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Sotera Health Co (SHC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 results showed core Sterigenics growth offset by expected Nordion lumpiness: net revenues $290.203M (-6.5% YoY), Adjusted EBITDA $152.934M (-8.3% YoY), Adjusted EPS $0.21 vs $0.23 in Q4’23; FY24 delivered $1.100B (+4.9% YoY) and ~50% Adjusted EBITDA margin .
  • Initial FY2025 outlook introduced: net revenue +4.0%–6.0% cc, Adjusted EBITDA +4.5%–6.5% cc, FX headwinds of ~2.25% on revenue and ~2.5% on EBITDA; Adjusted EPS $0.70–$0.76; CapEx $190–$210M .
  • Segment dynamics: Sterigenics grew Q4 revenue +4.2% on pricing and mix; Nordion declined as anticipated on harvest timing; Nelson Labs declined on lower Expert Advisory Services but improved margins on mix and productivity .
  • Potential stock catalysts: the 2025 guide signaling operating leverage, continued Nelson margin progression, clarity on cobalt/tariff impacts and FX headwinds, and visibility into declining CapEx beyond 2025 supporting FCF acceleration .

What Went Well and What Went Wrong

  • What Went Well

    • Sterigenics delivered Q4 revenue growth (+4.2% to $179.428M) with pricing +4.2% and favorable volume/mix; segment income +5.1% to $99.586M and ~50 bps margin expansion .
    • FY24 performance resilient: $1.10B revenue (+4.9%), Adjusted EBITDA $548.574M (+3.9%), ~50% margin; 19th consecutive year of revenue growth .
    • Nelson Labs margin improved YoY in Q4 (~+140 bps to 33%) on mix/pricing/productivity; management executed labor productivity and consolidated a smaller lab to lift leverage .

  • What Went Wrong

    • Q4 revenue and EBITDA down YoY due to Nordion’s harvest timing: Nordion revenue -28.9% to $56.791M; segment income -33.8% to $35.282M; segment margin down ~470 bps to 62% .
    • Nelson Labs Q4 revenue -7.3% to $53.984M on lower Expert Advisory Services, partially offset by pricing; segment income -3.3% to $18.066M .
    • FX and interest expense remained headwinds: FY24 interest expense $165M; 2025 FX headwind ~2.25%/2.5% on revenue/EBITDA expected, especially in first three quarters .

Financial Results

Quarterly performance trend

MetricQ2 2024Q3 2024Q4 2024
Net Revenues ($USD Millions)$276.594 $285.468 $290.203
GAAP Diluted EPS ($)$0.03 $0.06 $0.04
Adjusted EPS ($)$0.19 $0.17 $0.21
Adjusted EBITDA ($USD Millions)$137.335 $146.361 $152.934
Adjusted EBITDA Margin (%)49.7% 51.3% 52.7%

Segment breakdown

SegmentQ2 2024 Revenue ($M)Q2 2024 Segment Income ($M)Q3 2024 Revenue ($M)Q3 2024 Segment Income ($M)Q4 2024 Revenue ($M)Q4 2024 Segment Income ($M)
Sterigenics$176.354 $96.778 $175.574 $95.989 $179.428 $99.586
Nordion$41.244 $23.420 $51.313 $31.733 $56.791 $35.282
Nelson Labs$58.996 $17.137 $58.581 $18.639 $53.984 $18.066

FY 2024 key performance indicators

KPI (FY 2024)Value
Net Revenues ($USD Millions)$1,100.441
Adjusted EBITDA ($USD Millions)$548.574
Adjusted EBITDA Margin (%)49.9%
GAAP Net Income ($USD Millions)$44.398
Adjusted EPS ($)$0.70
Cash & Cash Equivalents ($USD Millions)$278.865
Total Debt ($USD Millions)$2,321.112
Net Debt ($USD Millions)$2,043.870
Operating Cash Flow ($USD Millions)$224.164
Capital Expenditure ($USD Millions)$179.070
Net Leverage (x)3.7x

Note on estimates: S&P Global consensus for Q4 2024 was not available at query time due to a data access limit; as a result, vs-consensus comparisons are not shown.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenues Growth (cc)FY 2025N/A (initial 2025 outlook)+4.0% to +6.0%New
FX Headwind to RevenueFY 2025N/A~2.25%New
Adjusted EBITDA Growth (cc)FY 2025N/A+4.5% to +6.5%New
FX Headwind to Adjusted EBITDAFY 2025N/A~2.50%New
Interest Expense ($M)FY 2025N/A$155–$165New
Adjusted EPS ($)FY 2025N/A$0.70–$0.76New
Tax Rate (Adj. Net Income)FY 2025N/A33%–35%New
Diluted Shares (M)FY 2025N/A286–287New
CapEx ($M)FY 2025N/A$190–$210New

Segment outlook color from call (qualitative):

