Good morning, and thank you. Welcome to Sotera Health's first quarter 2023 results call. You can find today's press release and accompanying supplemental slides on the Investors section of our website at soterahealth.com. This webcast is being recorded and a replay will be available in the Investors section of Sotera Health website. On the call with me today are Chairman and Chief Executive Officer, Michael Petras; and Interim Chief Financial Officer, Michael Biehl. During the call, some of our comments may be considered forward-looking statements. The matters addressed in these statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied. Please refer to Sotera Health's SEC filings and the forward-looking statements slide at the beginning of this presentation for a description of these risks and uncertainties. The company assumes no obligation to update any such forward-looking statements. Please note that during the discussion today, the company will present both GAAP and non-GAAP financial measures, including adjusted net income, adjusted EBITDA, adjusted EPS, net debt, adjusted EBITDA margin and net leverage ratio in addition to constant currency comparisons. A reconciliation of GAAP to non-GAAP measures for all relevant periods may be found in the schedules attached to the company's press release and in the supplemental slides of this presentation. The operator will be assisting with the Q&A portion of the call today. Please limit yourself to one question and one follow-up so that we can give everyone an opportunity to ask questions. As always, if you have any questions post-call, please feel free to reach out to me and the Investor Relations team. I will now turn the call over to Sotera Health Chairman and CEO, Michael Petras.

Good morning, everyone, and thank you for joining Sotera Health's first quarter 2023 earnings call. As mentioned during our fourth quarter 2022 earnings call, first quarter 2023 revenues and adjusted EBITDA fell compared to the prior year, primarily due to the expected timing of Nordion cobalt-60 supply harvest schedules and reduced volumes at Nelson Labs and Sterigenics. The lower volumes are typical for this time of year, although Sterigenics volumes grew compared to the first quarter of 2022. Michael Biehl will provide further details on our financial results shortly, but I want to highlight a few key points from our first quarter results. Total company revenues decreased by 6.8%, and adjusted EBITDA fell by 14.6% compared to the first quarter of 2022. We achieved adjusted EPS of $0.13 for the quarter, down $0.09 from the same period last year. Sterigenics, our largest reporting segment, recorded a 7% increase in top line growth for the quarter, with business units experiencing growth across all major modalities during a typically slower segment quarter. The Sterigenics team continues to manage inflationary pressures and various customer supply chain issues. We are also investing in our capacity with six active expansion projects at Sterigenics and making headway on our EO facility improvements in North America. These enhancements exemplify our strong commitment to implementing best-in-class emission controls for our employees, customers, and the communities we serve. Nordion, our other reporting segment in the sterilization services business, experienced a projected 75% year-over-year revenue decline due to the timing of cobalt-60 harvest deliveries. As we have consistently indicated, Nordion's revenue timing is connected to the harvest schedules from our cobalt-60 suppliers, which are large utilities. Given our clarity regarding these schedules, we remain confident in our 2023 revenue forecast, although the timing of Nordion's revenue is expected to be particularly irregular this year, with around 75% of the revenue forecasted for the second half of the year. As many of you are aware, Nordion sources part of its cobalt-60 supply from Russia. Previously, we assessed that a complete disruption of supply from Russia could lead to a 0% to 3% impact on total Sotera Health revenues for 2023. With the quarter concluded, we now project the potential risk from the Russian cobalt-60 supply disruption to be a 0% to 2.5% impact on total Sotera Health revenues. Importantly, ensuring a consistent supply of cobalt-60 is vital for the global healthcare community because cobalt-60 is used to sterilize roughly 30% of the world’s single-use medical devices. I am proud of our Nordion team's ongoing efforts in this area, which exemplify our mission of safeguarding global health. Nelson Labs, our lab testing and advisory service business, experienced lower volumes in the first quarter, leading to a 2.3% revenue decrease compared to the prior year. The first quarter tends to be softer for Nelson Labs, where we have not yet seen a full recovery of certain testing types to pre-pandemic levels. However, we are encouraged by recent order trends and are operationally positioned for a return to pre-pandemic volume levels. As noted during our last earnings call, Sotera Health successfully completed a $500 million Term Loan B issuance during the first quarter. Our net leverage ratio for the first quarter of 2023 was 3.4x. Given our current position after the first quarter, we confidently reaffirm our previously communicated outlook. Our 2023 outlook anticipates revenue and adjusted EBITDA growth in the range of 5% to 9% compared to 2022. Michael Biehl will summarize the specifics of our outlook in a few moments. While we still face challenges with inflation, labor, and customer supply chains, we are observing some stabilization in these areas. Our teams remain dedicated to driving growth and profitability for our shareholders. I want to emphasize our mission of safeguarding global health, which is central to our work across the company. Our products and services address a wide array of human health and well-being needs. Whether providing essential scientific expertise and regulatory consulting to tackle our customers' most difficult sterility challenges, preventing infections across a range of medical and pharmaceutical products, or verifying the accuracy of our product performance, we contribute to the safety of healthcare and protect millions of lives worldwide. Now, Michael Biehl will delve deeper into the financials.

