Skip to content
    SHC
    Earnings call· Mar 2026(Q1 FY26)

    Sotera Health Q1 FY26 earnings call SHC

    May 5, 2026 Source

    Executive summary

    Sotera Health Q1 FY26 — Strong Start with Reaffirmed Full-Year Outlook and Key Legal Dismissals

    Sotera Health reported a strong first quarter, exceeding expectations with robust constant currency revenue and adjusted EBITDA growth, driven by Sterigenics and Nordion. The company reaffirmed its full-year 2026 outlook, highlighting the resilience of its mission-critical services and strong customer satisfaction. Significant legal progress was made with the dismissal of all eight bellwether personal injury cases in Georgia, reinforcing the company's stance on the safety of its operations. A planned CEO transition was also announced, with the current CEO moving to Executive Chair.

    Highlights

    5

    • Constant currency revenue growth of 6.5% in Q1 FY26.

    • Constant currency adjusted EBITDA growth of 6.9% in Q1 FY26, leading to over 20 bps margin expansion.

    • Sterigenics delivered 6.1% constant currency revenue growth despite weather impacts.

    • Nordion grew constant currency revenue 25.8% and expanded margins by over 290 bps.

    • All 8 bellwether personal injury cases in Georgia related to EO have been dismissed, with the latest 5 dismissed on March 30, 2026.

    Concerns

    2

    • Nelson Labs revenue declined 3.8% on a constant currency basis in Q1 FY26, with segment income decreasing 15.1% constant currency.

    • Localized weather impacts in the U.S. during Q1 resulted in a 1.7% headwind to Sterigenics volumes.

    Guidance & targets

    16
    CategoryTargetConfidence
    Total company revenue
    $1.23 billion to $1.25 billion
    high materiality
    High
    Adjusted EBITDA
    $632 million to $641 million
    high materiality
    High
    Total company pricing
    midpoint of our 3% to 4% long-term range
    medium materiality
    High
    Sterigenics constant currency revenue growth
    mid- to high single-digit
    medium materiality
    High
    Sterigenics Q2 constant currency revenue growth
    similar to the first quarter of 2026
    medium materiality
    High
    Nordion constant currency revenue growth
    low to mid-single digits
    medium materiality
    High
    Nordion first half revenue
    approximately 40% to 45% of full year 2026 revenue
    low materiality
    High
    Nelson Labs constant currency revenue growth
    low single digits
    medium materiality
    High
    Nelson Labs Q2 constant currency revenue growth
    slight return to growth
    medium materiality
    High
    Nelson Labs full year margins
    low to mid-30s
    medium materiality
    High
    Interest expense
    $135 million and $145 million
    medium materiality
    High
    Effective tax rate applicable to adjusted net income
    27% to 29%
    medium materiality
    High
    Adjusted EPS
    $0.93 to $1.01
    high materiality
    High
    Fully diluted share count (weighted average)
    289 million to 291 million shares
    low materiality
    High
    Capital expenditures
    $175 million to $225 million
    medium materiality
    High
    Net leverage ratio
    further improvement
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Sterigenics
    Strong growth driven by favorable pricing and improved volume mix, partly offset by localized weather impacts in the U.S. during Q1.
    Constant currency revenue growth: 6.1%Pricing benefit: 4.5%Foreign currency benefit: 3.6%Volume mix improvement: 1.6%Localized weather impact: -1.7% (volume headwind)Constant currency segment income growth: 6%
    		$186 million9.7%—$96 million
    Nordion
    Exceptional growth primarily due to increased volume mix from Cobalt-60 harvest schedules, foreign currency tailwinds, and pricing benefits, leading to significant margin expansion.
    Constant currency revenue growth: 25.8%Volume mix increase: 23.7% (due to Cobalt-60 harvest schedules)Foreign currency tailwind: 3.2%Pricing benefit: 2.1%Constant currency segment income growth: 33.1%Segment income margin: 56.4%Segment income margin expansion: >290 bps
    		$42 million29%—$24 million
    Nelson Labs
    Revenue declined due to changes in volume and mix, despite pricing and foreign currency benefits. Segment income and margins decreased, in line with expectations.
    Constant currency revenue decline: 3.8%Pricing benefit: 2.8%Foreign currency benefit: 3.1%Volume and mix change: negative (offsetting benefits)Constant currency segment income decrease: 15.1%Segment income margin: 28%
    		$52 million-0.7%—$15 million

    Operational metrics

    12
    Adjusted EBITDA
    $135 million10.5% YoY
    Q1 FY26

    Adjusted EBITDA grew 10.5% to $135 million or 6.9% on a constant currency basis, while adjusted EBITDA margins expanded to over 20 basis points.

