- 2023 net revenues increased 4.5% to
$1.05 billion , compared to 2022 - 2023 net income of
$51 million or$0.18 per diluted share - 2023 Adjusted EBITDA(1) increased 4.3% to
$528 million - 2023 Adjusted EPS(1) decreased
$0.15 to$0.81 per diluted share - Full-year 2024 outlook of 4.0% - 6.0% growth for Net Revenues and Adjusted EBITDA
For the fourth-quarter 2023, net revenues increased 23.3% to
For full-year 2023, net revenues increased 4.5% to
“Today I am pleased to announce another year of top- and bottom-line growth,” said Chairman and Chief Executive Officer,
Fourth-Quarter and Full-Year 2023 Review by Business Segment
Sterigenics
For fourth-quarter 2023, net revenues were
For full-year 2023, Sterigenics net revenues were
Net revenue growth for fourth-quarter 2023 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 also driven by favorable pricing and changes in foreign currency rates, partially offset by higher costs and unfavorable volume and mix.
For fourth-quarter 2023 net revenues were
For full-year 2023,
The increase in net revenues, segment income and segment income margin for fourth-quarter 2023 was driven by favorable impacts from volume and pricing.
For fourth-quarter 2023, net revenues were
For full-year 2023,
Net revenue growth for the fourth-quarter 2023 was driven by favorable pricing and changes in foreign currency exchange rates, partially offset by unfavorable volume and mix.
Segment income and margin decline for the fourth-quarter 2023 was driven by unfavorable volume and mix coupled with the impact of inflation, partially offset by favorable pricing.
Balance Sheet and Liquidity
As of
Full-Year 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(1) 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
- Barclay’s 2024 Global Healthcare Conference at
7:30 a.m. Eastern Time ,March 13, 2024 KeyBanc Life Sciences & Medtech Investor Forum at9:00 a.m. Eastern Time ,March 19, 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, plus 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 CONTACTS
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.
Consolidated Statements of Operations (in thousands, except per share amounts) (unaudited) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenues: | |||||||||||||||
Service | $ | 237,918 | $ | 220,377 | $ | 905,598 | $ | 864,828 | |||||||
Product | 72,321 | 31,213 | 143,690 | 138,859 | |||||||||||
Total net revenues | 310,239 | 251,590 | 1,049,288 | 1,003,687 | |||||||||||
Cost of revenues: | |||||||||||||||
Service | 106,921 | 98,105 | 418,611 | 390,860 | |||||||||||
Product | 23,235 | 11,765 | 53,519 | 55,823 | |||||||||||
Total cost of revenues | 130,156 | 109,870 | 472,130 | 446,683 | |||||||||||
Gross profit | 180,083 | 141,720 | 577,158 | 557,004 | |||||||||||
Operating expenses: | |||||||||||||||
Selling, general and administrative expenses | 60,358 | 65,949 | 236,667 | 245,714 | |||||||||||
Amortization of intangible assets | 15,701 | 15,603 | 63,799 | 62,940 | |||||||||||
Total operating expenses | 76,059 | 81,552 | 300,466 | 308,654 | |||||||||||
Operating income | 104,024 | 60,168 | 276,692 | 248,350 | |||||||||||
Interest expense, net | 42,653 | 32,269 | 142,878 | 80,144 | |||||||||||
Illinois EO litigation settlement | — | 408,000 | — | 408,000 | |||||||||||
Georgia EO litigation settlement | — | — | 35,000 | — | |||||||||||
Impairment of investment in unconsolidated affiliate | — | — | — | 9,613 | |||||||||||
Foreign exchange (gain) loss | (227 | ) | 647 | 159 | 145 | ||||||||||
Other income, net | (4,072 | ) | (2,246 | ) | (7,372 | ) | (6,441 | ) | |||||||
Income (loss) before income taxes | 65,670 | (378,502 | ) | 106,027 | (243,111 | ) | |||||||||
