SHC - Earnings call transcript Q4 2021

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Operator

Good morning. This is Norma, and welcome to Sotera Health Fourth Quarter 2021 Results Call.

You may find today's press release, and accompanying supplemental slides in the Investors section of the company's website at soterahealth.com. This webcast is being recorded, and a replay will be available in the Investors section of Sotera's Health website.

On the call today are Michael Petras, Chairman and Chief Executive Officer; and Scott Leffler, Chief Financial Officer.

of considered in forward-looking some make company call, be can statements. the the the statements may During The matters results addressed risks, from and in projected these statements and those could are that cause implied. actual or to materially uncertainties differ subject to Health presentation Please this the forward-looking beginning a uncertainties. description of filings, statement refer SEC and at slide to the and Sotera's for of these risks to no company obligation update any statements. assumes The forward-looking adjusted non-GAAP EBITDA, discussion, today's company represent financial the leverage measures, and including EPS Please note during ratio. adjusted both will net and GAAP reconciliation measures A the for relevant periods supplemental company's of to press in attached in found all slides. non-GAAP to and release GAAP may schedules the be call [Operator to Executive Chairman Sotera's Instructions] Chief Petras. Chief will I turn the over and Michael now Officer,

Michael Petras

reported last public our for call. a in growth reported XXXX joining since This EBITDA in quarter fourth quarter our On company, XXXX. is delivered very I'm you of adjusted and we Sotera fifth Sotera you November be we thank Health's double-digit quarter on of Health and begins. come XXXX as reporting double-digit earnings us top growth. quarter the to that year is everyone, every pleased tracking revenue won't bottom another and morning, revenue Good I public remind growth call, every line and when have that

With these positive full XXXX. year results for

of of fourth XXXX XX%, the We fourth finished levels. in and facilities of XX% the which of onset growth full year manage level, year as kept healthy the detail performance. fourth historical year. growth XXXX highlights well run our fourth positive a as performance of the the total moment, initial are to EBITDA year yet to its pandemic. comparable, continuing provide the of reported another quarter optimum quarter to significantly compared EPS near over team against with some We last our grew while now at momentum continues outpacing but here off of quarter good Sterigenics adjusted another in Nordion at our $X.XX, quarter, we peak even extended have utilization with during was a Street year officially increase Scott a which more the of $X.XX adjusted will trajectory. strong revenue growth

But even sheet consistent for where year. for a a testing mission, the excited than today, Nelson improvement longer-term translates is This we our More As customer our we have discussion a includes normalization headwinds. difference leverage and artificial return strong in with as had testing call, elevated results in reflected taken example on more our PPE to representing pandemic-related combination weak of to and of Sotera on unwinding critical a and pandemic labs. Labs through and Nelson supply financial our performed detail health the expected X.Xx, to XXXX importantly impacts. consolidated contributed Nelson disruptions total you One lingering patients. how we of continues last chain to labor action activity, the patients. segment. also making counter impact That the Labs both quarter a on recently, core lab impact global of examples near- leverage by performance Overall, of burn challenges ongoing had the testing, testing work The is for for safeguarding in goals. you our negative basis. few business of a net good for a Health has market ultimately markets absenteeism the of careful management three-fourth countless well. This achieved balance these to of The is and decisive the as team I'm for skin operate quarter

which Sterigenics is surgeries, example Another facilities robotic Nordion's cobalt-XX. using is sterilization completed the using to cardiac of components

also and of execution to excited of a our significant Mark, in was Labs means and and and adequately of that Nelson Labs customers the consumers which are culmination Mark a is the growth in products Nelson about strategic validation of complementing legitimacy recent financial legend is strategic we're a terms on verification offering our certain for authenticates We from priorities, products The program been tested. our may have efficacy, initiatives XXXX with us executing to Nelson to those testing, the that confirmed safety performance of the be marketplace. M&A. the a differentiate not continued of Labs organic launch excited year and testing really years

In advance to we that ESG our ESG continue our as communication well Among are critically advancing program other external as our we're mission to drive where related the strategy, to important and topics our addition, the elements, actions overall of helping internal equity stakeholders. forward rollout inclusion. our is on first

strong a and As is well ideas. we culture collaborative a seek as maintain attributes and team an organization, always diverse that as that supports to

content for which compliance base. recent will our to our XXXX, In acquisition, This expand regulatory Sotera to advisers, expertise Academy Health new our leveraging launched associates library our expert is digital we better addition, to allow in The Sotera customers by most creates access the a their includes customers serve leadership and knowledge, or Health thought the Academy. also RCA. critical expertise knowledge of

others regulatory industry entire delivering the for them many year first a help our Health Sotera full in I'm our in year and in proud rely Overall, to customers company. landscape. in of a record expertise increasingly team Our as the very XXXX navigate the public complex

health, customers, our care patients. mission, and maintained team their workers health the while meeting Our of needs Sotera on global safeguarding Health focus

to capacity look across priorities, pursuit this operational our our such and will include guidance XXXX, integrating investing acquisitions. we strategic as focus Earlier provided forward which our on morning, continue driving of excellence growth XXXX. as and we and our infrastructure So for enhancing businesses, efficiently we M&A, for adding

