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What were the key takeaways from Sotera's earnings call?

- **Record Q3 Financials**: 9.1% revenue growth, 12.2% EBITDA expansion, and 147bps margin improvement highlight strong execution.
- **Debt Reduction & Savings**: $75M debt repayment cuts annual interest by $13M, lowering net leverage to 3.3x.
- **Nordion License Renewal**: 25-year Cobalt-60 supply secured, reinforcing global healthcare sterilization.
- **Litigation Defense Strength**: Georgia court rulings support scientific refutation of EO causation claims.
- **2025 Guidance Upped**: EBITDA growth raised to 6.75-7.75%, EPS to $0.81-0.86, reflecting operational and financial discipline.

**【CEO Summary Section】**
- **Q3 2025 Performance Highlights**: Total revenue grew 9.1% YoY to $311 million, with adjusted EBITDA up 12.2% to $164 million. Margins expanded 147 basis points to 52.7%, driven by Sterigenics (55.6%) and Nelson Labs (34.1%).
- **Balance Sheet Strength**: Reduced debt by $75 million, lowering annual interest expense by $13 million. Net leverage improved to 3.3x from 3.7x YoY.
- **Strategic Milestone**: Nordion secured a 25-year renewal of its Class 1B license, ensuring long-term Cobalt-60 supply for healthcare sterilization.

**【CFO Financial Commentary】**
- **Segment Breakdown**:
  - **Sterigenics**: 9.8% revenue growth ($193M) from volume/mix (+4.6%), pricing (+3.8%), and FX (+1.4%). Segment income rose 11.6% to $107M.
  - **Nordion**: 22.4% revenue growth ($63M) due to volume/mix (+18.9%) and pricing (+4.7%). Segment income increased 19.9% to $38M, though margins dipped 130bps to 60.6% due to product mix.
  - **Nelson Labs**: 5% revenue decline ($56M) from Expert Advisory Services decline, offset by core lab testing growth. Segment income grew 1.9% to $19M with 290bps margin expansion.
- **Updated Guidance**: Full-year constant currency revenue growth maintained at 4.5-6%, with EBITDA raised to 6.75-7.75% (vs. 6-7.5% prior). Adjusted EPS now $0.81-0.86 (vs. $0.75-0.82 prior) due to EBITDA growth and tax rate improvement.

**【Q&A Key Highlights】**
- **Litigation Update**: Georgia court ruled against plaintiffs' causation experts, dismissing three bellwether cases. Company expects science-based defense to prevail in remaining cases.
- **Budget Flush Impact**: No material impact from government shutdown; minimal delays in Expert Advisory Services.
- **4Q Margin Outlook**: Nelson Labs may see slight margin step-down due to lower Q3 expenses, but Sterigenics remains stable.
- **2026 Growth**: CEO confident in mid-single to high-single digit growth for Sterigenics, with potential pricing upside from NESHAP compliance investments.
- **Nelson Labs Recovery**: Core lab testing growth expected to offset Expert Advisory Services decline, with 2026 return to growth possible.

Sotera Health Company (SHC) Q3 2025 Earnings Call Transcript

- **Revenue Growth**: 6.4% YoY to $294 million, driven by Sterigenics (10.5% growth) and Nelson Labs margin expansion.
- **Profitability**: Adjusted EBITDA up 9.8% to $151 million, with 51.2% margin (156 bps expansion).
- **Segment Strengths**: Sterigenics pricing (4%) and volume (6%), Nordion Cobalt-60 shipments, Nelson Labs core lab testing recovery.
- **Guidance Update**: 2025 revenue growth raised to 4.5%-6%, adjusted EBITDA to 6%-7.5%, adjusted EPS to $0.75-$0.82.
- **Leverage Reduction**: Net leverage 3.5x (down from 3.7x), targeting 2-3x long-term.
- **Key Risks**: Nordion Q4 2025 revenue decline (mid-teens), Nelson Labs expert advisory services impact.


**【Management Opening Remarks】**
- Welcome to Q2 2025 earnings call. Key financial metrics and slides available on the company’s website. Forward-looking statements and non-GAAP measures reconciliation provided.

