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
three months ended March 31, 2024.
First-quarter 2024 net revenues increased 12.5% to $248 million,
compared to $221 million in the first-quarter 2023. Net revenues
increased 11.8% on a constant currency basis. Net income was $6
million, or $0.02 per diluted share, compared to net income of $3
million, or $0.01 per diluted share for the first-quarter 2023.
Adjusted EBITDA for the first-quarter 2024 increased by 13.7% to
$112 million compared to the first-quarter 2023. First-quarter 2024
Adjusted Earnings Per Diluted Share (“Adjusted EPS”) of $0.13 was
flat compared to the first-quarter 2023.
“This morning we announced a solid start to the year delivering
top- and bottom-line growth for the quarter,” said Chairman and
Chief Executive Officer, Michael B. Petras, Jr. “We are reaffirming
the Company’s 2024 outlook that we previously provided. The team
remains focused on executing on our strategic priorities as we
manage through continued market headwinds.”
“We are also pleased that the Environmental Protection Agency
(EPA) finalized its update of the National Emission Standards for
Hazardous Air Pollutants (NESHAP),” added Petras. “Although the
updated requirements will be very challenging for the sterilization
industry to meet, we believe that Sterigenics’ significant
investments in state-of-the-art emission controls have positioned
Sterigenics to be able to comply with the updated standards within
the timeframes specified by the final rule.”
Petras concluded, “As always, our focus is to support our global
team members while serving our customers with high quality, safe
and reliable service.”
First-Quarter Review by Business Segment
Sterigenics
For first-quarter 2024, net revenues were $166 million, an
increase of 4.1% compared to the first quarter a year ago. Segment
income was $86 million, an increase of 3.6%.
Net revenue growth for first-quarter 2024 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 driven by favorable
pricing, partially offset by unfavorable volume and mix, as well as
inflation.
Nordion
For first-quarter 2024, net revenues were $24 million, an
increase of 180.8%, compared to an unusually light first quarter a
year ago. Segment income increased 606.7% to $11 million.
Increases in net revenues, segment income and segment income
margin for the first-quarter 2024 were primarily driven by
favorable volume and mix related to the timing of reactor harvest
schedules.
Nelson Labs
For first-quarter 2024, net revenues were $58 million, an
increase of 10.8% compared to the first quarter a year ago. Segment
income increased 8.8% to $15 million.
Net revenue and segment income growth for the first-quarter 2024
were primarily driven by volume and mix improvements as well as
favorable pricing.
Balance Sheet and Liquidity
As of March 31, 2024, Sotera Health had $2.3 billion in
total debt, and $261 million in cash and cash equivalents, compared
to $2.3 billion in total debt and $296 million in cash and cash
equivalents as of December 31, 2023. As of March 31,
2024, the Company had no balance outstanding on its revolving
credit facility. Material debt balances currently outstanding do
not mature until 2026. Sotera Health’s Net Leverage Ratio(2) as of
March 31, 2024 was 3.8x, consistent with December 31,
2023.
On March 1, 2024 the Company extended the maturity of its
revolving credit facility to the earlier of March 1, 2029 and the
date that is 91 days prior to the maturity date of its existing
term loans.
