SHC - Earnings call transcript Q1 2022

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Operator

Good morning. This is Joe and welcome to Sotera Health's First Quarter 2022 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 the Sotera Health website.

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

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

Michael Petras

thank Health's as you the on reporting I'm and in Earnings Call. another us joining and the First growth prior compared top pleased double-digit XXXX bottom everyone, this to Sotera very for line quarter to morning, morning be quarter Quarter Good same year. of

driven of we growth some the of growth more revenue provide the pandemic our lifetimes. a continues XXXX. and XX% total Health good experience labor see the adjusted was highlights more $X.XX robust across meaningful to quarter last compared quarter have our Nordion continues We Sterigenics progress the of but by active increase impacted had public comparable of major a XX% $X.XX, will start, also business quarter this of our has capacity to to reported which all in quarter. quarter, demand have in are to a enhancements. as of EPS Sotera Diluted first continued throughout up last addition benefit and history. adjusted a detail facility in moment, XX% was Scott favorable strong EPS reported company macro to the also programs year's consistently had growth cobalt-XX Despite and the deliver here in per shipments, each a in performance. of of a environment EO modalities seen EBITDA over year. first sterilization. and supply the backdrop, landscape is markets its us in year share, and the have than has chains, the both Sterigenics in many made disruption of While expansion timing geopolitical $X.XX, to and

navigating to on been that Our that revenue Again, last this for quarter. the a to Russian disruption cobalt-XX deserves Nordion recognition complexities maintain cobalt-XX Nordion we Based Health of of team reduced many disruptions to environment Sotera geopolitical to call for To deliveries Sotera call, total X% result range from of potential despite the now revenue. in in there well XXXX has supply Sotera the Health's our team of or on the order the March environment in estimate date, supply no on during earnings supply navigating in received X% mentioned the a to impact I supply tremendous X% be X% process. revenue. our our so in since current Russia on potentially several we Health's have thanks impact XXXX. of from in impact the the could to

environment. performance the Labs impact weaker of testing. in been and more well, experienced on challenging communicated Nelson Sterigenics expected pandemic-related had Labs in faced While the quarter, first elevated Nelson was the Labs, we a are last the which and unwinding of largest performing from with Nordion as last levels has our which Nelson quarter call,

first followed to disproportionate volumes call, quarter Omicron-related our in challenges, impact last on labor-related due As absenteeism. including we had from Labs the mentioned Nelson reduced

expect levels we Labs staffing despite the Nelson encouraged moving market. various second and absenteeism direction, these the improvement towards reduced, in quarter. materially is good see The Labs levels to Nelson team in on of within headwinds impact has competitive a normalized Omicron managing are labor more management We and doing in job the very positive a

adjusted manage leverage we of our with still longer-term a of all X% in in few deliver the revenue Global continue net our Health. recap growth EBITDA X.Xx. Scott on with in of mission balance the highlight that our we goals. growth the to given want outlook details I solid also some to both and adjusted call in sheet, reaffirming examples minutes. and outlook the We X% This of our achieving recent last to communicated of EPS consistent to range we start will and on the to XXXX Based XX% leverage and is that early the near- year, XX%. it's are of how Safeguarding

expert I Overall, and Health in success ensure of this vials just critical bioreactor With and the of for is our Sotera acquired a single-use day. effective drugs ways application secured configurations XXXX. used proud Sterigenics of bags the to being health collection hepatitis growth delivering sterilizing gene the advisory entire assign Europe perform for of are Nelson for with every quarter kits for vaccines help used devices care we in therapy RCA, ensure consistently business, influenza. we to team reliably location, therapies for bioprocessing, safety And to XX working am COVID-XX, of continued trials. recently fight in testing cancer. At These the positioning and cell clinical from we examples to safe than another tetanus, few in customers and Labs more shipment B Company our very is producing to are good

and on always, the Safeguarding Health needs and our while mission, customers, one care in Health, the of supportive in other meeting the team workers Global their Sotera As process. maintained focus of being health patients

Scott, to comment where like over on briefly broader markets we handing to the Before I'd operate.

