Sotera Health Company ((SHC)) has held its Q1 earnings call. Read on for the main highlights of the call.
Sotera Health’s recent earnings call painted a picture of resilience and growth, despite facing some challenges. The company reported strong revenue and EBITDA growth, particularly in its Nelson Labs and Nordion segments, and maintained a positive outlook for 2025. However, issues such as the timing of Cobalt-60 shipments, a GAAP net loss due to legal settlements, and a decline in Nelson Labs advisory services were highlighted. Overall, the company’s reaffirmed growth outlook suggests a robust performance.
Solid Start to 2025 with Revenue and EBITDA Growth
Sotera Health kicked off 2025 on a strong note, reporting a 2.6% increase in total company revenues, or 4.4% on a constant currency basis, for Q1 compared to the same period in 2024. The company’s adjusted EBITDA also saw an impressive increase of 8.8%, or 11.2% on a constant currency basis, signaling a solid start to the year.
Nelson Labs Margin Expansion
Nelson Labs continued its positive trajectory with a 479 basis point margin expansion compared to Q1 2024. This marks the third consecutive quarter of year-over-year margin growth, highlighting the lab’s operational efficiency and strategic improvements.
Nordion’s Strong Revenue Performance
Nordion delivered a remarkable performance with a 36% increase in revenue, reaching $33 million, or 40.6% on a constant currency basis, compared to Q1 2024. The segment’s income also surged by approximately 62%, underscoring its strong market position.
Reaffirmed 2025 Outlook
Sotera Health reaffirmed its optimistic outlook for 2025, projecting revenue growth between 4% to 6% and adjusted EBITDA growth of 4.5% to 6.5% on a constant currency basis. This guidance reflects the company’s confidence in its strategic initiatives and market opportunities.
Successful Amendment to Revolving Credit Facility
The company successfully amended its revolving credit facility, adding approximately $175 million in liquidity and extending maturity to April 2030. This move provides Sotera with greater financial flexibility to support its growth ambitions.
FDA Clearance for Bionic Pancreas
Sotera Health played a pivotal role in securing FDA clearance for the first-ever bionic pancreas, showcasing the integrated expertise of Nelson Labs and Sterigenics. This achievement underscores the company’s commitment to innovation and advancing healthcare solutions.
Impact of Cobalt-60 Shipment Timing on Nordion
Nordion’s Q1 revenue exceeded expectations due to a shift in Cobalt-60 shipments, which will have implications for Q2 revenue. This timing issue highlights the complexities of supply chain management in the segment.
Net Loss Due to Settlement of EO Claims
Sotera Health reported a GAAP net loss of $13 million, or $0.05 per diluted share, primarily due to a $31 million settlement of EO claims in Illinois. This legal settlement impacted the company’s financial results for the quarter.
Decline in Nelson Labs Advisory Services Revenue
Nelson Labs experienced a 9.3% decline in revenue from its expert advisory services, despite improvements in core lab testing. This decline points to challenges in maintaining advisory service demand.
Foreign Currency Headwinds
Foreign currency fluctuations posed a 180 basis point headwind for the quarter, particularly affecting the Canadian-based Nordion business. This challenge underscores the impact of global economic factors on Sotera’s operations.
Forward-Looking Guidance
Sotera Health’s forward-looking guidance remains optimistic, with expectations of revenue growth between 4% to 6% and adjusted EBITDA growth of 4.5% to 6.5% for 2025. The company anticipates foreign exchange headwinds of approximately 1.25% on revenue and 1.5% on adjusted EBITDA. Additionally, Sotera projects capital expenditures between $190 million to $210 million for the year and aims to generate $500 million to $600 million in free cash flow over the next three years.
In summary, Sotera Health’s earnings call highlighted a resilient performance with strong growth in key segments, despite facing certain challenges. The company’s reaffirmed outlook and strategic initiatives suggest a promising path forward, making it a company to watch for investors and stakeholders alike.