Sotera Health Company (NASDAQ:SHC) Q4 2025 Earnings Call Transcript

Sotera Health Company (NASDAQ:SHC) Q4 2025 Earnings Call Transcript February 24, 2026

Sotera Health Company misses on earnings expectations. Reported EPS is $0.1217 EPS, expectations were $0.24.

Operator: Good morning, and welcome to Sotera Health Fourth Quarter and Full Year 2025 Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Vice President of Investor Relations, Jason Peterson. Jason, please go ahead.

Jason Peterson: Good morning, and thank you. Welcome to Sotera Health’s Fourth Quarter and Full Year 2025 Earnings Call. Today’s press release and supplemental slides are available on the Investors section of our website at soterahealth.com. This webcast is being recorded, and a replay will also be available on the Investors section of the Sotera Health website shortly after the call. Joining me today are Chairman and Chief Executive Officer, Michael Petras; and Chief Financial Officer, Jon Lyons. During the call today, some of our comments may be considered forward-looking statements. The matters addressed in these statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied.

Please refer to Sotera Health’s SEC filings and the forward-looking statement slide at the beginning of the presentation for a description of these risks and uncertainties. The company assumes no obligation to update any such forward-looking statements. Please note that during the discussion today, the company will present both GAAP and non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, tax rate applicable to net income, adjusted net income, adjusted EPS, adjusted free cash flow, net debt and net leverage ratio as well as constant currency comparisons. A reconciliation of GAAP to non-GAAP measures for all relevant periods may be found in the schedules attached to the company’s press release and in the supplemental slides to this presentation.

The operator will be assisting with the Q&A portion of the call today. Please limit yourself to one question and one follow-up. For further questions, feel free to reach out to the Investor Relations team. With that, I’ll now turn the call over to Sotera Health Chairman and CEO, Michael Petras.

Michael Petras: Good morning, and thank you for joining us. This morning, we announced another strong year of performance, extending our track record of year-over-year revenue growth to 20 consecutive years. In 2025, the total company revenue increased 5.7% to $1.164 billion or 5.2% growth on a constant currency basis versus 2024. Adjusted EBITDA increased 8.2% or 7.8% on a constant currency basis, with margins expanding to 51%, an increase of nearly 120 basis points. We also delivered adjusted free cash flow of over $200 million in 2025. Our results demonstrate strong execution, growing demand for our mission-critical services and disciplined financial management. The team’s performance in 2025 positions us well for sustained growth ahead.

We also had several notable achievements during the year. Our customer satisfaction exceeded 80%, underscoring our commitment to delivering excellent service. We advanced our portfolio across several key areas, including our commercial initiatives continue to build momentum with revenue from XBU customers expanding 9% year-over-year. Sterigenics delivered approximately 8% constant currency revenue growth versus 2024, driven by improved volume and mix. Significant progress was also made on the EO facility enhancements program as well as the construction of the new X-ray facility, which is planned to open in 2026. Nordion delivered a strong year, achieving approximately 9% constant currency revenue growth. Also in the fourth quarter, the team signed a cobalt development agreement with Westinghouse and PSEG, and they secured a 25-year Class 1B license renewal for our Ottawa facility, which is the longest ever issued by the Canadian Nuclear Safety Commission.

Nelson Labs delivered core lab testing growth during the year. They expanded margins by 312 basis points and made progress on clean room investment. On the capital markets front, we reduced borrowing costs by 75 basis points on our $1.4 billion term loan and paid down $86 million of debt, resulting in $13 million of annual interest savings. We also upsized and extended our revolver, increasing liquidity by $175 million. Sotera Health’s public float increased to 80% of our outstanding shares during 2025. We continue to strengthen our corporate governance with the appointment of a lead independent director. Also, as you may have seen, we welcomed Richard Kyle to the Board earlier this month. Rich’s leadership experience as a public company CEO and his extensive experience in operations and governance, along with a strong financial acumen will serve as tremendous assets as we continue to grow.