disruptions, largely able and market macro the to are actions. both serve and mitigate inflationary of challenges ability landscape geopolitical to markets reasonably us the marketplace. challenges, throughout especially are with been giving Thus impacts pandemic inflation remained have the times we've far, be indirect the impactful Supply our As the mentioned effects several I the felt optimistic and direct offset previously, continue now. to XXXX. pressures labor chain by of remainder direct with pricing most have regarding we the and Even of resilient, encouraged the

quarter Now over the more to first call the in to I'll turn Scott cover XXXX detail. the outlook reaffirmed and

Scott Leffler

XXXX consolidated cover I'll leverage. deployment margins The driven Labs to while million. of EBITDA within $XXX segment of basis a last business total revenue consolidated basis Adjusted the of grew first as margin I'll the quarter had of quarter year the discuss Michael. from basis both the on segments, in company On and first to I a quarter insight then a first XXXX along compression approximately to reminder on Thanks, XX.X%. constant XX%. XX% a Sterigenics currency XXXX, by revenue segment, XXXX outlook. Nelson with million. our entirely EBITDA of grew quarter. will the each details for in was and decline of Nordion year capital moment. further the on by reaffirmed XX% by margin highlights end some provide to XX with and updates a first grew On to margins the last QX of compared basis, declined expansion Adjusted $XXX by QX compared points

an of performance XX% of QX operating per adjusted drove strong EPS of $X.XX increase about from share, Our XXXX.

expense interest gain certain rate interest million benefits of on from reported mark-to-market $XX Our outstanding a hedges.

have EPS. removed the effect in that gain We of our adjusted

QX would been approximately have gain, interest expense million. $XX that Excluding

first income as headwind. well and by than segment included of expanded segment mix quarter performances. almost our at look million Revenue by was and closer QX pricing There contribution drivers to a was the growth basis contribution growth operating driven QX income growth last inorganic to and than as no to revenue XX% for X%. Compared of In to XX% and XXXX, segment pricing. points take XX% let's more growth XX.X%, as X% million leverage compared of for Now of margins FX Sterigenics $XX delivered volume XX to a more QX, quarter, year. $XXX the

Sterigenics with both active North in the our We driving made are projects expansion has enhancements pleased at American progress facilities. and the their forward EO

than grew XX% for the over Nordion same to was quarter. segment more mix driven from period about grew For from to compared revenue relatively XX% X% year. almost flat FX last by QX million XX% Nordion, the and by compared $XX of volume pricing. million income $XX XXXX. revenue to growth was to QX contribution by Nordion's and

revenue by pricing. was XXX what As year-over-year low Nordion's relatively XXXX. in to a by operating comparison sales leverage approximately margins Michael on QX by quarter XX.X%, higher driven expanded basis of is points mentioned, and impacted Nordion's

X% highlight basis by year decline decline line XXX to about X% last than last and and want call. on referenced Labs was that compared $XX volumes declines declined segment by with expectations Compared contributed also contracted from in an each last X%. from compared points and to the our X% approximately year, X% from XX% Labs, this Nelson from XXX we a benefit of XX%. pandemic-related first from of earnings that I driven declined For approximately FX PPE testing offset price. acquisitions XXXX by about quarter to Other XX% absenteeism, lower XXXX, to almost QX points primarily by basis mix and XXX core for of employee points to basis and of testing to and impact Omicron's million. Nelson on million the from QX Omicron-related absenteeism volumes. were margin decline points of by margins more to XXX was impact $XX over of mostly from testing, Revenue testing revenue basis income QX acquisitions

and the recover the in as in QX synergies second in dilution to the Omicron-related half up the ramp expect of improvement component We acquisition-related year. see

