Sotera Health Company (NasdaqGS:SHC) Q4 2025 Earnings call February 24, 2026 09:00 AM ET Company ParticipantsDavid Windley - Managing Director and Founding Member of Healthcare Equity Research TeamJason Peterson - VP of Investor Relations and TreasuryJonathan M. Lyons - CFOMichael Petras - Chairman and CEOSam Eiber - Equity Research AssociateConference Call ParticipantsBrett Fishman - VP and Senior Equity Research AnalystCasey Woodring - VP and Senior Equity Research AnalystChristine Rains - Healthcare Equi ...

Financial Data and Key Metrics Changes - Total company revenue increased by 5.7% to $1.164 billion in 2025, or 5.2% growth on a constant currency basis compared to 2024 [5][15] - Adjusted EBITDA rose by 8.2% to $593.8 million, or 7.8% on a constant currency basis, with margins expanding to 51%, an increase of 118 basis points [5][15] - Adjusted EPS for the year was $0.86, an increase of $0.16 versus 2024, driven by operational growth and a lower tax rate [16] Business Line Data and Key Metrics Changes - Sterigenics revenue improved by 10.6% to $198 million, or 8% on a constant currency basis, driven by favorable pricing and volume [12] - Nordion's revenue decreased by 12.3% to $50 million due to unfavorable volume and mix from Cobalt-60 harvest timing [13] - Nelson Labs revenue increased by 2.3% to $55 million, with favorable pricing and core lab testing growth partially offset by lower advisory services revenue [14] Market Data and Key Metrics Changes - Customer satisfaction exceeded 80%, indicating strong service delivery [6] - Revenue from XBU customers expanded by 9% year-over-year, reflecting successful cross-selling initiatives [6][50] Company Strategy and Development Direction - The company aims to execute its 2025-2027 long-range plan, focusing on operational excellence, disciplined capital deployment, and enhancing free cash flow [8][21] - The construction of a new X-ray facility is planned to open in 2026, which is part of a strategic investment to expand service offerings [6][44] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to drive long-term growth and shareholder value, emphasizing strong cash flow generation and customer relationships [21][105] - The company expects total revenue for 2026 to be in the range of $1.233 billion to $1.251 billion, representing 5%-6.5% constant currency growth [9][18] Other Important Information - The company reduced borrowing costs by 75 basis points on its $1.4 billion term loan and paid down $86 million of debt, resulting in annual interest savings of $13 million [7] - The company has approximately $940 million of available liquidity as of December 31, 2025 [16] Q&A Session Summary Question: Guidance and EBITDA margins - Management indicated that the expected EBITDA margin expansion is primarily due to normal operating leverage without any unusual dynamics [23][24] Question: Sterigenics client insourcing - Management noted that while one client is transitioning back to outsourcing, significant shifts in the market are not yet observed due to extended compliance periods [25][26] Question: 2026 outlook for Sterigenics - Management expects mid to high single-digit constant currency revenue growth for Sterigenics in 2026, with a soft start anticipated in Q1 [18][32] Question: Nelson Labs margins - Management expects Nelson Labs to maintain margins in the low to mid 30% range, with Q1 typically being the softest quarter [34][35] Question: Nordion segment headwinds - Management clarified that Nordion's challenges were due to Cobalt-60 harvest timing rather than demand issues [84][85] Question: Competitive positioning in Sterigenics - Management believes Sterigenics is well-positioned despite the extended compliance period, with strong customer satisfaction scores [68][69] Question: Impact of onshoring - Management has not seen significant movement towards onshoring but is prepared for potential shifts in the market [87] Question: Volume and mix visibility - Management indicated that volume and mix are key factors that could drive performance towards the higher end of guidance [91][92]

Sotera Health Company (NasdaqGS:SHC) Q4 2025 Earnings call February 24, 2026 09:00 AM ET Speaker9Please note this event is being recorded. I would now like to turn the conference over to Vice President of Investor Relations, Jason Peterson. Jason, please go ahead.Speaker5Good morning. Thank you. Welcome to Sotera Health's fourth quarter and full year 2025 earnings call. Today's press release and supplemental slides are available on the investor section of our website at soterahealth.com. This webcast is bei ...

Summary of Sotera Health Company FY Conference Call Company Overview - **Company Name**: Sotera Health Company (NasdaqGS:SHC) - **Mission**: Safeguarding global health through its three business units: Sterigenics, Nordion, and Nelson Labs [2][3] - **Global Presence**: Over 5,000 customers in 50 countries, 3,100 employees, and 62 facilities across 13 countries [3] - **Customer Base**: Engages with 40 of the top 50 medical device companies and 9 of the top 10 pharmaceutical companies [3] Business Segments Sterigenics - **Largest Business Unit**: Represents about two-thirds of the company's revenue [4] - **EBITDA Margins**: Approximately 50% [4] - **Sterilization Methods**: 39% ethylene oxide, 49% gamma, and 12% eBeam [5] - **Service Model**: Operates as a service business, where customers drop off products for sterilization [5] Nordion - **Product Business**: World's largest provider of Cobalt-60, critical for sterilization [6] - **EBITDA Margins**: Approximately 60% [7] - **Cobalt Sourcing**: Obtains Cobalt-60 from reactors in multiple countries including China, Canada, and Russia [6] Nelson Labs - **Testing Services**: Leader in microbiological and analytical chemistry testing with about 3,000 customers [7] - **Revenue Composition**: 48% routine testing, 37% validation, and 15% advisory services [8] Financial Performance - **Revenue Growth**: Surpassed $1.16 billion in revenue, with a minimum growth of over 5% [10] - **CAGR**: 7% growth in top line and adjusted EBITDA since going public in 2020 [11] - **Free Cash Flow**: Targeting $500 million to $600 million in cumulative free cash flow from 2025 to 2027 [20] - **Leverage Ratio**: Aiming to reduce net leverage from 3.3 times to a target of 2-3 times [12] Strategic Priorities 1. **Customer Service Excellence**: Focus on providing end-to-end solutions [13] 2. **Growth Market Segmentation**: Targeting high-growth segments within med tech and pharma [14] 3. **Operational Excellence**: Enhancing free cash flow through disciplined capital deployment [15] 4. **Long-term Value Creation**: Aiming for consistent top-line growth of 5%-7% annually [17] Market Outlook - **Growth Projections**: Sterigenics expected to grow mid-single to high-single digits, Nelson Labs mid-single digits, and Nordion low-single to mid-single digits [18] - **Pricing Strategy**: Anticipating a price increase of 3%-4% across the company [30] Regulatory Environment - **NESHAP Standards**: New regulations for ethylene oxide have been extended to April 2028, impacting smaller competitors [33] - **Litigation Updates**: Favorable rulings in Georgia regarding ethylene oxide litigation, with ongoing cases in California [52][54] Investment Rationale - **Market Position**: Leader in a growing $18 billion addressable market with strong margins and cash flow [24] - **Regulatory Expertise**: Established expertise in navigating highly regulated markets [24] - **Growth Potential**: Continued investment in capacity and operational improvements expected to drive future growth [25] Conclusion - **Company Confidence**: Strong execution and commitment to delivering growth and cash flow, positioning Sotera Health as a compelling investment opportunity for the future [55]

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.

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]