Sotera Health Reports Fourth-Quarter and Full-Year 2023 Results; Provides 2024 Outlook

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2023 net revenues increased 4.5% to $1.05 billion, compared to 2022
2023 net income of $51 million or $0.18 per diluted share
2023 Adjusted EBITDA(1) increased 4.3% to $528 million
2023 Adjusted EPS(1) decreased $0.15 to $0.81 per diluted share
Full-year 2024 outlook of 4.0% – 6.0% growth for Net Revenues and Adjusted EBITDA

CLEVELAND, Feb. 27, 2024 (GLOBE NEWSWIRE) — Sotera Health Company (“Sotera Health” or the “Company”) (NASDAQ:SHC), a leading global provider of mission-critical end-to-end sterilization solutions, lab testing and advisory services for the healthcare industry, today announced financial results for the fourth-quarter and full-year 2023 and its initial 2024 outlook.

For the fourth-quarter 2023, net revenues increased 23.3% to $310 million, compared with $252 million in the same period a year ago. Net revenues increased 21.9% on a constant currency basis. Net income attributable to the Company (“net income”) was $39 million, or $0.14 per diluted share, compared with a net loss attributable to the Company (“net loss”) of $320 million, or $1.14 per diluted share for the fourth-quarter 2022, which included a $408 million legal reserve. Adjusted EBITDA increased by 28.7% to $167 million compared to the prior-year quarter. Adjusted earnings per diluted share (“Adjusted EPS”) was $0.26, an increase of $0.01 per diluted share, compared to the fourth quarter of 2022.

For full-year 2023, net revenues increased 4.5% to $1.05 billion, compared with $1.00 billion for full-year 2022. Net revenues increased 4.2% on a constant currency basis. Net income was $51 million, or $0.18 per diluted share, compared with net loss of $234 million, or $0.83 per diluted share, for 2022. Adjusted EBITDA increased 4.3% to $528 million, compared to 2022. Adjusted EPS was $0.81 in 2023, a decrease of $0.15 from 2022.

“Today I am pleased to announce another year of top- and bottom-line growth,” said Chairman and Chief Executive Officer, Michael B. Petras, Jr. “Throughout 2023, the Sotera Health team demonstrated resilience, adaptability and an unwavering commitment to the Company’s core values in the face of continued macro-economic pressures. During the year, Sterigenics completed four capacity expansions, the Nordion team successfully navigated the complex Cobalt-60 supply chain, and Nelson Labs continued to provide our customers with world-class lab testing services and expert advisory support. We remain focused on our mission of Safeguarding Global Health© and are excited for continued growth in 2024.”

Fourth-Quarter and Full-Year 2023 Review by Business Segment

Sterigenics

For fourth-quarter 2023, net revenues were $172 million, an increase of 6.5% compared to the fourth quarter a year ago. Segment income was $95 million, an increase of 6.4%.

For full-year 2023, Sterigenics net revenues were $667 million, an increase of 6.5% compared to 2022. Segment income increased 6.8% to $362 million.

Net revenue growth for fourth-quarter 2023 was driven by favorable pricing and changes in foreign currency exchange rates, partially offset by unfavorable volume and mix.

Segment income growth for the quarter was also driven by favorable pricing and changes in foreign currency rates, partially offset by higher costs and unfavorable volume and mix.

Nordion

For fourth-quarter 2023 net revenues were $80 million, an increase of 134.2%, compared to the fourth quarter a year ago as Nordion generated 50% of its full-year revenue in the quarter, as expected. Segment income increased 162.7% to $53 million.

For full-year 2023, Nordion net revenues were $160 million, an increase of 4.4% compared to 2022. Segment income increased by 8.0% to $97 million.

The increase in net revenues, segment income and segment income margin for fourth-quarter 2023 was driven by favorable impacts from volume and pricing.

Nelson Labs

For fourth-quarter 2023, net revenues were $58 million, an increase of 4.3% compared to the fourth quarter a year ago. Segment income decreased 7.8% to $19 million.

