Executive Summary

Q1 2025 delivered mid-single-digit revenue growth and double-digit Adjusted EBITDA growth on a constant currency basis; Adjusted EPS was $0.14 and GAAP EPS was -$0.05 due to a $30.9M EO settlement charge .
Revenue and Adjusted EPS both beat Wall Street consensus; revenue $254.5M vs $245.8M*, Adjusted EPS $0.14 vs $0.122*, and Adjusted EBITDA $121.8M vs $113.6M*; guidance reaffirmed with improved FX headwind assumptions (net revenue headwind cut to ~1.25% from 2.25%) . Values retrieved from S&P Global*.
Segment performance: Sterigenics grew on pricing (+4.1% pricing) with margin expansion; Nordion benefited from shipment timing; Nelson Labs’ margins expanded 479 bps YoY despite revenue headwinds in expert advisory services .
Catalysts: continued Sterigenics volume recovery, Nelson Labs margin trajectory toward 30s, and FX tailwinds; legal overhang managed via settlements and confident defense narrative; capex trajectory set to decline to ~$110M by 2027 to drive $500–$600M FCF over 3 years .

What Went Well and What Went Wrong

What Went Well
- “We met or exceeded our expectations across each of our lines of business to deliver mid-single-digit top line growth and double-digit bottom line growth on a constant currency basis” .
- Nelson Labs margin expansion of 479 bps YoY driven by pricing and lab optimization; management reiterated a path to low-to-mid-30s margin target .
- FX headwind assumptions improved for FY25 (net revenue headwind ~1.25% vs 2.25%; Adjusted EBITDA headwind ~1.5% vs 2.5%), and revolver amended +$176M capacity to $600M, extended to 2030, strengthening liquidity .
What Went Wrong
- GAAP net loss of $13.3M (-$0.05 EPS) driven by $30.9M Illinois EO litigation settlement; signals ongoing legal expense drag despite operational strength .
- Nelson Labs revenue declined 9.3% YoY on reduced expert advisory services, partially offsetting core testing improvements .
- Nordion’s stronger Q1 from shipment timing likely shifts volume out of Q2, adding quarterly volatility to segment reported metrics .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Millions)	$285.468	$290.203	$254.523
Net Income (GAAP) ($USD Millions)	$16.998	$12.323	$(13.260)
Diluted EPS (GAAP) ($USD)	$0.06	$0.04	$(0.05)
Adjusted EBITDA ($USD Millions)	$146.361	$152.934	$121.839
EBITDA Margin (%)	51.3%	52.7%	47.9%
Adjusted EPS ($USD)	$0.17	$0.21	$0.14

Segment breakdown (Revenue and Segment Income):

Segment	Q3 2024 Revenue ($MM)	Q4 2024 Revenue ($MM)	Q1 2025 Revenue ($MM)	Q3 2024 Segment Income ($MM)	Q4 2024 Segment Income ($MM)	Q1 2025 Segment Income ($MM)
Sterigenics	$175.574	$179.428	$169.684	$95.989	$99.586	$88.004
Nordion	$51.313	$56.791	$32.557	$31.733	$35.282	$17.422
Nelson Labs	$58.581	$53.984	$52.282	$18.639	$18.066	$16.413

KPIs (Q1 2025):

KPI	Q1 2025
Cash And Equivalents ($USD Millions)	$306.081
Total Debt ($USD Millions)	$2,317.421
Net Debt ($USD Millions)	$2,013.031
Net Leverage (x)	3.6x
Cash from Operations ($USD Millions, Q1)	$55.521
Capital Expenditure ($USD Millions, Q1)	$19.918
Weighted Avg Diluted Shares (for Adjusted EPS) (MM)	285.714
Sterigenics Pricing (Q1)	~4.1%
FX Headwind (Q1)	~180 bps

Vs Wall Street consensus (Q1 2025):

Metric	Consensus*	Actual	Beat/Miss
Revenue ($USD Millions)	$245.789*	$254.523	Beat
Adjusted EPS ($USD)	$0.122*	$0.14	Beat
Adjusted EBITDA ($USD Millions)	$113.648*	$121.839	Beat

Values retrieved from S&P Global*.

