Sotera Health's Q1 2025: Conflicting Views on Volume Recovery and Margin Outlook

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Earnings and Revenue Growth:
- Sotera Health reported revenues of $255 million for Q1 2025, a 2.6% increase or 4.4% on a constant currency basis.
- Adjusted EBITDA increased by 8.8% to $122 million, resulting in an adjusted EBITDA margin of 47.9%.
- This growth was driven by mid-single-digit top-line growth and double-digit bottom-line growth, with Sterigenics reporting a margin expansion of 30 basis points.

Segment Performance:
- Sterigenics delivered 1.9% revenue growth to $170 million and a segment income growth of 2.5% to $88 million.
- Nordion's first-quarter revenue increased by 36% to $33 million, with a segment income margin expansion of nearly 860 basis points.
- Nelson Labs saw a 479 basis point margin expansion despite a 9.3% revenue decline, driven by improved core lab testing volumes and lab optimization.

Volume Trends and Market Dynamics:
- Sterigenics volumes improved throughout the quarter, with expectations for continued improvement throughout 2025.
- Nordion's volume and mix improved by 39.3%, due to the shift of Cobalt 60 shipments from Q2 to Q1.
- Nordion's revenue was higher than expected due to this shift, impacting second-quarter revenues but maintaining the full-year outlook.

Financial Outlook and Capital Deployment:
- Sotera Health reaffirmed its 2025 outlook, expecting revenue growth in the range of 4% to 6% and adjusted EBITDA growth of 4.5% to 6.5% on a constant currency basis.
- The company has a strong liquidity position with $715 million in available liquidity, including $300 million in unrestricted cash.
- The company is prioritizing organic growth, deleveraging, and opportunistic M&A, with capital expenditures expected to decrease over the next few years.