- Q1 2024 net revenues increased 12.5% to
$248 million , compared to Q1 2023 - Q1 2024 net income of
$6 million or$0.02 per diluted share, compared to net income of$3 million or$0.01 per diluted share in Q1 2023 - Q1 2024 Adjusted EBITDA(1) increased 13.7% to
$112 million , compared to Q1 2023 - Q1 2024 Adjusted EPS(1) of
$0.13 compared to Adjusted EPS of$0.13 in Q1 2023 - Company reaffirms 2024 outlook
First-quarter 2024 net revenues increased 12.5% to
“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,
“We are also pleased that the
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
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.
For first-quarter 2024, net revenues were
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.
For first-quarter 2024, net revenues were
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
On
Reaffirming 2024 Outlook
Today,
- 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
Earnings Webcast
Updates on recent developments in matters relevant to investors can be found on the Investor Relations section of the
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 at9:00 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
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
INVESTOR RELATIONS CONTACT
Vice President & Treasurer,
IR@soterahealth.com
MEDIA CONTACT
Chief Marketing Officer,
kgibbs@soterahealth.com
Source:
(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.
Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited) | |||||||
Three Months Ended | |||||||
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 | |||||
Segment Data (in thousands) (unaudited) | |||||
Three Months Ended | |||||
2024 | 2023 | ||||
Segment revenues: | |||||
Sterigenics | $ | 166,497 | $ | 159,997 | |
24,007 | 8,551 | ||||
57,672 | 52,042 | ||||
Total net revenues | $ | 248,176 | $ | 220,590 | |
Segment income: | |||||
Sterigenics | $ | 85,818 | $ | 82,840 | |
10,785 | 1,526 | ||||
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 |
(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 |
(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 |
(f) | The three months ended |
(g) | Represents litigation and other professional fees associated with our EO sterilization facilities. Amounts presented for the three months ended |
(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. |
Condensed Consolidated Balance Sheets (in thousands) (unaudited) | |||||
As of | As of | ||||
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 | |||
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 | |
Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) | |||||||
Three Months Ended | |||||||
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 | |||||
Non-GAAP Financial Measures (in thousands, except per share amounts) (unaudited) | |||||||
Three Months Ended | |||||||
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 |
(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 |
(d) | The three months ended |
(e) | Represents litigation and other professional fees associated with our EO sterilization facilities. Amounts presented for the three months ended |
(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 |
(i) | Includes depreciation of Co-60 held at gamma irradiation sites. |
(j) | Represents the difference between income tax provision or benefit as determined under |
(k) | |
Non-GAAP Financial Measures (in thousands, except Net Leverage) (unaudited) | |||||||
As of | As of | ||||||
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 |
Non-GAAP Financial Measures (in thousands) (unaudited) | |||||||
Twelve months ended | |||||||
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 |
(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 |
(d) | The twelve months ended |
(e) | Represents litigation and other professional fees associated with our EO sterilization facilities. Amounts presented for the twelve months ended |
(f) | Represents the cost to settle 79 pending EO claims against |
(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 |
(j) | Includes depreciation of Co-60 held at gamma irradiation sites. |
(k) | Represents the difference between income tax provision or benefit as determined under |
(l) | |
Source:
2024 GlobeNewswire, Inc., source