**【CEO Summary Section】**
- **Revenue Growth**: 6.4% YoY to $294 million, driven by strong performance across Sterigenics, Nordion, and Nelson Labs.
- **Adjusted EBITDA**: Increased 9.8% to $151 million, with margin expansion to 51.2%.
- **Segment Highlights**:
  - *Sterigenics*: 10.5% revenue growth (10% constant currency) due to volume/mix (6%), pricing (4%), and facility expansion benefits.
  - *Nordion*: 2.9% revenue growth (3.4% constant currency) from Cobalt-60 shipments timing and pricing gains.
  - *Nelson Labs*: 13.9% segment income growth (514 bps margin expansion) from core lab testing volume and optimization.
- **2025 Guidance Update**: Raised revenue growth to 4.5%-6% (from 4%-6%) and adjusted EBITDA to 6%-7.5% (from 4.5%-6.5%).

**【CFO Financial Commentary】**
- **GAAP Net Income**: $8 million ($0.03 EPS) vs. $9 million ($0.03 EPS) in Q2 2024, impacted by $34 million EO claims settlement.
- **Adjusted EPS**: $0.20 (up $0.01 YoY).
- **Segment Details**:
  - *Sterigenics*: $108 million segment income (11.3% growth), 42 bps margin expansion.
  - *Nordion*: $23 million segment income (145 bps margin decline due to supplier mix).
  - *Nelson Labs*: $20 million segment income (13.9% growth), 514 bps margin expansion.
- **Balance Sheet**: $918 million liquidity, net leverage 3.5x (down from 3.7x in Q4 2024).
- **2025 Outlook**: 
  - Sterigenics: Mid- to high single-digit revenue growth.
  - Nordion: Mid-single-digit growth, 15% Q4 2025 revenue decline due to shipment timing.
  - Nelson Labs: Low single-digit revenue decline (core lab recovery expected in Q4).
  - Adjusted EPS: $0.75-$0.82 (up from $0.70-$0.76).

**【Q&A Key Highlights】**
- **Sterigenics Growth**: 6% volume/mix growth in Q2, no material tariff pull-forward. Mid- to high single-digit full-year growth expected.
- **Nelson Labs Margins**: 4 consecutive quarters of margin expansion (514 bps in Q2), targeting low-30s margin range.
- **Capital Deployment**: 2025 CapEx reduced to $170-$180 million (from $190-$210 million), with $110 million 2027 target maintained.
- **Tax Rate**: 31.5%-33.5% due to U.S. tax law changes, benefiting interest deductibility.
- **Competitive Position**: Sterigenics well-positioned for MedTech supply chain shifts, with U.S. capacity expansion planned for late 2027.


Sotera Health Company (SHC) Q2 2025 Earnings Call Transcript

- **Q1 2025 Strong Start**: 4.4% CC revenue growth, 11.2% CC EBITDA expansion, and $0.14 EPS beat expectations.
- **Segment Highlights**: Nordion Cobalt 60 revenue up 40.6% CC, Nelson Labs margins +479bps, Sterigenics volumes improving sequentially.
- **2025 Outlook**: 4-6% revenue growth (CC), $0.70-$0.76 EPS, and $500-600M free cash flow target over 3 years.
- **Key Risks Mitigated**: Tariff exemption for Nordion, Russian Cobalt risk reduced to 0-2%, and litigation strategy focused on scientific defense.
- **Growth Drivers**: Bioprocessing volumes up 39%, cross-selling initiatives (70% shared customers), and lab optimization driving margin expansion.


**【CEO Opening Remarks】**
- Q1 2025 revenue grew 2.6% (4.4% on constant currency) to $255M, with adjusted EBITDA up 8.8% (11.2% CC) to $122M.
- Sterigenics delivered 1.9% revenue growth (3.9% CC), Nordion saw 36% revenue surge (40.6% CC), and Nelson Labs expanded margins by 479bps.
- Full-year 2025 guidance reaffirmed: 4-6% revenue growth (CC), 4.5-6.5% EBITDA growth (CC), and $0.70-$0.76 EPS.

**【CFO Financial Breakdown】**
- GAAP net loss of $13M ($0.05 EPS) vs. $6M ($0.02 EPS) in Q1 2024; adjusted EPS improved to $0.14.
- Foreign exchange headwind of 1.25% on revenue (vs. prior 2.25%) and 1.5% on EBITDA.
- Free cash flow target of $500-600M over 3 years, with 2025 capex $190-210M.

