Sotera Health Q1 Earnings Call Highlights

Key Points

• Strong Q1 performance: Sotera reported revenue up 10% to $280 million and adjusted EBITDA up 10.5% to $135 million (adjusted EPS $0.18, +~29%), and management reaffirmed 2026 guidance — revenue $1.233–1.251B, adjusted EBITDA $632–641M, adjusted EPS $0.93–1.01.
• Leadership transition: The board appointed Alton Shader as CEO effective May 26, with current CEO Michael Petras moving to Executive Chair and remaining involved in investor relations, commercial and litigation strategy.
• Legal and regulatory developments: Georgia courts dismissed the eight EtO bellwether personal-injury cases (appeals possible), and Sotera has spent about $200 million on EO facility enhancements while preparing under current regulatory requirements despite ongoing uncertainty.

Sotera Health NASDAQ: SHC reported what management described as a “strong start to the year” in the first quarter of 2026, led by constant-currency growth at Sterigenics and Nordion and modest margin expansion. The company also reaffirmed its full-year 2026 guidance and announced a planned CEO transition, with current Chairman and CEO Michael Petras set to become Executive Chair and Alton Shader slated to take over as CEO later in May.

First-quarter results and reaffirmed 2026 outlook

On a consolidated basis, Chief Financial Officer Jon Lyons said first-quarter revenue increased 10% to $280 million, or 6.5% on a constant-currency basis versus the prior-year quarter. GAAP net income was $27 million, or $0.09 per diluted share.

Adjusted EBITDA grew 10.5% to $135 million, or 6.9% on a constant-currency basis, and adjusted EBITDA margin expanded by “over 20 basis points,” according to Lyons. Adjusted EPS was $0.18, up about 29% year over year.

Management reaffirmed the outlook provided in February. Petras reiterated full-year expectations for revenue and adjusted EBITDA growth, emphasizing what he called the “strength and resiliency” of the company’s business model and the role of “mission-critical regulated services” embedded in customer supply chains. He noted that more than 70% of revenue is supported by multi-year contracts.

Lyons summarized the 2026 guidance as follows:

• Revenue: $1.233 billion to $1.251 billion (5% to 6.5% constant-currency growth), including an estimated ~100 basis point foreign-exchange benefit
• Adjusted EBITDA: $632 million to $641 million (5.5% to 7% constant-currency growth), including an estimated ~100 basis point foreign-exchange impact
• Adjusted EPS: $0.93 to $1.01
• Interest expense: $135 million to $145 million (based on the forward rate curve)
• Effective tax rate (adjusted net income): 27% to 29%
• Capital expenditures: $175 million to $225 million

Lyons added that the company expects the foreign-exchange benefit to be “fully realized in the first half of 2026,” with the second half “approximately neutral” year over year. Total company pricing is expected to be around the midpoint of the company’s long-term 3% to 4% range.

Segment performance: Sterigenics and Nordion drive growth; Nelson Labs declines

Sterigenics revenue rose 9.7% to $186 million, or 6.1% on a constant-currency basis. Lyons attributed performance to “favorable pricing of 4.5%,” a 3.6% foreign-currency benefit, and improved volume/mix of 1.6%. He said localized weather in the U.S. created a 1.7% headwind to Sterigenics volumes versus the prior-year quarter. Segment income increased 9.6% to $96 million (6% constant currency), partially offset by higher costs.

In Q&A, Petras said January and February were “a little softer,” citing weather, but that March was “the best quarter on volume we’ve had in the last three or four years in March.” He added that April “started off strong” and that the company felt “very comfortable in the guide.” Petras also said medical device end markets were “good solid,” while bioprocessing was up “significant year-over-year again,” though he noted it remains a small portion of the overall business.

Nordion revenue increased 29% to $42 million, or 25.8% on a constant-currency basis. Lyons said results were driven primarily by a 23.7% increase in volume/mix tied to “the timing of Cobalt-60 harvest schedules,” along with 3.2% foreign-currency tailwinds and a 2.1% pricing benefit. Segment income rose about 36% to $24 million (33.1% constant currency), with margins expanding more than 290 basis points to 56.4%.