Thank you, Michael. I will begin by covering the first quarter 2023 highlights on a consolidated basis and then provide some details on each of the business segments, along with updates on capital deployment and leverage. I will conclude with some additional comments around our 2023 outlook. On a consolidated total company basis, first quarter revenues declined by 6.8% as compared to the same period last year to $221 million. This equates to a 5.3% decline on a constant currency basis as we experienced a total company foreign currency headwind of 1.5%. We do feel these headwinds are moderating and currently expect foreign currency to become a tailwind during the back half of the year. Adjusted EBITDA declined by 14.6% compared to the first quarter of 2022 to $98 million. Adjusted EBITDA margins were 44.6%, representing a 410 basis point decline from first quarter 2022 levels. The majority of which is explained by the anticipated Nordion cobalt-60 supply harvest schedules. Our operating performance drove adjusted earnings per share of $0.13, a decrease of $0.09 from the first quarter of 2022. The first quarter of 2023 had net income of $3 million or $0.01 per diluted share compared to net income of $31 million or $0.11 per diluted share in first quarter 2022. Our reported interest expense for the quarter was $29 million. Now let's take a closer look at our segment performances. Sterigenics delivered another good quarter with 7% revenue growth to $160 million and over 4% segment income growth of $83 million as compared to the first quarter of last year. On a constant currency basis, Sterigenics grew revenue over 8% compared to the first quarter of last year. Revenue growth drivers for the first quarter include favorable pricing of about 6% and favorable volume mix, 2%, partially offset by unfavorable changes in foreign currency of about 1%. Compared to the first quarter of 2022 segment income margins contracted by 135 basis points to 51.8%, driven by the impacts of typical lighter first quarter volume relative to the remainder of the year and inflation, partially offset by favorable pricing. Nordion's first quarter revenue declined by approximately 75% to $9 million compared to the first quarter of 2022, which, as expected, was driven by the timing of cobalt-60 harvest supply schedules. Nordion's segment income declined to $2 million compared to the same period last year. Nordion's revenue and segment income change versus first quarter 2022 was driven by volume decline and mix of nearly 71% and headwinds associated with changes in foreign currency of over 4%. For Nelson Labs first quarter 2023 revenue declined by 2.3% to $52 million, and segment income declined by over 17% to $14 million compared to the first quarter of 2022. As we previously communicated, the first quarter is typically the lowest quarter of the year for Nelson Labs. On a constant currency basis, Nelson Labs revenue declined approximately 1% compared to the first quarter of last year. Reduced revenue for the first quarter of 2023 was impacted by volume decline and mix of over 5% as well as headwinds associated with changes in foreign currency of 1%. These were partially offset by an approximate 4% benefit from pricing. First quarter 2023 margins for Nelson Labs contracted to 27.1%, or approximately 490 basis point decline versus first quarter of 2022. Decline was driven by the impact of typical lighter first quarter volume relative to the remainder of the year, partially offset by favorable pricing. I want to note that we are maintaining staffing levels at Nelson Labs in anticipation of increased volumes throughout the year. I will now provide highlights on cash generation, capital deployment and net leverage. During the quarter, the company generated approximately $34 million of operating cash flow. As of March 