Finally, we remain actively engaged with our shareholders on many corporate responsibility initiatives. 2025 was a strong first step in executing the 2025 to 2027 long-range plan we presented at our November 2024 Investor Day, and we expect this year to represent another meaningful year of progress towards those goals. Earlier today, we issued our 2026 outlook. For the full year, we expect total revenue to increase to a range of $1.233 billion to $1.251 billion, representing constant currency growth of 5% to 6.5% versus 2025 and adjusted EBITDA to grow to a range of $632 million to $641 million or 5.5% to 7% constant currency growth. Before I hand it over to Jon, I’d like to highlight a management transition. As you may have seen in our press release this morning, effective April 1 of this year, Senior Vice President and General Counsel, Alex Dimitrief was transitioned to an outside adviser to the company.

I would like to thank Alex for his leadership and service in the past 3 years, and we are grateful that he will continue to support the company going forward as an adviser. We are excited to announce that Erika Ostrowski, who has served for the last 2 years as the Vice President, Deputy General Counsel and Corporate Secretary under Alex’s leadership, will be promoted to Senior Vice President and General Counsel for Sotera Health after demonstrating strong leadership, sound judgment and a deep understanding of our business. Erika is well positioned for continued success in her new role. Now Jon will take us through our fourth quarter and full year 2025 financials and our 2026 outlook in more depth.

Jonathan Lyons: Thank you, Michael. I’ll begin with our consolidated fourth quarter and full year 2025 results and close with additional detail on our 2026 outlook. For the quarter, total company revenues increased 4.6% to $303 million or 2.5% on a constant currency basis versus Q4 2024. The year-over-year comparison reflects the expected impact of Cobalt-60 harvest timing at Nordion. Adjusted EBITDA grew 2.7% to $157 million or 0.5% on a constant currency basis, while adjusted EBITDA margins were 51.8% for the quarter. Interest expense was $35 million in the quarter, a $6 million improvement versus Q4 2024. Net income was $35 million or $0.12 per diluted share. Adjusted EPS increased to $0.26, up $0.05 from the prior year, driven by a lower tax rate as well as strong operating performance and lower interest expense, partially offset by higher depreciation.

Now let’s take a closer look at our segment performances for the fourth quarter as compared to the same period last year. Sterigenics revenue improved 10.6% to $198 million or 8% on a constant currency basis. Growth was driven by 4.3% favorable pricing, 3.7% volume and mix as well as a 2.6% foreign currency benefit. Segment income increased 10.4% to $110 million or 7.8% on a constant currency basis, reflecting favorable pricing, volume mix and foreign currency, partially offset by inflation. As expected, Nordion’s revenue decreased 12.3% to $50 million as the timing of Cobalt-60 harvest schedules drove unfavorable volume and mix of 15%, which was partially offset by 2.4% favorable pricing. Nordion segment income decreased by 18.9% to $29 million.

Segment income margins decreased 466 basis points to 57.5%, primarily driven by the lower volumes and unfavorable product mix. Nelson Labs revenue increased 2.3% to $55 million, which was nearly flat on a constant currency basis. Favorable pricing of 3.2%, foreign exchange of 2.5% and core lab testing growth were partially offset by lower Expert Advisory Services revenue. Segment income rose 1.9% to $18 million, a decline of 1.2% on a constant currency basis. Growth was driven by favorable pricing, growth in core lab testing and foreign currency, partially offset by lower Expert Advisory Services revenue and higher costs. Now let’s turn to the full year 2025 results as compared to the prior year on a consolidated basis. We delivered revenue growth of 5.7% to $1.164 billion or 5.2% on a constant currency basis.

Adjusted EBITDA improved 8.2% to $593.8 million or 7.8% on a constant currency basis, resulting in adjusted EBITDA margins of 51%, an improvement of 118 basis points. Interest expense improved $9 million to $156 million, driven by lower interest rates, the favorable repricing of our term loan and $86 million of debt paydown. Reported net income for 2025 was $78 million or $0.27 per diluted shares. Adjusted EPS for the year was $0.86 per weighted average diluted share, an increase of $0.16 versus 2024, driven by operational growth, a lower tax rate and improved interest expense, partially offset by higher depreciation. I will now turn to the balance sheet, cash generation and capital deployment for the full year 2025. Adjusted free cash flow was $210 million, putting us well on track to achieve the 2025 through 2027 cumulative goal of $500 million to $600 million we set at our November 2024 Investor Day.

