Sotera Health (NASDAQ:SHC) Chief Financial Officer Jon Lyons told investors at the KeyBanc Healthcare Forum that the company’s core investment case remains intact more than five years after its 2020 IPO, pointing to a long track record of revenue growth, consistently high EBITDA margins, and accelerating free cash flow generation.
Business positioning and long-term profile
Lyons described Sotera Health as a global industry leader operating in “highly regulated markets,” with an estimated $18 billion serviceable addressable market and a footprint of 62 facilities worldwide. He said the company offers “end-to-end solutions” across sterilization and lab services and believes it is positioned for “above market growth” going forward.
2025 results: Upside in Sterigenics offset advisory weakness
Discussing 2025 performance, Lyons said the year played out differently than initial expectations, but landed within the company’s organic revenue guidance range of 4% to 6%, finishing at 5.2% organic revenue growth. He said the expert advisory business at Nelson Labs performed worse than expected and became a “pretty significant” headwind. However, that was offset by stronger-than-anticipated volume performance at Sterigenics, which improved more quickly than planned.
Lyons framed 2025 as the first year of the company’s three-year plan and said results were on track with objectives set at the company’s November 2024 investor day. He highlighted several segment-level dynamics:
- Nelson Labs: Margin expansion was “headlined” by more than 300 basis points of improvement, supported by growth in higher-margin core lab testing.
- Sterigenics: Lyons said Sterigenics grew nearly 8% on the top line and nearly 9% on the bottom line, citing strong med device and pharma demand.
- Nordion: He said Nordion posted “another great year” with upper-single-digit revenue and EBITDA growth.
Lyons also pointed to improved interest expense of $9 million year over year and a significantly lower tax rate, contributing to a $0.16 increase in adjusted earnings per share in 2025.
2026 outlook: Volumes, pricing, and downtime shape the year
For 2026, Lyons reiterated the company’s constant-currency organic growth guidance of 5% to 6.5%. He said Sterigenics is expected to deliver mid- to high-single-digit revenue growth on a constant-currency basis, supported by another solid year of demand in medical devices and pharmaceuticals.
At Nordion, Lyons said the company is targeting low- to mid-single-digit growth for the full year, with more revenue weighted to the first half than in recent years. He said the company expects 40% to 45% of Nordion revenue to occur in the first half, with the second quarter heavier than the first.
For Nelson Labs, Lyons said the company expects low-single-digit growth. He said core sterilization-related routine testing connected to Sterigenics should continue to grow, and he expects the consulting business to be “no longer a headwind,” though he cautioned that validation testing tied to new regulations and new product development can be “a little choppy.”
Lyons also said pricing should be another positive contributor, with expectations around the midpoint of the company’s 3% to 4% long-term pricing guide, while noting that volumes remain the biggest swing factor for overall performance.
Cadence, margin considerations, and energy exposure
Lyons clarified comments made about a “shutdown” impacting early 2026 results, saying this referred to facility maintenance downtime rather than any government shutdown. He said downtime is higher in the first quarter of 2026 versus the prior year, creating a year-over-year headwind and contributing to a mid-single-digit outlook for Sterigenics in the first quarter. Lyons said that headwind should persist in the second quarter but become a tailwind in the back half of the year, adding that while the year started slowly due to weather and downtime, activity has begun to pick up.
On margins, Lyons referenced the company’s long-range plan target of 50 to 150 basis points of EBITDA margin improvement over the 2025 to 2027 period and said the company achieved 118 basis points of improvement in 2025. He also noted that pricing can be margin dilutive in a business with EBITDA margins above 50% unless pricing increases more than double inflation in dollar terms.
Regarding energy and commodities, Lyons said Sotera has exposure to natural gas and electricity, but characterized those costs as “very small factors of production” and said the company is largely insulated in the near term through fixed contracts in many deregulated markets. He added that the company has an “immaterial” revenue base in the Middle East and that he is more focused on broader geopolitical impacts than direct energy-cost risk.
CapEx and free cash flow: Timing shifts, step-down expected in 2027
Lyons said the company remains focused on free cash flow generation and reiterated its three-year target of $500 million to $600 million in free cash flow. He noted the company generated more than $200 million last year and said it is “well on track” to achieve that goal.
Capital spending was $138 million in 2025, which Lyons said came in below initial guidance due primarily to timing. He attributed the shift to two main factors: a delay in the company’s second greenfield project as management reviewed return expectations, and a two-year delay in NESHAP regulations that enabled improved supplier negotiations while pushing some spending from 2025 into 2026.
Looking ahead, Lyons said CapEx should “drop significantly” in 2027 as the company nears completion of NESHAP-related spending and growth investments step down, with cobalt development spending also decreasing from 2026 to 2027.
In concluding remarks, Lyons said net leverage has improved by nearly a full turn over about two years and is approaching the company’s 2x to 3x target range. While he said capital allocation priorities are not changing, he noted that improved leverage provides more flexibility. Lyons said Sotera will continue to prioritize organic growth, while remaining opportunistic around debt paydown, M&A, and potentially share repurchases over time.
About Sotera Health (NASDAQ:SHC)
Sotera Health Inc (NASDAQ: SHC) is a global provider of sterilization and laboratory testing services that support the medical device, pharmaceutical, life sciences and consumer product industries. Headquartered in Jacksonville, Florida, the company offers a suite of services designed to ensure products meet rigorous safety and regulatory requirements before reaching market.
Sotera Health operates through three primary service platforms. Its Sterigenics division delivers contract sterilization solutions, including ethylene oxide (EtO), gamma irradiation, electron beam and X-ray technologies.