XX% approximately billion, the $X.XX billion of X% in range XX%. X% of XX%. growth and $X.XX the million, growth total guidance to $XXX million to representing representing is in also in adjusted revenues Adjusted $X EBITDA of to full range of year EPS range to of the to the to of $X.XX, $XXX X% For growth represents XXXX, our approximately which

targeting demand positive level view of are growth-oriented for in our products a environment the investment of in services. longer-term reflecting projects We XXXX, increased and

We will continue that the active coming with into were year. the capacity extensions

cadence. In addition, what well development we outlook cover Scott kick qualitative new two greenfields our previously. in continuing currently sterilization supply major the we the more announced relating expect cobalt-XX invest detail, in intend will trends as that to the we off as to projects including on assumptions while to

what on expect they broader the we where The an nature we in our with persistent businesses. pandemic, markets Now and evolving operate how markets the chain, and labor this I on of supply coming impacts remain will important comment factor into ancillary along impact briefly XXXX. and

challenges impacts labor are higher we market they impact as the more those there of on have labor of absenteeism created in pandemic-related Recently, For most we year, and inflation. based shortages of indirectly our feeling levels the been in as form of disruptions were last how labor for customers. felt wage well more significantly terms as

through the margin Last would environment optimistic. characterized remain businesses We manner. the have environment inflation, that changed. This year, unsettled, a our maintain macro is not we position profile are this often our cautiously cost positioned characterize and in to pass year, I to well but similar pressures has said and we

cover our relate to of by over encouraged the in call are the in many I serve the the unexpected quarter more markets and are light We outlook. further turn terms pandemic on Scott in to the in cautious we detail now products. the comment of but this will fourth

Scott Leffler

year Thanks, Labs XX.X% compared on declined of quarter, basis, to and $XXX basis last Adjusted Michael. by revenue the leverage. compression of capital our grew in I'll segments, XX.X%. $XXX XX% regarding margins a quarter moment. year, I'll from more outlook. detail Adjusted detail fourth Nelson compared segment. first driven some basis I'll highlights within revenue of quarter currency approximately grew with million. entirely business EBITDA updates XXXX along by the a that provide the on end by each with deployment for by XXXX total to On and last on grew a the consolidated XX as cover provide QX consolidated QX company million. then EBITDA margin to basis on points a to On insight constant fourth fourth more the

operating EPS performance, with than more our interest strong combined $X.XX of $X.XX in from of adjusted up expense reduction XXXX. in Our million share, resulted QX of per $XX

loan from repricing strategy. the the reduction term consistent our debt planned of capital As deployment with a paydown and our of resulted interest reminder, expense

for and growth the more as more a QX Sterigenics Now XX minimal. X%. than contribution levels pricing growth of Sterigenics expanded peak growth look of let's and of QX, well last the income over There organic quarter the as segment fourth level. In than basis take almost XX% FX for segment X% by remain nearly XX% inorganic pricing. and performances. year. impact volumes was was driven Compared near Revenue margins volume at points no drivers utilization of more higher than delivered utilization income revenue mix XXXX, quarter by to contribution growth QX included and closer segment

continue make our facility. at in enhancements to American and the We North investments meaningful EO capacity, Sterigenics

the bottom to period year. to contribution Nordion's compared $XX of revenue XXXX. XXX leverage QX last of pricing same from driven on XX% up growth pricing were line and Nordion, volume X% to a sales, and by last by FX Nordion Nordion's XX% by QX compared favorable segment year. mix margins impact. million basis $XX to points, QX from driven For were X% and grew XX% and a approximately compared by operating to top grew favorable almost higher income million the

$XX revenue million $XX segment XXXX. XX% X% to increased For approximately year-over-year income fourth by Labs, period. of million declined Nelson And by for quarter the to same to the QX compared

the largely the unit scale BioScience and impacts testing from challenges basis Michael contracted contributed contributed offset points segment the mentioned, revenue impact approximately pandemic. volumes the labs The relating largely acquisition. nature the compared while reduced with last third Favorable to by acquisition about we QX QX acquisitions driven lower a of margin by one by margins of XX% Labs year, is Nelson from term to dilution and Labs view that the experienced Labs We XXX the Nelson significantly shorter income indirect in XXX points businesses. to PPE but RCA a non-PPE of over of QX. experiencing Nelson direct basis to most from and is headwind Similar little XXXX margins from Lab two in As the quarter, acquisitions this up contributions from mix of BioScience and dilution PPE flat. testing, X% which RCA. pricing also was business for

earlier. referenced as Finally, QX market was also challenging by the increasingly affected labor

provide deployment let capital highlights Now some relating net me to leverage. and

