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Sotera Health (SHC) Q4 FY25 earnings call: guidance and Q&A

Earnings call· Dec 2025 (Q4 FY25)· Health Care· Feb 24, 2026

Source: earnings call transcript

Executive summary

Sotera Health Q4 FY25 — Strong Performance and Positive 2026 Outlook

Sotera Health delivered a strong Q4 and full-year FY25, extending its revenue growth streak and expanding adjusted EBITDA margins. The company is well-positioned for sustained growth in 2026, driven by operational execution and disciplined financial management, despite some segment-specific headwinds related to Cobalt-60 harvest timing and commercial segment choppiness. Management remains committed to its long-range plan and capital allocation priorities.

Highlights

5

  • FY25 total company revenue increased 5.7% to $1.164 billion (5.2% constant currency), marking 20 consecutive years of growth.

  • FY25 Adjusted EBITDA increased 8.2% (7.8% constant currency) to $593.8 million, with margins expanding 118 basis points to 51%.

  • FY25 Adjusted Free Cash Flow was $210 million, on track for the $500M-$600M cumulative 2025-2027 goal.

  • Net leverage improved to 3.2x at year-end FY25 from 3.7x in FY24, progressing towards the 2-3x long-term target.

  • Sterigenics revenue grew 8% constant currency in Q4 FY25, driven by favorable pricing (4.3%) and volume/mix (3.7%).

Concerns

4

  • Nordion Q4 FY25 revenue decreased 12.3% to $50 million due to Cobalt-60 harvest timing, impacting segment income by 18.9% to $29 million.

  • Nelson Labs Q4 FY25 revenue was nearly flat on a constant currency basis, with Expert Advisory Services revenue being lower.

  • Commercial segment volumes in Sterigenics are shrinking, impacting a small portion (less than 16%) of the business.

  • Q1 FY26 revenue for Sterigenics and Nelson Labs is expected to be the lightest quarter of the year, with Nelson Labs Q1 growth declining low to mid-single digits.

Guidance & targets

CategoryTargetConfidence
Total Company Revenue
$1.233 billion to $1.251 billion
high materiality
High
Adjusted EBITDA
$632 million to $641 million
high materiality
High
Total Company Pricing
Midpoint of 3% to 4%
medium materiality
High
Sterigenics Constant Currency Revenue Growth
Mid- to high single-digit
medium materiality
High
Sterigenics Q1 Constant Currency Revenue Growth
Mid-single digits
medium materiality
High
Nordion Constant Currency Revenue Growth
Low to mid-single digits
medium materiality
High
Nordion H1 Revenue as % of Full Year
Approximately 40% to 45%
medium materiality
High
Nelson Labs Constant Currency Revenue Growth
Low single digits
medium materiality
High
Nelson Labs Q1 Revenue Growth
Decline low to mid-single digits
medium materiality
High
Interest Expense
$135 million to $145 million
medium materiality
High
Effective Tax Rate (Adjusted Net Income)
27% to 29%
medium materiality
High
Adjusted EPS
$0.93 to $1.01
high materiality
High
Fully Diluted Share Count
289 million to 291 million shares
low materiality
High
Capital Expenditures
$175 million to $225 million
medium materiality
High
Net Leverage Ratio
Continued progress in reduction
high materiality
High
X-ray Facility Opening
Open in 2026
medium materiality
High
Customer Sterilization Volume Transition
Start late this year
medium materiality
High
Cumulative Adjusted Free Cash Flow
$500 million to $600 million
high materiality
High
Long-term Net Leverage Target
2x to 3x
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Sterigenics
Growth driven by favorable pricing, volume and mix, and foreign currency benefit, partially offset by inflation.
Constant Currency Revenue Growth: 8%Segment Income Growth: 10.4%Constant Currency Segment Income Growth: 7.8%Favorable Pricing: 4.3%Favorable Volume and Mix: 3.7%Foreign Currency Benefit: 2.6%
$198 million10.6%—$110 million
Nordion
Revenue and segment income decreased primarily due to the timing of Cobalt-60 harvest schedules, partially offset by favorable pricing.
Segment Income Decrease: 18.9%Segment Income Margin: 57.5%Segment Income Margin Decrease: 466 bpsUnfavorable Volume and Mix: 15% (due to Cobalt-60 harvest timing)Favorable Pricing: 2.4%
$50 million-12.3%—$29 million
Nelson Labs
Revenue growth driven by favorable pricing, foreign exchange, and core lab testing growth, partially offset by lower Expert Advisory Services revenue and higher costs.
Constant Currency Revenue Growth: Nearly flatSegment Income Growth: 1.9%Constant Currency Segment Income Decline: 1.2%Favorable Pricing: 3.2%Foreign Exchange: 2.5%Core Lab Testing: growthExpert Advisory Services: lower revenue
$55 million2.3%—$18 million

Deals & partnerships

Westinghouse and PSEG Cobalt development agreement

Nordion signed a cobalt development agreement with Westinghouse and PSEG in Q4 FY25.