For full-year 2023, Nelson Labs net revenues were $222 million, a decrease of 0.8% compared to 2022. Segment income decreased 10.9% to $69 million.

Net revenue growth for the fourth-quarter 2023 was driven by favorable pricing and changes in foreign currency exchange rates, partially offset by unfavorable volume and mix.

Segment income and margin decline for the fourth-quarter 2023 was driven by unfavorable volume and mix coupled with the impact of inflation, partially offset by favorable pricing.

Balance Sheet and Liquidity

As of December 31, 2023, Sotera Health had $2.3 billion in total debt, and $296 million in cash and cash equivalents, compared to $2.0 billion in total debt and $395 million in cash and cash equivalents as of December 31, 2022. As of December 31, 2023, the Company had no balance outstanding on its revolving credit facility. Material debt balances outstanding do not mature until 2026. Sotera Health’s Net Leverage Ratio(1) as of December 31, 2023 was 3.8x, compared to 3.2x at December 31, 2022.

Full-Year 2024 Outlook

Today, Sotera Health is providing its full-year 2024 outlook:

Net revenues and Adjusted EBITDA growth in the range of 4.0% to 6.0%,
Interest Expense in the range of $170 million to $180 million,
Tax rate applicable to Adjusted Net Income(1) in the range of 31.5% to 34.5%,
Adjusted EPS in the range of $0.67 to $0.75,
A weighted-average fully diluted share count in the range of 283 million to 285 million shares,
Capital expenditures in the range of $205 million to $225 million

The Company does not provide a reconciliation for non-GAAP financial measures on a forward-looking basis where it is unable to provide a meaningful or accurate calculation or estimation of reconciling items without unreasonable effort. The Company cannot reconcile its expected Adjusted EBITDA,

Adjusted Net Income, Adjusted EPS and Net Leverage Ratio without unreasonable effort because certain items that impact net income, earnings per share and other reconciling metrics are out of the Company’s control and/or cannot be reasonably predicted at this time, including uncertainties caused by changes to the regulatory landscape, restructuring items and certain fair value measurements, all of which are potential adjustments for future earnings.

The outlook provided above contains a number of assumptions, including, among others, the Company’s current expectations regarding supply chain continuity, particularly for the supply of EO and Cobalt-60, the impact of inflationary trends including their impact on energy prices and the supply of labor, and the expectation that exchange rates as of January 31, 2024 remain constant for the remainder of 2024. Our outlook is based on current plans and expectations and is subject to several known and unknown risks and uncertainties, including those set forth below under “Cautionary Note Regarding Forward-Looking Statements.”

Earnings Webcast

Sotera Health management will host a conference call and webcast to discuss the Company’s operating highlights and financial results at 9:00 a.m. Eastern Time today. To participate in the live call, please dial 1-844-481-2916 if dialing in from the United States, or 1-412-317-0709 if dialing in from other locations. A live webcast of the conference call and accompanying materials may also be accessed via the Investor Relations section of the Company’s website at Presentation & Events | Sotera Health. A replay of the webcast will be archived on the Company’s website.

Updates on recent developments in matters relevant to investors can be found on the Investor Relations section of the Sotera Health website at Investor Relations | Sotera Health. For developments related to EO, updates can be found at Ethylene Oxide | Sotera Health.

Upcoming Investor Events

Barclay’s 2024 Global Healthcare Conference at 7:30 a.m. Eastern Time, March 13, 2024
KeyBanc Life Sciences & Medtech Investor Forum at 9:00 a.m. Eastern Time, March 19, 2024