Guidance Changes

Metric	Period	Previous Guidance (2/27/25)	Current Guidance (5/1/25)	Change
Net revenues growth (constant currency)	FY 2025	4.0%–6.0%	4.0%–6.0%	Maintained
FX headwind to net revenues	FY 2025	~2.25%	~1.25%	Lower headwind
Adjusted EBITDA growth (constant currency)	FY 2025	4.5%–6.5%	4.5%–6.5%	Maintained
FX headwind to Adjusted EBITDA	FY 2025	~2.50%	~1.50%	Lower headwind
Interest Expense ($USD Millions)	FY 2025	$155–$165	$155–$165	Maintained
Tax rate (Adjusted Net Income basis)	FY 2025	33%–35%	33%–35%	Maintained
Adjusted EPS ($USD)	FY 2025	$0.70–$0.76	$0.70–$0.76	Maintained
Weighted-average fully diluted shares (MM)	FY 2025	286–287	286–287	Maintained
Capital expenditures ($USD Millions)	FY 2025	$190–$210	$190–$210	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024, Q4 2024)	Current Period (Q1 2025)	Trend
Tariffs/Macro	Not a focus; pricing supported across segments	Minimal impact expected; Co-60 exempt under USMCA; ~85% revenue services	Unchanged/low risk
Regulatory/Legal (EO)	Georgia settlement (79 claims) in 2023 affects comps	$30.943M Illinois settlement; confident defense if science central; uptick in CA cases disclosed	Managed, ongoing
FX Headwinds	2024 guidance updated capex but FX not highlighted	FY25 FX headwinds improved (net revenue ~1.25%; EBITDA ~1.5%)	Improving
Supply Chain (Co-60)	Harvest timing boosted Q3; quarter-to-quarter variability	Q1 shipments pulled forward from Q2; full-year Nordion unchanged; Russia supply risk ~0–2% of total revenue	Stable availability; timing shifts
Pricing	Pricing aided segments in Q3/Q4	Sterigenics pricing ~4%; ongoing renewals; future NESHAP-related pricing discussions	Stable to firm
Volumes (Sterigenics)	Improving underlying volumes	Continued volume recovery through Q1; expected to improve through 2025	Improving
Nelson Labs Margin Execution	Strong margin drivers highlighted	+479 bps YoY margin expansion; path to low-to-mid 30s reiterated	Improving
Cross-Selling (Sterigenics/Nelson)	Discussed at Investor Day	~70% shared customers; embedded labs growth; incentives in place	Ongoing build
Capex/FCF Trajectory	2024 capex cut; FY25 outlook provided	Capex $190–$210M in 2025; declining to ~$110M by 2027; FCF target $500–$600M over 3 years	Improving FCF visibility

Management Commentary

“We met or exceeded our expectations… to deliver mid-single-digit top line growth and double-digit bottom line growth on a constant currency basis” — Michael Petras, CEO .
“Revenue came in higher than expected as some Cobalt-60 shipments originally scheduled for Q2 2025 occurred in Q1” — Jonathan Lyons, CFO .
“We do not expect the current tariff policies to have a material impact on our business… Cobalt-60 is exempt from tariffs under the USMCA” — Michael Petras .
“Nelson Labs… margin expansion… continued progress towards our low to mid-30s margin target” — Michael Petras .
“We successfully closed an amendment to our revolving credit facility [to $600M]… extending maturity to April 2030” — Jonathan Lyons .

Q&A Highlights

Tariffs: Management reiterated minimal impact; Nordion’s Canada→US Co-60 flows exempt under USMCA; some minor direct/indirect items not material .
Sterigenics volumes: Continued recovery expected across 2025; bioprocessing sequential and YoY growth albeit small portion of mix .
Nelson Labs margins: Drivers include regulatory-driven demand (e.g., USP 665), price discipline, stable labor, and lab optimization; path to 30s margin reiterated .
Legal strategy: Confident in defense when science is central; Illinois settlement charge booked; uptick in California case count noted; no active litigation in NC/TX .
FX and quarterly cadence: Nordion shipment timing boosted Q1; margin improvement through 2025 to be led by Nelson; one fewer selling day in Q1 .
Capex/FCF: Capex expected to decline toward ~$110M by 2027, enabling $500–$600M FCF over next 3 years (no M&A assumed) .

Estimates Context

Q1 2025 results vs consensus: Revenue $254.5M vs $245.8M*, Adjusted EPS $0.14 vs $0.122*, Adjusted EBITDA $121.8M vs $113.6M*; all beats. Values retrieved from S&P Global*.
Forward quarters: Street models mid-teens to mid-20s EPS per quarter and ~$300M revenue prints into late 2025*, consistent with mid-single-digit growth narrative and improving FX. Values retrieved from S&P Global*.
Potential estimate revisions: FX headwind improvement and Nelson margin trajectory likely support upward bias to EBITDA/EPS; shipment timing at Nordion may reallocate quarter-by-quarter revenue but not change full-year .

Key Takeaways for Investors

Reaffirmed FY25 guidance with better FX assumptions is constructive; underscores operational resilience despite legal charges .
Sterigenics volume recovery and firm pricing (~4%) support margin mix; watch for continued sequential improvement as the year progresses .
Nelson Labs’ margin expansion is becoming a trend; execution toward low-to-mid 30s margin is a medium-term value driver .
Nordion’s revenue timing can create quarterly noise; management’s full-year outlook and minimal Russia supply risk (~0–2%) mitigate structural concerns .
Liquidity strengthened via revolver amendment to $600M and maturity extension to 2030; deleveraging and declining capex path set up $500–$600M FCF over 3 years .
Legal overhang persists but is being actively managed; GAAP volatility from settlements remains a headline risk despite steady non-GAAP performance .
Trading setup: near-term catalysts include Sterigenics volume trajectory and Nelson Labs margins; improved FX and reaffirmed guide reduce downside risk, while any regulatory/legal developments (EO/NESHAP) could drive volatility .

Notes: All periods and figures cited from company documents; estimates marked with * are from S&P Global and may reflect consensus methodologies that differ from company non-GAAP definitions.

Sotera Health Co (SHC)·Q1 2025 Earnings Summary