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Sotera Health Co (SHC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered solid execution: net revenues $294.341M (+6.4% YoY), Adjusted EBITDA $150.735M (+9.8% YoY), Adjusted EPS $0.20 (+$0.01 YoY) .
  • Results beat Wall Street consensus: revenue $294.341M vs $275.941M*, Adjusted EPS $0.20 vs $0.173*, and EBITDA outperformed consensus $137.219M*; company-reported Adjusted EBITDA was $150.735M, reflecting non-GAAP addbacks .
  • Guidance raised: FY25 net revenue growth to 4.5–6.0% (from 4.0–6.0%), Adjusted EBITDA growth to 6.0–7.5% (from 4.5–6.5%), Adjusted EPS to $0.75–$0.82 (from $0.70–$0.76); tax rate lowered to 31.5–33.5%; capex cut to $170–$180M .
  • Key catalysts: Sterigenics volume/mix momentum (+6% volume/mix, +4% price in Q2) ; Nelson Labs margin expansion (>500 bps) ; leverage improved to 3.5x (from 3.7x) .

Values retrieved from S&P Global.*

What Went Well and What Went Wrong

What Went Well

  • Sterigenics outperformed: revenue +10.5% YoY to $195M; segment income +11.3% to $108M, driven by favorable volume/mix and pricing . CEO: “more than 6% top-line growth… Adjusted EBITDA grew nearly 10%… 160 bps of margin expansion, driven by over 500 bps of improvement at Nelson Labs” .
  • Nelson Labs margin execution: segment income +13.9% YoY to $20M; margin expansion from core lab testing, optimization, and pricing; fourth consecutive quarter of YoY margin improvement .
  • Raised FY25 outlook across revenue/EBITDA/EPS, signaling confidence in trajectory; FX impact now expected neutral on full-year .

What Went Wrong

  • GAAP headwind from EO litigation settlements: $34M in Q2 and $64.943M YTD weighed on GAAP EPS (diluted $0.03) despite non-GAAP strength .
  • Nelson Labs revenue declined 3.3% YoY to $57M due to Expert Advisory Services softness, though margins improved .
  • Nordion segment margin decreased (supplier mix timing), despite revenue +2.9% YoY to $42M .

Financial Results

Consolidated Results and Trajectory

MetricQ4 2024Q1 2025Q2 2025
Net Revenues ($USD Millions)$290.203 $254.523 $294.341
GAAP Diluted EPS ($)$0.04 $(0.05) $0.03
Adjusted EPS ($)$0.21 $0.14 $0.20
Adjusted EBITDA ($USD Millions)$152.934 $121.839 $150.735
Adjusted EBITDA Margin (%)52.7% 47.9% 51.2%
Gross Profit ($USD Millions)$164.365 $135.432 $166.621
Cash and Cash Equivalents ($USD Millions, period-end)$278.865 $306.081 $334.272
Net Leverage (x, period-end)3.7x 3.6x 3.5x

Q2 2025 vs Consensus

MetricQ2 2025 Consensus*Q2 2025 Actual
Revenue ($USD Millions)$275.941*$294.341
Adjusted/Primary EPS ($)$0.173*$0.20
EBITDA ($USD Millions)$137.219*$150.735 (Adjusted EBITDA)

Values retrieved from S&P Global.*

Segment Breakdown – Q2 2025

SegmentRevenue ($USD Millions)YoY ChangeSegment Income ($USD Millions)YoY Change
Sterigenics$194.839 +10.5% $107.745 +11.3%
Nordion$42.431 +2.9% $23.477 Slight increase; margin down on supplier mix
Nelson Labs$57.071 −3.3% $19.513 +13.9%

