Title

Presentation

Sotera Health Company beats earnings expectations. Reported EPS is $0.18, expectations were $0.17.

Operator: Good morning, and welcome to the Sotera Health Company First Quarter 2026 Earnings Call. All participants will be in listen-only mode. To ask a question, you may press star then 1 on a touchtone phone. To withdraw your question, please press star then 2. Please 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.

Jason Peterson: Good morning, and thank you. Welcome to Sotera Health Company’s first quarter earnings call. Today’s press release and supplemental slides are available on the Investors section of our website at soterahealth.com. This webcast is being recorded and a replay also will be available on the Investors section of the Sotera Health Company website shortly after the call. Joining me today are Chairman and Chief Executive Officer, Michael B. Petras, and Chief Financial Officer, Jonathan M. Lyons. During today’s call, some of our comments may be considered forward-looking statements. The matters addressed in these statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied.

Please refer to Sotera Health Company’s SEC filings and the forward-looking statements slide at the beginning of the presentation for a description of these risks and uncertainties. The company assumes no obligation to update any such forward-looking statements. Please note that during the discussion today, the company will present both GAAP and non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, tax rate applicable to adjusted net income, adjusted net income, adjusted EPS, adjusted free cash flow, net debt and net leverage ratio, as well as constant currency comparisons. A reconciliation of GAAP to non-GAAP measures for all relevant periods may be found in the schedules attached to the company’s press release and in the supplemental slides to this presentation.

The operator will be assisting with the Q&A portion of the call today. Please limit yourself to one question and one follow-up. For further questions, feel free to reach out to the Investor Relations team. With that, I will now turn the call over to Sotera Health Company Chairman and CEO, Michael B. Petras.

Michael B. Petras: Good morning, everyone, and thank you for joining us today. This morning, we announced a strong start to the year with 6.5% constant currency revenue growth and 6.9% constant currency adjusted EBITDA growth, driving over 20 basis points of margin expansion compared to the first quarter of last year. Sterigenics delivered 6.1% constant currency revenue growth in the quarter, while Nordion grew constant currency revenue 25.8% and expanded margins by over 290 basis points. Nelson Labs results were in line with the expectations we outlined on our last earnings call. Today, we are reaffirming our 2026 outlook provided during our February earnings call. As a reminder, we expect total company revenue to increase to a range of $1.23 billion to $1.25 billion, representing constant currency growth of 5% to 6.5% versus 2025, and adjusted EBITDA to grow to a range of $632 million to $641 million, or 5.5% to 7% constant currency growth.

As we reaffirm our full-year outlook, I want to reiterate the strength and resiliency of our business model. We provide mission-critical regulated services that are deeply embedded in our customer supply chains. More than 70% of our revenue is supported by multiyear contracts servicing long-tenured customer relationships through a global network of facilities. Our commitment to customers is a core company value, and in 2025, we delivered substantial improvements in our customer satisfaction scores across both Sterigenics and Nelson Labs. Our business model has demonstrated its resilience over time, delivering consistent revenue growth for the past two decades across multiple economic cycles. We sit in a unique position in the healthcare supply chain and take our mission of safeguarding global health very seriously.

Jonathan will get into the financial details in a moment, but first, I want to take the time to highlight some events that took place during the quarter. On the governance front, in addition to adding Rich Kyle to our board of directors in February, we are excited to welcome Ken Krausz, who joined our board in March. Ken’s leadership and proven track record of creating shareholder value as a public company chief financial officer for over ten years, combined with his extensive experience in strategy, finance, and governance, will be tremendous assets as we continue to grow. I would also like to thank Dean Meehos and Robert Canals, two of our private equity board members, for their service and contributions to Sotera Health Company. Dean recently completed his board service and Rob will transition off the board later this month.

Both have provided valuable perspective and guidance, and we sincerely appreciate their impact over the years. In March, the private equity shareholders completed another secondary sale of existing shares, bringing our public float to approximately 90% of outstanding shares. Lastly, I want to briefly comment on some positive legal developments in Georgia. As a reminder, eight bellwether personal injury cases were selected into Phase 1 and Phase 2 causation proceedings where the court focused on the science. On 03/30/2026, the Georgia State Court dismissed the remaining five bellwether cases, as the plaintiffs could not prove general causation in the Phase 1 proceedings. As a reminder, the court dismissed the other three bellwether cases in October in the Phase 2 specific causation proceedings.