    Interest expense
    $35 millionimproved by $6 million YoY
    Q1 FY26

    Interest expense for Q1 2026 improved by $6 million to $35 million compared to the prior year quarter. Approximately half of the improvement was driven by the term loan repricing and debt paydown completed late in the third quarter of 2025 with the remainder driven by lower interest rates.

    Adjusted EPS
    $0.18increased by 29% YoY
    Q1 FY26

    Adjusted EPS increased to $0.18 per share, an improvement of approximately 29% from the prior year.

    Capital expenditures
    $46 million
    Q1 FY26

    Capital expenditures for the quarter totaled $46 million as we continue to make progress on our Stardex greenfield expansions, EO facility upgrades and Cobalt-60 development projects.

    Available liquidity
    over $900 million
    end of Q1 FY26

    The company's liquidity position remains strong as of the end of Q1 2026, we had over $900 million of available liquidity.

    Net leverage ratio
    3.2x
    end of Q1 FY26

    Finally, we finished the quarter with a net leverage ratio of 3.2x nearing our long-term target range of 2 to 3x.

    Foreign currency benefit (total company revenue)
    100 bps
    FY26

    Total company revenue guidance includes an estimated 100 basis point foreign currency benefit. The foreign exchange benefit is expected to be fully realized in the first half of 2026, with the second half impact expected to be approximately neutral versus the prior year.

    Foreign currency impact (Adjusted EBITDA)
    100 bps
    FY26

    Adjusted EBITDA guidance includes an estimated 100 basis point impact from foreign currency. The foreign exchange benefit is expected to be fully realized in the first half of 2026, with the second half impact expected to be approximately neutral versus the prior year.

    Sterigenics pricing
    4.5%
    Q1 FY26

    Favorable pricing of 4.5% drove revenue growth for Sterigenics in the quarter.

    Nordion pricing
    2.1%
    Q1 FY26

    Nordion's first quarter revenue growth included a pricing benefit of 2.1%.

    Nelson Labs pricing
    2.8%
    Q1 FY26

    Nelson Labs' revenue was supported by pricing benefits of 2.8%.

    EO facility upgrades CapEx
    approximately $200 million
    duration

    The company has spent approximately $200 million on CapEx in Sterigenics for general facility enhancements related to ethylene oxide activity, with the vast majority expected to be completed in 2026.

    Industry KPIs

    5
    MetricValueDetails
    Revenue EPS guidanceRevenue: $1.233B-$1.251B; Adjusted EPS: $0.93-$1.01USD
    Pricing price realizationmidpoint of 3% to 4%%
    Diagnostics testing demanddown a little bit over prior year
    Segment organic revenue growthSterigenics: 6.1%; Nordion: 25.8%; Nelson Labs: -3.8%%
    Bioprocessing orders book to billup significant year-over-year

    Deals & partnerships

    5
    Ken KrauseJoined Board of Directors

    Ken Krause joined the Board of Directors in March, bringing leadership and proven track record as a public company CFO.

    Rich KyleJoined Board of Directors

    Rich Kyle joined the Board of Directors in February.

    Dean MehasCompleted Board service

    Dean Mehas, a private equity board member, recently completed his Board service.

    Robert KanasTransitioning off Board of Directors

    Robert Kanas, a private equity board member, will transition off the Board later this month.

    Private equity shareholdersCompleted secondary sale of existing shares

    In March, private equity shareholders completed another secondary sale of existing shares, bringing the public float to approximately 90% of outstanding shares.

    Risks & headwinds

    3
    Localized weather impacts in the U.S.Q1 FY26

    1.7% headwind to Sterigenics volumes

    Mitigation: The quarter finished strong in March, and April started strong, leading to an optimistic outlook for the year.

    Nelson Labs volume and mix declineQ1 FY26

    Revenue declined 0.7% (3.8% constant currency), segment income decreased 11.5% (15.1% constant currency)

    Mitigation: The headwind from Expert Advisory Services (EAS) is expected to be the last for this quarter, routine testing volumes are returning, and the validation pipeline is building for late 2026, with margins expected to improve throughout the year.

    Uncertainty of ethylene oxide (EO) regulation timingLast several quarters

    Activity for customer conversions slowed down over the last several quarters

    Mitigation: The company is executing on current rule requirements, with the vast majority of $200 million CapEx for enhancements completed in 2026. They are well-positioned to meet requirements and will provide comments on the new proposed rule.

    What to watch in Q2 FY26

    5

    Sterigenics Q2 Constant Currency Revenue Growth

    Q2 FY26
    Current6.1% (Q1 FY26)
    TargetSimilar to Q1 FY26

    Why it matters

    To confirm the company's guidance for Q2, especially given Q2 FY25 was a strong comparable, and to assess underlying demand trends.