  • Sterigenics: Q1’25 cc revenue growth low-to-mid single digits; FY mid-single-digit growth; pricing at high end of 3–4% company range .
  • Nordion: FY’25 cc revenue growth mid-single digits; 1H/2H split similar to 2024; Q1 up slightly YoY .
  • Nelson Labs: Back-half weighted; Q1 down low double digits YoY with better margins vs Q1’24; FY low-to-mid single-digit cc growth and sequential margin improvement .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Volume/mix recoverySterigenics positive volume returned; gradual improvement expected H2’24 Companywide volume/mix improved; reaffirmed FY outlook Gradual improvement into 2025; destocking noise limited to a few customers Improving steadily
PricingTotal company ~4% in Q2; framework 3.5–5% Pricing supporting margins across segments 2025 pricing ~midpoint of 3–4%; Sterigenics high end; Nelson/Nordion low end Stable, supportive
Nelson Labs marginsMargins down YoY but sequentially improving; labor focus Continued sequential margin gains; core testing volumes improving Durable benefits from labor productivity and lab consolidation; sequential improvement expected through 2025 Improving
BioprocessingSmall exposure; sequential improvement with one large customer lag Sequential growth in Q3, still down YoY Sequential improvements continued; expected to continue in 2025 Stabilizing
Regulatory (NESHAP)Not a major Q2 focusConfident on compliance; clarifications ongoing; industry challenge seen as net positive Execution continuing; no material change to rules; clarifications on measurement windows Managed risk
CapEx/FCFPeak CapEx cycle, step-down expected 2025–26 to boost FCF CapEx reduced in 2024; peak moved to 2025, then down through 2027 2025 CapEx $190–$210M; trending to ~$110M by 2027; $500–$600M FCF over next 3 years Peak near-term, then lower
Cobalt program (Darlington)Program progressing; first harvest expected 2028 First insertion completed; harvest 2028 expected On track; yields expected; capital lighter than planned On track
Tariffs/FXFX headwind noted—FX headwind in 2025 (~2.25%/2.5%); cobalt tariffs historically exempt; contracts push costs to customers FX headwind near-term

Management Commentary

  • “We reported both top and bottom line growth for the full year 2024, while delivering $1.1 billion of revenue and approximately 50% adjusted EBITDA margins. 2024 marks the 19th consecutive year of annual revenue growth.”
  • “For the full year 2025, we expect to deliver another year of top and bottom line growth… total company revenue growth 4% to 6% cc… Adjusted EBITDA growth 4.5% to 6.5% cc.”
  • “Sterigenics delivered 4.2% revenue growth… driven by favorable pricing as well as volume and mix… margins increased by ~50 bps.”
  • “We consolidated a lab [at Nelson], which supported our margin improvement for the quarter… labor productivity alignment with order patterns sets us up well for 2025.”
  • “The first installation of cobalt was placed into a Darlington reactor with an expected Cobalt-60 harvest in 2028.”

Q&A Highlights

  • Volume and destocking: Management sees gradual 2025 volume improvement with limited destocking impacts confined to a few customers; Sterigenics may see minor Q1 carryover, but broader trend improving .
  • Margin trajectory: Expect margin progress in 2025 (EBITDA growing faster than revenue); Q1 is the seasonal trough; Nelson margins to continue sequential improvement .
  • Nelson actions: Durable margin benefits from labor productivity and consolidation of a smaller lab; core lab volumes remain the focus; Expert Advisory Services is lower margin and lumpy .
  • FX/tariffs: 2025 FX headwinds ~2.25% revenue/~2.5% EBITDA; cobalt tariffs historically exempt; contractual structures shift costs to customers; any cobalt tariffs would be manageable .
  • CapEx and greenfields: One Sterigenics greenfield coming online in 2025 with minimal near-term margin impact; last greenfield likely into 2027; CapEx to decline meaningfully by 2027 .
  • Competitive context: On Sterigenics vs competitor growth, management emphasized quarter-to-quarter noise, geographies/bioprocessing mix, and a few customer-specific issues; confident in competitive position .

Estimates Context

  • Wall Street consensus estimates (S&P Global) for Q4 2024 were unavailable at the time of query due to an access limit, so vs-consensus comparisons cannot be shown at this time. If you’d like, I can refresh and add a vs-consensus table when access resumes.

Key Takeaways for Investors

  • Core engine intact: Sterigenics pricing power and modest volume/mix recovery are supporting margins, with mid-single-digit revenue growth embedded in 2025 .
  • Nordion volatility is transitory: Q4 declines reflect harvest timing; FY’25 mid-single-digit growth expected with 1H/2H cadence similar to 2024 .
  • Nelson margin story credible: Structural actions (labor/productivity, lab consolidation) and mix shift should continue to drive sequential margin improvement in 2025 despite softer Expert Advisory Services .
  • 2025 outlook implies operating leverage despite FX: Revenue +4–6% cc, EBITDA +4.5–6.5% cc; FX headwinds front-loaded, with Q1 seasonally lowest .
  • CapEx rolling off supports FCF: Peak CapEx now behind near-term after 2025; glide path to ~$110M by 2027 underpins $500–$600M 3-year FCF goal and deleveraging .
  • Tariff/cobalt risk monitored but manageable: Historical exemptions, cost pass-through, and diversified supply base help mitigate risk .
  • Execution watch items for 1H’25: FX impact vs pricing, Sterigenics volume trajectory, Nelson sequential margin gains, and any updates on tariff policy.

All figures and statements are sourced from Sotera Health’s Q4 2024 press release, 8-K, and earnings call transcript as cited above.