CapEx in XXXX $XXX reflected for significant which was of acceleration a million, Our spend QX.

anticipated growth projects. Our spending cobalt focused enhancements facility This both on and customer in in is was demand. to is supply current Nordion growth response initiatives, and and

As position. and of December million maintained in had cash we XX, a strong liquidity $XXX

- X.Xx, the three-fourth Our of the from a net for improvement leverage to the year representing declined total term. about of

recent in from full year As in our previously of XXXX. combination in $XX million loan the repricing million in paydowns our January interest the expense of $XXX term reduction debt resulted over to communicated, about in and a

Finally, our with the summary want finish outlook. around start color our to I with and I'll provide XXXX additional assumptions. quantitative

weighted Adjusted of For approximately range million Adjusted X% also income range to of representing XX%. $X.XX, of of $XXX providing to to shares million XXX billion guidance of adjusted applicable in million total rate in million, X% revenues a to XX%. to share representing in to EPS XX% range we basis. growth to tax of fully XX%. on in net billion, the a shares the full $X.XX $X.XX $X diluted XXXX, XXX The growth the of growth XX%, range X% the count to and approximately of $XXX of to average are representing EBITDA year

rate effective Before discussing XXXX. capital expenditures, tax color our on add for I some wanted to

a would at that recall limitations deductibility limit result deductibility interest the with be prior from combined period interest. that provided increasing The This higher taxes a reform XXXX. tax in of limited. and on a slightly for tax further large you tax impact deductibility, of how whereby XXXX, change rate time carryforward may reform of we for in provided XXXX nondeductible Some for in account on

CapEx. to on Moving

that two We In kick a expected off projected are material sterilization new is investment XXXX, million to year. our our $XXX by capacity in XXXX even we range XXXX. greater in represents This number the CapEx of levels. XXXX, increase historical for million greenfields over over in Our are a of and spending an and expansion online level increasing to plan to projects. $XXX the increase come CapEx,

long-term project, at and up and to in on In invest facilities. continue Cobalt Nordion's addition, we to existing expansions routine spend ramp Labs Sterigenics, expect capacity more development Nelson

Our all portfolio our company. segments, investments major projects and geographies and capacity across technologies all expansion of of represent the of in

particularly kickoff spend, the customer new of greenfield reflects elevated the our optimism for services. demand long-term regarding Our sterilization two our

we we've for demand investments calls As make did frequently not unless noted the in the past, types of it. these

also We spending related of enhancements U.S. levels network. of expect to across program increased our our facility EO

The offset our we to anticipating standpoint, interest in portion assumptions a unhedged through well translate rate debt first the we as market of some From the rising Finally, expect which be XXXX. or XXXX. interest expense half rate should labor are on XXXX indirect to line of savings the pay continue environment follows: in down are interest of some direct to increases from supply debt, from pressures in as will in impact with ongoing variable repricing XXXX, chain COVID-related the qualitative continued as disruption. and inflationary and our expense

on the extent projections, have risk but managing are focused are able. of We to in any assumed these anticipating we specific types not risks and geopolitical our

reporting, As that we recent XXXX benefit with of XXXX. the finished at and we quarterly momentum, expect each expansions pricing being and with the of half to into initiatives look positive unit. continue the and XXXX in business on realized capacity cadence comment greatest I'll briefly from second Sterigenics

questions the our first rates some in of effect standpoint, in for in to deployment we headwinds of is we between the the between half case, quarters. with with We cost Q&A. expected is take feel of there inflationary the total first guidance. run initiatives, case, Nelson any that prioritize From our and of to the in revenue reflected Nelson cobalt-XX. Sterigenics schedules a driven continue of year, guidance assume put from collaborative company Nordion's this That future relatively back Current standpoint, expect beginning range acquisitions. year. will the be how experience price deliveries normal deterioration expect lag our in to the quarters. the the this low in all even affecting half for of lot, the in the year the approximately closer during the XXXX down to harvest headwind Labs we pressure for first As for a to income for more team and rates both and offsetting rate and realizing to recent of pressures initiatives our capital thank would represent we large we're in and by Combined benefits any efforts, XXXX. headwind acquisitions year, remainder part Michael, being current half continue second growth I segment Labs performance balance will strategic the early Like strong that guidance. a from in was year. you. to a do and in half subsequent phasing the is of X% year position revenue margin benefits know happy which remain Michael, XX% the their pricing on FX From segment we I an individual to to us for continued growth. second same assumes want the a not shipment the shaping and see to half be operational the and to return and year. levels margins always think up Based is further