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

which for of QX planned CapEx have with is XXXX. the for million, spend increased was Our $XX we consistent levels

liquidity $XXX XX, cash and XXXX, a position. As March of maintain we strong million had in

leverage Our X.Xx. declined net to

like I'd our outlook. XXXX to recap Now reaffirmed

range of approximately to million XXXX, Adjusted of to year range we X% to and $X $XXX EPS representing $XXX expect EBITDA in XX%, the also the Adjusted million of billion For X% of the range revenues range billion, million $X.XX of representing year. the $X.XX $XXX in in approximately of XX%. to to million, for growth $XXX CapEx X% growth to growth full representing total $X.XX, XX%. in to of the

our call, existing remains earnings at the two expansions greenfields includes consistent for last Sterigenics. with of facilities Our which expansions and comments seven program capacity from

outlook previously The other elements remain of well. as the issued same our

quarter reporting, As this particularly in look high QX year. quarterly single had of performance, want concentration of for outlier a has in business again variability Nordion segment a in an Nordion. occur QX often the not period-to-period at XXXX that was shipments to will expect we that of cobalt-XX remind XXXX you cadence I for of that even we any

improving Michael, We expect and back the you. in to solid results second Sterigenics quarter. Labs Nelson performance

Michael Petras

you, Thank Scott.

it Before trials will we first comments. earnings open up begin, our a provide I take place to next so EO for few call want the question-and-answer, after

trial in is to first on in The August. XX scheduled sometime and concludes begin July Illinois

Our team trial. preparing is actively for

media times claims to drive we to stated these these Company against the and operations. trials trial we we At several cannot intends intend of next months many and of anticipate nor itself are that we our about over time, this want and pretrial to do I defend the statements claims. predict reinforce motions decisions updates. and Although to provide the confident what developments legal attention. as vigorously not have the impact safety number defenses trial outcomes, a our court We could

company over Our years our It's and facilities in and our and our consistent a Sotera so and compliant critical much our so commitments outlook employees' operate me XXXX health for optimism manner. which to beyond. and performance our role a Health's and plays in mission, results many safe and outstanding in care, company gives employees over

to over Health to want with on and and has forward this as ramping call connecting introduce of community a Vitale] Company's the the us Sotera member Head like questions Health I operator, the new a turn open of Investor I'd take to Relations joined today. quickly, him Finally, us with the to [Joe the we is moment and is team. answers. up story. investment and are and At our to Sotera for Joe, it up point, it looking Joe

Operator

Sean from Dodge [Operator first comes Instructions] Capital. question RBC with Our

Sean Dodge

pandemic and Labs, a begin half Nelson accelerate. to were more revenue you pointed activities effects as weighting for to and In off the of non-COVID-related there EBITDA back

the of the back view give us half to -- sounds across what On kind you update or have to still like we on an just Nelson on the year? can But you activity beginning visibility the do accelerate that's latter, it as there. normalize get of

Michael Petras

Nelson on The still in to but of question. the there quarter. But Michael. that we and have the we we're depending level for Thanks Sterigenics for visibility team. good it's team Sean, here have Obviously, the had rebound. team, continue testing first expectations the you to visibility according the volumes with the isn't the Nordion, to to some the delivered

We continue to get there. visibility

force. But second point. stabilize not It's all the more perfect beyond looking the we're on feel quarter how we at We confident continue the broadly. and labor and to this half yet second at

Sean Dodge

'XX. that those detail the mentioned what as a mentioned Michael, you disruption complexities are? Russia. There's disruption we look then, to of that. from complexities And you Nordion navigate how think potential we more ahead on for beyond? -- 'XX about you're in bit give And impact Okay. and But should you the little having over supply from us course certainly to securing just some Can the

Michael Petras

Yes, Sean.

thing So rules out not all and to topic or make I I government, you, Cobalt first this clear, U.S. compliant the the there want the by regs in has the Russian government. it been would really sanctioned with government the tell Canadian particular. on we're

continue you ports, the get as We lot up getting containers, sure do to just intricacies, making in ports, when just we and on that. in the them monitor a can know, loading global business a So arrived on vessels work get logistics through basis. of leave you vessels, to unloaded banking. There's have

we out team, that, X% making job sanctions -- were because to to of has early remarks, as something a there X% it. And our point as get Nordion. no to we've supply. impact had to this week. in good to the that's So are given get sure done with done in really has far monitoring cobalt. job We've haven't as with of and our at as the they ability care impact on But if what referenced we're them. the team as We've the I our in on taking of my top our been an great this guidance that regulators, that recent complying here staying customers, of as talk communicating able impact cobalt time, really this potentially if We're to we've received customers, noticed as the

continue we'll that. So do to

of As about at the not far time. a talk units Health in for XXXX position or as business point XXXX, we're this Sotera to Nordion in or any

Operator

Hazan from Our with Amit next question comes Goldman Sachs.