Reaffirming 2024 Outlook
Today, Sotera Health is reaffirming the 2024 outlook first
provided on February 27, 2024. As a reminder, the outlook is:
- 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(2) 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 March 31, 2024 remain
constant for the remainder of 2024. Our outlook is based on current
plans and expectations and is subject to a 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
- RBC 2024 Global Healthcare Conference
at 9:30 a.m. Eastern Time, May 15, 2024
- Sotera Health 2024 Annual Meeting of
Shareholders at 9:00 a.m. Eastern Time, May 23, 2024
- Jefferies Global Healthcare Conference,
June 5, 2024
- Goldman Sachs 45th annual Global
Healthcare Conference, June 12, 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 against 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 California,
Georgia, Illinois 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 net of 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 CONTACTJason Peterson Vice
President & Treasurer, Sotera Health IR@soterahealth.com
MEDIA CONTACT Kristin GibbsChief Marketing
Officer, Sotera Healthkgibbs@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.(2) 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 CompanyConsolidated
Statements of Operations (in thousands, except per share
amounts)(unaudited) |
|
|
|
|
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
Revenues: |
|
|
|
Service |
$ |
226,481 |
|
|
$ |
214,510 |
|
Product |
|
21,695 |
|
|
|
6,080 |
|
Total net
revenues |
|
248,176 |
|
|
|
220,590 |
|
Cost of
revenues: |
|
|
|
Service |
|
110,852 |
|
|
|
104,210 |
|
Product |
|
10,209 |
|
|
|
4,877 |
|
Total cost of
revenues |
|
121,061 |
|
|
|
109,087 |
|
Gross
profit |
|
127,115 |
|
|
|
111,503 |
|
Operating
expenses: |
|
|
|
Selling, general and administrative expenses |
|
58,209 |
|
|
|
61,910 |
|
Amortization of intangible assets |
|
15,732 |
|
|
|
16,227 |
|
Impairment of long-lived assets |
|
73,941 |
|
|
|
78,137 |
|
Total operating
expenses |
|
73,941 |
|
|
|
78,137 |
|
Operating
income |
|
53,174 |
|
|
|
33,366 |
|
Interest expense, net |
|
41,771 |
|
|
|
28,870 |
|
Foreign exchange (gain)
loss |
|
(572 |
) |
|
|
347 |
|
Other expense (income),
net |
|
961 |
|
|
|
(1,253 |
) |
Income before income
taxes |
|
11,014 |
|
|
|
5,402 |
|
Provision for income
taxes |
|
4,691 |
|
|
|
2,560 |
|
Net
income |
|
6,323 |
|
|
|
2,842 |
|
|
|
|
|
Earnings per
share: |
|
|
|
Basic |
$ |
0.02 |
|
|
$ |
0.01 |
|
Diluted |
|
0.02 |
|
|
|
0.01 |
|
Weighted average
number of shares outstanding: |
|
|
|
Basic |
|
281,913 |
|
|
|
280,691 |
|
Diluted |
|
284,062 |
|
|
|
282,977 |
|
|
|
|
|
|
|
|
|
Sotera Health Company Segment
Data(in thousands)(unaudited) |
|
|
Three Months Ended March 31, |
|
2024 |
|
2023 |
Segment
revenues: |
|
|
|
Sterigenics |
$ |
166,497 |
|
$ |
159,997 |
Nordion |
|
24,007 |
|
|
8,551 |
Nelson Labs |
|
57,672 |
|
|
52,042 |
Total net
revenues |
$ |
248,176 |
|
$ |
220,590 |
Segment
income: |
|
|
|
Sterigenics |
$ |
85,818 |
|
$ |
82,840 |
Nordion |
|
10,785 |
|
|
1,526 |
Nelson Labs |
|
15,341 |
|
|
14,102 |
Total segment
income |
|
111,944 |
|
|
98,468 |
Less
adjustments: |
|
|
|
Interest expense, net(a) |
|
41,771 |
|
|
28,870 |
Depreciation and amortization(b) |
|
40,430 |
|
|
39,538 |
Share-based compensation(c) |
|
8,657 |
|
|
7,348 |
Loss on foreign currency and derivatives not designated as hedging
instruments, net(d) |
|
1,230 |
|
|
535 |
Business optimization expenses(e) |
|
54 |
|
|
2,231 |
Refinancing and secondary offering costs(f) |
|
1,807 |
|
|
— |
Professional services relating to EO sterilization
facilities(g) |
|
6,339 |
|
|
13,972 |
Accretion of asset retirement obligations(h) |
|
642 |
|
|
572 |
Consolidated income
before income taxes |
$ |
11,014 |
|
$ |
5,402 |
|
(a) |
Interest expense, net presented in this reconciliation for the
three months ended March 31, 2023 has been adjusted to conform to
the current year presentation to include interest expense, net on