    For 2026, we expect Sterigenics to deliver mid- to high single-digit constant currency revenue growth year-over-year. with the second quarter year-over-year growth similar to the first quarter of 2026.

    Q&A highlights

    6

    What is the progress on Sterigenics' strategy to realign around higher growth end markets, and did Q1 see any volume or mix shift benefits?

    Michael Petras stated the company is focused on key segments, achieved 1.6% volume and mix growth in Sterigenics despite weather impacts, and is optimistic about the outlook given a strong finish to March and start to April.

    “In the quarter, Sterigenics put up 1.6% volume and mix growth. And then remember, we also had an impact from weather. So we're happy. The first quarter beginning of the quarter started off slow with the weather, which we kind of signaled when we talked last time, but it finished strong and we're optimistic on the outlook as we go forward here and how March finished out and how we're starting out the second quarter.”

    asked by Thomas Keller · answered by Michael Petras

    3 min read7 chapters

    Detailed Narrative

    01

    Strong Q1 Performance and Reaffirmed Outlook

    Sotera Health reported a robust start to 2026, with consolidated constant currency revenue growth of 6.5% and adjusted EBITDA growth of 6.9%, leading to margin expansion of over 20 basis points. The company reaffirmed its full-year 2026 guidance for revenue ($1.23B-$1.25B) and adjusted EBITDA ($632M-$641M), emphasizing the resilience of its business model and mission-critical services. Management highlighted consistent revenue growth over the past two decades and strong customer satisfaction scores in 2025 across Sterigenics and Nelson Labs.

    02

    Sterigenics Segment Strength and Capacity

    Sterigenics delivered 6.1% constant currency revenue growth, driven by favorable pricing (4.5%) and improved volume mix (1.6%), despite a 1.7% headwind from localized U.S. weather impact🌐s in Q1. Management noted a strong finish to March and April, with optimism for continued growth. The company is in a good capacity position, targeting 80% utilization, with a new X-ray facility expected online later in 2026 and another scheduled for late 2027/early 2028. Med Device and bioprocessing volumes showed solid and significant growth, respectively.

    03

    Nordion's Exceptional Growth and Timing

    Nordion experienced significant growth, with revenue increasing 25.8% on a constant currency basis and segment income margins expanding over 290 basis points to 56.4%. This performance was primarily attributed to increased volume mix (23.7%) due to the timing of📎 Cobalt-60 harvest schedules, along with foreign currency tailwinds (3.2%) and pricing benefits (2.1%). The first half of 2026 is expected to represent 40% to 45% of Nordion's full-year revenue.

    04

    Nelson Labs Performance and Margin Outlook

    Nelson Labs saw a 3.8% constant currency revenue decline and a 15.1% constant currency decrease in segment income, which was in line with management's expectations. The decline was mainly due to volume and mix changes, with the headwind from Expert Advisory Services (EAS) expected to subside📎 after Q1. Management anticipates a slight return to growth in Q2 and full-year margins in the low to mid-30s, driven by routine testing volumes returning and a building pipeline for validation projects in late 2026.

    05

    Positive Legal Developments Regarding Ethylene Oxide (EO)

    The company highlighted positive legal developments in Georgia, where all eight bellwether personal injury cases related to EO have now been dismissed. The latest five cases were dismissed on March 30, 2026, due to the plaintiff's inability to prove general causation in Phase I proceedings, following the dismissal of three other cases in October 2025. This outcome reinforces the company's defense based on sound science and underscores the lack of reliable scientific support for remaining claims.

    06

    Leadership Transition and Governance Enhancements

    Michael Petras announced his transition from CEO to Executive Chair, effective May 26, with Alton Shader appointed as the new Chief Executive Officer. Petras will remain actively involved in investor relations, commercial, and litigation strategies. The company also strengthened its governance by welcoming Ken Krause to its Board of Directors in March, following Rich Kyle's addition in February, while Dean Mehas and Robert Kanas transitioned off the Board.

    07

    Capital Allocation and Financial Position

    Sotera Health generated $29 million in positive operating cash flow in Q1, inclusive of a $34 million legal settlement payment, and had positive adjusted free cash flow. Capital expenditures totaled $46 million, supporting Stardex greenfield expansions, EO facility upgrades, and Cobalt-60 development projects. The company maintains a strong liquidity position of over $900 million and finished the quarter with a net leverage ratio of 3.2x, nearing its long-term target range of 2x to 3x, with further improvement anticipated in 2026.

    AI-generated summary of the company’s earnings call. Not investment advice.