Sotera Health Reports Third-Quarter and Year-to-Date 2024 Results

Q3 2024 net revenues of $285 million increased 8.5%, compared to Q3 2023

Q3 2024 net income of $17 million or $0.06 per diluted share, compared to net loss of $14 million or $0.05 per diluted share in Q3 2023

Q3 2024 Adjusted EBITDA(1) of $146 million increased 9.0%, compared to Q3 2023

Q3 2024 Adjusted EPS(1) of $0.17 increased $0.01 per diluted share, compared to Q3 2023

Reaffirming 2024 Net Revenue and Adjusted EBITDA outlook ranges

CLEVELAND, Nov. 05, 2024 (GLOBE NEWSWIRE) -- Sotera Health Company ("Sotera Health" or the "Company") (NASDAQ:SHC), a leading global provider of mission-critical end-to-end sterilization solutions, lab testing and advisory services for the healthcare industry, today announced financial results for the three and nine months ended September 30, 2024.

Third-quarter 2024 net revenues increased 8.5% to $285 million, compared with $263 million in the third-quarter 2023. Net revenues increased 8.9% on a constant currency basis. Net income was $17 million, or $0.06 per diluted share, compared to a net loss of $14 million, or $0.05 per diluted share in the third-quarter of 2023. Adjusted EBITDA for the third-quarter 2024 increased 9.0% to $146 million compared to $134 million in the third-quarter 2023. Third-quarter 2024 Adjusted Earnings Per Diluted Share ("Adjusted EPS") increased by $0.01 to $0.17, compared to $0.16 in the third-quarter of 2023.

For the first nine months of 2024, net revenues increased 9.6% to $810 million, compared to $739 million for the same period in 2023. Net revenues increased approximately 9.8% on a constant currency basis. Net income was $32 million, or $0.11 per diluted share for the nine months ended September 30, 2024, compared with net income of $13 million, or $0.04 per diluted share, for the same period last year. Adjusted EBITDA for the first nine months of 2024 increased 9.5% to $396 million, compared to $361 million in the first nine-months of 2023. Adjusted EPS of $0.49 remained flat compared to the first nine months of 2023.

"I am pleased we achieved both top- and bottom-line growth for the third-quarter," said Chairman and Chief Executive Officer Michael B. Petras, Jr. "Our performance was largely in line with expectations, with an additional benefit at Nordion tied to the timing of cobalt-60 shipments. With most of the year behind us, we are reaffirming the 2024 revenue and EBITDA outlook ranges previously provided."

"We are also excited to host our inaugural investor day on November 20th, which will take place in New York City," Petras continued. "During the event, the management team will present a business and financial review, including future growth plans, while highlighting how we fulfill our mission of Safeguarding Global Health®."

_______________(1) This is non-GAAP financial measure used throughout this press release; please refer to the section "Non-GAAP Financial Measures" for explanations of our Non-GAAP financial measures and the schedules provided later in this release for reconciliations of reported GAAP to Non-GAAP financial measures.

Third-Quarter and Year-to-Date 2024 Highlights by Business Segment

Sterigenics

For the third-quarter 2024, Sterigenics net revenues were $176 million, an increase of 4.3% compared to the third quarter a year ago. Third-quarter 2024 segment income was $96 million, an increase of 3.0%. For the first nine months of 2024, Sterigenics net revenues were $518 million, an increase of 4.7% compared to the same period in 2023. Segment income increased 4.2% to $279 million.

Net revenue growth for the third-quarter 2024 was driven by favorable pricing, volume and mix, partially offset by unfavorable changes in foreign currency exchange rates.

The increase in segment income for the third-quarter 2024 was driven by favorable customer pricing as well as volume and mix. Increases in employee compensation costs negatively impacted segment income and segment income margin.

Nordion

For the third-quarter 2024, Nordion net revenues were $51 million, an increase of 28.0% compared to the third-quarter a year ago. Third-quarter 2024 segment income increased 31.9% to $32 million. For the first nine months of 2024, Nordion net revenues were $117 million, an increase of 44.6% compared to the same period in 2023. Segment income increased 52.1% to $66 million.

The timing of reactor harvest schedules resulted in favorable changes in volume and mix, which was the primary driver for net revenue, segment income and segment income margin growth for the quarter. Favorable pricing also drove improvement, partially offset by unfavorable changes in foreign currency exchange rates.

Nelson Labs

For the third-quarter 2024, Nelson Labs net revenues were $59 million, an increase of 7.0% compared to the third-quarter a year ago. Third-quarter 2024 segment income increased by 9.0% to $19 million. For the first nine months of 2024, Nelson Labs net revenues were $175 million, an increase of 7.2% compared to the same period in 2023. Segment income increased 1.3% to $51 million.