Term Loan B attributable to the loan proceeds that were used to
fund the $408.0 million Illinois EO litigation settlement. |
(b) |
Includes depreciation of Co-60 held at gamma irradiation
sites. |
(c) |
Represents share-based compensation expense to employees and
Non-Employee Directors. |
(d) |
Represents the effects of (i) fluctuations in foreign currency
exchange rates and (ii) non-cash mark-to-fair value of
embedded derivatives relating to certain customer and supply
contracts at Nordion. |
(e) |
Represents (i) certain costs related to acquisitions and the
integration of recent acquisitions, (ii) the earnings impact of
fair value adjustments (excluding those recognized within
amortization expense) resulting from the businesses acquired, (iii)
transition services income and non-cash deferred lease income
associated with the terms of the divestiture of the Medical
Isotopes business in 2018, (iv) professional fees and other costs
associated with business optimization, cost saving and other
process enhancement projects, and (v) professional fees, payroll
costs, and other costs, including ongoing lease and utility
expenses associated with the closure of the Willowbrook, Illinois
facility. The three months ended March 31, 2023 includes a $1.0
million cancellation fee received from a tenant in connection with
the termination of an office space lease at the Nordion
facility. |
(f) |
The three months ended March 31, 2024 includes $1.1 million of
expenses incurred in connection with the secondary offering of our
common stock that closed on March 4, 2024 and write-off of
unamortized debt issuance costs in connection with Amendment No. 3
to the Revolving Credit Facility. |
(g) |
Represents litigation and other professional fees associated with
our EO sterilization facilities. Amounts presented for the three
months ended March 31, 2023 have been adjusted to exclude interest
expense, net associated with Term Loan B attributable to the loan
proceeds that were used to fund the $408.0 million Illinois EO
litigation settlement. |
(h) |
Represents non-cash accretion of asset retirement obligations
related to Co-60 and gamma processing facilities, which are based
on estimated site remediation costs for any future decommissioning
of these facilities and are accreted over the life of the
asset. |
|
|
Sotera Health Company Condensed
Consolidated Balance Sheets(in thousands)(unaudited) |
|
|
As of March 31, |
|
As of December 31, |
|
2024 |
|
2023 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
262,820 |
|
$ |
301,654 |
Accounts receivable, net |
|
111,069 |
|
|
147,696 |
Inventories, net |
|
51,342 |
|
|
48,316 |
Other current assets |
|
61,948 |
|
|
59,578 |
Total current assets |
|
487,179 |
|
|
557,244 |
Property, plant, and
equipment, net |
|
979,422 |
|
|
946,914 |
Operating lease assets |
|
22,517 |
|
|
24,037 |
Other intangible assets,
net |
|
390,457 |
|
|
416,318 |
Goodwill |
|
1,102,851 |
|
|
1,111,190 |
Other assets |
|
77,266 |
|
|
74,717 |
Total assets |
$ |
3,059,692 |
|
$ |
3,130,420 |
Liabilities and
equity |
|
|
|
Total current liabilities |
$ |
152,340 |
|
$ |
230,654 |
Long-term debt, less current
portion |
|
2,224,611 |
|
|
2,223,674 |
Other noncurrent
liabilities |
|
193,197 |
|
|
167,904 |
Deferred income taxes |
|
60,152 |
|
|
64,454 |
Total liabilities |
|
2,630,300 |
|
|
2,686,686 |
Total equity |
|
429,392 |
|
|
443,734 |
Total liabilities and
equity |
$ |
3,059,692 |
|
$ |
3,130,420 |
|
Sotera Health CompanyCondensed
Consolidated Statements of Cash Flows(in
thousands)(unaudited) |
|
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
Operating
activities: |
|
|
|
Net income |
$ |
6,323 |
|
|
$ |
2,842 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
Non-cash items |
|
44,603 |
|
|
|
47,239 |
|
Changes in operating assets
and liabilities |
|
(41,227 |
) |
|
|
(16,210 |
) |
Net cash provided by operating
activities |
|
9,699 |
|
|
|
33,871 |
|
Investing
activities: |
|
|
|
Purchases of property, plant
and equipment |
|
(34,890 |
) |
|
|