Unidentified Analyst

on Phil for This is Amit.

like So you to Nelson out parse in line think the trying it was Labs sounds I with guidance, largely set. expectations

year-over-year. looks we Sterigenics, basis it For to have way accelerated or say your pretty on into general. cut basically any XQ outperformed compounded business coming the in strong expectations obviously, you that overall? a Nordion, quarter a Would

Michael Petras

right? because our slightly get as the say, at lumpiness. pieces the with But and Phil, times quarter last expectations, the quarter. Michael. referenced, is Scott say, there's came we past, will yes, mean So schedules would year in lumpy overall, at we've total, I quarter, quarter in first better And communicated larger just happy the as we're in was this than Nordion can I we're be quarter of I'd the year, from last working harvest the through a performance the a lower first second business some utilities.

Unidentified Analyst

Yes.

that's there? a you I know reported the range. Okay. is helpful. first top I a countervailing FX not of after you into after line the consideration that And question the conservatism with other strong remainder Is to factors lifting led That's the an raise there the headwind what line very not taking for are it quarter? provide guidance Or to guess such quarter. reasoning year that in guys second

Michael Petras

quarter it's the second would I FX just address Scott But you, here. one in tell let I'll down. a Yes.

but parts. We about three We're to quarters lots of shaping how go. XXXX optimistic up, is more there's have moving

really XXXX one year. this which for point. We've Obviously, respectable Our supply just quarter of customers are the But our We're of business. guidance, at flowing. about a and in dealing seeing will, reconfirming with our you good challenges we early that. reaffirming, some -- is materials significant getting in moving growth us. lot variation behind parts there's with if It's or got feel the

Scott Leffler

a year. QX did, with FX X% and assumption ago, that couple we our FX, in that FX And headwind fact, X% throughout express We Yes. scale relating results, specifically guidance a headwind I for in headwind the did time would we there issued of year. then referenced earlier, was embedded still have the in the assuming about in when continues our a months an see that guidance to of we respect that as we're to

Operator

Our from Barclays. Sergott comes with question next Luke

Luke Sergott

cleanups real couple Can of you a -- here for just quick. Scott

how the contribution from through quarter, BioScience from Nelson, Just going much of of rest what's how year. much M&A the flowing RCA? in then thinking to came for in about the the especially and the On model it be

Scott Leffler

specific broken the March contribution So of to calibrate, by acquired just I out we we mean, acquisition. haven't But in -- RCA last year. BioScience

in still in that an then last acquired you're so from we And probably of of here about you incremental was contribution And November them. getting it recall RCA. quarter that X/X QX

you're going quarter's then year full of the quarter. this partial incremental contribution a of So in at RCA, you're -- least a three from the first to fourth really, getting and quarters be getting worth through

Luke Sergott

right. All

Okay. to at about Nelson, here, elevated to lumpy have you're lot the little businesses you you guys -- where can would of on versus take pass you the a just contracts? it master where being be three more been And service able talk I it, have about but then of would talking guess, costs? when able do I a across pricing guess You've all

Scott Leffler

of capable passing tell past, you businesses on businesses stated price. that three all across we've would are I these the in

portion cost of our customers' that we is very That We services. products a have of critical overall and small bring. the a service

statement. as give of would just umbrella So kind an that you I

that Nelson transaction was more more three upon shorter that longer releases master term the contractors The at Sterigenics businesses, nature. that are the get of on If time how price against are term the versus oriented. the you one is in in fact more look because to Nordion, that the reliant with contracts it's

your question. answers that hopefully, So

confirms just what you though. it think suspecting, I were

Operator

Our next from Suisse. comes question Credit with Matt Miksic

Matt Miksic

on folks Congrats in device if in reaccelerating a We've little this our a wondering demand those fundamentals universe over wanted color med expand I'm I that of strong maybe kind Sterigenics of faster next on that quarters? businesses see have expecting, And bit to maybe expect Any than trends rebound translate to could bit seen on into side Sterigenics. trends to quarter. the the we then were you another in just driving should one little how just helpful. faster. would three I follow-up. be the four