All eight bellwether cases have now been dismissed and are subject to appeal. Although the March 30 order applies directly to the five Phase 1 pool cases, the court’s rejection of plaintiffs’ general causation theories is a critical issue common to all other personal injury cases. We believe this order underscores the lack of reliable scientific support for those remaining claims and should inform how the remaining cases are evaluated. We will continue to put sound science at the center of our defense as we stand behind the safety and importance of Sterigenics operations. As a reminder, developments related to EO can be found on our investors website. Now Jonathan will take us through the financials in more detail.

Jonathan M. Lyons: Thank you, Michael. I will begin by covering the first quarter 2026 highlights on a consolidated basis and then provide some details on each of the business segments. I will then wrap up with additional details on our 2026 outlook. For the first quarter on a consolidated total company basis, revenues increased by 10% to $280 million, or 6.5% on a constant currency basis compared to the first quarter 2025. Net income on a GAAP basis for the quarter was $27 million, or $0.9 per diluted share. Adjusted EBITDA grew 10.5% to $135 million, or 6.9% on a constant currency basis, while adjusted EBITDA margins expanded over 20 basis points. Interest expense for Q1 2026 improved by $6 million to $35 million compared to the prior-year quarter.

Approximately half of the improvement was driven by the term loan repricing and debt paydown completed late in 2025, with the remainder driven by lower interest rates. Adjusted EPS increased to $0.18 per share, an improvement of approximately 29% from the prior year. It was a strong first quarter overall, with results largely in line with our expectations, aside from some favorable timing in Nordion. Now let us go through the segment results. Sterigenics delivered 9.7% revenue growth to $186 million, or 6.1% on a constant currency basis. Favorable pricing of 4.5%, a foreign currency benefit of 3.6%, and improved volume/mix of 1.6% drove revenue growth for the quarter. Localized weather impacts in the U.S. during Q1 resulted in a 1.7% headwind to Sterigenics volumes versus the prior-year quarter.

Segment income grew 9.6% to $96 million, or 6% on a constant currency basis, driven by favorable pricing, a foreign currency tailwind, and improved volume/mix, partially offset by higher costs. Nordion’s first quarter revenue increased 29% to $42 million, or 25.8% on a constant currency basis compared to the same period last year, driven primarily by increased volume/mix of 23.7% due to the timing of Cobalt-60 harvest schedules, along with foreign currency tailwinds of 3.2% and a pricing benefit of 2.1%. Nordion segment income increased approximately 36% to $24 million, or 33.1% on a constant currency basis, with segment income margins expanding more than 290 basis points to 56.4%, driven by higher volume/mix, foreign currency benefits, and favorable pricing, partially offset by inflation.

Nelson Labs revenue declined 0.7% to $52 million, or 3.8% on a constant currency basis. Pricing benefits of 2.8% and a foreign currency benefit of 3.1% were more than offset by the change in volume/mix. Segment income decreased by 11.5% to $15 million, or 15.1% on a constant currency basis, with margins of 28%, reflecting lower volume/mix partially offset by favorable pricing and a foreign currency tailwind. Now I will touch on the balance sheet, cash generation, and capital deployment. In the first quarter, we generated $29 million in positive operating cash flow, inclusive of a $34 million payment for a previously disclosed legal settlement. We had positive adjusted free cash flow, which will accelerate throughout the year. Capital expenditures for the quarter totaled $46 million as we continue to make progress on our Sterigenics greenfield expansions, EO facility upgrades, and Cobalt-60 development projects.