Cautionary Note Regarding Forward-Looking Statements

Unless expressly indicated or the context requires otherwise, the terms “Sotera Health,” “Company,” “we,” “us,” and “our” in this document refer to Sotera Health Company, a Delaware corporation, and, where appropriate, its subsidiaries on a consolidated basis. This release contains forward-looking statements that reflect management’s expectations about future events and the Company’s operating plans and performance and speak only as of the date hereof. You can identify these forward-looking statements by the use of forward-looking words such as “will,” “may,” “plan,” “estimate,” “project,” “believe,” “anticipate,” “expect,” “intend,” “should,” “would,” “could,” “target,” “goal,” “continue to,” “positioned to,” “are confident” or the negative versions of those words or other comparable words. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, are forward-looking statements. Any forward-looking statements contained in this release are based upon our historical performance and on our current plans, estimates and expectations of the Company’s future performance and the future performance of the markets in which the Company operates in light of information currently available to us. The inclusion of this forward-looking information should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will be achieved. These forward-looking statements are subject to various risks, uncertainties and assumptions relating to our operations, financial results, financial condition, business, prospects, growth strategy and liquidity. These risks and uncertainties include, without limitation, any disruption in the availability or supply of, or increases in the price of ethylene oxide (“EO”) or Cobalt-60, or our other direct materials, services and supplies, including as a result of geopolitical instability and/or sanctions arising from United States, Canadian, United Kingdom or European Union relations with Russia; fluctuations in foreign currency exchange rates; changes in industry trends, environmental, health and safety regulations or preferences, and general economic, social and business conditions; the impact and outcome of current and future legal proceedings and liability claims, including litigation related to use of EO and/or emission and releases of EO from our facilities in Illinois, Georgia and New Mexico and the possibility that other claims will be made in the future relating to these or other facilities; our ability to increase capacity at existing facilities, build new facilities in a timely and cost-effective manner and renew leases for our leased facilities; our ability to attract and retain qualified employees; the risks of doing business internationally, including global and regional economic and political instability and compliance with numerous and sometimes inconsistent laws and regulations in multiple jurisdictions; and an inability to pursue strategic transactions, find suitable acquisition targets, or integrate strategic acquisitions into our business successfully. For additional discussion of these risks and uncertainties, please refer to the Company’s filings with the SEC, such as its annual and quarterly reports. We do not undertake any obligation to publicly update or revise these forward-looking statements, except as otherwise required by law.

Non-GAAP Financial Measures

To supplement our consolidated financial statements presented in accordance with GAAP, we consider Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, Adjusted EPS, Segment income margin, Net Debt and Net Leverage Ratio and constant currency, financial measures that are not based on any standardized methodology prescribed by GAAP.

We define Adjusted Net Income as net income (loss) before amortization and certain other adjustments that we do not consider in our evaluation of our ongoing operating performance from period to period.

We define Adjusted EBITDA as Adjusted Net Income before interest expense, depreciation (including depreciation of Co-60 used in our operations) and income tax provision applicable to Adjusted Net Income.

Adjusted EBITDA margin is equal to Adjusted EBITDA divided by net revenues.

Segment income margin is equal to segment income divided by net segment revenues.

We define Adjusted EPS as Adjusted Net Income divided by the weighted average number of diluted shares outstanding.

Our Net Debt is equal to our total debt, plus unamortized debt issuance costs and debt discounts, less cash and cash equivalents.

Our Net Leverage Ratio is equal to Net Debt divided by Adjusted EBITDA.

Constant currency is a non-GAAP financial measure we use to assess performance excluding the impact of foreign currency exchange rate changes. We calculate constant currency net revenues by translating prior year net revenues in local currency at the average exchange rates applicable for the current period. The translated results are then used to determine year-over-year percentage increases or decreases. We generally refer to such amounts calculated on a constant currency basis as excluding the impact of foreign currency exchange rates. These results should be considered in addition to, not as a substitute for, results reported in accordance with GAAP. Results on a constant currency basis, as we present them, may not be comparable to similarly titled measures used by other companies and are not measures of performance presented in accordance with GAAP.

We use these non-GAAP financial measures as the principal measures of our operating performance. Management believes these measures allow management to more effectively evaluate our operating performance and compare the results of our operations from period to period without the impact of certain non-cash items and non-routine items that we do not expect to continue at the same level in the future and other items that are not core to our operations. We believe that these measures are useful to our investors because they provide a more complete understanding of the factors and trends affecting our business than could be obtained without these measures and their disclosure. In addition, we believe these measures will assist investors in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. Our management also uses these measurements in their financial analysis and operational decision-making and Adjusted EBITDA serves as the key metric for the attainment of our primary annual incentive program. These measures may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.