Capital expenditures totaled $138 million in 2025. The company continues to maintain a strong liquidity position. As of December 31, 2025, we had approximately $940 million of available liquidity, including $345 million of unrestricted cash and nearly $600 million of capacity under our revolving credit facility. Net leverage improved to 3.2x at year-end from 3.7x in 2024 as we continue progressing toward our 2 to 3x long-term target. Turning to our 2026 outlook. For the full year, we expect total company revenue to grow to a range of $1.233 billion to $1.251 billion, representing 5% to 6.5% constant currency growth and an estimated 100 basis point foreign currency benefit as compared to 2025. We expect adjusted EBITDA to improve to a range of $632 million to $641 million representing 5.5% to 7% constant currency growth and an estimated 100 basis point impact from foreign currency.

The foreign exchange benefit is expected to be weighted towards the first half of 2026 with the largest impact expected in the first quarter. Total company pricing is expected to be approximately the midpoint of our 3% to 4% long-term range. For 2026, we expect Sterigenics to deliver mid- to high single-digit constant currency revenue growth year-over-year with the first quarter anticipated to grow in the mid-single digits range. We expect the first quarter revenue to be the lightest of the year. We expect Nordion to grow constant currency revenue in the low to mid-single digits in 2026. Nordion’s first half 2026 revenue is expected to represent approximately 40% to 45% of full year revenue with Q2 ’26 revenue expected to be heavier than Q1 2026.

For Nelson Labs, we expect full year 2026 constant currency revenue growth to be in the low single digits with Q1 growth expected to decline low to mid-single digits versus Q1 2025. Additionally, Q1 2026 revenue is expected to be the lightest quarter of the year. For 2026, we expect interest expense between $135 million to $145 million based on the current forward rate curve. We are projecting an effective tax rate applicable to adjusted net income in the range of 27% to 29%. Adjusted EPS is expected to be in the range of $0.93 to $1.01, driven by operational growth as well as improved interest expense. We expect depreciation to increase in 2026, consistent with the step-up we experienced in 2025. We expect a fully diluted share count in the range of 289 million to 291 million shares on a weighted average basis.

Capital expenditures are expected to be in the range of $175 million to $225 million in 2026. We expect to make continued progress in reducing our net leverage ratio again in 2026. Finally, as usual, our guidance does not assume any M&A activity. I will now turn the call back over to Michael for closing remarks.

Michael Petras: Thank you, Jon. As we move into 2026, we are encouraged by our momentum, strengthened balance sheet, and we are confident in our ability to drive long-term growth, strong cash flow and shareholder value. We are on track to meet the commitments we made in our November 2024 Investor Day, and I’m confident in our team’s ability to execute and deliver for our customers and investors. We remain focused on executing on the priorities we’ve laid out previously, which are excellence in serving our customers with end-to-end solutions, winning in growth markets, driving operational excellence to enhance free cash flow and disciplined capital deployment. At this point, operator, let’s open the call for questions and answers.

Q&A Session

Operator: [Operator Instructions] Our first question comes from Sean Dodge with BMO Capital Markets.

Sean Dodge: Maybe just starting on the guidance and the EBITDA margins at the midpoint implies about 20 basis points of expansion. That’s on top of a pretty significant improvement you’ve drove in 2025. What you’re targeting this year, is that all just operating leverage? Or is there any other dynamics kind of happening there worth calling out? Are you taking costs out, adding costs in anywhere? Are there any unusual mix impacts or anything else like that? I guess it looks like Nelson will be a little bit of a kind of a slower grower, so you get a little bit of a mix benefit from that, but anything else worth highlighting?

Jonathan Lyons: Sean, thanks for the question. No, you’re spot on with the midpoint of the guide and what it implies. And no, it’s nothing abnormal going on, just normal operating leverage and running the business.