Michael Petras

to would a What I we're quarter, will of of from Sterigenics the lot had tell customer first and also you I strong year you very geography. variation the optimistic Matt, rest a we're customer optimistic. outlook. about Obviously, and there's tell

Asia, the start there, Sterigenics Matt. of obviously, kind around world could, if if I'll I'll a walk and from I just perspective,

the you We're demand challenges. Europe a going strong to If continues the bag. within facilities That on we perform our And customers. had well. COVID pretty the obviously, pretty regions make of in Asia, in been some caused looking sure U.S., mixed look it's the to there. shutdowns has has there's at care take and

doing and you customers really earnings. some well, in see that some of have their We

announcements well. that a you see the You their bit have of in are as impact others little that feeling

over and the that of a people monitoring well. there's January things matter absenteeism getting some a Obviously, as the labor borders challenges had instances. getting in little a our we're with impact some in we in of It's impact. So And in having supply then remarks components chain of still lot bit that. referenced they're

optimistic about So variation but seeing it, I'd we're some from customer. as cautious say, we're customer we to are overall,

challenges some I The now other give right other we around places backlogs surgical from visibility backdrop but they're hospitals a is that have the that have around in staffing. The having big is you would hospitals. volumes,

that And well care as second end user about also been I challenging, particularly impacting So overall, the is hope we workforce what it's but question, provider total think within network I left had health feel care, Health one. first Sterigenics, addressed Matt. demand. around the many for people in outlook you as nursing have Sotera the But for the that's a your XXXX. I positive

Matt Miksic

was That super absolutely. Yes, helpful.

if our provide how Second if the could is seeing a top-down cycle universe. based cost, big us of costs? some labor rising of on those been like shipping, give some cost, some outlook a obviously, sort It's costs is kinds maybe things affected on of sort wondering quarter three input and topic, you perspective first that perspective on shifting just rising XXXX you relative major the we're on earnings for of energy that. are across could businesses your just for basis how I'm

Michael Petras

Yes.

thus we're really two other As of I ton utility we've far stated around that get inflation buckets. referencing pressures Those the in the and here the didn't past labor It's call, the energy, seeing. are spend. than into details today

On the we Sterigenics businesses, transportation cost, Nelson. when you don't look across and within costs our transportation have three

we customers. Nordion, the where On to costs, have pass-through a do transportation it's our

a across piece. of seeing our the It's utility the costs, side Sterigenics kind have and around it they focused larger say don't because businesses. percent mostly our of the inflation. And side, facility the it overview they see really would That's have footprint and because the material world. side. seeing the as labor the then Sterigenics we On the We labor it's businesses. We the have But transportation again, in labor Nelson total across the cost. across their where we're businesses, higher I predominantly in energy, a have we're energy don't side of just on

Operator

Our Citi. Donnelly next Patrick with from question comes

Patrick Donnelly

just And well? progress you the as one to pacing on just on way pressure. Nelson through puts touched to maybe our levers think on we on about Obviously, the up on year? maybe going how work kind that it following as a as there. try things cost pieces moving of terms the different we want between takes a lot side. the margin through in you the get the we some margin of of pricing. on talk about kind year, the of Scott, the Can the should just and Obviously, handle I touch

Scott Leffler

Sure.

unit, I while that quarter unit Sterigenics, typically bit not of a does of QX So business go is if by first one seasonality Sterigenics, that of little have a business pressure. all, ton the there's seasonality-related impacts

impact line the translates of profile top the the just leverage lowest the because year. margin really on typically seasonality that also operating business in of to so And the

so throughout what the expect -- business profile P&L. would continues flow on And the continue that the up line we amount in we into operating is as to the they ramp top Sterigenics sequentially, incremental pricing then based for year as margin just to to of and again improve would the well expect that leverage some incremental the

