STERIS plc

Good day and welcome to the Steris PLC 4th Quarter 2026 Financial Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a 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 touchtone phone. To withdraw your question, please press star, then two. Please note, This event is being recorded. I would now like to turn the conference over to Julie Winter, Investor Relations. Please go ahead.

Thank you, Chad, and good morning, everyone. Speaking on today's call will be Karen Burton, our Senior Vice President and CFO, and Dan Crestio, our President and CEO. And I do have a few words of caution before we open for comments. This webcast contains time-sensitive information that is accurate only as of today. Any redistribution, retransmission, or rebroadcast of this call without the express written consent of Staris is strictly prohibited. Some of the statements made during this review are, or may be considered, forward-looking statements. Many important factors could cause actual results to differ materially from those in the forward-looking statements, including without limitation, those risk factors described in Staris' securities filings. The company does not undertake to update or revise any forward-looking statements as a result of new information or future events or developments. Staris' SEC filings are available to the company and on our website. In addition, on today's call, non-GAAP financial measures including adjusted earnings per diluted share, adjusted operating income, constant currency organic revenue growth, and free cash flow will be used. Additional information regarding these measures, including definitions, is available in our press release, as well as reconciliations between GAAP and non-GAAP financial measures. Non-GAAP financial measures are presented during this call with the intent of providing greater transparency to supplemental financial information used by management and the Board of Directors in their financial analysis and operational decision-making. With those cautions, I will hand the call over to Karen.

Thank you, Julie, and good morning, everyone. It is my pleasure to be with you this morning to review the highlights of our fourth quarter performance from continuing operations. As anticipated, we ended this strong year with a lighter fourth quarter. For the fourth quarter, total as-reported revenue grew 7%. Constant currency organic revenue grew 5% in the quarter, driven by volume, as well as 230 basis points of price. Gross margin for the quarter was 44%, down 30 basis points versus the prior year. We continue to realize positive pricing, which helped mitigate the impact of higher tariffs and inflation. EBIT margin for the quarter was 24.2% of revenue, a high for fiscal 2026. This was 60 basis points below the fourth quarter last year, mainly driven by inflation and tariffs. Incremental tariffs impacted our fourth quarter by approximately $10 million, which was below our expectations due to lower volumes in materials and products sourced from outside the U.S. The adjusted effective tax rate in the quarter was 25.4%, an increase from 23.5% in the fourth quarter last year. The year-over-year increase was driven primarily by changes in geographic mix and unfavorable discrete items. Adjusted net income from continuing operations in the quarter was $278.3 million. Earnings per diluted share from continuing operations were $2.83, a 3% increase over the prior year, as the lower margin and higher tax rate limited earnings growth in the quarter. Before I turn to cash flow for the year, I want to dig into the upward pressure on our tax rate for a moment. For the full year, fiscal 2026, our adjusted effective tax rate was 24.4%, an increase of 130 basis points from fiscal 2025. Our tax rate varies based on many factors, most notably geographic profit mix and discrete item adjustments, which include withholding taxes. Since we generate the majority of our profit in the United States, it is common that we need to move cash across borders to deploy capital. This movement may trigger U.S. withholding taxes. Our fiscal 2027 guidance assumes that in accordance with our capital allocation priorities, we will increase the dividends, reinvest in our business, invest to grow through M&A, and return excess cash to shareholders through our share buyback program. To fund some of these priorities, we expect to incur additional withholding tax, putting further upward pressure on our effective tax rate. This is reflected in our estimate of 25% in fiscal 2027. Capital expenditures for fiscal 2026 totaled $369 million, and depreciation and amortization totaled $486.5 million. We ended the year with a strong balance sheet, reflecting $1.9 billion in total debt. Gross debt to EBITDA at year end was approximately 1.2 times, well below our targets of 2 to 2.5 times. Free cash flow for fiscal 2026 was exceptional at $982.9 million. With year-over-year improvement driven primarily by an increase in earnings, which more than offset the significantly lower contribution from working capital in fiscal 2026 compared with fiscal 2025. To provide some context, recall that the working capital improvement that we generated in fiscal 2025 was primarily the result of targeted inventory reductions as we recovered from supply chain challenges. Going forward, we would expect our working capital will grow in line with volumes. Once again, we are heading into a new fiscal year in a strong financial position with continued commitment to our capital allocation priorities. With that, I will now turn the call over to Dan for his remarks.