Net revenue increase for the third-quarter 2024 was driven by favorable changes in volume and mix as well as pricing.

Segment income and segment income margin increases for the third-quarter 2024 were driven by favorable customer pricing, volume and mix, as well as labor productivity improvements, partially offset by increases in employee compensation costs.

Balance Sheet and Liquidity

As of September 30, 2024, Sotera Health had $2.3 billion of total debt and $307 million in unrestricted cash and cash equivalents, compared to $2.3 billion in total debt and $296 million of unrestricted cash and cash equivalents as of December 31, 2023. As of September 30, 2024, the Company had no balance outstanding on its revolving credit facility. Sotera Health's Net Leverage Ratio(2) as of September 30, 2024 was 3.6x.

_______________(2) This is non-GAAP financial measure used throughout this press release; please refer to the section "Non-GAAP Financial Measures" for explanations of our Non-GAAP financial measures and the schedules provided later in this release for reconciliations of reported GAAP to Non-GAAP financial measures.

2024 Outlook

Today, Sotera Health is reaffirming the following 2024 outlook ranges previously provided:

Net revenues and Adjusted EBITDA growth in the range of 4.0% to 6.0%,

Interest Expense in the range of $165 million to $175 million,

Tax rate applicable to Adjusted Net Income(3) in the range of 31.5% to 34.5%,

Adjusted EPS in the range of $0.67 to $0.75,

A weighted-average fully diluted share count in the range of 283 million to 285 million shares, and

The following range in the 2024 outlook is being updated:

Capital expenditures are now expected to be in the range of $175 million to $185 million, from previous guidance of $205 million to $225 million

The Company does not provide a reconciliation for non-GAAP financial measures on a forward-looking basis where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items without unreasonable effort. The Company cannot reconcile its expected Adjusted EBITDA, Adjusted Net Income Tax Rate, Adjusted Net Income and Adjusted EPS without unreasonable effort because certain items that impact net income, earnings per share and other reconciling metrics are out of the Company's control and/or cannot be reasonably predicted at this time, including uncertainties caused by changes to the regulatory landscape, restructuring items and certain fair value measurements, all of which are potential adjustments for future earnings.

The outlook provided above contains a number of assumptions, including, among others, the Company's current expectations regarding supply chain continuity, particularly for the supply of ethylene oxide ("EO") and Cobalt-60, the impact of inflationary trends including their impact on energy prices and the supply of labor, and the expectation that exchange rates as of September 30, 2024 remain constant for the remainder of 2024. Our outlook is based on current plans and expectations and is subject to several known and unknown risks and uncertainties, including those set forth below under "Cautionary Note Regarding Forward-Looking Statements."

Earnings Webcast

Sotera Health management will host a conference call and webcast to discuss the Company's operating highlights and financial results at 9:00 a.m. Eastern Time today. To participate in the live call, please dial 1-844-481-2916 if dialing in from the United States, or 1-412-317-0709 if dialing in from other locations. A live webcast of the conference call and accompanying materials may also be accessed via the Investor Relations section of the Company's website at Presentation & Events | Sotera Health. A replay of the webcast will be archived on the Company's website.

Updates on recent developments in matters relevant to investors can be found on the Investor Relations section of the Sotera Health website at Investor Relations | Sotera Health. For developments related to EO, updates can be found at Ethylene Oxide | Sotera Health.

_______________(3) This is a non-GAAP financial measure used throughout this press release; please refer to the section "Non-GAAP Financial Measures" for explanations of our Non-GAAP financial measures and the schedules provided later in this release for reconciliations of reported GAAP to Non-GAAP financial measures.

Upcoming Events

Sotera Health Investor DaySotera Health will hold its inaugural Investor Day on Wednesday, November 20, 2024 at 12:30 p.m. Eastern Time in New York City with presentations by members of the management team. Attendance at the in-person event is by invitation only. Parties interested in attending in person can send inquiries to To attend via webcast, please register at Presentation & Events | Sotera Health.

