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Sotera Health (SHC) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Health Care· Aug 6, 2026

Source: earnings call transcript

Executive summary

Sotera Health Q2 FY26 — Strong Performance Across Segments Drives Raised Full-Year Outlook

Sotera Health reported a strong second quarter, driven by broad-based growth across all segments, particularly Sterigenics and Nordion. The company raised its full-year 2026 outlook for both revenue and adjusted EBITDA, reflecting confidence in its business model and execution. Management is focused on accelerating growth through internal investments, strategic M&A, and enhancing cross-business unit collaboration to better serve customers.

Highlights

5

  • Consolidated revenue increased 9.2% to $321 million, or 8% on a constant currency basis, compared to Q2 2025.

  • Adjusted EBITDA improved 10% to $166 million, or 8.7% constant currency growth, with margins expanding 36 basis points to 51.6%.

  • Adjusted EPS increased 30% to $0.26 per diluted share versus the prior year.

  • Sterigenics delivered 7% constant currency revenue growth and over 50 basis points of margin expansion.

  • Nordion achieved 16.7% constant currency revenue growth and more than 160 basis points of segment income margin expansion.

Concerns

1

  • Nelson Labs segment income margin declined versus the prior year quarter, primarily reflecting higher costs, despite a sequential improvement of 438 basis points.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 Constant Currency Revenue Growth
5.25% to 6.75%
high materiality
High
Full-year 2026 Constant Currency Adjusted EBITDA Growth
5.75% to 7.25%
high materiality
High
Full-year 2026 Total Company Revenue
$1.236 billion to $1.254 billion
high materiality
High
Full-year 2026 Adjusted EBITDA
$634 million to $643 million
high materiality
High
Full-year 2026 Total Company Pricing
3% to 4%
medium materiality
High
Full-year 2026 Sterigenics Constant Currency Revenue Growth
mid- to high single-digit
medium materiality
High
Full-year 2026 Nordion Constant Currency Revenue Growth
low to mid-single digits
medium materiality
High
Full-year 2026 Nelson Labs Constant Currency Revenue Growth
low single digits
medium materiality
High
Full-year 2026 Nelson Labs Segment Income Margin
low to mid-30% range
medium materiality
High
Full-year 2026 Interest Expense
$135 million to $142 million
medium materiality
High
Full-year 2026 Effective Tax Rate (Adjusted Net Income)
27% to 28%
medium materiality
High
Full-year 2026 Fully Diluted Share Count (Weighted Average)
289 million to 291 million shares
low materiality
High
Full-year 2026 Adjusted EPS
$0.95 to $1.01 per diluted share
high materiality
High
Full-year 2026 Capital Expenditures
$200 million to $225 million
medium materiality
High
Net Leverage Ratio
improvement compared to 2025
medium materiality
High
M&A Activity
Does not assume any M&A activity
low materiality
High
Nordion H1 2026 Revenue as % of Full Year
above 40% to 45%
medium materiality
High
Nordion H2 2026 Revenue Split
approximately evenly between Q3 and Q4
low materiality
High
CapEx for second greenfield facility
finished up towards the end of next year, early '28
medium materiality
High
CapEx spending
meaningful step down from '26 to '27
medium materiality
High
Free Cash Flow Commitment (3-year)
$500 million to $600 million
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Sterigenics
Revenue growth driven by favorable pricing (4.3%), improved volume and mix (2.7%), and foreign currency benefit (160 basis points). Segment income and margin growth driven by strong top-line, partially offset by inflation. Stable demand environment with strong growth across the portfolio.
Constant currency revenue growth: 7%Segment income growth: 9.6%Constant currency segment income growth: 7.9%Segment income margin improvement: 53 basis points
$212 million8.6%—$118 million
Nordion
Revenue growth primarily driven by increased volume mix due to timing of Cobalt-60 harvest schedules and pricing benefits. First half revenue finished above the 40%-45% full-year range due to certain shipments shifting into Q2. Segment income and margin growth driven by higher volume mix, favorable pricing, and foreign currency benefits, partially offset by inflation.
Constant currency revenue growth: 16.7%Volume mix increase: 13.6%Pricing benefits: 3.1%Segment income growth: 19.2%Constant currency segment income growth: 20.6%Segment income margin: 56.9%Segment income margin expansion: 160 basis points
$49 million15.8%—$28 million
Nelson Labs
Revenue growth driven by favorable pricing, volume and mix growth, and favorable foreign currency impact. Segment income margin declined versus prior year quarter due to higher costs but improved significantly sequentially, returning to the long-term range of low to mid-30s. Performance benefited from new customer engagements and underlying market demand.
Constant currency revenue growth: 5.4%Pricing: 2.8%Volume and mix growth: 2.6%Constant currency segment income growth: -0.6%Segment income margin: 32.4%Segment income margin improvement sequentially: 438 basis points
$61 million6.3%—$20 million

Risks & headwinds

Inflationary Pressures Q2 FY26

partially offset segment income growth

Mitigation:Strong top-line growth and pricing benefits helped mitigate impact.

