Sotera Health Company (NasdaqGS:SHC) Conference Transcript

Sotera Health Company Conference Summary Company Overview - Company Name: Sotera Health Company - Ticker: NasdaqGS:SHC - Date of Conference: November 19, 2025 - CEO: Michael Petras - Business Structure: Comprises three entities: Sterigenics, Nordion, and Nelson Labs - Global Presence: Approximately 5,000 customers in over 50 countries, with 62 facilities worldwide and over 3,000 employees [3][4][5] Core Business Insights - Sterigenics: Largest business segment, a global leader in sterilization services for medtech and pharma industries. Utilizes gamma radiation, ethylene oxide, and E-beam sterilization methods [4][6][9] - Nordion: Unique product business providing cobalt-60 for sterilization, with a recently renewed 25-year site license in Ottawa, Canada [7][8] - Nelson Labs: Focuses on microbiology and analytical chemistry testing, serving the same customer base as Sterigenics [8][9] Financial Performance - Growth Metrics: - 7% CAGR on both top line and bottom line since going public in 2020 - Recent quarter: 9% top line growth, 12.2% adjusted EBITDA growth, and adjusted EPS of $0.09 [9][10] - Year-to-date: 6% top line growth, 10% adjusted EBITDA growth, and adjusted EPS of $0.11 [10] - Liquidity: Approximately $900 million in liquidity with a net leverage ratio of about 3.3 times [10] Strategic Priorities - Customer Service Excellence: Focus on end-to-end solutions and cross-business collaboration, with over 40% of Nelson Labs business tied to sterility assurance [11][12] - Market Growth: Targeting mid to high single-digit organic growth across all business segments, with a long-range plan of 5-7% growth from 2025 to 2027 [12][13] - Operational Excellence: Emphasis on enhancing free cash flow and disciplined capital allocation, with a focus on growth investments in cobalt-60 development [12][14] Capital Allocation and M&A Strategy - Capital Deployment: Majority focused on CapEx for growth investments, particularly in cobalt-60 development [13][14] - M&A Outlook: Open to strategic acquisitions, particularly in Sterigenics and Nordion, while ensuring stability in Nelson Labs [34][35] Market Dynamics - Competitive Landscape: Nelson Labs operates in a fragmented market with many competitors, but differentiates itself through a focus on med device and pharma testing [31][32] - Regulatory Influence: New regulations drive demand for Nelson Labs' services, particularly in helping customers meet compliance [32][33] Future Outlook - Growth Projections: Anticipated growth of 5-7% on the top line and 5-8% on the bottom line from 2025 to 2027, with expected free cash flow of $500 million to $600 million over the same period [15][17] - Market Positioning: Strong customer relationships and a global network of facilities position the company well for future growth [16][17] Additional Insights - Capacity Expansion: Ongoing investments in capacity to support growth, including new facilities for X-ray sterilization [21][22] - Inventory Management: Improved stability in customer inventory levels is expected to enhance growth in the Sterigenics business [39][41] - Bioprocessing Growth: Although a small percentage of total business, bioprocessing is showing growth, influenced by new regulatory requirements [43][44]