Labs, story their impacted Nelson impacted have the these significantly For recent their various results. factors normalization of by obviously, is that

about which going They their just as to in of from profile. in is translates lumpy as of improvement comments a more profile we absenteeism, mentioned we've as margin second for year. profile, some QX. it's Nelson by to And the half end the -- point return And revenue really, fairly XXX from Nelson often at hold to As the can which movement primarily leverage basis and expect of drivers quarter-to-quarter a the their we the of have last impact in a that's a we such see a business, first again, we to Nordion Labs, line streams "normalized see you in fixed. But some for being relative to to year's margin Nordion, of harvest top that in steady. performance. meaningful such Nordion of be forth of the prepared the in sees margin back their result the expect last and day, half the their structure year then other levels" they the normalization the schedule, high by referenced, our QX, significantly And driven and Omicron-related margin cited is the cost sequential driven proportion operating then normalization

Patrick Donnelly

prepared there? And the the forward then we on to potential start to Maybe really that in dates, that's just Obviously, framing line on Michael, going right through high helpful. get helpful level, out for? talk on maybe time about can that just side, set around resolution. the What's you catalyst way of No, the Okay. maybe touched that the keep the little at bit an think some kind eye front litigation a remarks. a

Michael Petras

XXXX in would for will. XXXX I September and one, it dates July are as trials. XXXX, and the X. the three schedule you kind then is of say if focus November now, mentioned, let's Yes. XX take first on right XX three and bite-size Illinois. I Those the is trials

remember, dates. set Now those we don't set court. Those are by the

estimate then we So feel ruling time in August. from XX, to it'll will for starting long That's to our September pretty change, to come and weeks, start that, trial mid-August a on adhere think right say four will four Similar behind next given they're pattern, the be to We out and schedule. confident of would start that a but how subject that, of would jury. one best there the coming July we in be XX, that this sometime to would probably a late ruling type

Operator

question KeyBanc. Mishan from next with Our comes Matthew

Matthew Mishan

confidence making I you're working going getting moving and start that scheduled difficulties, I is time. this capacity want to your as just And through of in that construction expansions are at And progressing show the Sterigenics. the off towards the expansions that guess, just forward those current point. and with on one in environment you're

Michael Petras

timing. schedules seeing are But with and construction challenges, we Matt, are. they Yes,

material be don't we timing. it's could expansions We confident we now, that anything in think earlier. but going to there that, contractor should I place, and subject referenced, right So and based some we're to continue changing things feel about putting the in as asked a but of year be to like out or Matt they are month-to-month movements question the reference, on also nature. availability

also I I labor an it utility, Matt I on some inflation. about area, on inflation monitor, well. that materials is reference. to and referenced but is energy was we that as construction This and think that too, asked there construction side, should and too, to too, the continue got

Matthew Mishan

in the Can how investments I I lot talking there guys of the update a the that on supply? of last that multiyear side. like sell probably of of line imagine have of And you're of couple the just kind investments. about months. the line Yes, on And are additional they're of you're Matts the about supply cobalt lot making thinking any realized time through talk you that? diversifying time then you a spent time throughout long-term

Michael Petras

Yes.

work So with we've the got out that going with development. for OPG the coming cobalt work got Canada several in on projects additional expansion Obviously, the we've we've of around referenced. capacity

optimistic with team States and very look continue we're to his India, that Canada, results world, doing we We Westinghouse good it's for going we the We expand capacity and in Russia, years. significant on pretty relationship. working projects out feel work cobalt we about good in and actually our overall, at can teams get also of quarter, with are into They have We investments. Westinghouse. I updating with Riaz Argentina, with with there the from of hopefully, And in the some help United are to and on them very feel expand the the And time about us. deploying regions those. a that Those leadership overall. past with and strategic the spent We're for are about Westinghouse. all to China, the it. job buy the nice cobalt capital. diversify partners. the But

Operator

question Windley next Dave Jefferies. with comes from Our

David Windley

I -- I you around -- gave detail the guess, Nelson margin. Scott, my appreciate around of that question strategy was kind pricing there. I targets, the

guess, some guess. I some Omicron, basis I was that points, given labor, absenteeism, had You XXX

are recovery and you coming labor So how margin attempting question how strategy is improvement operational in that year? you here back and the into part latter as the of much with versus more to is in much the in of simply spirit that price excellence pricing the acquisitions get cover initiatives the margin the of the drive