Michael Petras

Scott. you, Thank

address to Nordion in investors. on do, Before transitioning Q&A, our many source from topic the of We minds the disclosed. our like cobalt-XX previously of have business, some Russia, to we I'd as

taking We the appropriate are customers time, current cobalt-XX. supply the to the monitoring geopolitical been are present At and situation, protect no have action of affected.

the sanctions, understanding time. with have Russian already expect on an or between supply at which worsen, short impact There way of our our impact if XXXX X% XXXX is and Our X based Sotera certainty the in at term. on current situation thus long predict announced even scenarios do not how no on events to is we any any revenue. to guidance this unfold Health total of was of have we will the dramatically far, Based expect the looked to we

XXXX. both to question like future sum to a you. Thank So question-and-answer answers. in session, the bottom up At the to line into feel Overall, Health up, the as call the we this we company's current growth for move for and and point, continues on really Norma, in Sotera we'd open and good prospects. about position strong be top

Operator

Our first question Instructions] Suisse. Matt with comes Miksic Credit [Operator from

Your line is open.

MattMiksic

understand Great. potentially range you One factors And a other And the have range, of Scott, one guidance. the bottom just to higher provided. color. the growth the factors and end I that what range of question I to the appreciate on is side, drive just on at level. EPS end kind And all below drive love some obviously The the would I sort growth EPS to would you what that follow-up. then of leverage? the deliver sales

Scott Leffler

Sure. Thanks, Matt.

the terms the largely revenue, look of movement think infer you adjusted I from guide can relative if to in you the movement adjusted the So at EBITDA EBITDA flat in in margins level. at that

net in of investments so adjusted other depreciation some and the drivers would increase the other of which a income making. some expense, that EPS is And include in reflective of factors we're we're adjusted modest contemplating that

really based on the on tax of earlier, but flat change the expense assuming net to corporate reform. year-over-year, tax in the environment increase modest interest XXXX relatively As the rate we're in tax assuming we income, preprogram a based I are adjusted mentioned applicable kind

MattMiksic

Okay.

the tax for roughly, to that think way expense rate interest flattish, right the So about depreciation it? and is but not

Scott Leffler

That's a yes. fair interpretation,

MattMiksic

Okay. Ukraine, just on a follow-up, And gotten of could, and lot Michael, a questions if Russia I've then I - obviously. on

and exposure what starting at than agreements a looking the like some expecting more have least nature position relationship. that sounds a a superficial at more sanctions significant contracts expressed at others potentially provide comfort maybe expressing just you with impact. you You're the level, how have might of others have around Any that context the can you bit of more a or of this we're of at confidence or point, location and nature more, not the

Michael Petras

be Matt. inventory, as Yes, Russia them to sources it right the this is customers point inbound shipments of other around is and of in it in world. with utilities long-term to matter continue world. our cobalt time, we my our And our on Based ultimately scenario at I gave customers. would the and of you of to some and do situation remarks, outbound or the that. the impact authorities, the and our supply we're able worst-case that we're tell if we then would have But time, feel that one agreement What them, also, we the and dramatically I our buy several processing. not not to see around any final kind over change. it Obviously, on materials from you to do and now impacting we like projecting what product then move we get at some a managing a to matter. around today to of our it's prepared Remember, procure talk financials we facility point we we this see are the Ottawa the going in transport to with sanctioned

MattMiksic

worst know, Would would scenario, the of would getting you that gets does out? include or What clear just logistical X challenges change? on that... X% I case be some, at and don't I the end materials to sanctioned And what supplies be that high mean, or to become that to

Michael Petras

we plans, have the maneuvering, great above, or at Also, on that's evolving we exactly could It's obviously, in if into the many But I be logistics be we get banking it's segment, sanctions all evolving. you you - that sanctions as may specifically there's there's looked visibility materials the go that hard, It right? contemplating. that paths any right, this if the downside of will, is how an the to If it. others be would or impact. cobalt Matt, are don't into and the it. the the need, relationships, how basically know factors weren't the able situation,

Operator

Dodge Markets. Our RBC next comes of from question Sean Capital

is line open. Your

Sean Dodge

on on background guess two you much establishing Sterigenics, these are EO in permitting regulatory the mentioned where a capacity you then capacity Michael, they on I greenfields. that or process scratch? process Can expansions add? a lead there does new those, us different they? be times How of And technology? Are from the give going more in to kind anything involved difficulty facilities one of sterilization bit or little additional the

Michael Petras

always dialogue Yes. in what our as we look brings as Sean, capacity regulatory as specifics as communities to not with well how or get we've as modality when We're into is. it authorities the the been well people do we to in expansions. customers going as at much

across investments all making and geographies. network in all are major We technologies our

greenfields these past. we've the Scott of half on to And consistent in what is expect the the part second with nice We XXXX. referenced in done is come

and the ground. the we will the in in We shovels have expectations ultimately significant commitments put around customer and as interest this result

to big So and see be demand continue in we're is this the away is date the And reflected Sterigenics the performance our will as provide to and you this. we well. want I forward end in going point from there. optimistic services really about the to value markets take that's