(45,000 |
) |
Other investing
activities |
|
37 |
|
|
|
32 |
|
Net cash used in investing
activities |
|
(34,853 |
) |
|
|
(44,968 |
) |
Financing
activities: |
|
|
|
Proceeds from long-term
borrowings |
|
— |
|
|
|
500,000 |
|
Payment on long-term
borrowings |
|
(1,250 |
) |
|
|
— |
|
Payment on revolving credit
facility |
|
— |
|
|
|
(200,000 |
) |
Payments of debt issuance
costs |
|
(1,291 |
) |
|
|
(24,457 |
) |
Buyout of leased facilities |
|
(6,736 |
) |
|
|
— |
|
Other financing
activities |
|
(2,664 |
) |
|
|
(1,627 |
) |
Net cash (used in) provided by
financing activities |
|
(11,941 |
) |
|
|
273,916 |
|
Effect of exchange rate
changes on cash and cash equivalents |
|
(1,739 |
) |
|
|
1,067 |
|
Net (decrease) increase in
cash and cash equivalents, including restricted cash |
|
(38,834 |
) |
|
|
263,886 |
|
Cash and cash equivalents,
including restricted cash, at beginning of period |
|
301,654 |
|
|
|
396,294 |
|
Cash and cash equivalents,
including restricted cash, at end of period |
$ |
262,820 |
|
|
$ |
660,180 |
|
|
|
|
|
Supplemental
disclosures of cash flow information: |
|
|
|
Cash paid during the period for interest |
$ |
69,735 |
|
|
$ |
35,456 |
|
Cash paid during the period for income taxes, net of tax refunds
received |
|
9,837 |
|
|
|
14,014 |
|
Purchases of property, plant and equipment included in accounts
payable |
|
15,454 |
|
|
|
13,061 |
|
|
|
|
|
|
|
|
|
Sotera Health CompanyNon-GAAP Financial
Measures(in thousands, except per share
amounts)(unaudited) |
|
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
Net
income |
$ |
6,323 |
|
|
$ |
2,842 |
|
Amortization of intangible assets |
|
20,124 |
|
|
|
20,607 |
|
Share-based compensation(a) |
|
8,657 |
|
|
|
7,348 |
|
Loss on foreign currency and derivatives not designated as hedging
instruments, net(b) |
|
1,230 |
|
|
|
535 |
|
Business optimization expenses(c) |
|
54 |
|
|
|
2,231 |
|
Refinancing and secondary offering costs(d) |
|
1,807 |
|
|
|
— |
|
Professional services relating to EO sterilization
facilities(e) |
|
6,339 |
|
|
|
13,972 |
|
Accretion of asset retirement obligations(f) |
|
642 |
|
|
|
572 |
|
Income tax benefit associated with pre-tax adjustments(g) |
|
(9,546 |
) |
|
|
(12,250 |
) |
Adjusted Net
Income |
|
35,630 |
|
|
|
35,857 |
|
Interest expense, net(h) |
|
41,771 |
|
|
|
28,870 |
|
Depreciation(i) |
|
20,306 |
|
|
|
18,931 |
|
Income tax provision applicable to Adjusted Net Income(j) |
|
14,237 |
|
|
|
14,810 |
|
Adjusted
EBITDA(k) |
$ |
111,944 |
|
|
$ |
98,468 |
|
|
|
|
|
Net
Revenues |
$ |
248,176 |
|
|
$ |
220,590 |
|
Adjusted EBITDA
Margin |
|
45.1 |
% |
|
|
44.6 |
% |
Weighted average
number of shares outstanding |
|
|
|
Basic |
|
281,913 |
|
|
|
280,691 |
|
Diluted |
|
284,062 |
|
|
|
282,977 |
|
Earnings per
share |
|
|
|
Basic |
$ |
0.02 |
|
|
$ |
0.01 |
|
Diluted |
|
0.02 |
|
|
|
0.01 |
|
Adjusted earnings per
share |
|
|
|
Basic |
$ |
0.13 |
|
|
$ |
0.13 |
|
Diluted |
|
0.13 |
|
|
|
0.13 |
|
|
|
|
|
|
|
|
|
(a) |
Represents share-based compensation expense to employees and
Non-Employee Directors. |
(b) |
Represents the effects of (i) fluctuations in foreign currency
exchange rates and (ii) non-cash mark-to-fair value of
embedded derivatives relating to certain customer and supply
contracts at Nordion. |
(c) |
Represents (i) certain costs related to acquisitions and the
integration of recent acquisitions, (ii) the earnings impact of
fair value adjustments (excluding those recognized within
amortization expense) resulting from the businesses acquired, (iii)
transition services income and non-cash deferred lease income
associated with the terms of the divestiture of the Medical
Isotopes business in 2018, (iv) professional fees and other costs
associated with business optimization, cost saving and other
process enhancement projects, and (v) professional fees, payroll
costs, and other costs, including ongoing lease and utility
expenses associated with the closure of the Willowbrook, Illinois
facility. The three months ended March 31, 2023 includes a $1.0
