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    SHC
    Earnings call· Jun 2026(Q2 FY26)

    Sotera Health Q2 FY26 earnings call SHC

    Aug 6, 2026 Source

    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

    21
    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

    3
    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

    Operational metrics

    15
    Consolidated Revenue
    $321 millionup 9.2% YoY
    Q2 FY26

    Consolidated total company revenue.

    Adjusted EBITDA
    $166 millionup 10% YoY
    Q2 FY26

    Consolidated adjusted EBITDA.

    Adjusted EBITDA Margin
    51.6%expanded 36 bps YoY
    Q2 FY26

    Consolidated adjusted EBITDA margin.

    Interest Expense
    $34 millionimproved over $6 million YoY
    Q2 FY26

    Primarily driven by benefits of term loan repricing and debt reduction actions in Q3 2025, and lower interest rates.

    Adjusted EPS
    $0.26up 30% YoY
    Q2 FY26

    Consolidated adjusted EPS.

    Term Loan Borrowing Costs Reduction
    100 bps
    Less than a year

    Reduction in borrowing costs on the $1.4 billion term loan in less than a year, including the repricing completed this past quarter.

    Capital Expenditures
    $46 million
    Q2 FY26

    Capital expenditures for the quarter supporting various growth and upgrade projects.

    Net Leverage Ratio
    3ximproved
    Q2 FY26

    Reached the long-term target leverage range of 2x to 3x.

    Liquidity
    $950 million
    Q2 FY26

    Total available liquidity, with nothing drawn on the revolver.

    Sterigenics Constant Currency Revenue Growth
    6.1%
    Q1 FY26

    Q1 constant currency revenue growth for Sterigenics, mentioned as a comparison to Q2's 7% growth.

    Historical Pricing Range
    3.5% to 5%
    Longer-term history

    Analyst's recollection of a historical pricing range, which was later revised to 3% to 4%.

    Foreign Currency Benefit (Full-year 2026 Revenue)
    100 bps
    FY26

    Estimated foreign currency benefit for full-year 2026 revenue outlook.

    Foreign Currency Benefit (Full-year 2026 Adjusted EBITDA)
    100 bps
    FY26

    Estimated foreign currency benefit for full-year 2026 adjusted EBITDA outlook.

    Foreign Currency Impact
    slight headwind
    Q3 FY26

    Expected foreign currency impact in the third quarter based on recent exchange rates.

    Depreciation
    increaseconsistent with 2025
    FY26

    Expected to increase in 2026, consistent with the increase experienced in 2025.

    Industry KPIs

    4
    MetricValueDetails
    FCF conversion ROIC$500M-$600MUSD
    Revenue EPS guidanceRevenue: $1.236B-$1.254B; Adj. EPS: $0.95-$1.01USD
    Pricing price realization3% to 4%%
    Segment organic revenue growthSterigenics: 7%; Nordion: 16.7%; Nelson Labs: 5.4%%

    Risks & headwinds

    4
    Inflationary PressuresQ2 FY26

    partially offset segment income growth

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

    Foreign Currency HeadwindQ3 FY26

    slight headwind

    Litigation - GeorgiaDecision 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 - CaliforniaFY27

    Trial expected January or April 2027

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

    What to watch in Q3 FY26

    5

    Sterigenics Growth Uptick

    H2 FY26
    Current7% constant currency growth in Q2 FY26
    TargetMeaningful 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.

    Q&A highlights

    8

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

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