31, 2023, we had $648 million in cash and cash equivalents and over $1 billion of available liquidity. As Michael mentioned earlier, during the first quarter, we closed on a $500 million Term Loan B. Using cash on the balance sheet and a portion of the new term loan proceeds, we paid off the existing $200 million of borrowings under our revolving credit facility. And on May 1, funded into escrow of $408 million related to the Illinois ethylene oxide litigation settlement. Although this new debt and the funding of the $408 million cash settlement will initially increase our net leverage ratio in the second quarter 2023 to above 4x, we expect net leverage to finish the year within our stated long-term target range of 2 to 4x. The $408 million funded into escrow will be classified as restricted cash on the company's balance sheet in the second quarter 2023 until the settlement is consummated and the funds are dispersed to the settling plaintiffs. During the first quarter, the company also closed on an amendment to its first lien credit agreement, which added $76.3 million of new revolving loan commitments and increased our total available capacity to $423.8 million. On a pro forma basis at the end of the first quarter, after funding $408 million to the settlement escrow, our approximate liquidity is $600 million, putting us in a strong position moving forward. We were also able to increase our letter of credit capacity included in the revolving credit facility by $165 million to a total of $351 million. Our capital expenditures for the first quarter 2023 totaled $45 million. Growth CapEx and facility enhancements drove the increased investment during the quarter. As Michael mentioned, based on where we ended the first quarter and what we see for the remainder of the year, we are comfortable reaffirming the outlook we provided in February 2023. To recap, the full year 2023, we expect total revenues to be in the range of $1.055 billion to $1.090 billion, representing an annual growth rate of 5% to 9%. Adjusted EBITDA to be in the range of $530 million to $550 million, also representing an annual growth rate of 5% to 9%. And effective tax rate on our adjusted net income in the range of 30% to 33%. As I outlined in our fourth quarter earnings call, the increase in the tax rate compared to the prior year is primarily attributable to increased interest expense, coupled with limitations and deductibility of interest expense as a result of 2017 U.S. tax reform. Adjusted EPS is expected to be in the range of $0.78 to $0.86. This represents a decline of 10% to 19%, which is primarily driven by increased interest expense as well as the increased tax rate compared to the full year 2022. Capital expenditures are expected to be in the range of $185 million to $215 million, representing continued elevated investment for growth as we continue to fund capacity expansions at both Sterigenics and Nelson Labs as well as invest in EO facility enhancements in North America and cobalt development projects at Nordion. The other elements of our previously issued outlook remain the same as well. As we look at the cadence of quarterly reporting, I will provide some specifics on each business unit. For Nordion, I will comment briefly on the lumpiness that we continue to expect during the year. Approximately 75% of Nordion's total year revenue and 80% of total year segment income will be realized in the second half of the year. As Michael mentioned previously, the potential impact of the complete loss of cobalt-60 supply from Russia on total Sotera Health 2023 revenues is now 0% to 2.5% as there was no disruption in supply during the first quarter. We expect Sterigenics and Nelson Labs to realize increased volumes and margin expansion throughout the year. I'll now turn the call back over to you, Michael.

