Sotera Health (SHC) Q1 FY26 earnings call: guidance and Q&A

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.

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.

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.

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.

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.

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.

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.