Sean Dodge: Okay. Great. And then on Sterigenics, you mentioned recently you had one or at least one client that had been in-sourcing sterilization that’s now chosen to outsource to you all. Is there any more background you can share on in their decision? Was that all because of NESHAP? Or were there some other factors driving that decision to finally outsource? And then maybe anything on like the magnitude timing of that shift. And I know you’re not building these in numbers, but are we starting to see kind of ice break now and the backdrop being set for more of these decisions to happen?

Michael Petras: Yes. Sean, this is Michael. I would say we don’t see — I think your words were ice breaking or we’re not seeing significant shifts in that arena at this point in time. The compliance period is out for 2 more years. The one customer you’re referencing that we’ve talked about in the past, will start to bring some volume in late this year, and it will roll in through ’27 and ’28. There’s lots of factors that go into the decisions. That’s ultimately the customer’s choice. I’m sure the requirements of the new regulations was a factor. I can’t speak on behalf of the customer and all the details. And also, I’ve got to respect some confidentiality we have in place with them. But overall, we’re progressing as we told you previously that, that customer will be transitioning over to us with their sterilization volume.

Operator: Our next question comes from Patrick Donnelly with Citi.

Patrick Donnelly: Michael, maybe one for you on Sterigenics. Can you just talk about how you’re thinking about ’26, both on the volume and pricing side? Would love just a little color on areas like bioprocessing, MedTech, how you’re thinking about just those categories improving throughout ’26 and what you’re seeing on the demand front?

Michael Petras: Yes. Thanks, Patrick. I would say we’ve given out a long-range guide for the company of 3% to 4% price. Sterigenics came in, in ’25 on the high end of that range, which is what we call for. We’d expect the same thing to happen in 2026. Bioprocessing, we have a very small base, but we had significant growth that we experienced last year. We’d expect that to continue as we move into 2026. and MedTech volumes, we saw growth in volume and mix as the year progressed, and we expect that to continue into ’26 as well. And we’re seeing across multiple categories as we referenced on our last call, and I’d say we’re seeing the consistency there as well. We’ve got — and the only other thing I’d call out, Patrick, as I think about it is the commercial segment has been a little bit more challenging, some of the volumes there as we wrapped up ’25 looking into ’26.

But overall, the core volumes, which are really the foundation for the business is MedTech, and those are in a pretty good spot.

Patrick Donnelly: Okay. That’s helpful. And then maybe just Nelson Labs, I know you guys have the EAS headwinds, those are going to ease. It sounds like 1Q maybe down a little bit. How do we think about the progression through the year there and as that headwind eases? And then maybe for Jon on the Nelson margins, I know that’s a big driver for margin expansion. Is ’26 getting back to that low to mid-30% — just would love some color there.

Jonathan Lyons: Yes. I’ll start with the second part of your question there, Patrick, on the margin side. We see Nelson solidly staying in the low to mid-30s again this year. Q1 being the lightest quarter. I expect on the lower side of the margin rate. And then the first part of your question, could you repeat again, was about Nelson progression throughout the year on the revenue side?

Patrick Donnelly: Yes. Yes. Just with the EAS headwinds, how you’re thinking about it.

Jonathan Lyons: Yes. I would say the biggest headwind we have, the expert advisory comp actually has a little bit trailing into Q1 comp challenge. So we should improve from here, and this should be the last quarter where we faced that kind of headwind. It’s a lower headwind than it’s been, but still meaningful to the quarter.

Michael Petras: And remember, as Jon stated, first quarter is typically our softest quarter in that business. Every year, it’s like that. So margins and volumes will be softer in the first quarter.

Operator: Our next question comes from Luke Sergott with Barclays.

Unknown Analyst: This is [ Salem ] on for Luke. Maybe just piggybacking off of Patrick’s question on 1Q guide. Sterigenics ramping a little bit throughout the year. I think you talked a little bit about how volumes are kind of accelerating out of the year. But if you could just talk about any dynamics at play there with the slightly slower start to the year for Sterigenics?

Michael Petras: Yes. Thanks, Sam. Sterigenics, like Nelson, typically, the first quarter is the softest quarter. We also — kind of where we sit today, we’re seeing a soft start to the year. Some of that’s shutdown related, some of but also there is some weather impact that we felt as well. But we’re guiding towards mid-single digits as we kind of look at the first quarter for Sterigenics.

