• Total Revenue: Increased by 2.6% to $255 million, or 4.4% on a constant currency basis compared to Q1 2024.
• Adjusted EBITDA: Increased by 8.8% to $122 million, equating to an 11.2% growth rate on a constant currency basis.
• Adjusted EBITDA Margin: 47.9%, a 276 basis point increase from Q1 2024.
• Adjusted EPS: $0.14, a $0.01 improvement versus Q1 2024.
• Net Loss (GAAP): $13 million or $0.05 per diluted share, inclusive of a $31 million settlement.
• Sterigenics Revenue: Grew 1.9% to $170 million, or 3.9% on a constant currency basis.
• Nordion Revenue: Increased 36% to $33 million, or 40.6% on a constant currency basis.
• Nelson Labs Revenue: Declined by 9.3% to $52 million.
• Interest Expense: Improved to $41 million from $42 million in Q1 2024.
• Available Liquidity: $715 million, including over $300 million of unrestricted cash.
• Capital Expenditures: $20 million for Q1 2025.
• Net Leverage Ratio: 3.6 times, improved from 3.7 times at the end of 2024.

• Warning! GuruFocus has detected 2 Warning Sign with SHC.

Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sotera Health Co (NASDAQ:SHC) reported mid-single-digit top line growth and double-digit bottom line growth on a constant currency basis compared to Q1 2024.
• Sterigenics, the largest segment, achieved revenue growth of 1.9% and a margin expansion of approximately 30 basis points.
• Nordion's revenue increased by 36% due to early Cobalt-60 shipments, with a segment income margin expansion of nearly 860 basis points.
• Nelson Labs showed margin expansion for the third consecutive quarter, with a 479 basis point increase compared to Q1 2024.
• The company reaffirmed its 2025 outlook, expecting revenue growth of 4% to 6% and adjusted EBITDA growth of 4.5% to 6.5% on a constant currency basis.

Negative Points

• Foreign currency fluctuations presented a headwind of 180 basis points, particularly affecting the Canadian-based Nordion business.
• Net loss on a GAAP basis for Q1 2025 was $13 million, impacted by a $31 million settlement of EO claims in Illinois.
• Nelson Labs experienced a 9.3% revenue decline due to a decrease in expert advisory services revenue.
• The shift in Cobalt-60 shipments from Q2 to Q1 will impact Nordion's second-quarter revenues.
• Interest expense remains high, with a projection of $155 million to $165 million for the full year 2025.

Q & A Highlights

Q: Can you discuss the impact of tariffs on your business, particularly regarding Nordion's operations? A: Michael Petras, CEO, stated that they are confident current tariff policies will not materially impact the company. Cobalt-60 shipments from Canada to the US are exempt under USMCA, and any smaller impacts are not considered material.

Q: How is the recovery in Sterigenics volumes progressing, and what are your expectations for the rest of the year? A: Michael Petras, CEO, mentioned that they are optimistic about volume improvements throughout the year. They have seen positive trends in the first quarter and expect continued improvement, supported by strong customer relationships and survey results.

Q: Can you elaborate on the factors driving Nelson Labs' margin improvements and the outlook for the rest of 2025? A: Michael Petras, CEO, highlighted that new regulations, product spending, and sterilization volumes are driving improvements. The team has stabilized labor costs and continues to deliver high service levels, contributing to margin expansion.

Q: What is your legal strategy regarding ongoing ethylene oxide litigation, and how do you assess the risks? A: Michael Petras, CEO, emphasized their confidence in defending against claims, stating that their operations are safe and compliant. They will continue to vigorously defend themselves in court, adapting strategies based on jurisdictional differences.

Q: How are cross-selling initiatives between Nelson Labs and Sterigenics progressing? A: Michael Petras, CEO, noted that they have incentives in place to encourage cross-selling, with significant progress in service integration. Approximately 70% of revenue from both segments comes from shared customers, and they are seeing positive customer responses.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.