Sotera Health Company

Good morning, and welcome to the Sotera Health first quarter of 2025 earnings call. All participants will be in a listen-only mode for the duration of the call, and should you need any assistance, please signal your conference specialist 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 one on your touch-tone phone. To withdraw from the question queue, please press star, then two. Please also note that this event is being recorded. I would now like to turn the conference over to Vice President of Investor Relations and Treasurer, Jason Peterson. Jason, I turn the call over to you.

Good morning, and thank you. Welcome to Sotera Health's first quarter 2025 earnings call. You can find today's press release and accompanying supplemental slides on the investor section of our website at soterahealth.com. This webcast is being recorded, and a replay will be available in the investor section of the Sotera Health website. On the call with me today are Chairman and Chief Executive Officer Michael Petras and Chief Financial Officer John Lyons. 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 Sotero Health's SEC filings in the forward-looking statement slide at the beginning of this presentation for a 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 EBITDA margin, tax rate applicable to net income, adjusted net income, adjusted EPS, net debt, net leverage ratio, and free cash flow, as well as 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 the supplemental slides to this presentation. 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 give everyone an opportunity to ask questions. If you have any questions after the call, please feel free to reach out to me and the investor relations team. I'll now turn the call over to Sotero Health Chairman and CEO, Michael Petras.

Good morning, everyone, and thank you for joining Sotero Health's first quarter 2025 earnings call. Today, we announced a solid start to the year as 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 compared to the first quarter of 2024. Total company revenues increased 2.6% or 4.4% on a constant currency basis and adjusted EBITDA increased 8.8% or 11.2% on a constant currency basis compared to the first quarter of 2024. We delivered adjusted EPS of $0.14 for the quarter, a $0.01 improvement versus the same period last year. Sterigenics, our largest reporting segment, delivered top-line growth in line with what we communicated during our fourth quarter 2024 earnings call, with margin expansion of approximately 30 basis points versus the first quarter of 2024. Sterigenics has a leading position in a $4.5 billion sterilization service addressable market with positive underlying trends driven by aging population, healthcare spending, product innovation, and stringent regulatory requirements. The Sterigenics team excels at delivering on these requirements, which is a critical source of advantage in capturing and retaining customer volume. We are in a strong position and are optimistic as today's sterilization volumes continue to improve. NORDAN delivered higher revenue for the first quarter than anticipated as some Cobalt 60 shipments originally scheduled for the second quarter of this year shifted in the first quarter at the request of our customers. This shift in timing will impact second quarter revenues, but the full year outlook for Nordean remains unchanged. Nelson Labs outperformed the expectations for the first quarter that we outlined during our fourth quarter 2024 earnings call. Improved first quarter core lab testing volumes partially offset the revenue headwind from expert advisory services. The Nelson team continues to do a great job with lab optimization and price performance, which resulted in 479 basis point margin expanses and versus the first quarter of 2024. This marks the third consecutive quarter of year-over-year Nelson Labs margin expansion and demonstrates continued progress towards our low to mid-30s margin target. This morning, we are reaffirming our outlook from our February earnings call. As a reminder, our 2025 outlook calls for revenue growth in the range of 4% to 6% and adjusted EBITDA growth in the range of 4.5% to 6.5% on a constant currency basis versus 2024. John will update you on FX, which is improving versus our prior outlook. I want to take a moment to touch on the topic of tariffs. We do not expect the current tariff policies to have a material impact on our business at this time. Approximately 85% of total company revenue is service revenue, and we believe the strategic service-based structure positions a company well to navigate the current tariff environment. Nordion, our one product business, sells Cobalt 60 from Canada into the United States. Currently, Cobalt 60 is exempt from tariffs under the USMCA. Before I hand it over to John, I'd like to share a recent example that touched the lives of so many and demonstrates the important value we deliver to our customers across our businesses. Together, our teams across Nelson Labs and Sterigenics recently played a critical role in securing FDA clearance for the first ever bionic pancreas. At Nelson Labs, our scientists performed the biocompatibility testing while regulatory experts helped our customers navigate the numerous requirements to get the product to market. Our team at Sterigenics then provided the mandated product sterilization, which is crucial for device use and patient safety. Our integrated expertise in science, quality, and navigating the regulatory environment provides our customers with the peace of mind that their products will be safe. For insulin-dependent diabetic patients, this means 100% of their insulin doses can be fully automated, and this innovative device can connect to numerous continuous glucose monitors. This is a great example of how we get involved early in the development phase for new products to serve our customers and grow our business, ultimately shifting product mix to higher growth and higher value segments. Our mission of safeguarding global health comes with great responsibility, and every day I'm proud to see our teams living our mission.