STERIS(STE)2025-05-29 20:36Business Segments and Revenue - STERIS operates in three reportable business segments: Healthcare, Applied Sterilization Technologies (AST), and Life Sciences, with the majority of revenues derived from healthcare and medical device customers[11]. - For the year ended March 31, 2025, no customer represented more than 10% of total revenues in any of the segments[17][21][26]. - As of March 31, 2025, the company reported a backlog of $452.9 million, with $369.2 million related to the Healthcare segment and $83.7 million to the Life Sciences segment, indicating an increase from $425.2 million in the previous year[49][50]. - Healthcare segment revenue increased to $12,341 million in fiscal 2025 from $11,419 million in fiscal 2024, representing an increase of 8.1%[78]. - Revenues increased by $320.8 million, or 6.2%, to $5,459.5 million for the year ended March 31, 2025, compared to $5,138.7 million for the year ended March 31, 2024[205]. Research and Development - STERIS invests significantly in research and development to discover and market innovative, cost-effective products and services[45]. - The company has 607 U.S. patents and 2,315 patents in other jurisdictions, with 90 U.S. patent applications and 289 applications pending[31]. Operational Performance and Costs - STERIS experienced a rise in supply chain and labor costs during fiscal 2023 and 2024, which moderated in fiscal 2025[29]. - The company applies Lean principles across its operations to enhance performance, agility, and value[34]. - The average number of employees during fiscal 2025 was approximately 18,000, with less than 11% represented by work councils or labor unions, indicating generally good employee relations[77]. - Total employees rose to 17,787 in fiscal 2025, up from 16,768 in fiscal 2024, reflecting a growth of 6.1%[78]. - Total employee costs increased to $1,850,544 thousand in fiscal 2025 from $1,718,164 thousand in fiscal 2024, marking a rise of 7.7%[86]. - The company maintained zero Class I recalls in fiscal 2025, 2024, or 2023, demonstrating strong compliance with safety standards[89]. Environmental and Sustainability Efforts - The company has made significant investments to comply with environmental laws and regulations, focusing on improving energy and water efficiency and reducing waste[69]. - The company tracks greenhouse gas emissions and reports direct and indirect energy use, participating in the Carbon Disclosure Project[70]. - The company has developed new products aimed at reducing environmental impact, such as ultra-concentrate cleaning chemistries that offer 10 times the uses per container[71]. - The company has established key performance indicators aligned with Sustainability Accounting Standards Board (SASB) Standards for Medical Equipment & Supplies, focusing on financial materiality in sustainability reporting[56]. - STERIS has three facilities accredited to ISO 14001 and ISO 45001 standards, reflecting commitment to environmental management[82]. Regulatory and Compliance Challenges - STERIS is subject to extensive governmental regulations, which require compliance and can significantly impact operations and costs[38][39]. - The company faces extensive regulatory requirements for product approvals, and delays in obtaining these could harm revenues and profitability[106]. - Compliance with international laws and regulations may be burdensome and expensive, impacting operational efficiency[103]. - Regulatory changes regarding greenhouse gas emissions and sustainability reporting may impose additional compliance costs and risks of non-compliance[138]. - The company's EO sterilization operations are at risk from regulatory actions that could significantly affect operational costs and demand for medical devices[141]. Financial Position and Debt - As of March 31, 2025, STERIS had approximately $2,043.7 million of outstanding indebtedness, including $1,350.0 million of Senior Public Notes, $674.2 million of Private Placement Senior Notes, and $34.8 million under the Revolving Credit Facility[153]. - The debt-to-total capital ratio was 23.6% at March 31, 2025, indicating a stable capital structure[209]. - The company expects to continue paying cash dividends for the foreseeable future, as determined by its Board of Directors[187]. Acquisitions and Growth Strategy - Acquisitions are a key part of STERIS's long-term growth strategy, alongside organic opportunities[45]. - The company completed several tuck-in acquisitions during fiscal 2025, with total aggregate consideration of approximately $54.1 million, enhancing its Healthcare and AST segments[201]. - The acquisition of assets from Becton, Dickinson and Company was valued at $539.8 million, financed through borrowings from the existing credit facility[203]. - The company plans to sell its Dental segment for total cash consideration of $787.5 million, with potential additional payments based on revenue targets in fiscal 2025[205]. Employee Relations and Engagement - Employee turnover rate was 16% in fiscal 2025, slightly up from 15% in fiscal 2024, with a goal to achieve a rate of 10% or less[85]. - 88% of employees participated in the pulse survey in fiscal 2025, indicating strong engagement levels[85]. Cybersecurity and Risk Management - The company has implemented a cybersecurity risk management program integrated into its enterprise risk management (ERM) framework, with no material cyberattacks reported in fiscal year 2025[178]. - The company maintains a comprehensive incident response policy for managing cybersecurity incidents, overseen by an Executive Cybersecurity Steering Committee[173]. - The company may face increased cybersecurity risks due to reliance on IT systems and remote work arrangements[149]. Market and Competitive Environment - The competitive environment is intensifying, with increased competition from new products and technologies in infection prevention and sterile processing[128]. - Consolidations among healthcare customers may lead to pricing pressures and potential loss of customers[130]. - Geopolitical instability may lead to supply chain disruptions, increased production costs, and reduced consumer demand, potentially adversely affecting the company's business[102]. Legal and Liability Risks - The company is exposed to product liability claims, which could result in substantial costs and distract management from core responsibilities[110]. - Future litigation related to EO operations may increase costs and divert management attention, potentially impacting financial results[144]. - STERIS agreed to pay up to approximately $48.2 million to resolve claims related to EO exposure in Illinois[143].