**【Q&A Key Takeaways】**
- **Tariffs & Supply Chain**: 85% of revenue is service-based, with Nordion's Cobalt 60 exempt under USMCA. Russian Cobalt risk now 0-2% of 2025 revenue.
- **Sterigenics Growth**: Bioprocessing volumes up 39%, pricing stable at 4%, with 2025 mid-single-digit growth expected.
- **Nelson Labs Margin Expansion**: 479bps margin improvement driven by lab optimization, targeting low-mid 30s margin range.
- **Litigation Update**: $31M Illinois EO settlement; science-based defense strategy maintained across jurisdictions.
- **Cross-Selling Success**: 70% shared customers, embedded lab volumes growing, with end-to-end solutions driving new product spend.


Sotera Health (SHC)-1 May 25-2025 Q1 Earnings call transcript

- **2024 Growth Achieved**: $1.1 billion revenue (+4.9% YoY), 50% EBITDA margin, 19th straight year of growth.
- **2025 Outlook**: 4-6% revenue growth (midpoint within 5-7% LRP range), 4.5-6.5% EBITDA growth.
- **Segment Strength**: Sterigenics Q4 +4.2% revenue, Nordion mid-single-digit 2025 growth, Nelson Labs sequential margin improvement.
- **Key Risks**: 0-3% potential revenue impact from Russian cobalt supply, Q1 2025 Nelson Labs revenue down low double-digits.
- **Cash Flow Ambition**: $500-600 million free cash flow over 3 years, capital expenditures peaking in 2024.

**【CEO Opening Remarks】**
- **2024 Full Year Performance**: Total revenue of $1.1 billion (+4.9% YoY), adjusted EBITDA of $548.6 million (+3.9% YoY), and 50% adjusted EBITDA margin. 19th consecutive year of revenue growth.
- **Strategic Priorities**: 
  - Customer satisfaction >80% across all segments.
  - Balance sheet strengthened with $1.1 billion refinancing and 2031 maturity extension.
  - Sterigenics U.S. EO facility expansion completed; Nordion Cobalt-60 first harvest in 2028.
- **Segment Highlights**: 
  - Sterigenics: +4.2% Q4 revenue, +5.1% segment income.
  - Nordion: +8.3% full year revenue, mid-single-digit 2025 growth expected.
  - Nelson Labs: Sequential margin improvement; Embedded Labs double-digit growth.
- **2025 Outlook**: 
  - Revenue: 4-6% constant currency growth (midpoint within 5-7% LRP range).
  - Adjusted EBITDA: 4.5-6.5% growth.
  - Free cash flow target: $500-600 million over 3 years.

**【CFO Financial Details】**
- **Q4 2024 Results**: 
  - Revenue: $290 million (-6.5% YoY), adjusted EBITDA: $153 million (-8.3% YoY).
  - Sterigenics: +4.2% revenue, 52.7% margin.
  - Nordion: -29% revenue due to harvest timing, 62% margin.
  - Nelson Labs: -7.3% revenue, 33% margin (up 140bps YoY).
- **2024 Full Year**: 
  - Adjusted EPS: $0.70 (-$0.02 YoY) due to higher interest expense.
  - Free cash flow: $225 million (positive for the year).
  - Net leverage: 3.7x (improved from 2023).
- **2025 Guidance**: 
  - Sterigenics: Low-mid single-digit Q1 growth, mid-single-digit full year.
  - Nordion: Mid-single-digit growth, similar first-half/second-half mix as 2024.
  - Nelson Labs: Back-half weighted growth, Q1 revenue down low double-digits.
  - CapEx: $190-210 million (peak behind us; $110 million by 2027).

**【Q&A Highlights】**
- **Volume Recovery**: Gradual improvement expected; no significant destocking observed.
- **Nelson Margins**: Sequential improvement driven by labor productivity, lab consolidation.
- **Tariff Risk**: 0-3% potential revenue impact; no tariffs baked into guidance.
- **Sterigenics vs. Competitor**: Growth trends align over time; focus on execution and customer alignment.
- **Cobalt Program**: 2028 harvest on track; team confident in yield and quality.
- **Free Cash Flow**: $500-600 million target over 3 years; no M&A assumed in guidance.

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