Provision (benefit) for income taxes | 26,989 | (58,783 | ) | 54,651 | (9,541 | ) | |||||||||
Net income (loss) | 38,681 | (319,719 | ) | 51,376 | (233,570 | ) | |||||||||
Earnings (loss) per share: | |||||||||||||||
Basic | $ | 0.14 | $ | (1.14 | ) | $ | 0.18 | $ | (0.83 | ) | |||||
Diluted | 0.14 | (1.14 | ) | 0.18 | (0.83 | ) | |||||||||
Weighted average number of shares outstanding: | |||||||||||||||
Basic | 281,335 | 280,417 | 281,008 | 280,096 | |||||||||||
Diluted | 283,339 | 280,417 | 283,222 | 280,096 |
Segment Data (in thousands) (unaudited) | |||||||||||
Three Months Ended | Year Ended | ||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||
Segment revenues: | |||||||||||
Sterigenics | 172,196 | 161,669 | 667,130 | 626,646 | |||||||
79,835 | 34,088 | 160,459 | 153,639 | ||||||||
58,208 | 55,833 | 221,699 | 223,402 | ||||||||
Total net revenues | 310,239 | 251,590 | 1,049,288 | 1,003,687 | |||||||
Segment income: | |||||||||||
Sterigenics | 94,753 | 89,056 | 362,212 | 339,144 | |||||||
53,316 | 20,298 | 96,678 | 89,477 | ||||||||
18,679 | 20,259 | 69,139 | 77,628 | ||||||||
Total segment income | 166,748 | 129,613 | 528,029 | 506,249 | |||||||
Less adjustments: | |||||||||||
Interest expense, net(a) | 33,793 | 24,516 | 116,068 | 78,490 | |||||||
Depreciation and amortization(b) | 40,722 | 36,462 | 157,925 | 145,554 | |||||||
Share-based compensation(c) | 8,229 | 6,256 | 32,364 | 21,211 | |||||||
(Gain) loss on foreign currency and derivatives not designated as hedging instruments, net(d) | (3,011 | ) | 7,938 | (1,552 | ) | 3,150 | |||||
Acquisition and divestiture related charges, net(e) | 120 | 420 | 937 | 1,398 | |||||||
Business optimization project expenses(f) | 217 | 617 | 7,310 | 2,226 | |||||||
Plant closure expenses(g) | 55 | 954 | (585 | ) | 4,730 | ||||||
Impairment of investment in unconsolidated affiliate(h) | — | — | — | 9,613 | |||||||
Professional services and other expenses relating to EO sterilization facilities(i) | 20,222 | 22,401 | 72,122 | 72,639 | |||||||
Georgia EO litigation settlement(j) | — | — | 35,000 | — | |||||||
Illinois EO litigation settlement(k) | — | 408,000 | — | 408,000 | |||||||
Accretion of asset retirement obligation(l) | 731 | 550 | 2,413 | 2,194 | |||||||
COVID-19 expenses(m) | — | 1 | — | 155 | |||||||
Consolidated income (loss) before income taxes | 65,670 | (378,502 | ) | 106,027 | (243,111 | ) |
(a) The three and twelve 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, (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at
(e) Represents (i) certain direct and incremental costs related to the acquisitions of
(f) Represents professional fees, exit costs, severance and other payroll costs, and other costs associated with business optimization and cost savings projects relating to the integration of recent acquisitions, operating structure realignment and other process enhancement projects.
(g) Represents professional fees, severance and other payroll costs, and other costs including ongoing lease and utility expenses associated with the closure of the
(h) Represents an impairment charge on an equity method investment in a joint venture.
(i) Represents litigation and other professional fees associated with our EO sterilization facilities. This includes
(j) Represents the cost to settle 79 pending EO claims against the Defendant Subsidiaries in
(k) Represents the cost to settle 880 pending and threatened EO claims against the Defendant Subsidiaries in
(l) Represents non-cash accretion of asset retirement obligations related to Co-60 gamma and EO 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.
(m) Represents non-recurring costs associated with the COVID-19 pandemic, including incremental costs to implement workplace health and safety measures.