Sean Dodge

that's tax. of you on I becomes some on and is then from you producing? Scott, interest capacity as about higher dragging influences to think we the Okay. this new build out it EBITDA the before there net and year for these anything EBITDA related income the If guess, investments, revenue had outlined

Scott Leffler

to our guide. XXXX not No. Certainly respect with

Operator

next Donnelly with Our comes Patrick from Citi. question

open. Your is line

Unidentified Analyst

for questions. on quick Jason Two Patrick.

labor some year? you're of for elective terms you first inflation supply in First, the seeing embedded you rates. things there just chain, what outlook, in can recovery the trends and assumptions and discuss noted for Maybe supply procedure like

Michael Petras

Yes.

take continuous - elective year recovery the seeing soft of far last device of got procedures as increases end Omicron an similar going obviously, back, we're improvement, we towards about shut But we'll I'm well? year, Jason, other as what forward. the volumes, XXXX, starting sorry, as predicted with to of was being the coming in. piece, to were comments and question the the gradual then we things which down last On see Jason part what think my a year, as

Unidentified Analyst

Just on labor chain and supply and maybe spend. inflation

Michael Petras

in very that supply labor On the predicted challenging chain, the price about Yes. with good we business. We business. We inflation feel and see our improvements market. offset ability in to operational other a

As that we have it like we'll markets businesses mentioned comments, it's clearly some where seen offset to United of world. able in and in year, some feeling year. And the are overhang around other able productivity our then price And to inflationary the see half into to Nelson, of We the in mentioned, Sterigenics States going start be the it. that in second inflation as we've we think more and than to we'll half that we first of the pressure. be

Unidentified Analyst

question. Got helpful. just it. more And That's one then

at get leverage forward? you drop of As kind end your I M&A year. moving think you with? guys and growth And At of organic updated are comfortable three what the position on to continues towards level times what's the

Michael Petras

Yes.

to last accomplish down four in X.X to getting We was very us long-range year, net been our As able proud we that today. feel stated, leverage range times. we're what of two objective to we've times

again, heightened for growth. in to comments is business didn't there, has across capacity high there. That's satisfaction inorganic our and the you're priority customer we capital Our seeing from completed customer businesses in reinvest acceleration customers. And remarks and had always we back demand increase annual the the reference one our point very in just still is why our around our other that The the survey expansions. been here,

change be end teams proud the then growth. And and sure we're day and would to M&A the strategic We inorganic from pretty around and it's the out. outlined returns doing being a deployment deploy for on not delivers overall, thoughtful in capital in that strategy, of and we'll making strong, expect it in we've day and So markets strategy going our what really we're the major really capital very what see but we are past.

Operator

Next KeyBanc. from Mishan comes with question Matthew

line Your is open.

MatthewMishan

talk as in bit a you some of Willowbrook about visibility litigation the year. can NESHAP your at little rulemaking as expected end there's July point know on well thoughts by proposed your in on. a First's, towards the progressing as I

Michael Petras

Yes, Matt, this Michael. is

Let me an take hit of couple I'll actually the that. opportunity as on use points this situation. a EO to

the of XXXX. First, September Illinois 'XX, trials now November and for set are answering in your question, 'XX July right

to that positioned but those courts. be ultimately, We've trials right We're on there will. So feel the will of you be we're decided three the on focused now very today, we the teams see it's got going in anxious plan our get where for defense, if year, half second our to done. we and about good

move continue As our as we forward GFE far developments, overall enhancements. to with

year. may the of have then noticed the Some activity at this more beginning end recently you the and towards some of the year of of

the attorney forward. company, both was an of was First We on proposals and be court front the would call New pleased with order parties, the judge ought going out both outcome took that how monitored judge granted, in order The a facility the a of general Mexico. were There operating that. some have that and point, many we'll Georgia the we've with for had with here quite consistent facility we up although in XXXX our aspects. which, with Teresa and improvements, key are another enhancements facility. in our moving time Santa world-leading Also GFE in a again, are completed forward for expectations, to

early by we are during granted regulators, a in Atlanta to the parts that We and see air are new permit also recognized pleased of environmental XXXX.

area, things we're by encouraged to very move that continue going that to we're forward we're with and in strategy. this So doing

current now, see comment. I is our will As half, probably what we be which you're to, right second NESHAP, late in the proposed for far second will half, as public that understanding is referring open NESHAP believe sometime new rule

earlier. 'XX, done here projecting told So just times, make see now, We rules, anxious and multiple it - 'XX, like timing. new this in second half there. the sure XXXX. we'd is government the Right We the we're of that would've expectations or 'XX. we'll we've us before, have the is 'XX liked to the tell exceed team And current we to