Scott Leffler

real in absenteeism, pandemic, about on Omicron to see we being margin was XXX in Well, surge not to we that basically profile mentioned isn't basis points, relating that the Omicron-related the meant so the was in continued mitigated largely that QX. absenteeism would saw impact cover that as which there we that but and QX, QX

course, the absenteeism translates capacity margin of and sequential talk to level, of driven in expect and course, frontline then, we quarters the to that then business, lab by incremental the to profile which improved we So for from that really profile. which, to QX are revenue microbiologist of QX, the in increased normalization And improvement throughput in terms at subsequent translates about technician improvements force. And as of pressures primarily I response think referenced that continued yes, by, we line ago, are, the other that manifesting the we we good inflationary amount the initiatives of driven initiatives associated to some throughout sight seeing pricing second recent excellence we're then labor operational to some a you with see acquisitions and seeing year. on believe, realization of of synergies in the be

David Windley

it. very Got That's helpful.

still price of inflationary more of you I -- get sensitive expect it Nelson you in in pricing I you extract the year, more guided range, more that last that's environment? is able kind with to So able that is get mid-X% the you to think to a hard as your Are more even think got are to than -- and those businesses. Or what you us reasons? in that's

Scott Leffler

No.

We are get able to more.

affect response think saw a our of as of prepared also, comments in But price of we reflective we mentioned over versus made environment. that this pricing recent a minutes is ago trends I couple a from ability couple to X% in little in to Michael question. Nelson bit And to inflationary a that in capture comments, contribution a in for their Nelson QX. the for increase price different

way Nelson not obviously, lab pandemic. in the business only is by that's some so the testing impacted And

of for testing seeing And And disruptions. is some amount services other inflationary pressures and we marketplace these the continuing lab pricing there. so overall overall, see opportunities

Michael Petras

taking at scores looking the and our really demand David, and as stabilizing now turnaround it's to staffing come our job is improve what of a ramp. doing now that's where care that's Michael. our as would starts taking really customers that and I our starts also times customers' add, continue demand nice focus is right care turnaround it the team just right the And focused in. NPS on to team to and of is times,

David Windley

it. appreciate Got that. I

the question, detail just the a prepared. missed Last clarification. I Sorry, in

unrealized gain I think think past were we hedging was this releases, I looking through new.

in I from the clarify, wondered, that called And maybe adjusted You I also excluded out of your am and that, about your then explain remarks, that? could being from EPS. new excluded right it you also that's talked it nature is EBITDA? adjusted

Scott Leffler

Sure.

rate program it associated So debt that P&L we out new rates is the volatility, program the given macro risk has on a far as just variable lot that as the there hedging the had fact more what's program our volatility new. itself environment just What rising. going -- have around in is not management with is the interest

income you, any well And almost it from of of from it did think, question adjusted to adjusted EBITDA. is adjusted interest with so rate-related rate respect we going EBITDA, I And adjusted -- excluded ago, be number again, specifically definition, then is EPS. a purposes about type derivative by as second interest our as for mentioned and net excluded exclude to calculating your

just here view a and of our level So of without -- with EBITDA results of give on the to both the is the people associated operating noise near-term hedges. adjusted our objective cleaner the EPS adjusted the mark-to-market some of

Operator

Research. comes Michael Polark with next Wolfe Our from question

Michael Polark

recall for me. and in Two of up influences Nelson, there. takes lot helpful framing a puts at I year, all the last

testing -- FDA One for were FDA was building believe there scopes. of FDA And was backlog was was on guidance certain mentions I certain some products, was to customers the the requirements. to on folks because constraint that related for -- waiting provide the a a that

of Am the potentially of that the half this something reads and saw well? are steady of this year. communications And the the process scope April, for to in Nelson good I which me FDA suggested in large manufacturers is for ease into constraint resolving, back I on margin me stream so not, bottleneck misremembering, as that if from you seeing perhaps And two, is a one?

