700.6 | $623.2 | +12.4% | | Total Recurring | $1,135.6 | $1,037.3 | +9.5% | | Capital Equipment | $255.5 | $242.2 | +5.5% | | Total Revenues | $1,391.1 | $1,279.5 | +8.7% | **Geographic Revenue Distribution (Q1 FY26):** | Region | Revenue (in millions) | % of Total | | :--- | :--- | :--- | | United States | $1,025.6 | 74% | | International | $342.9 | 24% | | Ireland | $22.5 | 2% | **Backlog (Continuing Operations, as of June 30, 2025):** | Segment | Backlog (in millions) | | :--- | :--- | | Healthcare | $403.5 | | Life Sciences | $111.0 | | Total Backlog | $514.5 | **Income Tax Rates (Continuing Operations, Q1 FY26 vs Q1 FY25):** | Tax Rate Type | FY26 Q1 | FY25 Q1 | | :--- | :--- | :--- | | As reported, U.S. GAAP Income Tax Rate | 23.3% | 20.1% | | Adjusted Income Tax Rate | 23.5% | 21.3% | [Non-GAAP Financial Measures](index=2&type=section&id=Non-GAAP%20Financial%20Measures) [Definition and Purpose of Non-GAAP Measures](index=2&type=section&id=Definition%20and%20Purpose%20of%20Non-GAAP%20Measures) STERIS uses non-GAAP measures to provide greater transparency and a more complete understanding of its core operating results - Non-GAAP financial measures are presented to provide **greater transparency** to supplemental financial information used by management and the Board of Directors[15](index=15&type=chunk)[30](index=30&type=chunk) - Adjusted net income, adjusted EPS, and adjusted income from operations **exclude items** such as amortization of acquired intangible assets, acquisition costs, and other unusual or non-recurring items[17](index=17&type=chunk) - **Free cash flow** is defined as cash flows from operating activities less purchases of property, plant, equipment and intangibles, plus proceeds from sales of those assets[18](index=18&type=chunk)[28](index=28&type=chunk) - **Constant currency organic revenue growth** removes the impact of currency exchange rates, acquisitions, and divestitures to measure underlying revenue trends[19](index=19&type=chunk)[32](index=32&type=chunk) - Non-GAAP measures should not be considered replacements for U.S. GAAP results and may not be comparable to similarly titled measures used by other companies[15](index=15&type=chunk)[20](index=20&type=chunk)[31](index=31&type=chunk) [Reconciliation of Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section provides detailed reconciliations of GAAP to non-GAAP financial measures for revenue, gross profit, net income, and EPS **Segment Revenues - Constant Currency Organic Growth (Q1 FY26):** | Segment | As reported, U.S. GAAP Growth | Constant Currency Organic Growth | | :--- | :--- | :--- | | Healthcare | 8.2% | 7.6% | | AST | 12.6% | 10.2% | | Life Sciences | 5.2% | 4.2% | | Total | 8.7% | 7.8% | **Reconciliation of GAAP to Adjusted Financials (Q1 FY26 vs Q1 FY25, in millions, except EPS):** | Metric | GAAP (2025) | Adjustments (2025) | Adjusted (2025) | GAAP (2024) | Adjustments (2024) | Adjusted (2024) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Gross Profit | $628.0 | $1.6 | $629.6 | $572.4 | $3.8 | $576.6 | | Income from Operations | $246.0 | $71.0 | $316.9 | $185.5 | $100.0 | $285.4 | | Income from continuing operations, net of income tax | $178.0 | $53.8 | $231.8 | $139.9 | $80.6 | $201.7 | | Net income attributable to shareholders | $177.4 | $53.8 | $231.2 | $145.4 | $67.2 | $212.6 | | Diluted EPS from continuing operations | $1.79 | $0.55 | $2.34 | $1.41 | $0.62 | $2.03 | [FY2026 Outlook Non-GAAP Reconciliation](index=11&type=section&id=FY2026%20Outlook%20Non-GAAP%20Reconciliation) This section provides the reconciliation for the fiscal 2026 outlook for adjusted EPS and free cash flow **FY26 Outlook - Adjusted Net Income from Continuing Operations per Diluted Share:** | Metric | Outlook (Ended March 31, 2026) | | :--- | :--- | | Net income from continuing operations per diluted share | $7.79 - $8.04 | | Amortization of acquired intangible assets | $2.08 | | Restructuring | $0.03 | | Adjusted net income from continuing operations per diluted share | $9.90 - $10.15 | **FY26 Outlook - Free Cash Flow (in millions):** | Metric | Outlook (Ended March 31, 2026) | | :--- | :--- | | Cash flows from operating activities | $1,195.0 | | Purchases of property, plant, equipment, and intangibles, net | $(375.0) | | Free Cash Flow | $820.0 | [Cautionary Statement Regarding Forward-Looking Information](index=3&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Information) This section advises that forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from projections - The release contains forward-looking statements, identified by terms such as "may," "will," "expects," "believes," "anticipates," and "outlook"[21](index=21&type=chunk) - Actual results could differ materially due to various factors, including **operating costs, pricing pressure, integration of acquisitions, changes in tax laws or tariffs**, and regulatory actions[22](index=22&type=chunk) - Other potential risks include **international unrest, economic downturns, currency fluctuations, increasing competition**, and labor-related issues[23](index=23&type=chunk) - STERIS does not undertake to update or revise any forward-looking statements unless legally required[23](index=23&type=chunk)

Company Transition - Michael J. Tokich is stepping down as CFO after 17 years, effective August 18, 2025, and will become Senior Financial Advisor [2][3] - Karen L. Burton, currently Chief Accounting Officer, will succeed Tokich as CFO [4][5] Financial Performance - Under Tokich's leadership, STERIS's revenue has quadrupled, and market capitalization has increased from $1 billion to $22 billion [3] Leadership Background - Tokich joined STERIS in 2000 and has held various roles, including Assistant Controller, before becoming CFO in 2008 [3][4] - Burton has been with STERIS since 2004, progressing from Assistant Controller to Chief Accounting Officer in 2017 [4][5] Transition Planning - The transition has been described as well-planned, with both Tokich and Burton having worked closely together for 20 years [4][5] - Burton will join STERIS's senior executive board and oversee all global finance functions and IT [4]

Core Insights - STERIS plc reported a strong financial performance for the first quarter of fiscal 2026, with total revenue from continuing operations increasing by 9% to $1.4 billion compared to $1.3 billion in the same period last year [1][8] - The company experienced an adjusted net income of $231.2 million or $2.34 per diluted share, up from $201.7 million or $2.03 per diluted share in the previous year [2][8] Financial Performance - Total revenue from continuing operations increased by 9% to $1.4 billion, with constant currency organic revenue growth at 8% [1][9] - Net income from continuing operations was $177.4 million or $1.79 per diluted share, compared to $139.8 million or $1.41 per diluted share in the first quarter of fiscal 2025 [2][8] - Free cash flow for the first quarter was $326.5 million, an increase from $195.7 million in the prior year [6][10] Segment Performance - Healthcare revenue grew by 8% to $974.7 million, driven by a 13% increase in service revenue, 6% in capital equipment revenue, and 5% in consumable revenue [3][8] - Applied Sterilization Technologies (AST) revenue increased by 13% to $281.2 million, with a 46% rise in capital equipment revenue [4][8] - Life Sciences revenue rose by 5% to $135.2 million, supported by an 8% increase in consumable revenue [5][8] Outlook - The company updated its fiscal 2026 revenue outlook, now expecting an increase of 8-9% compared to previous expectations of 6-7% [9][10] - Adjusted earnings per diluted share are expected to remain in the range of $9.90 to $10.15, despite increased tariffs and higher employee healthcare costs [9][10] - Free cash flow is now anticipated to be approximately $820 million, up from prior expectations of $770 million [10] Board Changes - STERIS announced changes to its Board, with Dr. Jaqueline Kosecoff and Dr. Richard Steeves retiring, and Louis Shapiro being elected to the Board [7][9]