Sotera Health Company (NASDAQ:SHC) Q4 2022 Earnings Call Transcript

We’ll be able to evaluate it. We think that this gets closed out sometime late July, early August. We have to fund the $408 million into escrow count on May 1. So at a high level, that’s how it works. The 4, what they’re calling trial plaintiffs, Kamuda, Schumacher and Fornek have already signed and committed on their numbers. So that’s Illinois. On the other litigation, just to be clear on New Mexico, there is no personal injury cases in New Mexico. And on Georgia, there’s 1 personal injury case that will come up in 2023, and the rest of them have a pretty extended time line because Georgia is going to be a different approach than what you saw in Illinois. Georgia, the first thing they have to do is go through a Phase I to prove general causation.

And then after that, it goes to Phase II for specific causation. A very different approach that was taken in Illinois.

Patrick Donnelly: Understood. Okay. And then maybe just a quick one on the margin side. Nelson, obviously been tracking those margins here the last couple of quarters. It sounds like get back to the normal run rate in the second half. Can you just talk about that ramp? Is it just kind of the staffing pressures, volumes normalizing? What gets you there? And then just a quick one. The interest expense, I didn’t get the exact number for ’23. I might have missed that. So if you have that, that would be great.

Michael Petras: Okay. I’ll take the margin questions and then Michael Biehl could address questions on interest. So on the Nelson margin side, if you look at it, the last 3 quarters have kind of homed in on that mid-30s, right? 36%, 35% kind of range. We had good improvement fourth quarter over third quarter sequentially. Always the first quarter ends up being the lowest margin just because of volumes and how they fall and there’s a little bit of a seasonality impact. But we’re feeling pretty good about what the Nelson team has done. Remember, one of the things we mentioned in our last quarterly call is that we went ahead in staffed up, anticipating a little bit more volume, but we didn’t reduce the staffing because one of our key priorities is to make sure we take care of service rates and turnaround times.

And I’m really pleased with the progress on our Net Promoter Score there as well as our just overall turnaround time. Ironically, I was just looking over the past week, we got our customer satisfaction scores back our annual survey for both Sterigenics and Nelson and then both of them were very strong performance. So I’m confident on what we’re doing there. We’re seeing some nice pockets of growth. But from a margin perspective, we see that the first quarter will be a little lighter, but we see this business in the mid- to high 30s as I had referenced earlier.

Michael Biehl: Right. Now the interest expense for 2023, we expect to be in the $160 million to $167 million range on a cash basis. Does that answer your question?

Patrick Donnelly: It does.

Operator: Our next question will come from Matthew Mishan with KeyBanc.

Matthew Mishan: I just have a follow-up question on Nelson Labs. I believe when we — when you first came public, and we’re going through the process you actually thought Nelson Labs was going to be a double-digit growth business and kind of a driver for you guys. Where are you at now from like a longer-term like outlook on kind of where you think Nelson Labs will be from a growth perspective for you?