SHC 10-Q
Sotera Health Co (SHC)
10-Q
2025-11-04
For: 2025-09-30
View Original
Added on
April 08, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended September 30, 2025
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number 001-39729
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
( | ||||||||
| Registrant’s telephone number, including area code | ||||||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
As of October 28, 2025, there were 284,093,929 shares of the registrant’s common stock, $0.01 par value per share, outstanding.
SOTERA HEALTH COMPANY
- TABLE OF CONTENTS -
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often characterized by the use of words such as “believes,” “estimates,” “expects,” “projects,” “may,” “intends,” “plans” or “anticipates,” or by discussions of strategy, plans or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance, achievements, or industry results, to differ materially from historical results or any future results, performance or achievements expressed, suggested or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to:
•a disruption in the availability or supply of, or increases in the price of, ethylene oxide (“EO”), Cobalt-60 (“Co-60”) or our other direct materials, services and supplies, including as a result of geopolitical instability and/or sanctions against Russia by the United States, Canada, United Kingdom and/or the European Union;
•fluctuations in foreign currency exchange rates;
•evolving changes in environmental, health and safety regulations or preferences, and general economic, social and business conditions;
•health and safety risks associated with the use, storage, transportation and disposal of potentially hazardous materials such as EO and Co-60;
•the impact and outcome of current and future legal proceedings and liability claims, including litigation related to the use, emissions and releases of EO from our facilities in California, Georgia, Illinois and New Mexico and the possibility that additional claims will be made in the future relating to these or other facilities;
•our ability to satisfy the conditions for settlement of the EO claims related to our former facility in Willowbrook, Illinois;
•allegations of our failure to properly perform services and potential product liability claims, recalls, penalties and reputational harm;
•compliance with the extensive regulatory requirements to which we are subject, the related costs, and any failures to receive or maintain, or delays in receiving, required clearances or approvals;
•adverse changes in industry trends;
•competition we face;
•market conditions and changes, including inflationary trends and the impact of tariffs, that impact our long-term supply contracts with variable price clauses and increase our cost of revenues;
•business continuity hazards, including supply chain disruptions, the impact of the U.S. federal government shutdown, and other risks associated with our operations;
•the risks of doing business internationally, including global and regional economic and political instability and compliance with various applicable laws and potentially inconsistent laws and regulations in multiple jurisdictions;
•our ability to increase capacity at existing facilities, build new facilities in a timely and cost-effective manner and renew leases for our leased facilities;
•our ability to attract and retain qualified employees;
•severe health events or environmental events;
•cybersecurity incidents, unauthorized data disclosures, and our dependence on information technology systems;
•an inability to pursue strategic transactions, find suitable acquisition targets, or integrate strategic acquisitions into our business successfully;
•our ability to maintain effective internal control over financial reporting;
•our reliance on intellectual property to maintain our competitive position and the risk of claims from third parties that we have infringed or misappropriated, or are infringing or misappropriating, their intellectual property rights;
•our ability to comply with rapidly evolving data privacy and security laws and regulations in various jurisdictions and any ineffective compliance efforts with such laws and regulations;
•our ability to generate profitability in future periods;
•impairment charges on our goodwill and other intangible assets with indefinite lives, as well as other long-lived assets and intangible assets with definite lives;
•the effects of unionization efforts and labor regulations in countries in which we operate;
•adverse changes to our tax positions in U.S. or non-U.S. jurisdictions or the interpretation and application of U.S. tax legislation or other changes in U.S. or non-U.S. taxation of our operations; and
•our significant leverage and how this significant leverage could adversely affect our ability to raise additional capital, limit our ability to react to challenges confronting our Company or broader changes in our industry or the economy, limit our flexibility in operating our business through restrictions contained in our debt agreements and/or prevent us from meeting our obligations under our existing and future agreements governing our indebtedness.
3
These forward-looking statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update them publicly in light of new information or future events, except as required by law. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved.