Thank you, Michael. Before transitioning to the Q&A session, I want to touch on the topic of ethylene oxide regulations and litigation. As many of you know, the EPA has released its proposal for the stricter EO regulations. Now that the proposals have been issued, there is a period for industry participants and members of the public to submit comments to be considered by the EPA in finalizing the proposed regulations. Although the proposals pose challenges that would require all industry participants to make changes to their operations, we have invested a lot of time, effort and capital in our EO facilities and are confident in our leadership in this area. As for the Illinois EO settlement, the plaintiff Executive Committee reports that the process remains on track for the participation rates to be presented in May. Pursuant to the terms of the settlement agreement on May 1, Sterigenics funded into escrow the agreed upon settlement amount of $408 million. Subject to the participation by substantially all the eligible claimants, we expect this settlement to be completed and the settled cases to be dismissed in late summer. As I wrap up my comments, I want to reemphasize that Sotera Health remains in a strong position for growth throughout 2023. The first quarter was atypical due to the expected cadence of cobalt-60 supply harvest schedules. Overall, we feel very good about the company's current and future prospects. At this point, operator Joe, I'd like to open the call up for question and answers.

And our first question will come from Patrick Donnelly with Citi. Please go ahead.

Hi. Good morning. This is Lizzie on for Patrick. So I think on the 4Q call, you mentioned the return to the high 30% margins for Nelson Labs in the back half of the year. It sounded kind of constructive on order trends. Can you talk a little bit more about what you're seeing there? Thanks. And I have one follow-up.

Good morning, Lizzie, this is Michael. Yes, we expect to see the Nelson Labs margin rates settle in around the levels you just discussed, mid- to high 30s, and we expect volumes to continue to pick up as the year progresses.

Great. Thanks. And then, on Sterigenics, I think you mentioned around 6% pricing for the quarter. Is that kind of how we should think about it for the year as well and just outlook on inflation broadly? Thanks. That’s it for me.

Thank you. As we've indicated throughout the company, we anticipate a price increase of 3.5% to 5% per year. Sterigenics falls in the middle of that range, Nelson is at the lower end, and Nordion is on the higher end. In recent quarters, we've been slightly above those ranges due to inflation offsets. I believe it will stabilize over time to align more with the typical ranges we've observed, but the last couple of quarters have seen higher figures because of inflation adjustments.

And our next question will come from Mike Polark with Wolfe Research. Please go ahead with your question.

Hi. Good morning. Thank you for taking the question. Two for me. First on the guidance, appreciate the affirmation of the full year. Any twists and turns in the segments relative to your prior plan? My suspicion is no, but I'm just wondering if say, maybe Nelson is now a little lighter than you had before, Sterigenics is a little better. Anything like that? Or are all three segments individually in year now versus when you first set the outlook?

Yes, Mike. This is Michael. I would say they're in line with what we gave you back in February when we did the initial outlook. It's pretty consistent.

Thank you. The follow-up on Illinois, I guess, have you seen the participation rates? Or when specifically do you expect to see those? And will we, the public, see those at some point this month via filing or other forum?

No. Those are just being presented now to the claimants, and they'll have a period of time over the next weeks and months to review that; we don't have visibility to that right now. We do have ongoing dialogue with the plaintiff counsel to ensure things are progressing. As stated earlier, we did fund the escrow of $408 million on May 1 because we feel comfortable with how things are moving along. However, we won't have visibility until late summer, as I've mentioned before.

And our next question will come from Sean Dodge with RBC Capital. Please go ahead with your questions.

Yes, thanks. Good morning. Michael, now that the EPA proposal is out, can you provide an update on your progress in upgrading your scrubbing capabilities? How many facilities have been completed, and how many are still in progress? Additionally, are the enhancements you've made sufficient to comply with the more stringent standards set by the EPA?

Yes, we are progressing very well on our improvements. As we’ve stated in the past, there's three primary improvements that we've been putting in place, central discharge, double scrub and permanent total and closure negative pressure 204. We are very comfortable with the investments we've made, the progress we've made. There are some things in the proposal that the whole industry has got to address. There's a public comment period that will take place over the next several weeks and months and we'll provide our comments to that point. There will be some things that we need to modify based on that. It may require some additional capital. I mean, there are some things that are in there that potentially could be unachievable for the entire industry. I don't think, ultimately, that's the intention of the EPA. I think when they get in and understand from the industry, how these facilities operate, they'll make the appropriate adjustments. These are draft proposals. But we feel very, very good about the leadership position of the investments we've made and the direction that we're heading on that.

Okay, great. And then, on the guidance, you touched on a little bit, Michael Biehl, in the prepared remarks, but the steep ramp in EBITDA into the kind of the remainder of the year, I guess, is the expectation that it will be driven pretty equally across all of the segments? Or is this mostly dependent on Nelson rebounding and Nordion operating at a more kind of consistent cadence, I guess, is there anything more you can share on kind of the drivers and then the visibility you have at this point into the back half of the year?