MatthewMishan

more then range And year, I sales bit of I wider of the little wider not. there Excellent. early little end? 'XX, versus last think was you reported noticed low that a But year, than this end growth not the maybe by Okay. the range? that year, guidance driving clarity what's bit mean, would of than little maybe last Kind encompasses bit kind I what a did a But much. a high of

Michael Petras

out of I and Obviously, the think, Matt, is range guidance initial my the going the as wouldn't of we're the want the this variable the of in sure anything the is range. we the did lot read of the world size representative We year, right range. was of the far we drivers - that of half second on 'XX, early issued the of terms of This that factors. just there consistent now, business. in kind as the the into as size narrow make range different but it contemplating the with part we recollection a got in into just, there's I of to

MatthewMishan

Okay. would And it to also then supply the were frame then impact just broadly Sterigenics? like how would just could Nordion, changes, last down some Cobalt. slow that on a how to disruption there question you but If just

Michael Petras

the cobalt So would from can't the in cobalt get So we are the projected Russia that we like then coming right? our Russia, that we disperse be from that we is need customers Sterigenics. business impact have some would

to won't be they to be able would get it it, flow ship the hence, customers. the and doesn't So Nordion

all same to year. Nordion. customers in given goes processing of whole that out year ability we customers recognize cobalt have X% other it out. a impact a X get sources we the on be cobalt other to that that hence, of lag and would the you company. of range And get across rely we of in our such things nature as the the or to our gave Sterigenics out Now get And There's time to also that

Scott Leffler

that X of impact be total well any on to emphasize, Nordion downstream to the kind both as of Michael mentioned, impact of just impact would inclusive company as Sterigenics. that range direct X% And that

Operator

comes with Luke question Barclays. from next Sergott Our

Your open. line is

Luke Sergott

wanted device just how here thinking the on guys to I you Great. recovery. follow-up about are

most that is that your until online in your the Sterigenics aren't at and capacity full is going think device half seems 'XX. And it capacity any So new bring second expansions full. to guys coming CapEx

come trying the to your certain those Just to out figure upside numbers from levels? can where given

Michael Petras

this Luke, Yes. Michael. is

process will year, the also of several late couple in similar recoveries that of you type then in XXXX ramping to referenced So from see stronger first be recognize we year the come half. the 'XX. second up had be you're that being mentioned have and last Device. a greenfields Med two We second than similar what the that And that half. are will on of that 'XX and kind several also points. throughout But hearing and of I half we expansions

some of have about then that them to process, That's and And talked of do greenfields. we that seven live in that then we to I two past you gone addition base. tell have mentioned to that would are had the company. we in we've count. in past would tell even going about in capacity on I And our coming you work of the you where about got So across the three you work to asset on the board what there to also to recognize out operational things excellence efficiency that is and doing drive that, more and we the team multiple the existing times Mike some productivity the

our the revenue capacity confident feel situation. given we our based on we've to you ability on that deliver So about

helpful, that's hopefully, Luke. So

Luke Sergott

- on And greenfield technologies for Yes, opportunities, that then, is those implemented? are abreast I of or on have that horizon here stay mostly EO going is you you guys guess, - the to to guys it trying be new planning Just is. you. to are what's

Michael Petras

Yes.

major said are geographies technologies. We to in all all the stating investments publicly in haven't specifically what what across are, be we going

would EO, in that tell So what point you would be that's we x-ray, at time. e-beam, this cobalt,

Operator

Tycho from Peterson comes question JPMorgan. next Our with

is line Your open.

Tycho Peterson

a any you're touched historical see have may to times your greater And pricing discolor this where just a divisions Can five? the three expecting you in the guys year of of on the us sense you potential? versus You pricing comments. across couple give three prepared magnitude

Michael Petras

And said, of XXXX, of in see Well, the I cost have would that price. to form around across look inflationary as we our impact obviously we pressures cost we inflation. to high can probably we X.X% say I incremental any say would when the through that pressure. confidence the X%. we've and pressure businesses, is - really, translates And a cost inflationary degree the for pass of

the about X.X% recapture able when XXXX, beyond you incremental incremental expect above to think price in to run that with so we and price X% would to And be rate. historical

Overall, of as they far businesses terms think our to be which more going cost the to or each in impacted pick of terms it. would feel less we of question other whatever that As be up is by able businesses pressures. your of in part

Tycho Peterson

And fact Russian about all the here. talking then the appreciate you're I situation, a helpful. the That's Okay. X% color on impact and to X

source disclosed that XX% suppliers? of in at sites point? of How have kind have of situation, switch? facilities easy looking from about you kind I'm it comes XX-K curious you that two the at cobalt the of if do to You you Russia. the we this you as think are in out alternative volume to even be requirements And switch is Russia holding the minimum