Unknown Analyst: Got it. That’s helpful. And then if you could talk a little bit about the X-ray facility and when exactly it opens in ’26, maybe any tailwinds associated with the facility opening? And maybe just talk about a little bit on the strategy behind opening the X-ray facility and how bringing in that capability helps to serve customers and create new opportunities.

Michael Petras: Yes. Sam, we’re a full supplier across sterilization and all the modalities. We made the strategic decision over 3 years ago when we go through a 3-year strat plan every year with our Board. And in the process of that, Mike and the team laid out a strategic plan to build some more X-ray capability beyond the capability we already have today. We expect that to open up in the second half of this year. We’re in qualification with our customers, just like any other facility that will have a ramp period over time. There will be a little impact in 2026, and then we’ll start to see that accelerate in ’27 and ’28 and beyond. But this was a long-term strategic investment. We got to co-locate with the gamma facilities. We’re working with some customers on qualifications now. But again, it’s more part of our longer strategic plan to make sure we have full service offering across all modalities.

Operator: Our next question comes from Brett Fishbin with KeyBanc.

Brett Fishbin: Just maybe moving past the segment conversation. I think at a high level, you noted that revenue from the cross-selling or XBU customer base was up 9% year-over-year in 2025. So I was curious if you could maybe dive in a little bit. I’m curious how big that group of customers is as a percentage of total? And then maybe any other color on what you think drove that excess 400 bps of growth within that cohort relative to total company?

Michael Petras: Yes, Brett, we’ve got several activities going on in across BU. We’ve got several hundreds of customers that are doing business across both platforms. And then we also — within that, we have strategic pilots of some key segments that we’re really looking to accelerate on. So we’ve seen significant growth, as I said, the 9%. But even within those pilots, it’s even greater than that. The team is doing a really good job in leveraging the value prop across Sotera Health and being able to bring the capabilities end-to-end. We continue to look at our customer satisfaction scores. Sterigenics overall, I think, first of all, in the company, they’re over 80% overall. Sterigenics numbers were even significantly higher last year, and the XBU customers continue to be above that average.

So we’ll continue to look for opportunities to accelerate that. We’ve got a lot of commercial work going on with the teams, and we’re hopeful to see even more rewards from that in 2026.

Brett Fishbin: All right. Great. And then for a follow-up, maybe just thought I’d bring up capital allocation. I think the story continues to get better here and net debt and net leverage are continuing to gradually improve. So just wondering if there’s any slight marginal change in how you’re thinking about further activity here in terms of like organic investment and debt reduction versus the potential to see maybe a bolt-on acquisition this year?

Michael Petras: Yes. Thanks, Brett. Our priorities are staying the same as what we told you before. Our first priority is to fund organic investments and making sure we get the appropriate returns on that. We committed to a free cash flow target for the ’25 to ’27 period. We’re still committed to that today. And the guide that we gave you an outlook for CapEx for 2026 fits within that framework. So the business will continue to do well and generate cash flow and being prioritized as we’ve talked about in the past.

Operator: Our next question comes from Max Smock with William Blair.

Christine Rains: It’s Christine Rains on for Max Smock. Just hoping to circle back to your 2 active Sterigenics growth projects. On the X-ray facility, in the past, you pointed to a roughly 40% customer utilization target before breaking ground. And it says the project did not meet the threshold, but obviously, it’s strategically important. So curious how much below that 40% typical benchmark you’re currently seeing? And if you’re assuming any margin dilution for the segment in 2027 until utilization ramps? And then also if you can give us some color on the sterilization modality for the other facility build.

Michael Petras: Okay. I’m sorry, you’ve got like 7 questions within that one. Let me try to break this down a couple of perspectives. Yes. That’s okay. Let me just walk through it. We’ve stated in the past, we target 40% before we put shovels in the ground, 40% utilization. That’s what we hope to have committed with our customers. This one is a little bit lighter than that one. We’ve also said we target 20% IRR on our investments. Obviously, if we’re putting cobalt in existing facility or an EO chamber in existing facility that’s above the 20%, greenfields are below that. This one will be below that, obviously, because it’s a complete greenfield. Strategically, it’s important to us because we think there are some segments of the market that would like X-ray, and we’re bringing that service to them.