The company’s liquidity position remains strong; as of Q1 2026, we had over $900 million of available liquidity. Finally, we finished the quarter with a net leverage ratio of 3.2x, nearing our long-term target range of 2x to 3x. As Michael mentioned, we are reaffirming our 2026 outlook. To recap, we expect the following as compared to 2025: total company revenue to grow to a range of $1.233 billion to $1.251 billion, representing 5% to 6.5% constant currency growth and an estimated 100 basis point foreign currency benefit. We expect adjusted EBITDA to improve to a range of $632 million to $641 million, representing 5.5% to 7% constant currency growth and an estimated 100 basis point impact from foreign currency. The foreign exchange benefit is expected to be fully realized in the first half of 2026, with the second half impact expected to be approximately neutral versus the prior year.

Total company pricing is expected to be approximately the midpoint of our 3% to 4% long-term range. For 2026, we expect Sterigenics to deliver mid- to high-single-digit constant currency revenue growth year over year, with the second quarter year-over-year growth similar to the first quarter of 2026. As a reminder, Q2 was our strongest quarter of growth in 2025. We expect Nordion to grow constant currency revenue in the low- to mid-single digits in 2026. Nordion’s first-half revenue is expected to represent approximately 40% to 45% of full-year 2026 revenue. For Nelson Labs, we expect full-year 2026 constant currency revenue growth to be in the low single digits, with a slight return to growth in Q2. Segment income margins at Nelson Labs are expected to improve throughout the year, resulting in full-year margins in the low- to mid-30s.

Based on the current forward rate curve, we expect interest expense between $135 million and $145 million. We are projecting an effective tax rate applicable to adjusted net income in the range of 27% to 29%. We expect adjusted EPS in the range of $0.93 to $1.01. We continue to expect depreciation to increase in 2026, consistent with the step-up we experienced in 2025. On a weighted average basis, we expect a fully diluted share count in the range of 289 million to 291 million shares. Capital expenditures are expected to be in the range of $175 million to $225 million. We anticipate further net leverage ratio improvement in 2026. Finally, as usual, our guidance does not assume any M&A activity. Now I will turn the call back over to Michael.

Michael B. Petras: Thank you, Jonathan. It has been my privilege to serve Sotera Health Company as CEO and Chair since 2016. With the company on strong footing after a decade of progress, I believe the time is right for a leadership transition that supports Sotera Health Company’s continued evolution. Following a thoroughly planned, board-led succession process, the board has appointed Alton Shader as Sotera Health Company’s new Chief Executive Officer, effective May 2026. Alton is a seasoned healthcare executive with significant experience leading and growing global healthcare organizations, including Viant Medical, Hillrom, and Baxter. In my new role as Executive Chair and as a meaningful investor in this company, I look forward to working closely with Alton to ensure a smooth and deliberate leadership transition.

We have already started discussing priorities and the path forward for Sotera Health Company. I also will continue to be actively involved in investor relations and commercial and litigation strategies. As I transition to my new role, I want to thank our board for its guidance and support over the past decade. I want to thank our 3,100 employees for working with me and our leaders in continuing to make this company really special and a great place to work. I also want to thank our investors for your support since we took the company public in 2020. Rest assured, I continue to believe in and will remain engaged and committed to the long-term success of our company. With that, Operator, I would like to open it up for questions, please.

Operator: Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then 1 on a touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Sean Dodge with BMO Capital Markets. Please go ahead.

Receive real-time insider trading and news alerts

Sean Dodge: Hey, good morning. This is Thomas Keller on for Sean. First off, congratulations on the ten years, Michael. Thank you for taking the questions. I wanted to start off on Sterigenics and the realignment of the business around higher-growth end markets. Where are you all in that strategy? I imagine it takes some time to get the pieces in place internally for that, and then to win and onboard new business. Was there any benefit here from a volume or mix shift standpoint in Q1? Or is there anything contemplated in the full-year guide? Thanks.

Michael B. Petras: Yes, thanks, Tom. That is something that we are focused on as an organization. As we look at our cross-business unit activity and our strategic selling activity, we are focused on those key segments. In the quarter, Sterigenics put up 1.6% volume and mix growth, and remember, we also had an impact from weather. We are happy with the first quarter. The beginning of the quarter started off slow with the weather, which we signaled when we talked last time, but it finished strong, and we are optimistic on the outlook as we go forward based on how March finished out and how we are starting out the second quarter.