You should carefully consider the above factors, as well as the factors discussed elsewhere in this Quarterly Report on Form 10-Q, including under Part II, Item 1A, “Risk Factors,” as well as Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”). If any of these trends, risks or uncertainties actually occur or continue, our business, financial condition or operating results could be materially adversely affected, the trading prices of our securities could decline and you could lose all or part of your investment. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.
Unless expressly indicated or the context requires otherwise, the terms “Sotera Health,” “Company,” “we,” “us,” and “our” in this Quarterly Report on Form 10-Q refer to Sotera Health Company, a Delaware corporation, and, where appropriate, its subsidiaries on a consolidated basis.
4
Part I—FINANCIAL INFORMATION
Item 1. Financial Statements
Sotera Health Company
Consolidated Balance Sheets
(in thousands, except per share amounts)
| As of | |||||||||||
| September 30, 2025 | December 31, 2024 | ||||||||||
| Assets | (Unaudited) | ||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash short-term | |||||||||||
Accounts receivable, net of allowance for uncollectible accounts of $ | |||||||||||
| Inventories, net | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Income taxes receivable | |||||||||||
| Total current assets | |||||||||||
| Property, plant, and equipment, net | |||||||||||
| Operating lease assets | |||||||||||
| Deferred income taxes | |||||||||||
| Post-retirement assets | |||||||||||
| Other assets | |||||||||||
| Other intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued liabilities | |||||||||||
| Deferred revenue | |||||||||||
| Current portion of long-term debt | |||||||||||
| Current portion of finance lease obligations | |||||||||||
| Current portion of operating lease obligations | |||||||||||
| Income taxes payable | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Finance lease obligations, less current portion | |||||||||||
| Operating lease obligations, less current portion | |||||||||||
| Noncurrent asset retirement obligations | |||||||||||
| Deferred lease income | |||||||||||
| Post-retirement obligations | |||||||||||
| Noncurrent liabilities | |||||||||||
| Deferred income taxes | |||||||||||
| Total liabilities | |||||||||||
| See Commitments and contingencies note | |||||||||||
| Equity: | |||||||||||
Common stock, with $ | |||||||||||
Preferred stock, with $ | |||||||||||
Treasury stock, at cost ( | ( | ( | |||||||||
| Additional paid-in capital | |||||||||||
| Retained deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
See notes to consolidated financial statements.
5
Sotera Health Company
Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share amounts)
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Service | $ | $ | $ | $ | |||||||||||||||||||
| Product | |||||||||||||||||||||||
| Total net revenues | |||||||||||||||||||||||
| Cost of revenues: | |||||||||||||||||||||||
| Service | |||||||||||||||||||||||
| Product | |||||||||||||||||||||||
| Total cost of revenues | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||
| Amortization of intangible assets | |||||||||||||||||||||||
| Illinois EO litigation settlements | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Loss on refinancing of debt | |||||||||||||||||||||||
| Foreign exchange gain | ( | ( | ( | ( | |||||||||||||||||||
| Other income, net | ( | ( | ( | ( | |||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Net income | |||||||||||||||||||||||
| Other comprehensive income (loss) net of tax: | |||||||||||||||||||||||
Pension and post-retirement benefits (net of taxes of $( | ( | ( | |||||||||||||||||||||
Interest rate derivatives (net of taxes of $( | ( | ( | ( | ( | |||||||||||||||||||
| Foreign currency translation | ( | ( | |||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | |||||||||||||||||||||||
| Weighted average number of shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
See notes to consolidated financial statements.