Yes. This is Michael Biehl. As we indicated, with Nordion being lumpy, and we think 75% of the revenues and 80% of the EBITDA will be in the second half. That continues to be on track with what we had originally said. And so, there's no really change in from what we originally said. And really, with Sterigenics and Nelson, the first quarter is typically lighter as we've seen historically, and we think that will continue to ramp up over the remainder of the year sort of on an even basis.

And our next question will come from Luke Sergott with Barclays. Please go ahead with your questions.

Good morning. Thank you for discussing the recovery in Nelson. I understand you're anticipating an increase in volumes, but could you provide more clarity on this? Were there any delays during the quarter? Can you share details about your backlog and whether you are accumulating excess? Any information that would reassure us about the expected return of volumes would be appreciated.

Yes, when we examine some of our order trends in our backlog, specifically in the validation area, we are noticing a bit more strength than previously observed. This relates to some prepared remarks regarding pre-pandemic levels. As previously mentioned, we have discussed validation not fully recovering from pandemic levels, but we are seeing some optimism as we move forward. The team continues to execute well. I am particularly proud of our improved turnaround times, competitiveness, and the strong results we are achieving in customer satisfaction scores and Net Promoter Scores. Overall, the team is performing well, and we anticipate a ramp-up. Additionally, regarding the labor situation, we feel well-positioned as we progress through the year.

Okay. And then, for a follow-up here. Can you disclose what your recapture rates are for the Atlanta facilities and your other EO sterilization in Sterigenics?

Please define what you mean by recapture rate?

Well, it's expected that the new rulings are going to be around like 99.5% recapture? Are you guys operating above that?

Yes. I think what you might be referencing is process emissions. I don't mean to get too technical here, but there's … Yes, there are process emissions and fusion emissions, depending on the context. I believe you may be referring to process emissions, where our goal is 99.5%. In some of our facilities, especially in Atlanta where we implemented improvements, we've achieved an impressive rate of 99.996. We're confident in our performance. However, we anticipate challenges related to the monitoring requirements outlined in the proposed rules, which could be technically complex. Overall, we are not worried about meeting the efficiency standards set by these proposed regulations.

And our next question will come from David Windley with Jefferies. Please go ahead with your questions.

Hi. Thanks. I wanted to first come back to Nelson, if I could. Last year, Michael, you mentioned the first quarter seasonality. In addition, there was a timing mismatch between the inflation affecting labor in the business and your ability to implement price increases, which came later in the year. You also made a couple of acquisitions that had lower margins, but there were expectations to improve those margins over time. These factors seem to have contributed to the irregularity in last year's margins. This year, the margins are even lower. I'm hearing in the prepared remarks that this was largely as you anticipated. If that's the case, I'm trying to understand why that was what you expected.

Yes. So David, I would say the overall geography of the business is the total and going forward was the question I was addressing, we'd like to see more volume in all three of our businesses. Obviously, the Nordion one, we have very good visibility on to that. As far as Nelson Labs, the first quarter is always the lowest or has traditionally been the lowest, I shouldn't say always. It's traditionally been the lowest. And our labor leverage isn't as strong there because of the fact that we've got labor built in and we don't have the flexibility to drop labor in and out. So overall, we feel good about where they're going to continue to get price to offset inflation. And I'd tell you the challenge when you look at it for the quarter on the margin rates that you're looking at relative to last year or previous quarters would be on the volume side and also the productivity.

Okay. Okay. That's helpful. Thank you. On the EPA for my follow-up, one of the things that stood out to us, you mentioned the monitoring frequency as one. I appreciate the specificity there. One of the things that stood out to us was maybe the 18 months to come into compliance is you have a jump start at Sotera in the investments that you've been making. I guess, one, would be interested in your reaction to that 18-month timeframe, is that pretty aggressive? And/or is it something that because you've started ahead of the game that you could comply with in that timeframe, but maybe the industry couldn't? Thanks.