Condensed Consolidated Balance Sheets (in thousands) (unaudited) | ||||||||
As of | ||||||||
2023 | 2022 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents, including restricted cash | $ | 301,654 | $ | 396,294 | ||||
Accounts receivable, net | 147,696 | 118,482 | ||||||
Inventories, net | 48,316 | 37,145 | ||||||
Other current assets | 59,578 | 93,089 | ||||||
Total current assets | 557,244 | 645,010 | ||||||
Property, plant, and equipment, net | 946,914 | 774,527 | ||||||
Operating lease assets | 24,037 | 26,481 | ||||||
Other intangible assets, net | 416,318 | 491,265 | ||||||
1,111,190 | 1,101,768 | |||||||
Other assets | 74,717 | 78,654 | ||||||
Total assets | $ | 3,130,420 | $ | 3,117,705 | ||||
Liabilities and equity | ||||||||
Total current liabilities | $ | 230,654 | $ | 791,567 | ||||
Long-term debt, less current portion | 2,223,674 | 1,747,115 | ||||||
Other noncurrent liabilities | 167,904 | 160,761 | ||||||
Deferred income taxes | 64,454 | 68,024 | ||||||
Total liabilities | 2,686,686 | 2,767,467 | ||||||
Total equity | 443,734 | 350,238 | ||||||
Total liabilities and equity | $ | 3,130,420 | $ | 3,117,705 |
Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) | |||||||
Year Ended | |||||||
2023 | 2022 | ||||||
Operating activities: | |||||||
Net income (loss) | $ | 51,376 | $ | (233,570 | ) | ||
Non-cash items | 204,177 | 102,297 | |||||
Changes in operating assets and liabilities | (403,285 | ) | 409,234 | ||||
Net cash provided by (used in) operating activities | (147,732 | ) | 277,961 | ||||
Investing activities: | |||||||
Purchases of property, plant and equipment | (214,975 | ) | (182,378 | ) | |||
Adjustment to purchase of | — | 450 | |||||
Other investing activities | 69 | 32 | |||||
Net cash used in investing activities | (214,906 | ) | (181,896 | ) | |||
Financing activities: | |||||||
Proceeds from revolving credit facility and long-term borrowings | 500,000 | 200,000 | |||||
Payment of revolving credit facility | (200,000 | ) | — | ||||
Payment of long-term borrowings | (2,500 | ) | — | ||||
Payments of debt issuance costs and prepayment premium | (25,645 | ) | (31 | ) | |||
Shares withheld for employee taxes on equity awards | (4,089 | ) | (393 | ) | |||
Other financing activities | (1,807 | ) | (1,815 | ) | |||
Net cash provided by financing activities | 265,959 | 197,761 | |||||
Effect of exchange rate changes on cash and cash equivalents | 2,039 | (4,456 | ) | ||||
Net increase in cash and cash equivalents, including restricted cash | (94,640 | ) | 289,370 | ||||
Cash and cash equivalents, including restricted cash, at beginning of period | 396,294 | 106,924 | |||||
Cash and cash equivalents, including restricted cash, at end of period | $ | 301,654 | $ | 396,294 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the period for interest | $ | 173,842 | $ | 75,849 | |||
Cash paid during the period for income taxes, net of tax refunds received | 50,210 | 75,496 | |||||
Purchases of property, plant and equipment included in accounts payable | 16,720 | 16,413 |
Non-GAAP Financial Measures (in thousands, except per share amounts) (unaudited) | |||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Net income (loss) | $ | 38,681 | $ | (319,719 | ) | $ | 51,376 | $ | (233,570 | ) | |||||
Amortization of intangible assets | 20,058 | 19,958 | 81,348 | 81,554 | |||||||||||
Share-based compensation(a) | 8,229 | 6,256 | 32,364 | 21,211 | |||||||||||
(Gain) loss on foreign currency and derivatives not designated as hedging instruments, net(b) | (3,011 | ) | 7,938 | (1,552 | ) | 3,150 | |||||||||
Acquisition and divestiture related charges, net(c) | 120 | 420 | 937 | 1,398 | |||||||||||
Business optimization project expenses(d) | 217 | 617 | 7,310 | 2,226 | |||||||||||
Plant closure expenses(e) | 55 | 954 | (585 | ) | 4,730 | ||||||||||
Impairment on investment in unconsolidated affiliate(f) | — | — | — | 9,613 | |||||||||||
