You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our 2021 Form 10-K. This discussion and analysis contains forward-looking statements that are based on management's current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of various factors, including the factors we describe in the section entitled Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q, as well as Part I, Item 1A, "Risk Factors" in our 2021 Form 10-K.

OVERVIEW

We are a leading global provider of mission-critical end-to-end sterilization solutions, lab testing and advisory services for the healthcare industry. We are driven by our mission: Safeguarding Global Health®. We provide end-to-end sterilization as well as microbiological and analytical lab testing and advisory services to help ensure that medical, pharmaceutical and food products are safe for healthcare practitioners, patients and consumers in the United States and around the world. Our services are an essential aspect of our customers' manufacturing process and supply chains, helping to ensure sterilized medical products reach healthcare practitioners and patients. Most of these services are necessary for our customers to satisfy applicable government requirements.

We serve our customers throughout their product lifecycles, from product design to manufacturing and delivery, helping to ensure the sterility, effectiveness and safety of their products for the end user. We operate across two core businesses: sterilization services and lab services. The combination of Sterigenics, our terminal sterilization business, and Nordion, our Co-60 supply business, makes us the only vertically integrated global gamma sterilization provider in the sterilization industry. For financial reporting purposes, our sterilization services business consists of two reportable segments, Sterigenics and Nordion, and our lab services business consists of one reportable segment, Nelson Labs.

For the three and six months ended June 30, 2022, respectively, we recorded net revenues of $266.6 million and $503.4 million, net income of $30.4 million and $61.1 million, Adjusted Net Income of $75.8 million and $136.1 million, and Adjusted EBITDA of $136.1 million and $251.5 million. For the definition of Adjusted Net Income and Adjusted EBITDA and the reconciliation of these non-GAAP measures from net income, please see "Non-GAAP Financial Measures."

STRATEGIC DEVELOPMENTS AND KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS

The following summarizes strategic developments and key factors that impacted our operating results for the three and six months ended June 30, 2022 and may continue to affect our performance and financial condition in future periods.

•Business and market conditions. During the three and six months ended June 30, 2022, Sterigenics and Nordion continued to benefit from a sustained demand for sterilization services. Although the decline in pandemic-related testing stabilized in the second quarter, the competitive labor market, broad inflationary impacts, supply chain constraints and regulatory update delays remained an ongoing challenge for Nelson Labs. As discussed in more detail in our most recent Form 10-K, a portion of our supply of Co-60 is generated by Russian nuclear reactors. We continue to monitor the potential for disruption in the supply of Co-60 from Russian nuclear reactors; to date there has been no material impact on our supply or revenue.

•Investment initiatives. We remain focused on our investments in capacity expansions and facility improvements as well as our efforts to strengthen our Co-60 supply chain. For the six months ended June 30, 2022, we increased capital expenditures by $26.9 million compared to the six months ended June 30, 2021.

•Disciplined and strategic M&A activity. We remain committed to our highly disciplined acquisition strategy and continue to seek suitable acquisition targets in 2022. On November 4, 2021, we acquired Regulatory Compliance Associates Inc. ("RCA") headquartered in Pleasant Prairie, Wisconsin. RCA is an industry leader in providing life sciences consulting focused on quality, regulatory, and technical consulting for the pharmaceutical, medical device and combination device industries. RCA expands and strengthens the technical consulting and expert advisory capabilities of Nelson Labs. On March 8, 2021, we acquired BioScience Laboratories, LLC ("BioScience Labs") based in Bozeman, Montana, bringing expertise in antimicrobial and virology testing to our Nelson Labs segment.


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•Litigation costs. In connection with the ongoing litigation related to our Willowbrook, Illinois, Atlanta, Georgia and Santa Teresa, New Mexico facilities, as described in Note 16, "Commitments and Contingencies", we recorded costs of $17.7 million and $35.7 million for the three and six months ended June 30, 2022, respectively. Insurance coverage has been available for some of our costs in this ethylene oxide ("EO") tort litigation in the past and as of June 30, 2022 we have approximately $4.0 million of such coverage remaining. Our insurance for future alleged environmental liabilities excludes coverage for EO claims. See Note 16, "Commitments and Contingencies". In addition, we are pursuing other insurance coverage for EO tort litigation. In 2021, Sterigenics U.S., LLC filed an insurance coverage lawsuit in the U.S. District Court for the Northern District of Illinois relating to two commercial general liability policies issued in the 1980s. On August 3, 2022, the Court issued a Memorandum Opinion and Order concluding that the insurance company owes Sterigenics U.S., LLC and another party a duty to defend the Willowbrook, Illinois litigation, which may allow us to recover defense costs related to that litigation.

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