Operating Drivers and KPIs

  • Sterigenics Q2 drivers: +6% volume/mix, +4% pricing, ~50 bps FX tailwind .
  • FX tailwind ~40 bps quarter-wide; full-year FX impact reset to neutral .
  • Liquidity: $334M cash, $600M undrawn revolver; net leverage 3.5x .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenues Growth (cc)FY 20254.0% – 6.0% 4.5% – 6.0% Raised
Adjusted EBITDA Growth (cc)FY 20254.5% – 6.5% 6.0% – 7.5% Raised
FX Impact (Revenue/Adj. EBITDA)FY 2025Headwind ~1.25%/~1.50% (updated May 1) Neutral (based on avg Q2 FX) Improved
Interest ExpenseFY 2025$155M – $165M $155M – $165M Maintained
Tax Rate (Adj. Net Income)FY 202533.0% – 35.0% 31.5% – 33.5% Lowered
Adjusted EPSFY 2025$0.70 – $0.76 $0.75 – $0.82 Raised
Diluted Shares (WAVG)FY 2025286M – 287M 286M – 287M Maintained
Capital ExpendituresFY 2025$190M – $210M $170M – $180M Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Sterigenics demand/priceQ4: Pricing + vol/mix drove growth; FX a headwind . Q1: growth primarily pricing; FX headwind .Q2: +6% volume/mix, +4% price; mid-to-high single-digit FY growth outlook; some back-half maintenance downtime .Improving volume trajectory
Nelson Labs marginQ4: margin improved on lower EAS revenue, pricing, productivity . Q1: optimization and pricing drove margin gains amid EAS revenue decline .Q2: >500 bps margin expansion; fourth consecutive YoY margin improvement .Sustained margin expansion
Nordion lumpinessQ4: reactor harvest timing drove declines . Q1: strong YoY on harvest timing .Q2: modest growth; margin down on supplier mix; 60% revenue H2-weighted; Q4 down mid-teens YoY on shipment timing .Lumpy but managed
FXQ1: headwind reduced in outlook .Q2: quarterly tailwind ~40 bps; full-year neutral .Improving
Regulatory/legal (EO/EPA)Ongoing EO litigation costs; governance updates (FY24 PR) .EPA NESHAP implementation extension helps optimal installation/validation; continued investment; competitive position unchanged .Manageable execution window
Supply chain/tariffsPrior comms: general inflation/tariff impacts (FY24 PR) .No material tariff pull-forward seen; customers moving supply chains; SHC positioned in U.S.; incremental capacity program greenlit for late 2027 .Neutral-to-positive positioning

Management Commentary

  • CEO on performance and margin drivers: “more than 6% top-line growth… Adjusted EBITDA grew nearly 10%… approximately 160 basis points of margin expansion, driven by over 500 basis points of improvement at Nelson Labs” .
  • CFO on Sterigenics contribution: “Revenue growth… driven by … volume and mix contribution of 6%, pricing of 4% and a benefit from foreign currency … ~50 basis points” .
  • CEO on regulatory timing: extension “gives us an opportunity to facilitate optimal installation and validation of some of the emissions controls… we feel good about the competitive environment long term” .
  • CFO on leverage and cash: “available liquidity… $918M… net leverage ratio of 3.5x, an improvement from 3.7x” .
  • CEO on capacity: moving forward with a U.S. program for incremental capacity, targeted for late 2027, aligned to customer pricing commitments and construction economics .

Q&A Highlights

  • Tariffs/pull-forward: Management does not see material tariff-related pull-ins; strength reflects underlying volume recovery across medtech and bioprocessing .
  • Nelson Labs margin drivers: labor productivity and mix shift from Expert Advisory to core testing; price ~3% in quarter; sustained low-to-mid 30s margin target .
  • EPA ETO rule timing: extension viewed as helpful to optimize installations; continued investment; competitive implications limited .
  • Sterigenics modality mix: volumes strong across EO, e-beam; new X-ray capacity in Southeast expected by year-end; gamma softer but progressing .
  • Outlook details: Nordion ~60% revenue in H2; Q4 down mid-teens on shipment timing; Russian Co-60 exposure <0.5% of total company revenue .
  • Tax rate: lower midpoint for 2025 due to U.S. law change increasing deductible interest to 30% of U.S. EBITDA; trajectory could improve with growth .

Estimates Context

  • Q2 2025 beats: revenue $294.341M vs $275.941M*, Adjusted EPS $0.20 vs $0.173*, EBITDA actual $150.735M (Adjusted) vs $137.219M*; note that S&P Global “EBITDA actual” may reflect a different basis than company-reported Adjusted EBITDA .
  • Outlook raises imply upward estimate revisions to FY25 EPS/EBITDA and Sterigenics growth, with Nelson Labs margins trending higher despite low-single-digit revenue decline for FY25 .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Sterigenics momentum and pricing discipline are the principal earnings drivers; watch for maintenance downtime impact in H2 but trajectory remains constructive .
  • Nelson Labs margin expansion is durable; expect low-to-mid 30s margins with core testing strength offsetting EAS headwinds .
  • Nordion remains lumpy; Q4 expected down mid-teens YoY on shipment timing; use multi-quarter lens for modeling .
  • FY25 guidance raises across revenue/EBITDA/EPS and lower tax rate/capex support higher FCF conversion; leverage trending toward 2–3x longer term .
  • Regulatory timeline extension reduces execution risk; SHC’s U.S. capacity positioning and late-2027 program could capture supply-chain shifts .
  • Non-GAAP adjustments (EO settlements, professional fees) materially impact GAAP; focus on Adjusted metrics and legal developments cadence .
  • Near-term trade: positive estimate revisions and confidence in Sterigenics volumes are likely stock catalysts; monitor FX neutrality and H2 maintenance timing .

Additional Documents Reviewed

  • Q2 2025 earnings press release/8-K with full financials and guidance .
  • Q2 2025 earnings call transcript including segment drivers, FX, regulatory, and capital deployment commentary .
  • Prior quarter press releases for trend analysis: Q1 2025 and Q4 2024 .

Values retrieved from S&P Global.*