Sean Dodge: Okay, that is great. And then, from a capacity standpoint, where is the business in terms of utilization across different modalities, maybe versus historical averages? And with remaining expansions, do you have what you need to support potentially higher levels of growth for the next several years? Thanks.

Michael B. Petras: Yes, thank you. We are in a good spot on capacity. By modality and by geography you will have some pinch points at a given point in time, but we target approximately 80% utilization and we are in a good spot. The teams have done a nice job operationally trying to get more out of our existing capacity. We have a facility that we will start to bring online later this year in the X-ray modality, and then we have another one scheduled for late 2027, early 2028, that we feel good about. Overall, our capacity situation is in a good spot. We are well situated and have been servicing our customers very well. I also referenced on the call that we continue to see good satisfaction scores. We just got the results for 2025, and we saw significant improvement year over year in both Sterigenics and Nelson Labs. We are going in the right direction and are encouraged by what we see going forward.

Operator: The next question comes from Brett Fishbin with KeyBanc Capital Markets. Please go ahead.

Brett Adam Fishbin: Hey, good morning, everyone. Just a quick question on Sterigenics. Q1 was generally expected to be the lightest quarter for that segment, and you somewhat exceeded expectations. Do you still see Q1 as being the lightest quarter of the year? And then as a follow-up, can you speak a little bit to what you are seeing within core med devices and bioprocessing volumes, specific to Sterigenics?

Michael B. Petras: Yes, we saw a nice quarter out of Sterigenics. We would like to have seen it a little bit better, but we cannot control the weather. Last year we had a significant second quarter, as we have talked about in the past. We will see a good quarter here in the second quarter and consistent with the guide that we just provided. We are expecting similar constant currency growth to the first quarter. Med device had a solid quarter, and across all the end markets we serve, med device was solid. Bioprocessing was up significantly year over year again, but remember, it is a small portion of our total business, though it was significant growth over the prior year.

Brett Adam Fishbin: Alright, thank you very much. That is helpful.

Operator: The next question comes from Patrick Donnelly with Citi. Please go ahead.

Patrick Bernard Donnelly: Hey, guys, thanks for the question. Michael, congrats on the move and the transition. On Sterigenics, can you talk about what you saw as the quarter progressed on the volume side and the visibility there? It feels like you are in a pretty good spot, but talk through the different markets and what you saw as the quarter progressed, and the expectations here going forward?

Michael B. Petras: Yes, Patrick, January and February were a little softer, particularly weather related, but as the quarter progressed, March was the best month on volume we have had in the last three or four years. One month does not make a year, but we are optimistic about that, and April started out strong. We feel very comfortable in the guide we have given, and we are seeing nice growth. We expect that to continue as the year progresses with some of the things we have coming online. We have that X-ray facility coming online, we will see some growth from that, and we have a customer conversion that we have talked about previously that will start to impact late in the year. Overall, the level of engagement with our customers and some of the commitments that we see coming forth from them make us feel good about how Sterigenics is positioned coming out of the first quarter.

Patrick Bernard Donnelly: Okay, that is helpful. And then on the margin side, can you talk through the moving pieces? Pricing is always a good lever for you. Any changes on that front? And how should we think about margins as we work our way through the year?

Jonathan M. Lyons: Thanks for the question, Patrick. We feel good about the margins, as the guide implies. We saw margin improvement in the quarter, and we expect margin improvement for the year. That is really going to be driven by Sterigenics, where we expect to get some good operating leverage in the business, and really stable margins in the other segments. We are optimistic about the opportunity to see another year of margin improvement on the heels of our strong margin improvement last year.

Operator: The next question comes from William Blair. Please go ahead.

Analyst: Hi, good morning, and thanks for taking our questions. I will try to hit on the Sterigenics question another way. Excluding the weather impact, you did about 8% constant currency in Q1. You said you expect similar constant currency growth in Q2, even though April is off to a strong start and you do not have that weather piece. Is that slowdown relative to the 8% ex-weather just a comp issue? Is it conservatism? Or are there other factors we should be thinking about for Sterigenics in the second quarter? Thank you.