Michael Petras

But tell our Michael. it's benefits resolved. we completely of sections requirements. that comments into still the scopes or we some for with those it referenced in Mike, know start of past I customers that of But their you they're look we ever still there testing. whatnot. in clarity would clarification. that pipeline to hasn't out you But absolute that some because don't are the being I not that around of tell waiting is seeing got Yes, us all haven't realized particulars would at I been building for it regulatory on the FDA we regulations yet around

test business. just is for would you sections, I into and the it's I'm specific resolved it's right. be Labs Nelson getting we confident still have but going not be So recollection going but tell what uncertainty, your that we're to helpful to

Michael Polark

most Helpful. this Okay. pieces Look, for capital moving just And you deployment. lot in macro of have year a the then companies.

done You in just curious have in look M&A. I'm that 'XX calendar the pipeline point at how force tuck-in of and a steady where stream might historically ranks initiative time. this

Michael Petras

our Sterigenics. making going cobalt Yes. deploy organic know, and for as internal really facilities Nelson as of well that, always investments And is growth, as We're we're our to we've you with healthy a in capital priority diet expansion. got the and in

point hasn't how have and M&A. number but see at we look our And changed always nothing We're we demand, we sure and tell that's those. we we're that be on making a follow one to to That's of good our So fill significance really We track. that. time, in you and to have We any continue priority. M&A, pipeline strategy continuing a see in going we strong customer at can look at returns to priority. this

Operator

next Casey comes Woodring [Operator JPMorgan. Instructions] question from with Our

Casey Woodring

as know in projects in quarter, increases volume the and XX%. Sterigenics price progresses. year. contributed So expansion back you've I half year this of online capacity about the have then talked also coming price X% the you And flowing through

to on we full year like look pricing will relative for contribution XQ. growth to volume thoughts want saw just get the in business I your what what this in So

Michael Petras

So Casey, what on the past is that. into businesses have But we specifics by middle of to forecast price. in X% I'll kind is We don't that. X% the these of have take Sterigenics unit. said get business in

about volume like. digits in little in saying volume been, year around when what where we've thinking I of we've what the you mix. general We're Health reiterate factor a would growing just see is is outperformance in combination told single and high the and this still tell as an single that as our quarter. there And mix. focus those total been bit digits looks along But in optimistic Sotera the I guidance price, rest far of You you you a past has in lines. be would of the high the to business

Casey Woodring

about realize the on more you've going the the just talked then to in And benefits of piece, you're Okay. pricing pricing half year. how back

back couldn't about where you is Just And why then structural pass sooner? half? they're there wondering towards more something on the heavily contracts price weighted the

Scott Leffler

No.

on do day So to two. terms always perfectly utility about you a pretended marketplace, of never day model businesses the price we've dynamic general, increase we've that talked flexibility pricing on a get your fact prices in in rates generous but in that have we an where very our through one have passing you the increase and

and manner across a disciplined you a in really in or amount price us two roll takes structural for system, out inflation offsetting where impact see a of thousands the customers, that's and in So period do increases. of given some there is lag and the thousands the to structured our quarter

the So and it's you're really effect about. talking results the just that that that price lag

Michael Petras

Casey, to our and the importance to what being a supplier only significant recognize other And a make add us the comment, and key supplier to with great thing businesses customers do overall, in proposition. have of bring to high-quality Scott's We I'd they them. value it's that we we sure okay? industry got But we continue the right to get value

mandated, a So going do government good that's sure we're to with every also that customers. keep respectful want a job where we bring really our just it. We there's and stripes a of to often of our make well. there. balance to earning as we're got critical service day That's It's we

Operator

would I the the concludes our This closing CEO, back like remarks. session. turn to Petras, any Michael question-and-answer over to for conference

Michael Petras

team the -- the how we're the quarter, what in team performed has and has this the you, proud the Great. Thank performed optimistic taking you, thank of here morning. everybody, Joe, XXXX. for about We're rest first and time

and be Bye-bye. day. great you, have support, you the thank talking we'll future. near So for Thank here ongoing in your and a

Operator

presentation. attending The today's you conference has Thank now for concluded.

You may disconnect. now

Sotera Health (SHC) 7 May 222022 Q1 Earnings call transcript