Conferences

Piper Sandler 36th Annual Healthcare Conference at 8:00 a.m. Eastern Time, December 3, 2024

Citi's 2024 Global Healthcare Conference at 9:30 a.m. Eastern Time, December 4, 2024

Cautionary Note Regarding Forward-Looking Statements

Unless expressly indicated or the context requires otherwise, the terms "Sotera Health," "Company," "we," "us," and "our" in this document refer to Sotera Health Company, a Delaware corporation, and, where appropriate, its subsidiaries on a consolidated basis. This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and reflect management's expectations about future events and the Company's operating plans and performance and speak only as of the date hereof. Forward-looking statements present our current forecasts and estimates of future events. These statements do not strictly relate to historical or current results and can be identified by words such as "anticipate," "appear," "assume," "believe," "estimate," "expect," "forecast," "intend," "likely," "may," "plan," "project," "seek," "should," "strategy," "will" and other terms of similar meaning or import in connection with any discussion of future operating, financial or other performance. These forward-looking statements are subject to risks, uncertainties and other factors and actual results may differ materially from those results projected in the statements. These forward-looking statements are subject to various risks, uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. These risks and uncertainties include, but are not limited to, a disruption in the availability or supply of, or increases in the price of, EO, Cobalt-60 ("Co-60") or our other direct materials, services and supplies, including as a result of geopolitical instability and/or sanctions against Russia by the United States, Canada, United Kingdom and/or the European Union; fluctuations in foreign currency exchange rates; changes in environmental, health and safety regulations or preferences, and general economic, social and business conditions; health and safety risks associated with the use, storage, transportation and disposal of potentially hazardous materials such as EO and Co-60; the impact and outcome of current and future legal proceedings and liability claims, including litigation related to the use, emissions and releases of EO from our facilities in California, Georgia, Illinois and New Mexico and the possibility that additional claims will be made in the future relating to these or other facilities; allegations of our failure to properly perform services and potential product liability claims, recalls, penalties and reputational harm; compliance with the extensive regulatory requirements to which we are subject, the related costs, and any failures to receive or maintain, or delays in receiving, required clearances or approvals; adverse changes in industry trends; competition we face; market changes, including inflationary trends, that impact our long-term supply contracts with variable price clauses and increase our cost of revenues; business continuity hazards, including supply chain disruptions and other risks associated with our operations; the risks of doing business internationally, including global and regional economic and political instability and compliance with numerous laws and sometimes inconsistent laws and regulations in multiple jurisdictions; our ability to increase capacity at existing facilities, build new facilities in a timely and cost-effective manner and renew leases for our leased facilities; our ability to attract and retain qualified employees; severe health events or environmental events; cybersecurity breaches, unauthorized data disclosures, and our dependence on information technology systems; an inability to pursue strategic transactions, find suitable acquisition targets, or integrate strategic acquisitions into our business successfully; our ability to maintain effective internal control over financial reporting; our reliance on intellectual property to maintain our competitive position and the risk of claims from third parties that we have infringed or misappropriated, or are infringing or misappropriating, their intellectual property rights; our ability to comply with rapidly evolving data privacy and security laws and regulations in various jurisdictions and any ineffective compliance efforts with such laws and regulations; our ability to maintain profitability in the future; impairment charges on our goodwill and other intangible assets with indefinite lives, as well as other long-lived assets and intangible assets with definite lives; the effects of unionization efforts and labor regulations in countries in which we operate; adverse changes to our tax positions in U.S. or non-U.S. jurisdictions or the interpretation and application of recent U.S. tax legislation or other changes in U.S. or non-U.S. taxation of our operations; and our significant leverage and how this significant leverage could adversely affect our ability to raise additional capital, limit our ability to react to challenges confronting our Company or broader changes in our industry or the economy, limit our flexibility in operating our business through restrictions contained in our debt agreements and/or prevent us from meeting our obligations under our existing and future indebtedness. For additional discussion of these risks and uncertainties, please refer to the Company's filings with the SEC, such as its annual and quarterly reports. We do not undertake any obligation to publicly update or revise these forward-looking statements, except as otherwise required by law.

Non-GAAP and Other Financial Measures

To supplement our consolidated financial statements presented in accordance with GAAP, we consider Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted EPS, Net Debt and Net Leverage Ratio and constant currency, financial measures that are not based on any standardized methodology prescribed by GAAP.

We define Adjusted Net Income as net income (loss) before amortization and certain other adjustments that we do not consider in our evaluation of our ongoing operating performance from period to period.

We define Adjusted EBITDA as Adjusted Net Income before interest expense, depreciation (including depreciation of Co-60 used in our operations) and income tax provision applicable to Adjusted Net Income.

Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net revenues.

Segment income margin is equal to segment income divided by net segment revenues.

We define Adjusted EPS as Adjusted Net Income divided by the weighted average number of diluted shares outstanding.

Our Net Debt is equal to our total debt net of unamortized debt issuance costs and debt discounts, less cash and cash equivalents.