Yes. Very good question, David. I think the 18-month time period is aggressive for everybody, including us, but I do think we are way ahead of this game, okay? If we had to, I think we could be pretty well situated to meet that timeline. That doesn't mean us and others in the industry won't take note of that in the proposal and our public comments, that is a very aggressive timeline. When you think about the amount of equipment and construction and ventilation, particularly the fact that if I recall some of our previous conversations, one of the things that we said is important that we took a leadership position and is on negative pressure permanent total and closure 204. The amount of work that's required to accomplish that with ductwork and everything else, just the supply chains to be able to keep up with the requirements for an entire industry, when you have 100 facilities across the U.S. is going to be very challenging for many. We feel really good about where we are at in the advancement we've made in that area. Those are the kind of things that David that I'm referencing, I think they're going to have to be sensitive to what the industry can actually accomplish. I think there's already a comment in the document that said there could be extensions up to a year on top of that. But in conclusion, we feel good about where we are sitting on this because we are pretty far along in this.

Our next question will come from Casey Woodring with J.P. Morgan. Please go ahead with your question.

Hi. Thanks for taking my questions. Just a follow-up on the EPA proposed regulations. So you talked about the comment period that you're taking part in. Can you elaborate just on the range of outcomes there? If the proposal goes through as is, how much capital would you need to commit to make those further necessary enhancements?

Yes, Casey, we are still evaluating the situation. We are in the early stages of understanding the extent of the proposals and the modifications and capital needed. I don't believe it will be a large amount, but I prefer not to mention a figure until we delve deeper into this assessment and also gauge the EPA's position. This is a draft proposal that I expect will receive many comments, not just from us but also from others in the industry who might have concerns.

Okay, great. Hey, Michael.

Good morning.

I have a question about the potential for increased MedTech volumes. I'm assuming your customers would likely prefer more volume through their facilities for the remainder of the year, especially since some of their numbers are aligning with our expectations. Are there any factors that might prevent you from increasing capacity in the system to meet customer demand, particularly if they are requesting it?

No, Matthew. When we look at it, we are tracking kind of the end demand within healthcare, and the volumes have been pretty strong. We don't see that strength one-to-one correlation translating back to us in the volumes. That could be caused by inventory that may be in the system or things on supply chain that may be a challenge. But if the demand were to suddenly start to mirror on a one-to-one basis, I feel pretty good about our ability to react to that. We've been spending a lot of time as we've talked in the past around operational excellence and the things we've been doing in our facilities to try to continue to get more capacity in place, not only brick-and-mortar or additional chambers or whatever it may be, but also just how do we drive more efficiency within our operations. And Mike and the team continue to progress in that area as well. So I think we'd be able to react to any opportunities if they came to us.

Okay. And then, it looks like you're having continued negotiations with one of your EO plants in Ontario, California. Can you just quantify, like to some extent, like what percentage of Sterigenics that facility is? And if this were to drag on for a little bit longer, what would be like the worst case for that in the upcoming quarter?

Yes, Matt, to clarify, we do not have an ongoing negotiation with them. They have asked us to implement facility enhancements at all our U.S. locations. We have a timeline for both L.A. and Ontario in collaboration with them. In the meantime, they have requested us to find ways to capture even reduced levels of emissions. You may occasionally notice a blip where something exceeds that lower level until the new improvements are fully installed. This situation is currently in progress. It’s significant for our customers and for us. However, we have over 50 facilities globally, and this represents a relatively small segment of our Sterigenics business. The product mix at that facility is not among our higher-end products. I won’t go into more specifics, but I want to emphasize that this is not our largest or most profitable plant. However, it remains important to our customers and to us, and we aim to have it operational again soon.

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

Thank you, Joe. Thank you, everyone, for joining us this morning. The quarter came in largely as we anticipated, slightly softer in a few areas. The primary contributor was the Nordion volumes, which we expected and anticipate will be more pronounced later in the year. Overall, we are optimistic about the company's position. We appreciate your continued support and wish everyone a great day. Thank you. Goodbye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.