STERIS (STE) 7 Nov 24 2025 Q2 Earnings call transcript

STERIS plc recently held its second quarter 2025 earnings call, providing insights into the company's financial performance and future outlook. The call, led by executives Mike Tokich, Dan Carestio, and Julie Winter, highlighted key themes and trends, addressing investor concerns and providing a comprehensive overview of the company's growth and challenges.

Financial Performance Highlights

STERIS plc reported a 7% increase in total as-reported revenue for the second quarter, driven by both volume and price growth. The company's gross margin decreased by 50 basis points, reflecting labor inflation and productivity challenges, while adjusted earnings per share from continuing operations increased by 15%. The company's strong performance is evident in its financial metrics, with free cash flow at the halfway mark of its guidance and a total debt to EBITDA ratio of approximately 1.5x.

Segmental Analysis and Outlook

The healthcare segment, which accounted for a significant portion of STERIS plc's revenue, experienced a 7% constant currency organic growth, with strong recurring revenue streams. The outlook for the segment remains positive, with expectations of mid- to high single-digit growth for the fiscal year. The AST segment, driven by bioprocessing demand, reported a 9% constant currency organic growth, with expectations of high single-digit revenue growth for the year. However, a significant loss on a capital equipment order in the med-x business unit impacted margins, which are expected to improve in the second half of the year. The Life Sciences segment, impacted by the divestiture of the CECS business, is anticipated to be flat for the year.

Investor Questions and Management's Response

Investor queries focused on the impact of the loss on the capital equipment sale in the AST segment and the outlook for bioprocessing revenue. Management responded by acknowledging the unexpected magnitude of the loss and its impact on margins, emphasizing that it was a one-time event. Regarding bioprocessing, executives expressed optimism for its contribution to the company's growth, especially in the second half of the year.

Key Takeaways

STERIS plc's second quarter earnings call revealed a company in a strong financial position, with a diversified portfolio of segments contributing to its growth. The company's ability to navigate challenges, such as labor inflation and productivity, demonstrates its resilience and strategic acumen. The outlook for the remainder of the fiscal year remains positive, with expectations of mid- to high single-digit growth for the healthcare segment and high single-digit revenue growth for the AST segment. The company's focus on bioprocessing as a growth driver is a notable trend, positioning STERIS plc for potential success in the evolving healthcare landscape.