Nelson Labs revenue declined 0.7% to $52 million and fell 3.8% on a constant-currency basis. Lyons said pricing benefits (2.8%) and a foreign-currency benefit (3.1%) were more than offset by lower volume and mix. Segment income decreased 11.5% to $15 million (15.1% constant currency), and segment margin was 28%.

On Nelson Labs, Petras said results were in line with expectations. He noted that expert advisory services (EAS) remained a headwind in the quarter and said it was “the last quarter where we had that headwind that we’re lapping over.” He added that routine testing volumes were down slightly year over year but said “routine volumes are coming back,” and pointed to a correlation between sterilization volumes and routine testing volumes. Petras also said the company was seeing validation pipeline build for longer-term projects later in 2026, reiterating expectations for Nelson Labs margins to improve to the “low to mid 30s” for the full year.

Cash flow, leverage, and capital spending

Lyons said Sotera generated $29 million in operating cash flow in the quarter, which included a $34 million payment for a previously disclosed legal settlement. He said adjusted free cash flow was positive and is expected to “accelerate throughout the year.”

Capital expenditures were $46 million in the quarter, reflecting continued investment in Sterigenics greenfield expansions, ethylene oxide (EO) facility upgrades, and Cobalt-60 development projects.

As of the end of the first quarter, Sotera had more than $900 million of available liquidity and finished with a net leverage ratio of 3.2x, which Lyons said was nearing the company’s long-term target range of 2x to 3x.

Interest expense improved by $6 million year over year to $35 million. Lyons said about half of the improvement was driven by a term-loan repricing and debt paydown completed late in the third quarter of 2025, with the remainder due to lower interest rates.

Legal update in Georgia and EO regulation uncertainty

Petras highlighted what he called “positive legal developments” in Georgia related to ethylene oxide litigation. He said the Georgia State Courts on March 30, 2026 dismissed the remaining five bellwether personal injury cases because “the plaintiffs could not prove general causation” in phase I proceedings. Petras noted that the other three bellwether cases were dismissed in October of the prior year in phase II specific causation proceedings.

“All eight bellwether cases have now been dismissed and are subject to appeal,” Petras said, adding that the rejection of general causation theories is “a critical issue common to all of the personal injury cases.” He said the company believes the order underscores “the lack of reliable scientific support” for remaining claims and will continue to put “sound science at the center of our defense.”

During Q&A, Petras also addressed questions about potential changes to EO emissions regulations. He said the company has spent “approximately $200 million” on what it calls “general facility enhancements” related to EO and expects the “vast majority” to be completed in 2026. While noting uncertainty around how regulatory proposals may evolve, Petras said Sotera is “going as if the rule that’s in place is gonna be the requirement,” and that even the proposed changes would still be “tough and challenging rules.”

Leadership transition and board changes

Petras announced that, following a board-led succession process, the board has appointed Alton Shader as Sotera Health’s new CEO, effective May 26. Petras will become Executive Chair and said he expects to remain actively involved in investor relations and “commercial and litigation strategies.”

Petras also noted recent board updates, including the addition of Ken Krause in March following the appointment of Rich Kyle in February. He thanked private equity board members Dean Mihas and Robert Canals for their service, saying Mihas had completed his board duties and Canals would transition off the board later in the month.

In March, Petras said private equity shareholders completed another secondary sale of existing shares, bringing Sotera’s public float to approximately 90% of outstanding shares.

About Sotera Health NASDAQ: SHC

Sotera Health Inc NASDAQ: SHC is a global provider of sterilization and laboratory testing services that support the medical device, pharmaceutical, life sciences and consumer product industries. Headquartered in Jacksonville, Florida, the company offers a suite of services designed to ensure products meet rigorous safety and regulatory requirements before reaching market.

Sotera Health operates through three primary service platforms. Its Sterigenics division delivers contract sterilization solutions, including ethylene oxide (EtO), gamma irradiation, electron beam and X-ray technologies.

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