Michael B. Petras: Thanks. The big thing, and I alluded to it in my prepared remarks, is that Q2 of last year was our strongest quarter of growth, so it is really a comp issue versus anything else.

Analyst: That is helpful, thanks. And then one on Nelson Labs. You said it was in line with your expectations for the quarter. Can you help us think through testing growth versus Expert Advisory Services and, in particular, how much of a headwind the latter represented in Q1? And then on margins, they stepped down pretty significantly year over year, so help us understand the drivers behind that and the outlook for margins for that segment over the balance of the year.

Michael B. Petras: As we communicated, Nelson Labs came in as we expected. Expert Advisory Services is the last quarter we had that headwind that we are lapping over. Testing volumes were down a little bit over prior year, but routine volumes are coming back, and our service has been outstanding in that area. As sterilization volumes go up, we will continue to see that correlation and strength on the routine testing side. It is not always one-for-one, but there is a correlation. On the validation side, we are starting to see some pipeline in some of the longer-term projects start to build as we go into the latter parts of 2026. We signaled that we see the margins coming to the low to mid-30s, which is consistent with what we have been talking about for the last many quarters around this topic.

Analyst: Got it. Thanks again for taking our questions.

Operator: The next question comes from Piper Sandler. Please go ahead.

Analyst: Hey, everyone, and congrats on the announcement, Michael. I am going to attack Sterigenics from a slightly different lens. Growth and margins in Q1 were impressive, even in spite of the weather-related headwinds. As we look at the broader inflationary backdrop, can you help us think about the durability of Sterigenics margins through the year, and whether sustained cost inflation actually creates an opportunity to take incremental price throughout the year?

Michael B. Petras: Thanks. We are not seeing significant inflation in that business. We continue to manage that well. Our key inputs are really around labor and then gas and cobalt, and we are in a good spot there. We have set pricing in such a way that we make sure our value get is positive. In the quarter, Sterigenics had about 4.5% price, which is slightly above the 4% that we have guided toward. We continue to see that business in a good spot and being rewarded for the value it brings to our customers, and we are not concerned about anything material on the inflation side as we sit here today.

Analyst: Got it, thanks. And on that large customer onboarding that should come on this year, is there any more detail you can provide about sizing or how to think about the ramp through the rest of the year, and is that part of the guide?

Michael B. Petras: Yes, that is assumed in our guide. It will come late in the year. It is a meaningful customer, but it is not outsized. We are not building a facility for that business. It is a significant win for us from both a morale standpoint and reinforcing the company’s value proposition. We have that built into our outlook for the rest of this year, and you will see it late in the year.

Operator: The next question comes from Barclays. Please go ahead.

Analyst: This is Sam on for Luke. Thanks for taking the question. Michael, congrats on the ten years with the company and best of luck as Executive Chair. I wanted to talk about the administration’s announcement to potentially scale back some of the ethylene oxide emissions regulations. Can you talk about the different scenarios that might come out of that and what the implications might be from a top-line perspective? That has been talked about as a potential opportunity with higher regulations on some smaller players in the industry. How might that affect CapEx spend in the near term and the long term?

Michael B. Petras: Thanks, Sam, for your comments and questions. We are executing. We have spent approximately $200 million in Sterigenics over the duration on general facility enhancements for EO activity. The team is doing a very good job executing on that, and we should have the vast majority complete in 2026. There is a rule out there today that has another couple of years before requirements must be met, and now there is a new proposed rule out there. We are proceeding as if the rule that is in place is going to be the requirement, and our engineering teams are executing along those plans. I am not exactly sure how the administration will rule on this. Our job is to make sure we are operating in a safe and compliant manner and taking all actions to put the facility in the best place possible.

We will provide comments, as many others in the industry will, on the new proposed rule. Based on what we saw in the proposed rule, they are still going to be tough restrictions. They are a little easier than the rule that was recently put out, but still tough and challenging. We feel very well positioned to meet those requirements. As far as creating opportunities for us, depending on the final rule and timing, that will determine how much opportunity. We have a couple of opportunities: one customer we referenced who is converting over to us, and some other smaller ones where we continue to have dialogue and see opportunity. That activity slowed a little over the last several quarters with uncertainty on the timing of the new rule requirements, but we feel very well positioned for whatever the rule may be, and we will continue to operate in a safe and compliant manner for all our stakeholders, employees, and communities.