About Sotera Health

Sotera Health Company is a leading global provider of mission-critical end-to-end sterilization solutions and lab testing and advisory services for the healthcare industry. Sotera Health goes to market through three businesses – Sterigenics®, Nordion® and Nelson Labs®. Sotera Health is committed to its mission, Safeguarding Global Health®.

INVESTOR RELATIONS CONTACTS
Jason Peterson
Vice President & Treasurer, Sotera Health
IR@soterahealth.com

MEDIA CONTACT

Kristin Gibbs
Chief Marketing Officer, Sotera Health
kgibbs@soterahealth.com

Source: Sotera Health Company

(1) This is a non-GAAP financial measure used throughout this press release; please refer to the section “Non-GAAP Financial Measures” for explanations of our Non-GAAP financial measures and the schedules provided later in this release for reconciliations of reported GAAP to Non-GAAP financial measures.

 

Sotera Health Company
Consolidated Statements of Operations
(in thousands, except per share amounts)
(unaudited)

 

 
Three Months Ended
December 31,

 
Year Ended
December 31,

 
 
2023
 
 
 
2022
 
 
 
2023
 
 
 
2022
 

Revenues:
 
 
 
 
 
 
 

Service
$
237,918
 
 
$
220,377
 
 
$
905,598
 
 
$
864,828
 

Product
 
72,321
 
 
 
31,213
 
 
 
143,690
 
 
 
138,859
 

Total net revenues
 
310,239
 
 
 
251,590
 
 
 
1,049,288
 
 
 
1,003,687
 

Cost of revenues:
 
 
 
 
 
 
 

Service
 
106,921
 
 
 
98,105
 
 
 
418,611
 
 
 
390,860
 

Product
 
23,235
 
 
 
11,765
 
 
 
53,519
 
 
 
55,823
 

Total cost of revenues
 
130,156
 
 
 
109,870
 
 
 
472,130
 
 
 
446,683
 

Gross profit
 
180,083
 
 
 
141,720
 
 
 
577,158
 
 
 
557,004
 

Operating expenses:
 
 
 
 
 
 
 

Selling, general and administrative expenses
 
60,358
 
 
 
65,949
 
 
 
236,667
 
 
 
245,714
 

Amortization of intangible assets
 
15,701
 
 
 
15,603
 
 
 
63,799
 
 
 
62,940
 

Total operating expenses
 
76,059
 
 
 
81,552
 
 
 
300,466
 
 
 
308,654
 

Operating income
 
104,024
 
 
 
60,168
 
 
 
276,692
 
 
 
248,350
 

Interest expense, net
 
42,653
 
 
 
32,269
 
 
 
142,878
 
 
 
80,144
 

Illinois EO litigation settlement
 

 
 
 
408,000
 
 
 

 
 
 
408,000
 

Georgia EO litigation settlement
 

 
 
 

 
 
 
35,000
 
 
 

 

Impairment of investment in unconsolidated affiliate
 

 
 
 

 
 
 

 
 
 
9,613
 

Foreign exchange (gain) loss
 
(227
)
 
 
647
 
 
 
159
 
 
 
145
 

Other income, net
 
(4,072
)
 
 
(2,246
)
 
 
(7,372
)
 
 
(6,441
)

Income (loss) before income taxes
 
65,670
 
 
 
(378,502
)
 
 
106,027
 
 
 
(243,111
)

Provision (benefit) for income taxes
 
26,989
 
 
 
(58,783
)
 
 
54,651
 
 
 
(9,541
)

Net income (loss)
 
38,681
 
 
 
(319,719
)
 
 
51,376
 
 
 
(233,570
)

 
 
 
 
 
 
 
 

Earnings (loss) per share:
 
 
 
 
 
 
 

Basic
$
0.14
 
 
$
(1.14
)
 
$
0.18
 
 
$
(0.83
)

Diluted
 
0.14


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