Risks & headwinds

Cobalt-60 Harvest Timing Q4 FY25, H1 FY26

Nordion Q4 FY25 revenue decreased 12.3% to $50 million, segment income decreased 18.9% to $29 million, with segment income margins decreasing 466 bps.

Mitigation:Anticipated and communicated; part of normal supply timing and factored into guidance.

Lower Expert Advisory Services (EAS) Revenue Q4 FY25, Q1 FY26

Nelson Labs Q4 FY25 segment income declined 1.2% on a constant currency basis, and Q1 FY26 revenue is expected to decline low to mid-single digits.

Mitigation:Expected to ease after Q1 FY26, which is anticipated to be the last quarter with this comp challenge.

Commercial Segment Choppiness Since 2020-2021, expected to continue

Commercial segment volumes in Sterigenics are shrinking, impacting less than 16% of Sterigenics' total revenue.

Mitigation:Company is planning around this trend and focusing on core MedTech volumes.

NESHAP Compliance Period Extension Extended to 2028

2-year extension of the compliance period.

Mitigation:Reduces urgency for customers to make in-sourcing/outsourcing decisions, but discussions on strategic supply chain plans continue.

Q1 FY26 Soft Start Q1 FY26

Sterigenics and Nelson Labs Q1 FY26 revenue expected to be the lightest quarter of the year, with Nelson Labs Q1 growth declining low to mid-single digits.

Mitigation:Attributed to typical seasonality, shutdowns, and weather impact; incorporated into guidance.

What to watch in Q1 FY26

Sterigenics X-ray facility opening and ramp-up

H2 FY26
Current Under construction, planned to open H2 2026
Target Facility opened, qualification with customers underway

Why it matters

Strategic long-term investment for full-service offering, expected to accelerate revenue in FY27-FY28.

Significant progress was also made on the EO facility enhancements program as well as the construction of the new X-ray facility, which is planned to open in 2026.

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Q&A highlights

What drives the 2026 EBITDA margin expansion, and is the recent client outsourcing to Sterigenics a sign of broader NESHAP-driven shifts?

The margin expansion is due to normal operating leverage. The client outsourcing is progressing as planned, with volume starting late 2026, but no significant broader shifts are observed yet due to the NESHAP extension.

“No, you're spot on with the midpoint of the guide and what it implies. And no, it's nothing abnormal going on, just normal operating leverage and running the business.”

asked by Sean Dodge · answered by Jonathan Lyons

1 min read 5 chapters

Detailed narrative

FY25 Performance Highlights

Sotera Health achieved its 20th consecutive year of revenue growth, reaching $1.164 billion, up 5.7% (5.2% constant currency). Adjusted EBITDA grew 8.2% to $593.8 million, with margins expanding to 51%. Adjusted free cash flow exceeded $200 million, contributing to the 2025-2027 cumulative goal of $500 million to $600 million.

Segment-Specific Achievements

Sterigenics delivered 8% constant currency revenue growth in FY25, driven by volume and mix, and made progress on EO facility enhancements and a new X-ray facility. Nordion achieved 9% constant currency revenue growth in FY25, securing a cobalt development agreement and a 25-year license renewal for its Ottawa facility. Nelson Labs expanded margins by 312 basis points and saw core lab testing growth.

Financial Management and Capital Structure

The company reduced borrowing costs by 75 basis points on its term loan, paid down $86 million of debt, and increased liquidity by $175 million by upsizing its revolver. Net leverage improved to 3.2x at year-end 2025 from 3.7x in 2024, moving towards the long-term target of 2x-3x. The public float increased to 80% of outstanding shares in 2025.

Strategic Investments and Cross-Selling

Sotera Health continues to invest organically, with a new X-ray facility planned to open in the second half of 2026, part of a long-term strategic plan to offer full-service modalities. Revenue from cross-business unit (XBU) customers expanded 9% year-over-year in 2025, demonstrating successful leveraging of the integrated value proposition and high customer satisfaction.

Leadership Transition

Erika Ostrowski was promoted to Senior Vice President and General Counsel, effective April 1, succeeding Alex Dimitrief, who transitioned to an outside adviser. This internal promotion highlights strong leadership development and a deep understanding of the business within the company.

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