We still think that the other modalities will be, by and large, the largest segments in modalities. We will see this ramping up in the second half of the year trying to go through all your questions. On Sterigenics margins, so Jon mentioned that we’ll have slight margin improvements in 2026, and that will be driven predominantly by Sterigenics where we sit today. That encompasses some of the costs that will come in with low volumes on the X-ray facility, and we’ll see that phenomenon continue as we look into ’27 as well. So I think I’ve addressed all of them. I don’t know if I missed anything else.

Christine Rains: Yes. No, I think you got the majority of them. I was just wondering if you have any color on the sterilization modality for the other facility. I think your deck pointed to 2 growth projects in Sterigenics.

Michael Petras: The second facility, no, we have not gone ahead in detail. We’re working with our customers on that facility, and we have not gone ahead and publicly released what kind of facility or where that’s going to be at this point in time.

Operator: Our next question comes from Casey Woodring with JPMorgan.

Casey Woodring: Great. Maybe the first one, just any changes on how you’re thinking about the competitive positioning in Sterigenics in light of NESHAP. I know that, that was a focus coming out of the last Analyst Day just in terms of opportunity to gain share from smaller players. And then maybe same question on the Nelson side. Maybe just walk us through the latest and greatest on the current competitive landscape there.

Michael Petras: Thanks, Casey. On the Sterigenics competitive scenario, I would say, as I mentioned earlier in my comments, NESHAP has got a 2-year extension period. So we’re seeing discussions about in-sourcing and outsourcing slowing down. That doesn’t mean customers aren’t having discussions with us overall on what their strategic plans on their supply chain. Those have always been ongoing. But I don’t think there’s the urgency that people saw when the April 2026 deadline was in place that’s now been extended. We continue to compete very well. Our customer satisfaction scores were up significantly last year versus the prior year. We’ll see how ’26’s are when we do the surveys here coming out shortly. But overall, I think Sterigenics is well positioned.

And it’s the strength of the business model. It’s the global platform, it’s consistency in our quality systems. It’s our ability for our customers to contract with us on a global basis and us being a full-service provider that helps take care of in all modalities in all geographies. So I would say Sterigenics continues to be very well positioned. On Nelson Labs, Nelson Labs is a very fragmented market overall. but that business is really good at service and quality and the reputation is what really matters [ Eric ] with science. And the team continues to do very well. We’ve got pockets in that business. As you know, the core lab testing has improved over the last year. The advisory business has been a little bit more choppy because of some of the remediation projects that have come and gone based on some of the FDA activity.

But overall, we continue to accelerate in the marketplace. Our customer sat scores are good. Our NPS, we also do an NPS, Net Promoter Score, and that continues to perform very, very well. So I’d say we’re very well situated, but it’s a different dynamic, Casey, in that market. It’s a more fragmented market on a global basis. But we do 800, 900 tests in that business across our facilities around the world.

Casey Woodring: Got it. Understood. And then maybe just a quick follow-up. Any update in terms of the timing of when we could expect any updates on the litigation front?

Michael Petras: No. I mean there’s nothing material change on timing. I think when I look at it, there’s no trial set for this year other than the public nuisance case in New Mexico in the July time period. But other than that, there isn’t any material change in time lines.

Operator: Our next question comes from Jason Bednar with Piper Sandler.

Jason Bednar: Michael, I wanted to come back to one of the comments you made just on your responding to the first quarter Sterigenics guide. Just to unpack the comment, if you could, around the slower start to the year and the weather headwinds on Sterigenics. Were those comments connected? Or was that something where you’re saying demand was a little bit slower to start the year and weather has been creating some challenges as well? And then for the weather comment in particular, just if you can quantify how large is that headwind? Is that something that you feel like you can overcome here within the first quarter? Or does it take a couple of quarters to overcome and catch up on those — that impact of those headwinds?