Our Net Leverage Ratio is equal to Net Debt divided by Adjusted EBITDA.

Constant currency is a non-GAAP financial measure we use to assess performance excluding the impact of foreign currency exchange rate changes. We calculate constant currency net revenues by translating prior year net revenues in local currency at the average exchange rates applicable for the current period. The translated results are then used to determine year-over-year percentage increases or decreases. We generally refer to such amounts calculated on a constant currency basis as excluding the impact of foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with GAAP.

We use these non-GAAP financial measures as the principal measures of our operating performance. Management believes these measures allow management to more effectively evaluate our operating performance and compare the results of our operations from period to period without the impact of certain non-cash items and non-routine items that we do not expect to continue at the same level in the future and other items that are not core to our operations. We believe that these measures are useful to our investors because they provide a more complete understanding of the factors and trends affecting our business than could be obtained without these measures and their disclosure. In addition, we believe these measures will assist investors in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. Our management also uses these measurements in their financial analysis and operational decision-making and Adjusted EBITDA serves as the key metric for the attainment of our primary annual incentive program. These measures may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.

About Sotera Health

Sotera Health Company is a leading global provider of mission-critical end-to-end sterilization solutions and lab testing and advisory services for the healthcare industry. Sotera Health goes to market through three businesses, Sterigenics®, Nordion® and Nelson Labs®. Sotera Health is committed to its mission, Safeguarding Global Health®.

INVESTOR RELATIONS CONTACTS

Jason PetersonVice President Investor Relations & Treasurer, Sotera

MEDIA

Kristin GibbsChief Marketing Officer, Sotera

Source: Sotera Health Company

Sotera Health CompanyConsolidated Statements of Operations (in thousands, except per share amounts)(unaudited)

 

 

Three Months EndedSeptember 30,

 

Nine Months EndedSeptember 30,

 

 

2024

 

 

 

2023

 

 

 

2024

 

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

Service

$

238,790

 

 

$

227,120

 

 

$

703,027

 

 

$

667,680

 

Product

 

46,678

 

 

 

36,057

 

 

 

107,211

 

 

 

71,369

 

Total net revenues

 

285,468

 

 

 

263,177

 

 

 

810,238

 

 

 

739,049

 

Cost of revenues:

 

 

 

 

 

 

 

Service

 

111,080

 

 

 

103,580

 

 

 

331,068

 

 

 

311,690

 

Product

 

16,364

 

 

 

13,613

 

 

 

41,240

 

 

 

30,284

 

Total cost of revenues

 

127,444

 

 

 

117,193

 

 

 

372,308

 

 

 

341,974

 

Gross profit

 

158,024

 

 

 

145,984

 

 

 

437,930

 

 

 

397,075

 

Operating expenses:

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

62,009

 

 

 

54,112

 

 

 

180,793

 

 

 

176,309

 

Amortization of intangible assets

 

15,508

 

 

 

15,774

 

 

 

46,657

 

 

 

48,098

 

Total operating expenses

 

77,517

 

 

 

69,886

 

 

 

227,450

 

 

 

224,407

 

Operating income

 

80,507

 

 

 

76,098

 

 

 

210,480

 

 

 

172,668

 

Interest expense, net

 

41,572

 

 

 

40,627

 

 

 

123,731

 

 

 

100,225

 

Loss on refinancing of debt

 

70

 

 

 

—

 

 

 

24,160

 

 

 

—

 

Georgia EO litigation settlement

 

—

 

 

 

35,000

 

 

 

—

 

 

 

35,000

 

Foreign exchange (gain) loss

 

(1,054

)

 

 

(426

)

 

 

(2,237

)

 

 

386

 

Other (income) expense, net

 

(2,835

)

 

 

427

 

 

 

(4,084

)

 

 

(3,300

)

Income before income taxes

 

42,754

 

 

 

470

 

 

 

68,910

 

 

 

40,357

 

Provision for income taxes

 

25,756

 

 

 

14,130

 

 

 

36,835

 

 

 

27,662

 

Net income (loss)

 

16,998

 

 

 

(13,660

)

 

 

32,075

 

 

 

12,695

 

 

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

Basic

$

0.06

 

 

$

(0.05

)

 

$

0.11

 

 

$

0.04

 

Diluted

 

0.06

 

 

 

(0.05

)

 

 

0.11

 

 

 

0.04

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

Basic

 

283,059

 

 

 

281,105

 

 

 

282,624

 

 

 

280,898

 

Diluted

 

285,564

 

 

 

281,105

 

 

 

284,660

 

 

 

283,190