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Sotera Health Co (SHC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered revenue of $311.3M (+9.1% YoY) and Adjusted EPS of $0.26, both ahead of S&P Global consensus; revenue beat by ~$7.7M and Adjusted EPS beat by ~$0.04, with Adjusted EBITDA of $164.2M and margin expanding ~150 bps YoY to 52.7% (Consensus: Revenue $303.7M*, EPS $0.218*).
  • Management raised FY25 Adjusted EBITDA growth to 6.75–7.75% (from 6.0–7.5%), cut capex to $125–135M (from $170–180M) and improved interest expense ($154–158M) and tax rate (29–31%) guidance; Adjusted EPS raised to $0.81–0.86 (from $0.75–0.82) .
  • Sterigenics grew revenue 9.8% to $192.8M with margin +90 bps YoY; Nordion up 22.4% to $62.8M (license renewed for 25 years), while Nelson Labs fell 5.0% to $55.7M but posted margin expansion to 34.1% .
  • Balance sheet strengthened via $75M term loan repayment, repricing (-50 bps spread) and achieving a contractual leverage step-down (-25 bps), taking net leverage to 3.3x and cutting annual interest by ~$13M .
  • Stock reaction catalysts: guidance raise (EPS/EBITDA), margin expansion, deleveraging/interest cuts, 25-year Nordion license renewal, and litigation momentum in Georgia (appeals ruling vacating a lower standard, and 3 dismissals on specific causation) .

What Went Well and What Went Wrong

What Went Well

  • Broad-based execution drove top-line and margin: “strong top-line revenue growth and double-digit Adjusted EBITDA growth, with approximately 150 basis points of margin expansion” (CEO) .
  • Sterigenics strength: +9.8% revenue with pricing +3.8%, volume/mix +4.6%; segment margin +90 bps YoY to 55.6% .
  • Nelson Labs margins improved for the fifth consecutive quarter with lab optimization and favorable pricing; Q3 segment margin reached 34.1% (CEO) .
  • Balance sheet actions: $75M debt repayment and term loan repricing expected to save ~$13M annually (CFO) .
  • Strategic milestone: Nordion secured a 25-year Class 1B operating license, the longest ever granted by the CNSC (CEO) .

What Went Wrong

  • Nelson Labs revenue declined 5% YoY, pressured by Expert Advisory Services amid reduced FDA activity; management expects a step-back in Q4 margins from Q3 peak .
  • Nordion margin mix: despite 22.4% revenue growth, segment margin dipped ~130 bps YoY to 60.6% due to product mix (equipment sales) .
  • Litigation/EO spend persisted: $11.2M of professional services in Q3 tied to EO facilities; year-to-date $37.5M .
  • Ongoing EO legal exposure across states (CA, GA, NM) remains a headline risk; insurance recovery efforts still pending outcomes in courts .

Financial Results

Consolidated Performance (sequential Q1→Q3; include YoY growth per quarter)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$254.523 $294.341 $311.312
GAAP Diluted EPS ($)$(0.05) $0.03 $0.17
Adjusted EPS ($)$0.14 $0.20 $0.26
Adjusted EBITDA ($USD Millions)$121.839 $150.735 $164.190
Adjusted EBITDA Margin (%)47.9% 51.2% 52.7%
Net Income ($USD Millions)$(13.260) $7.962 $48.400
YoY Revenue Growth (%)+2.6% +6.4% +9.1%

Segment Breakdown

SegmentQ1 2025 Revenue ($M)Q2 2025 Revenue ($M)Q3 2025 Revenue ($M)Q1 2025 Segment Income ($M)Q2 2025 Segment Income ($M)Q3 2025 Segment Income ($M)
Sterigenics$169.684 $194.839 $192.845 $88.004 $107.745 $107.155
Nordion$32.557 $42.431 $62.805 $17.422 $23.477 $38.048
Nelson Labs$52.282 $57.071 $55.662 $16.413 $19.513 $18.987

KPIs and Balance Sheet

KPIQ1 2025Q2 2025Q3 2025
Net Leverage (x)3.6x 3.5x 3.3x
Net Debt ($USD Millions)$2,013.031 $1,983.691 $1,941.621
Cash & Equivalents ($USD Millions)$306.081 $334.272 $301.026
Capex ($USD Millions, period-to-date)$19.918 (Q1) $51.147 (H1) $87.319 (9M)

Q3 vs S&P Global Consensus (Beat/Miss)

MetricConsensus (Q3 2025)Actual (Q3 2025)Surprise
Revenue ($USD Millions)$303.651*$311.312 +$7.661
Adjusted EPS ($)$0.218*$0.26 +$0.042
Adjusted EBITDA ($USD Millions)$155.516*$164.190 +$8.674