Michael Petras: Yes, Jason, I would say a couple of comments. My comments were focused around — we have some shutdowns in the quarter and weather has had some impact that we felt. The guide that we gave today of mid-single digits is consistent with what we feel we can deliver and also the guide for the year, mid- to high single digits is we’re confident in our ability to deliver that as well. So I would say that’s how you should think about it.

Jason Bednar: Okay. Fair enough. And then maybe longer term or medium term to long term, I wanted to ask in the context of future CapEx and free cash flow. You have a couple of capacity expansion plans underway. We’ve been talking about those here today. I guess do you still feel comfortable with those long-term targets? I think you do. I just you’re reiterating them today. But just how do you think about those in the context of medium-term, long-term planning for additional capacity expansion? When do those additional capacity expansions or greenfield opportunities? When do those discussions happen? How are you planning for those today knowing you’re looking out to ’28, ’29 and ’30. Hopefully, that question makes sense.

Michael Petras: I think I got it, Jason. So as I mentioned multiple times as well as this morning, we do a 3-year strat plan with our leadership team and the Board every August, and we kind of lay out the next 3 years of where we see the capital demands. And that really was the foundation of the Investor Day presentation we gave for the ’25 to ’27 time period. As we continue to roll forward and look at opportunities beyond that, we continue to make sure that we’ve got the facility capacity in place to deliver the long-term growth that we need. So we will continue to refresh that and provide updates where appropriate on future outlooks. But for the time periods that we’ve given guidance around ’25 to ’27, we feel confident in our ability to deliver the free cash flow that we’ve outlined in that time period.

Operator: Our next question comes from Ryan Halsted with RBC Capital Markets.

Ryan Halsted: Maybe just to ask a question on the Nordion segment. Can you maybe provide a little more color on some of the headwinds you saw in the quarter, certainly, especially given that you were going up against maybe some lighter comps. You obviously talked about the timing of the Cobalt-60 harvest schedule. Maybe just any color around what were the drivers there, including that timing impact?

Michael Petras: Ryan, I would — this is Michael. I would just say it was driven by harvest schedules, right? That’s — we called this, we expected it to be down. It’s really — it’s not a demand problem. It’s a supply timing situation. So remember how this works, you get cobalt out of nuclear reactors, the primary purpose in life is to generate electricity for consumers and businesses. So we work with utilities on when they’re going to do a shutdown so we could harvest the cobalt out of the facilities, out of the reactors. And that — so we have very good visibility. That will shift every now and then a couple of weeks or a month here and there, but we have good visibility. So we anticipated this. We projected that to the investment community to make sure they understood it.

So we’re not concerned at all about the fourth quarter from a volume perspective. We knew that, and we had good visibility. And that’s why we also give you visibility on how we think of first half, second half, so you could start to circle in and hone in on how those harvests will work in the year to come, right? So there was no surprise about that. Overall, it came in as expected, — it’s actually slightly better even.

Ryan Halsted: Got it. That’s helpful. And then for my follow-up, just any updated views on the potential impact of onshoring by your customers, especially given the dynamic environment with tariffs and the government maybe proposing some regulations with incentives for manufacturers to try to bring more of that manufacturing onshore. Just curious your thoughts on impact to your business.

Michael Petras: Yes. Great. So remember, the majority of our business is service business. We’re not really impacted by tariffs. The one place where we have product is the cobalt product that’s USMCA certified. So we don’t have any tariffs. I just want to kind of level set that. Now talking about the bigger macro environment. We have not seen a significant movement of the onshoring. But if that were to happen and customers are having discussions with us, but we’re not seeing a significant investment commitment at this point in time. But if it were to happen, we’d be very well situated because we have a very significant position in the marketplace here in the United States where we anticipate that onshoring, if it were to occur, would happen here.

Operator: Our next question comes from David Windley with Jefferies.

David Windley: Michael, I was wondering in regard to the guidance, where are your areas of higher or lower visibility or said differently, what could firm up as the year progresses that takes you to the higher end of the range?