Michael Petras

kind to scenario, a Argentina, to that to able are one cobalt coming but time aren't we have We based do certain Yes. be things be reason degree, out you longer a signaled doing strategically market cobalt we're China, that. based of in - worst-case that from and supply to business about pressures lot the we there's India, us a also there of base. something really was long-range inventory for not and able of if on tell have work So Russia there. it haven't of diversification announced the one cobalt Westinghouse, of yet. in right? global open these recognize the I that how Nordion good The and has suppliers. a with our these some reactors get Canada, for we're in at more Tycho, bake. pop get in that agreements. cobalt with we supply take that out XX feel it's invest could network the isn't development also This we're the longer-range work minutes, of But We lot get XXXX it's for offsets the there a to excess We'll because in, was shipments in we're continue doing would we you to to supply Canadian you manage and any our global paths open we to long-term today with and on things supply of doing of CapEx term. well some investments up we to positioned where is we But the other the

helpful. that's hopefully, So

Operator

question Our next from comes Windley Jefferies. Dave with

is line Your open.

DaveWindley

questions. follow-up of couple on question A on Tycho's pricing. One

to you you getting seeing If expect pressure headwind price get EBITDA cost inflationary normally a degree as point margin then are are you're the incremental expansion you preventing in to and seeing, 'XX? the factors would what from to capture you that to that would as similar

Scott Leffler

between is that there increases. price out able then roll the identify a cost there and say, would time Dave, of pressure, price that inflationary the are One really. to two I amount offsetting small time the lag we So is are that we factors, that

the is profile, the behind bit - to business on as it creates then a got terms it's of said and a in normalization of their when And including performance, the a out. little at near more level that, factor on bit again normalize we time on we've QX you little it longer-term we of look have few a noise Labs doesn't quarters to really impact Obviously, our is just quarter unit work that results, in but Nelson one, last profile. still their us going so that a quarter on this margin other Nelson activity at call take to the for a few And term. but to go have one margin

better though full so look a a lot than And they're the year. of half of would for the creates, we company the in even lag half that of on to results. year expect to little going bit first year basis, the total rate see what the a run second

DaveWindley

Got it. a nice is my Nelson around which that's second margin. bridge And question, to

previously the think than as to those prior began at quarters, on were I front. PPE expected headwinds you least were in bigger and lap our

below the was PPE that think in Nelson of was 'XX those the you're What saw X,XXX and from that, quarter taking to down below we message or first well there to headwinds. that half to pressures fourth margins I declining margin XX%, saw closer points? that Nelson are And Obviously, be the the maybe expecting You XX% XX%. reflected of incremental that. basis are in down kind

Scott Leffler

Sure.

even there that we beyond bit QX saw into incremental So unwinding of little they PPE is some amount quarter. impact in coming baseline the the more what of a from had

that so we've us we of XXX that is just As said margin our is generous. again just in something almost comments, because related compression had to for the somewhat margin basis QX my in which activity, I typical profile past points in acquisition prepared is mentioned the

of relates mentioned, labor relating half pandemic Nelson of being from Michael factors near other impact closer - in the true acquire Omicron dilutive really, first to point, them eventually, starting scale that a an margin our people-heavy the to But those pretty QX market. some up the incremental the we early new to business our above to impact factor and really much pandemic then we the term. incremental is As expect most to the and had and very profile. be in year, anyone new Labs outsized then we beyond us impact or And in that

normalize of taken element their with in pleased in the part we're QX, so while respond to it take those they've little of pressures actions but to a model. order that to And the that operating will early

DaveWindley

the simply it you is scale talk those you're or that? longer could that you what you into the you term? businesses. one Perhaps that about last remarks, short lapping talked you I your time about just thinking being improve it. call than Is frame made, item acquisitions organic, that when And a that on and Scott, would prepared acquisition comment then in that short-term relatively about Got as think

Scott Leffler

And reiterating are what expecting rate business last getting of said reported of "normal" that Labs Nelson made, without maybe which close one specific be Labs, I'll call in segment for income into last to Nelson the that's that Well, on we they close call, normal. we back that we a for the as year, half comments margin specific to to we is the answer run second lines just view QX the being by of we by something profile as to year. time our margin profile drivers, as

the so the that half now, including profile in that to of the contribute about, all would factors headwinds right you asked various of more the normal that margin normalization of one combination experiencing year. And they're second the the

Operator

Our next with question comes from Sachs. Amit Goldman Hazan

open. line Your is

Amit Hazan

CapEx. with start Maybe

you of comparing Just the had in IPO was the to time included anticipated your is higher. that the there. IPO some at number already At looking where growth much time spending the back at this that it guidance of

the what onetime us of you is talk and help now? a first this number the the Just of versus kind And if also ongoing to maintenance curious just than if kind CapEx was changed can when were - as a that normal? when new we growth buckets, the first larger Is coming were through public you it bucket improvements. EO company. on of Has that

