Sotera Health(SHC) - 2025 Q1 - Quarterly Results

Financial & Operational Highlights Q1 2025 Overall Performance 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 $31 million related to ethylene oxide ("EO") claims against the Sterigenics segment[3] - The company's Chairman and CEO, Michael B. Petras, Jr., highlighted the solid start to the year, emphasizing mid-single-digit revenue growth and strong double-digit Adjusted EBITDA growth on a constant currency basis[4] Business Segment Performance Q1 2025 segment performance was mixed, with Nordion revenue surging 35.6%, Sterigenics growing 1.9%, and Nelson Labs revenue declining 9.3% despite improved segment income | Segment | Q1 2025 Revenue ($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 - 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] - Segment income grew 2.5% to $88 million, with favorable pricing being the main driver, though partially offset by inflation and currency impacts[5][7] 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] - Segment income increased significantly by 61.5% to $17 million, driven by the higher volume and mix[8][9] Nelson Labs - 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] - 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][11] Financial Position and Outlook Balance Sheet and Liquidity 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] - 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] Full-Year 2025 Outlook 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] Consolidated Financial Statements (Unaudited) Consolidated Statements of Operations 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 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 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 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 Reconciliation of Net Income to Adjusted EBITDA and Adjusted EPS 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] Net Debt and Net Leverage Ratio Calculation 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 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 |