Michael Petras: David, it’s pretty consistent year in and year out. I sound like a broken record, but it’s volume. It’s the volume and mix piece that would tend us towards the high end. And as you know, Nordion, we have probably the best visibility. Sterigenics, less so, we’ve got a quarter or so out. And then in Nelson Labs is more transactional in nature and some of those validation projects could take a little longer. So I’d say in that order, but the biggest thing that could drive us to the higher end of that would be volume and mix in Sterigenics and Nelson Labs.

David Windley: And if I ask you to take that down a level, would you — like between — you commented on this a little earlier in the call, but like med device versus bioprocessing, your kind of end markets is one of those firming up or accelerating more than the other vis-a-vis visibility?

Michael Petras: I got to think about that. We’re seeing bioprocessing with nice growth, but we’re in a pretty small share position. Maybe we pick — our sales guys really think we picked up a little share. I’m not sure we have. But we’re seeing nice growth overall in that area, but it’s a small category. I’d say they’re both in a pretty good spot right now, David, but just recognize bioprocessing is a much smaller base for us.

Operator: Our next question comes from Michael Polark with Wolfe Research.

Michael Polark: One of the things I heard on Sterigenics was the commercial segment volumes are challenged. Michael, can you unpack that? Remind us what product categories are commercial? Is this food and consumer products or something else? And what those challenges are, why you perceive them to be?

Michael Petras: Yes. So Mike, yes, that’s reflecting on the comment I made earlier. Commercial is exactly what you talked about. There’s some electronics in there. There’s some food in there. There’s some spice in there. There’s some other categories as well that it’s just been a choppy market. Coming out of COVID, it really hasn’t been very stable. It’s been moving around quite a bit. We continue to see that going forward here, and we’re planning around that. But I would say that would be — again, it’s a small portion of the total. I think it’s less than 16%. I can’t remember the exact numbers. It’s a small portion of Sterigenics in context-wise.

Michael Polark: Helpful. And just a follow-up to that and then one other topic, please. When you say challenged, like growing, but just loan growth or shrinking?

Michael Petras: Combination. I’d say more probably shrinking than growing. I mean it’s been choppy. Some customers have redesigned products and don’t have the need. I think — as I say this, I think I have one customer that had some packaging product for the food market and they’ve changed their designs coming out of COVID. But again, that’s not impacting 2026. That’s just — I’m looking backwards when I make that comment. So it’s just been — that there’s a churn in that customer base, and we’re seeing it’s just a little heavier than we’ve seen in the past, but it’s been like this since 2020, 2021.

Michael Polark: 5 Helpful. I appreciate that color. And then the other one, also Sterigenics, just as you reflect on calendar year ’25 and the performance and the acceleration in volume growth, the topic of tariffs we’ve discussed on prior calls, do you believe the tariff landscape contributed to customers kind of building some inventory out of that as part of their mitigation plans? Any — what’s the latest perspective on whether that was good neutral last year?

Michael Petras: Yes. We see — we’ve stated a couple of times, we’ve not seen a material impact from the tariff side that we’ve been able to detect. I referenced in the second quarter, there was a bump up in some stat volume in a particular facility I was in and I said, hey, what happened here? And they said, all the customer is trying to get some stuff in before tariffs. But that’s not — that’s a facility that’s got 50 customers. This was a customer that I happened to notice when I was going through some analytics with the team out there. We’re just not seeing material impact from that, Mike. I know people have asked us that question, and there’s nothing consistently shown up from our customers. We’re seeing nice consistent volumes on the Sterigenics side as we wrapped up 2025, which was good.

Operator: And I’m not showing any further questions at this time. I’d like to turn the call back to Michael for any further remarks.

Michael Petras: Great. We thank you for your time this morning. Hopefully, you can see we had a nice finish to 2025. We’re set up for a very strong 2026. And what I want you to take out of this is this business is built to perform. We’ve had 20 consecutive years of growth, strong cash flow generation, strong margins, sticky customer relationships. This business is built to run and perform. And what we’re going to try doing is making sure you have transparency of what we expect out of the business, and we’re just going to keep executing against it. So thank you for your time today, and I wish you all a good week. Bye-bye.