Foreign Currency Headwind Q3 FY26

slight headwind

Litigation - Georgia Decision expected Spring/Summer

Appellate process ongoing

Mitigation:Company believes court's rejection of plaintiff's general causation is a critical issue underscoring lack of reliable scientific support.

Litigation - California FY27

Trial expected January or April 2027

Mitigation:Continuing to work through court hearings, procedures, motions, and rulings.

What to watch in Q3 FY26

Sterigenics Growth Uptick

H2 FY26
Current 7% constant currency growth in Q2 FY26
Target Meaningful uptick in growth compared to H1 FY26

Why it matters

Management is confident in a significant acceleration of Sterigenics' growth in the second half, driven by facility shutdown schedules, a large customer outsourcing, and new X-ray facility revenue. Verification of this acceleration is key to meeting full-year guidance.

The first is we've got -- for our facility shutdown schedules, that is favorable in the back half of the year here in '26, again versus '25. Also, we've mentioned before a large customer who previously in-sourced their sterilization, they're now outsourcing to us. We will see that impact in the second half. And then also X-ray with our new facility with the additional revenues coming on there. All of those contribute to the guide that we have.

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Q&A highlights

What drove Nelson Labs' strong Q2 performance? Is it due to lapping EAS headwinds or other strengths? What is the visibility for this continuing in H2?

Nelson Labs' strong Q2 performance (5.4% constant currency growth) was driven by positive news from a few customers and underlying market demand. Management feels good about the environment for the second half of the year.

“Yes, we're really pleased with the second quarter performance of Nelson Labs with the 5.4% constant currency growth. We got some good news from a few customers that were looking to work with Nelson, and that positively impacted our results here in Q2.”

asked by Christopher Charlton · answered by Alton Shader

2 min read 6 chapters

Detailed narrative

Leadership Transition and Strategic Focus

Alton Shader assumed the role of CEO on May 26, with Michael Petras continuing as Executive Chairman. Shader emphasized his priorities include understanding the business, assessing talent, and enhancing customer partnerships. He aims to build on the existing customer-focused culture and improve cross-business unit collaboration to deliver differentiated solutions, leveraging the company's industry-leading expertise in highly regulated healthcare markets.

Nelson Labs Performance and Leadership Change

Nelson Labs exceeded expectations with 5.4% constant currency revenue growth in Q2 FY26, driven by favorable pricing and volume/mix, including new business wins. Joe Shrawder, President of Nelson Labs, retired and Riaz Bandali, formerly President of Nordion, assumed leadership. Bandali's extensive experience in laboratory services is expected to support Nelson Labs' growth priorities, with a search underway for his successor at Nordion.

Sterigenics and Nordion Strong Execution

Sterigenics continued its strong momentum with 7% constant currency revenue growth and over 50 basis points of margin expansion, building on Q1 performance. Nordion delivered 16.7% constant currency revenue growth and more than 160 basis points of segment income margin expansion, primarily due to increased volume/mix from Cobalt-60 harvest schedules and pricing benefits. The company sees a stable demand environment for Sterigenics, with confidence in its second-half growth drivers.

Capital Allocation and Leverage Improvement

Sotera Health generated $88 million in operating cash flow in Q2 FY26. Capital expenditures totaled $46 million, supporting capacity expansion, EO facility upgrades, Cobalt-60 initiatives, and clean room expansion. The net leverage ratio improved to 3x, reaching the long-term target range of 2x to 3x. Management is actively evaluating capital allocation priorities, with a focus on accelerating growth through internal investments and M&A, particularly in sterilization and Nelson Labs.

X-ray Facility Progress and Strategic Rationale

The new X-ray facility is progressing well, with revenue expected to flow through starting in Q3 FY26, contributing to Sterigenics' second-half growth. This facility is part of a strategic decision to offer all sterilization modalities and provide a complete offering to customers, complementing the company's leadership in Cobalt-60 gamma sterilization. The facility is not expected to have a notable margin impact, as fixed costs are minimal outside of depreciation.

Litigation Update

The company provided an update on ongoing litigation. For Georgia, the appellate process is underway, with a decision expected in spring/summer. The New Mexico case was settled in July for an immaterial amount, fully resolving all claims. For California litigation, court hearings and processes continue, with a trial expected in January or April 2027, though this timing could change.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.