million cancellation fee received from a tenant in connection with
the termination of an office space lease at the Nordion
facility. |
(d) |
The three months ended March 31, 2024 includes $1.1 million of
expenses incurred in connection with the secondary offering of our
common stock that closed on March 4, 2024 and write-off of
unamortized debt issuance costs in connection with Amendment No. 3
to the Revolving Credit Facility. |
(e) |
Represents litigation and other professional fees associated with
our EO sterilization facilities. Amounts presented for the three
months ended March 31, 2023 have been adjusted to exclude interest
expense, net associated with Term Loan B attributable to the loan
proceeds that were used to fund the $408.0 million Illinois EO
litigation settlement. |
(f) |
Represents non-cash accretion of asset retirement obligations
related to Co-60 and gamma processing facilities, which are based
on estimated site remediation costs for any future decommissioning
of these facilities and are accreted over the life of the
asset. |
(g) |
Represents the income tax impact of adjustments calculated based on
the tax rate applicable to each item. We eliminate the effect of
tax rate changes as applied to tax assets and liabilities and
unusual items from our presentation of adjusted net income. |
(h) |
Interest expense, net presented in this reconciliation for the
three months ended March 31, 2023 has been adjusted to conform to
the current year presentation to include interest expense, net on
Term Loan B attributable to the loan proceeds that were used to
fund the $408.0 million Illinois EO litigation settlement. |
(i) |
Includes depreciation of Co-60 held at gamma irradiation
sites. |
(j) |
Represents the difference between income tax provision or benefit
as determined under U.S. GAAP and the income tax provision or
benefit associated with pre-tax adjustments described in footnote
(g). |
(k) |
$23.8 million and $22.9 million of the adjustments for the three
months ended March 31, 2024 and 2023, respectively, are
included in cost of revenues, primarily consisting of amortization
of intangible assets, depreciation, and accretion of asset
retirement obligations. |
|
|
Sotera Health CompanyNon-GAAP Financial
Measures(in thousands, except Net
Leverage)(unaudited) |
|
|
As of March 31, |
|
As of December 31, |
|
|
2024 |
|
|
|
2023 |
|
Current portion of long-term
debt |
$ |
4,808 |
|
|
$ |
4,797 |
|
Long-term debt |
$ |
2,224,611 |
|
|
$ |
2,223,674 |
|
Current portion of finance
leases |
|
1,490 |
|
|
|
8,771 |
|
Finance leases less current
portion |
|
90,858 |
|
|
|
63,793 |
|
Total
Debt |
$ |
2,321,767 |
|
|
$ |
2,301,035 |
|
|
|
|
|
Less: cash and cash
equivalents |
|
(261,133 |
) |
|
|
(296,407 |
) |
Net Debt |
$ |
2,060,634 |
|
|
$ |
2,004,628 |
|
|
|
|
|
Adjusted
EBITDA(a) |
$ |
541,505 |
|
|
$ |
528,029 |
|
Net
Leverage |
3.8x |
|
3.8x |
|
|
|
|
(a) |
Represents adjusted EBITDA for the twelve months ended March 31,
2024 and December 31, 2023, respectively. Refer to the
reconciliation of net income (the most comparable GAAP measure) to
Adjusted EBITDA on the following page. |
Sotera Health CompanyNon-GAAP Financial
Measures(in thousands)(unaudited) |
|
|
|
Twelve months ended |
|
March 31, 2024 |
|
December 31, 2023 |
Net income |
$ |
54,857 |
|
|
$ |
51,376 |
|
Amortization of intangible assets |
|
80,865 |
|
|
|
81,348 |
|
Share-based compensation(a) |
|
33,673 |
|
|
|
32,364 |
|
Gain on foreign currency and derivatives not designated as hedging
instruments, net(b) |
|
(857 |
) |
|
|
(1,552 |
) |
Business optimization expenses(c) |
|
5,485 |
|
|
|
7,662 |
|
Refinancing and secondary offering costs(d) |
|
1,807 |
|
|
|
— |
|
Professional services relating to EO sterilization
facilities(e) |
|
37,679 |
|
|
|
45,312 |
|
Georgia EO litigation settlement(f) |
|
35,000 |
|
|
|
35,000 |
|
Accretion of asset retirement obligations(g) |
|
2,483 |
|
|
|
2,413 |
|
Income tax benefit associated with pre-tax adjustments(h) |
|
(46,893 |
) |