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious Guidance (Aug 8)Current Guidance (Nov 4)Change
Net Revenues Growth (cc)FY 20254.5%–6.0% 4.5%–6.0% Maintained
FX impact to Net RevenuesFY 2025Neutral ~+25 bps Raised
Adjusted EBITDA Growth (cc)FY 20256.0%–7.5% 6.75%–7.75% Raised
FX impact to Adjusted EBITDAFY 2025Neutral ~+25 bps Raised
Interest Expense ($M)FY 2025$155–$165 $154–$158 Improved
Tax Rate (Adj. Net Income)FY 202531.5%–33.5% 29%–31% Improved
Adjusted EPS ($)FY 2025$0.75–$0.82 $0.81–$0.86 Raised
Diluted Share Count (M)FY 2025286–287 286–287 Maintained
Capital Expenditures ($M)FY 2025$170–$180 $125–$135 Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Sterigenics pricing & demandPricing tailwind, improving volumes in medtech/bioprocessing Pricing ~3.8%, broad-based volume recovery; guidance confidence (no “budget flush” assumed) Stable/high-single-digit growth; resilient demand
Nordion supply & timing (“lumpiness”)Growth driven by reactor harvest timing; margin sensitive to mix 22.4% revenue growth; some deliveries pulled into Q3; margins dip on equipment mix; 25-year license renewal Supply secured long term; quarterly variability persists
Nelson Labs advisory vs core testingAdvisory headwind; core testing/embedded labs improving Advisory pressured by reduced FDA activity; core testing growth and margin expansion; Q4 margin step-down from Q3 peak Near-term headwind; 2026 growth potential discussed
Litigation (EO)IL settlements; NM AG case narrowed; ongoing cases GA appeals vacated Phase 1 standard; 3 bellwethers dismissed on specific causation; IL settlements progressing Legal posture improving (science-based standards)
Capital structure & interestRefinancing in 2024; deleveraging underway $75M term loan paydown; repricing (-50 bps); step-down (-25 bps) → ~$13M annual savings; net leverage 3.3x Lower interest burden; leverage trending down

Management Commentary

  • CEO: “Strong top-line revenue growth and double-digit Adjusted EBITDA growth, with approximately 150 basis points of margin expansion.”
  • CEO on Nordion: “Nordion recently secured a twenty five year renewal of its Class 1B operating license…the longest…ever granted by the CNSC.”
  • CFO: “We repriced the term loan for an additional 50 basis point reduction and repaid $75,000,000…expected to generate approximately $13,000,000 in annual interest savings.”
  • CFO on guidance: “We are raising our constant currency adjusted EBITDA growth outlook to 6.75% to 7.75%… and adjusted EPS to $0.81 to $0.86.”
  • CEO on litigation: “We believe the recent Phase one and Phase two rulings align with our long standing position… the evidence refutes the plaintiff's claims.”

Q&A Highlights

  • Volume recovery: Medtech and bioprocessing volumes broadly improving at Sterigenics; recovery expected to continue (CEO) .
  • Expert Advisory Services: Weakness tied to reduced FDA activity; ~10 percentage points impact on top-line within Nelson Labs; margins to step back in Q4 from Q3 peak (CEO/CFO) .
  • Nordion margins: Mix shift (equipment sales) pressured margin despite strong revenue; viewed as sporadic and not material long-term (CEO) .
  • Pricing trajectory/NESHAP compliance: Sterigenics pricing running at high end of 3–4%; niche application pricing could add over time as investments/regulations roll out (CEO) .
  • Tariffs/supply chain: Minimal impact observed; no material pull-forward effect detected in Sterigenics volumes (CEO) .

Estimates Context

  • Q3 2025 outcome vs consensus: Revenue $311.3M beat ($303.7M* cons.), Adjusted EPS $0.26 beat ($0.218* cons.), Adjusted EBITDA $164.2M beat ($155.5M* cons.) .
  • Forward look (Q4 2025 consensus): Revenue ~$299.2M*, EPS ~$0.242* (company noted Nordion “lumpiness” down YoY in Q4 due to timing) .
    Values retrieved from S&P Global.*

Where estimates may need to adjust:

  • Raise models for FY25 Adjusted EPS to $0.81–0.86 and EBITDA growth to 6.75–7.75% cc; reduce FY25 capex to $125–135M per guidance .
  • Nelson Labs advisory headwinds likely temper Q4 margin, while Sterigenics/Nordion operational execution supports consolidated profitability .

Key Takeaways for Investors

  • Consolidated beat with accelerating margins and an FY25 guidance raise for EBITDA and EPS; narrative improving on execution and cost discipline .
  • Sterigenics: resilient mid/high-single-digit growth profile with stable pricing and broad volume recovery; margin durability through inflation .
  • Nordion: 25-year license materially de-risks long-term Co-60 supply; expect quarterly “lumpiness” but favorable full-year trajectory .
  • Nelson Labs: near-term advisory headwind, but core testing and embedded labs are growing; management indicated a logical path to growth resumption in 2026 .
  • Balance sheet: active deleveraging and repricing lower interest burden; net leverage down to 3.3x and no revolver borrowings .
  • Litigation momentum: Georgia appeals and bellwether dismissals strengthen defense stance; Illinois settlements progressing; monitor California timelines .
  • Trading setup: Guidance raise, margin expansion, lower capex, and interest savings are near-term positives; watch Q4 Nordion timing/Nelson Labs margin cadence and ongoing EO headlines .

Appendix: Additional Data Points

  • Q3 revenue mix: Service $255.5M, Product $55.8M .
  • Q3 gross profit $177.6M; SG&A $63.3M; interest expense $39.1M .
  • Q3 EO-related professional services: $11.2M; YTD $37.5M .
  • Liquidity: ~$890M available (cash ~$300M + ~$592M undrawn revolver capacity) (CFO) .

Values retrieved from S&P Global.*