Scott Leffler

Sure.

about towards the maybe And you, million there from of for incremental we impact by number growth clearly, which than is spend the be of in going just the higher historical estimate average. largest to point to But XX% directed drive range be of our million a investments. XXXX, that So anchor growth investments. far, planned are going that factors spend of of that we to estimate out that is one that $XXX is $XXX

And expansions, add-ons active modest the capacity XXXX. expansions we've equal. created existing at talked not you capacity The of the all capacity are are really have we talked that fact expansions a think in that about cost. about that the throughout most that capacity come now to very we expansions I facilities right past to

run time, part a really greenfield our obviously, hopefully to as is the do same message sends really two So launching far from and at anytime it a move spend be as big we of that greenfields a of of we positive the the wouldn't necessarily you longer-term representative see. being at the is special onetime this outlook rate projects. reflective because as look long-term it mentioned, I as level

out development spend relating spend facility cobalt ramp-up the only have of will for around is be investment, and growth demand only few in of that EO Nordion relating the spend again, emphasis strong enhancements continue facility specific EO that long-term impact elevated that that the around will level - is the will million years. $XX which environment. those a the reflection category of But we range to We on to for a the - greatest cited. projects, a and enhancements, very XXXX the

Amit Hazan

you just there. supply about And you're us obviously right year general, of on give Okay. you chain Can the outside challenges chain good covered as to relates Russia pretty but question, as the looking out in supply issues other now just it seeing. that chain a detail, of you're second for factors supply more at in that risk talk just coming cobalt? color to back just some

Michael Petras

other getting redeploying samples and problem particularly as They be customers that where to driven them of people do a the some be still and just well. mostly labor might on. as them their I production it's - the on is we we that have absenteeism. Michael. some are we're taking We the customers say Lab jobs and in projects with around indirect side, of would this Amit, impact challenges say working they Yes, would I mentioned may the have seeing, or Nelson having past in

around some things are ability level downstream gets get to hopeful moving XXXX. those our at the more of seeing So But normalized - that aspect impacting of we're we us. that to that chain supply a that having that as customers is drivers. parts into go we're are We're examples

Operator

comes next Sergott Barclays. with Luke Our question from

is open. line Your

Luke Sergott

situation. the Just to here. thanks on me and I Russian let follow-up up just for cobalt the follow want again

be LNPP you idea that can And year? this was give us baked out expectations - if that Nordion how to that was sanctions? So expected that here? able to is I give of impact? were that on the what to there's harvest guys assume anything then an given the get guidance Or what's that Just duration Can X into X% you if when harvested you played was any us total planned. on

Michael Petras

Yes.

we've we've the have there guidance of on what past, said year quarter-to-quarter. is is or from the as year variability recognize XXXX. another some Also a strong will Luke, off side lumpiness in coming So said strong that Nordion

with in are on utilities, single of to We business There's we've going growth harvest ups that harvest every occur quarter. that it's quite and smooth and timing the Nordion And with to downs X So on got the of case That yourself referencing. a XXXX. What not if cobalt all Health be several bit see cures is revenue process today, the situation a already. we 'XX worst that total really impact bad. based on X% is highlighting in impact. gets of Sotera we on the what and are based based

walked aspects the Now door projected was 'XX the there's aspects go And through recognize of the get we've past out fleets, that to we of many in, it mean timing there's of thing. in cobalt necessarily when in the the container harvest the was with supply in in many revenue. processing, chain all doesn't XXXX you.

on we're you is giving XXXX outlook. So the tell a that I view you would based

anything done think to that. haven't We beyond

Luke Sergott

more time guys and just out timing just you us one And Okay. walk on the That's helpful. door when then it through usually? harvest can when goes of you

Michael Petras

it's by Russia, If it's of and the if degrees varying India, varies based it's on there's from Canada, where that. China, timing all That it's world. if lanes if Argentina, coming it's Yes. transit

Well, for So why I any supply numbers like a seeing levels in lose Russia to don't that at we the are point referenced depends cobalt in in some translate general have want the situation. some and to gave all sure line. on answer guidance processing no I became That's get in wanted thank it across why we higher get Russia I from that's the you dollar one the past on dollar of Great. - a given straight everyone from you're make want of get particular seeing But Hopefully, sanctions if not based logistics. Yes. revenue for we from your there's supply we're we've It it's we that into what it worsening exciting cobalt impact. time to business. sales. does chain now the feel time. everybody. today the I for today. not you That's

positioned a for to continue growth, are all Sotera Health health. well for We invest XXXX. long-term in And while we strong global safeguarding

So thanks day. for your time, and enjoy your Bye-bye.

Operator

this gentlemen, and conference Ladies today's concludes call.

may You day. have Everyone, wonderful now disconnect. a

Sotera Health (SHC) 1 Mar 222021 Q4 Earnings call transcript