Professional services and other expenses relating to EO sterilization facilities(g) | 20,222 | 22,401 | 72,122 | 72,639 | |||||||||||
Georgia EO litigation settlement(h) | — | — | 35,000 | — | |||||||||||
Illinois EO litigation settlement(i) | — | 408,000 | — | 408,000 | |||||||||||
Accretion of asset retirement obligations(j) | 731 | 550 | 2,413 | 2,194 | |||||||||||
COVID-19 expenses(k) | — | 1 | — | 155 | |||||||||||
Income tax benefit associated with pre-tax adjustments(l) | (11,166 | ) | (77,744 | ) | (50,617 | ) | (103,081 | ) | |||||||
Adjusted Net Income | 74,136 | 69,632 | 230,116 | 270,219 | |||||||||||
Interest expense, net(m) | 33,793 | 24,516 | 116,068 | 78,490 | |||||||||||
Depreciation(n) | 20,664 | 16,504 | 76,577 | 64,000 | |||||||||||
Income tax provision applicable to Adjusted Net Income(o) | 38,155 | 18,961 | 105,268 | 93,540 | |||||||||||
Adjusted EBITDA(p) | $ | 166,748 | $ | 129,613 | $ | 528,029 | $ | 506,249 | |||||||
Net Revenues | $ | 310,239 | $ | 251,590 | $ | 1,049,288 | $ | 1,003,687 | |||||||
Adjusted EBITDA Margin | 53.7 | % | 51.5 | % | 50.3 | % | 50.4 | % | |||||||
Weighted average number of shares outstanding | |||||||||||||||
Basic | 281,335 | 280,417 | 281,008 | 280,096 | |||||||||||
Diluted | 283,339 | 280,417 | 283,222 | 280,096 | |||||||||||
Earnings (loss) per share | |||||||||||||||
Basic | $ | 0.14 | $ | (1.14 | ) | $ | 0.18 | $ | (0.83 | ) | |||||
Diluted | 0.14 | (1.14 | ) | 0.18 | (0.83 | ) | |||||||||
Adjusted earnings per share | |||||||||||||||
Basic | $ | 0.26 | $ | 0.25 | $ | 0.82 | $ | 0.96 | |||||||
Diluted | 0.26 | 0.25 | 0.81 | 0.96 |
(a) Represents share-based compensation expense to employees and non-employee directors.
(b) Represents the effects of (i) fluctuations in foreign currency exchange rates, (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at
(c) Represents (i) certain direct and incremental costs related to the acquisitions of
(d) Represents professional fees, exit costs, severance and other payroll costs, and other costs associated with business optimization and cost savings projects relating to the integration of recent acquisitions, operating structure realignment and other process enhancement projects.
(e) Represents professional fees, severance and other payroll costs, and other costs including ongoing lease and utility expenses associated with the closure of the
(f) Represents an impairment charge on an equity method investment in a joint venture.
(g) Represents litigation and other professional fees associated with our EO sterilization facilities. This includes
(h) Represents the cost to settle 79 pending EO claims against the Defendant Subsidiaries in
(i) Represents the cost to settle 880 pending and threatened EO claims against the Defendant Subsidiaries in
(j) Represents non-cash accretion of asset retirement obligations related to Co-60 gamma and EO 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.
(k) Represents non-recurring costs associated with the COVID-19 pandemic, including incremental costs to implement workplace health and safety measures.
(l) 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.
(m) The three and twelve months ended
(n) Includes depreciation of Co-60 held at gamma irradiation sites.
(o) Represents the difference between the income tax provision/benefit as determined under
(p)
Non-GAAP Financial Measures (in thousands, except Net Leverage) (unaudited) | |||||||
Year Ended | |||||||
2023 | 2022 | ||||||
Current portion of long-term debt | $ | 4,797 | $ | 197,119 | |||
Long-term debt | $ | 2,223,674 | $ | 1,747,115 | |||
Current portion of finance leases | 8,771 | 1,722 | |||||
Finance leases less current portion | 63,793 | 56,955 | |||||
Total Debt | $ | 2,301,035 | $ | 2,002,911 | |||
Less: cash and cash equivalents | (296,407 | ) | (395,214 | ) | |||
Net Debt | $ | 2,004,628 | $ | 1,607,697 | |||
Adjusted EBITDA | $ | 528,029 | $ | 506,249 | |||
Net Leverage | 3.8x | 3.2x |
Source:
2024 GlobeNewswire, Inc., source