|
|
(49,597 |
) |
Adjusted Net
Income |
|
204,099 |
|
|
|
204,326 |
|
Interest expense, net(i) |
|
155,779 |
|
|
|
142,878 |
|
Depreciation(j) |
|
77,952 |
|
|
|
76,577 |
|
Income tax provision applicable to Adjusted Net Income(k) |
|
103,675 |
|
|
|
104,248 |
|
Adjusted
EBITDA(l) |
$ |
541,505 |
|
|
$ |
528,029 |
|
|
|
|
|
Net
Revenues |
$ |
1,076,874 |
|
|
$ |
1,049,288 |
|
Adjusted EBITDA
Margin |
|
50.3 |
% |
|
|
50.3 |
% |
|
|
|
|
|
|
|
|
(a) |
Represents share-based compensation expense to employees and
Non-Employee Directors. |
(b) |
Represents the effects of (i) fluctuations in foreign currency
exchange rates and (ii) non-cash mark-to-fair value of
embedded derivatives relating to certain customer and supply
contracts at Nordion. |
(c) |
Represents (i) certain costs related to acquisitions and the
integration of recent acquisitions, (ii) the earnings impact of
fair value adjustments (excluding those recognized within
amortization expense) resulting from the businesses acquired, (iii)
transition services income and non-cash deferred lease income
associated with the terms of the divestiture of the Medical
Isotopes business in 2018, (iv) professional fees and other costs
associated with business optimization, cost saving and other
process enhancement projects, and (v) professional fees, payroll
costs, and other costs, including ongoing lease and utility
expenses associated with the closure of the Willowbrook, Illinois
facility. The twelve months ended December 31, 2023 includes a $1.0
million cancellation fee received from a tenant in connection with
the termination of an office space lease at the Nordion
facility. |
(d) |
The twelve months ended March 31, 2024 includes $1.1 million
of expenses incurred in connection with the secondary offering of
our common stock that closed on March 4, 2024 and write-off of
unamortized debt issuance costs in connection with Amendment No. 3
to the Revolving Credit Facility. |
(e) |
Represents litigation and other professional fees associated with
our EO sterilization facilities. Amounts presented for the twelve
months ended March 31, 2024 and December 31, 2023 have been
adjusted to exclude interest expense, net associated with Term Loan
B attributable to the loan proceeds that were used to fund the
$408.0 million Illinois EO litigation settlement. |
(f) |
Represents the cost to settle 79 pending EO claims against
Sterigenics U.S., LLC and Sotera Health LLC in Georgia under a
Settlement Term Sheet entered into on December 21, 2023. |
(g) |
Represents non-cash accretion of asset retirement obligations
related to Co-60 and gamma processing facilities, which are based
on estimated site remediation costs for any future decommissioning
of these facilities and are accreted over the life of the
asset. |
(h) |
Represents the income tax impact of adjustments calculated based on
the tax rate applicable to each item. We eliminate the effect of
tax rate changes as applied to tax assets and liabilities and
unusual items from our presentation of adjusted net income. |
(i) |
Interest expense, net presented in this reconciliation for the
twelve months ended March 31, 2024 and December 31, 2023 has been
adjusted to conform to the current year presentation to include
interest expense, net on Term Loan B attributable to the loan
proceeds that were used to fund the $408.0 million Illinois EO
litigation settlement. |
(j) |
Includes depreciation of Co-60 held at gamma irradiation
sites. |
(k) |
Represents the difference between income tax provision or benefit
as determined under U.S. GAAP and the income tax provision or
benefit associated with pre-tax adjustments described in footnote
(h). |
(l) |
$95.0 million and $94.1 million of the adjustments for
the twelve months ended March 31, 2024 and December 31, 2023,
respectively, are included in cost of revenues, primarily
consisting of amortization of intangible assets, depreciation, and
accretion of asset retirement obligations. |
|
|
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