Analyst: Thank you. Maybe an unrelated follow-up on Nordion pricing. I think that came in slightly below the usual at about 2.1%. Anything significant to call out there?

Michael B. Petras: No. We have a long-range guide for the company of 3% to 4%. We said Nordion would be on the low end of that, around 3%. It is just a matter of timing and customer mix on which customers got shipments within the quarter. We are fine on price execution in Nordion and across the business.

Operator: The next question comes from J.P. Morgan. Please go ahead.

Analyst: Hi, this is Jayden on for Casey. Could you walk us through your pricing assumption for 2026 and highlight if anything has changed by segment? I know you just mentioned Nordion, but anything else would be helpful. Thank you.

Michael B. Petras: Nothing has changed from what we communicated previously. Price would be in the 3% to 4% range overall. Nordion will be on the low end of that range, Nelson will be on the low end of that range, and Sterigenics will be on the high end of that range. We do not see anything changing in our outlook on that.

Analyst: Alright. Thank you.

Operator: The next question comes from RBC Capital Markets. Please go ahead.

Analyst: Hey, this is Kevin on for Ryan. Two quick ones for us. Was there any extra selling-day benefit in Q1 2026? If so, how much did that impact your growth rates?

Michael B. Petras: No, very minimally.

Analyst: Awesome, thanks. In 2025, you talked about your XBU customers growing ahead of total company growth. Can you comment on how XBU is performing in 2026 at this point and any opportunities you have to further accelerate that XBU penetration?

Michael B. Petras: Thanks for the question. We had a good first quarter in that area and saw growth again. As I mentioned earlier, our customer satisfaction scores were very positive with significant improvement as well. Overall, the work is going very well in the XBU. Remember, there is a lot of strength around the embedded labs within Sterigenics, the Nelson Labs that coexist there. We continue to execute well in that area, so XBU is well situated.

Analyst: Gotcha. Thank you.

Operator: The next question comes from Wolfe Research. Please go ahead.

Michael K. Polark: Good morning. Hey, Michael, congrats and good luck. I would have thought if you were making a transition you would have shed the investor relations hat so you did not have to deal with folks like me and my clients, but I was surprised to see that is still part of your ongoing commitment.

Michael B. Petras: Trust me, I was trying to shed the litigation, but the board would not let me on that. You can imagine more fun things than defending multistate toxic tort cases. But yes, thank you, and please go ahead.

Michael K. Polark: Two for me. In the quarter, appreciate the weather callout for Sterigenics. If I recall, part of the Q1 guidance also considered excess EO maintenance downtime. Would you flag that as a significant item in the quarter on Sterigenics volumes? And then for the rest of the year, what is the maintenance schedule across the network? Anything unusual we should think about for Q2, Q3, Q4?

Michael B. Petras: One point to add is that the number of downtime days in the second half will be lower.

Jonathan M. Lyons: I would not add anything other than to reiterate that point. Downtime days are a headwind year over year in the first half and a tailwind in the second half.

Michael K. Polark: Helpful. And the second one: for Nelson Labs in the second quarter, you said “slight” return to growth. Is that about 1%, or something better?

Michael B. Petras: I would think in that range or below.

Michael K. Polark: Thank you.

Operator: This concludes our question-and-answer session. I would like to turn the conference over to Michael B. Petras for any closing remarks.

Michael B. Petras: Thank you. As we move through 2026, we are encouraged by our momentum and strengthened financial position. We remain confident in our ability to drive long-term growth, strong cash flow, and shareholder value. Our leadership in a large and growing market, global scale, regulatory expertise, accelerating free cash flows, and disciplined capital allocation position us well for sustainable growth. We look forward to seeing many of you at the conferences coming up this spring and early summer. Thank you for your continued support, and have a good day.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

Receive real-time insider trading and news alerts