Sotera Health Company

Good morning and welcome to the Sotera Health fourth quarter 2022 conference call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch-tone phone. To withdraw from the question queue, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Vice President and Treasurer Jason Peterson. Please go ahead.

Good morning and thank you. Welcome to Soterra Health's fourth quarter 2022 results call. You can find today's press release and accompanying supplemental slides on the investor section of our website at soterrahealth.com. This webcast is being recorded and a replay will be available in the investor section of the Soterra Health website. On the call with me today are Chairman and Chief Executive Officer Michael Petras and Interim Chief Financial Officer Michael Beal. During the call, some of our comments may be considered forward-looking statements. The matters addressed in these statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied. Please refer to Soterra Health's SEC filings in the forward-looking statement slide at the beginning of this presentation for description of these risks and uncertainties. The company assumes no obligation to update any such forward-looking statements. Please note that during the discussion today, the company will present both GAAP and non-GAAP financial measures, including adjusted EBITDA, adjusted EPS, net debt, net leverage ratio, and constant currency comparisons. A reconciliation of GAAP to non-GAAP measures for all relevant periods may be found in the schedules attached to the company's press release and in its supplemental slides. The operator will be assisting with the Q&A portion of the call today. Please limit yourself to one question and one follow-up so that we can try and give everyone an opportunity to ask questions. As always, if you have any questions post-call, feel free to reach out to me and the investor relations team. I'll now turn the call over to Soterra Health Chairman and CEO, Michael Futures.

Good morning, everyone, and welcome to Soterra Health's fourth quarter 2022 earnings call. This morning, we reported another quarter of year-over-year top and bottom line growth. We have achieved both top and bottom line growth in each quarter since becoming a public company in November of 2020, which speaks to the strength and resiliency of our business model. Consistent with my commentary during our third quarter earnings call, while we see improvement in certain areas of the broader macro environment, some headwinds still exist. Safeguarding global health remains our mission as we execute on delivering growth and profitability for our shareholders. Michael Beal will provide more detail on the financial results in a moment, but first I want to highlight a few items from our fourth quarter and full year results. We reported total revenue growth of 4.3% and adjusted EBITDA growth of 4% compared to the fourth quarter of 2021. We delivered adjusted EPS at 25 cents for the quarter, which is a two cent increase over the same period last year. For the full year, Revenue grew by 7.8% and adjusted EBITDA grew by 5.2% compared to the prior year. I am proud that we've extended our streak of annual revenue growth, which we've achieved since 2005 when we started tracking it. Let me now shift to cover each of the business unit results. Sterigenics, our largest reporting segment, delivered 7.6% top-line growth for the quarter. The segment saw solid demand across all modalities. For the full year, Sterigenics delivered 9.6% revenue growth. Consistent with our Sterigenics strategy, we are making significant investments in additional capacity across our global network. Currently, Sterigenics is progressing with seven capacity expansions across all major geographies and modalities. We are also advancing our EO emission control enhancements across our North American facilities. These industry-leading enhancements underscore our ongoing commitment to ensure best-in-class operations for our employees, customers, and the communities in which we operate. Nordian, our other reporting segment within the sterilization services business, had a good year. At the beginning of 2022, we indicated that a total disruption of Cobalt-60 supply from Russia could result in an up to 3% impact on total Sotero Health revenues. I am pleased to say that the Nordian team has done an exceptional job navigating this geopolitical risk in 2022 and avoided the potential 3% revenue risk from Russian-supplied Cobalt-60. As we consistently message, Nordian's revenues are lumpy due to the timing of Cobalt-60 harvest supply schedules. As expected for the quarter, Nordian's revenue declined by 7.1%, which was driven by the timing of Cobalt-60 harvest schedules. However, when viewed on a longer-term basis, Norion's revenue stream is very consistent. For the year, Norion revenues were up 9.3%. 2022 was a challenging year for Nelson Labs, our lab testing and advisory service business. Fourth quarter 2022 revenue grew by almost 3% compared with the same period in the prior year, while revenues grew approximately 2% year over year, or 4.4% on a constant currency basis. I am pleased with the Nelson team as they navigate through labor and supply chain challenges in 2022. Overall, 2022 was a good year for Satara Health considering the uncertainty driven by macroeconomic pressures in geopolitical events. As projected, we deployed the greatest amount of capital in the company's history to fund capacity expansions, cobalt development, EO emission control enhancements in various operational excellence projects across each business. This level of investment speaks to the company's commitment to growth. Additionally, our balance sheet ended the year in a strong position with net leverage finishing at 3.2 times, well within the long-term range of two to four times. As communicated in the press release last week, Cetera Health closed on the issuance of a $500 million term loan B. The proceeds of this incremental debt financing, along with cash on hand, will be used to fund the $408 million ethylene oxide litigation settlement in Cook County, Illinois, paying off the existing borrowings under our revolving credit facility to further enhance liquidity and for other general corporate purposes. We are pleased that this issuance receives such very positive interest from the market and puts us in a strong liquidity position moving forward. Although this new borrowing will initially increase our net leverage ratio slightly above four times, we expect net leverage to settle within our long-term target range of two to four times by the end of 2023. As for the Illinois EO settlement, the Plaintiff's Executive Committee reports that the process is on track for participation rates to be determined by late April or early May. We are scheduled to fund an escrow account for the settlement on May 1st, and subject to participation by substantially all the eligible claimants, we expect the settlement to be completed and the settled cases to be dismissed by late July or early August. I also want to take a moment to highlight the progress made on our ESG initiatives this past year. While I reflect on how far we've come in the past year, I am proud of our team's accomplishments. As part of our IPO, the Board established ESG oversight with our nominating and corporate governance committee. We established an internal cross-functional ESG committee which reports into me and appointed two seasoned senior executives as co-chairs to help lead the identification and implementation of ESG initiatives consistent with our overall business strategy. During 2022, we achieved numerous corporate responsibility accomplishments. I want to highlight a few of the specific activities. In the environment area, we established consistent environmental health and safety metrics across global businesses. We launched a new global EHS policy, added incremental EHS leadership, and engaged a third-party software solution to assist in establishing baseline EHS metrics. In addition, we continue our investment in state-of-the-art emission controls at our EO facilities. With respect to human capital, culture in our communities We completed our annual global employee engagement survey with 84% participation. We launched the Cetera Health Women's Network, leveraging the work done at Nelson Labs on women's leadership development and expanding its impact across the company. Additionally, we developed a new career website and completed our Leading for Our Future leadership development program, which had the project team focused on ESG activities. In 2022, we also launched a new corporate responsibility website and published our first corporate responsibility report. In addition to the operational and financial performance, our ESG initiatives combined to make an impressive and very busy year for the team. We look forward to reporting on our ESG progress in future calls. As we look forward to 2023, We will continue to focus on our priorities. A few of these are investing for organic growth, which includes adding capacity, enhancing our infrastructure, and investing in cobalt development programs. We will continue to invest in upgrades to our North American EO emission control systems. We remain committed to our focus on operational excellence, which involves improving customer service across our businesses. We will continue to be disciplined with capital while deleveraging our balance sheet during the course of the year. Today, we also provide our initial outlook for 2023. For the full year 2023, we expect total revenues in the range of $1.055 to $1.090 billion, which represents growth of approximately 5% to 9%. Adjusted EBITDA in the range of $530 to $550 million, resulting in growth of approximately 5% to 9%. And adjusted EPS in the range of 78 cents to 86 cents, representing a decline of 10 to 19%, which is driven by increased interest expense and expected increase in our adjusted net income tax rate. Now, Michael Beal will take us through the financials in more depth. Thank you, Michael.