6
Sotera Health Company
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation | |||||||||||
| Amortization of intangible assets | |||||||||||
| Loss on refinancing of debt | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Share-based compensation expense | |||||||||||
| Accretion of asset retirement obligations | |||||||||||
| Unrealized foreign exchange loss (gain) | ( | ||||||||||
| Unrealized (gain) loss on derivatives not designated as hedging instruments | ( | ||||||||||
| Amortization of debt issuance costs | |||||||||||
| Other | ( | ( | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | |||||||||||
| Inventories | ( | ||||||||||
| Other current assets | ( | ( | |||||||||
| Accounts payable | ( | ||||||||||
| Accrued liabilities | ( | ||||||||||
| Illinois EO litigation settlement | |||||||||||
| Georgia EO litigation settlement | ( | ||||||||||
| Income taxes payable / receivable, net | ( | ( | |||||||||
| Other liabilities | ( | ( | |||||||||
| Other long-term assets | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Investing activities: | |||||||||||
| Purchases of property, plant and equipment | ( | ( | |||||||||
| Other investing activities | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Financing activities: | |||||||||||
| Proceeds from long-term borrowings | |||||||||||
| Payment of long-term borrowings | ( | ( | |||||||||
| Payments of debt issuance costs and debt discount | ( | ( | |||||||||
| Buyout of leased facility | ( | ||||||||||
| Shares withheld for employee taxes on equity awards | ( | ( | |||||||||
| Other financing activities | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Net increase in cash and cash equivalents, including restricted cash | |||||||||||
| Cash and cash equivalents, including restricted cash, at beginning of period | |||||||||||
| Cash and cash equivalents, including restricted cash, at end of period | $ | $ | |||||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid during the period for interest | $ | $ | |||||||||
| Cash paid during the period for income taxes, net of tax refunds received | |||||||||||
| Purchases of property, plant and equipment included in accounts payable | |||||||||||
See notes to consolidated financial statements.
7
Sotera Health Company
Consolidated Statements of Equity
(in thousands)
(Unaudited)
| Three Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings / (Accumulated Deficit) | Accumulated Other Comprehensive (Loss) Income | Total Equity | |||||||||||||||||||||||||||||||||||||
Shares | Amount | Treasury Stock | |||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2025 | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Share-based compensation plans | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||
| Pension and post-retirement plan adjustments, net of tax | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Interest rate derivatives, net of tax | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2025 | |||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings / (Accumulated Deficit) | Accumulated Other Comprehensive (Loss) Income | Total Equity | |||||||||||||||||||||||||||||||||||||
Shares | Amount | Treasury Stock | |||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Share-based compensation plans | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||
| Pension and post-retirement plan adjustments, net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Interest rate derivatives, net of tax | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2025 | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
8
Sotera Health Company
Consolidated Statements of Equity (continued)
(in thousands)
(Unaudited)
| Three Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings / (Accumulated Deficit) | Accumulated Other Comprehensive (Loss) Income | Total Equity | |||||||||||||||||||||||||||||||||||||
Shares | Amount | Treasury Stock | |||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Share-based compensation plans | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Pension and post-retirement plan adjustments, net of tax | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Interest rate derivatives, net of tax | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings / (Accumulated Deficit) | Accumulated Other Comprehensive (Loss) Income | Total Equity | |||||||||||||||||||||||||||||||||||||
Shares | Amount | Treasury Stock | |||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Share-based compensation plans | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||||||
| Pension and post-retirement plan adjustments, net of tax | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Interest rate derivatives, net of tax | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | ( | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
See notes to consolidated financial statements.
9
1.Basis of Presentation
We operate and report in three
Interim Financial Statements – The accompanying consolidated financial statements include the assets, liabilities, operating results, and cash flows of the Company and its wholly owned subsidiaries. These financial statements are prepared in accordance with GAAP for interim financial information and the instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These unaudited interim financial statements should be read in conjunction with the Company's annual consolidated financial statements and accompanying notes in our 2024 10-K.
2.Recent Accounting Standards
Adoption of Accounting Standards Updates
In the year ended December 31, 2024, we adopted Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in ASU 2023-07 require an entity to provide enhanced disclosures about significant segment expenses. These interim financial statements reflect these amendments. The adoption of this standard did not have a material impact on our consolidated financial statements and disclosures.
Accounting Standards Updates (“ASU”) Issued But Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this ASU require entities to disclose, on an annual basis, specific categories in the reconciliation of the provision (benefit) for income taxes to the statutory rate and provide additional information for reconciling items that meet a quantitative threshold. Additionally, the update requires entities to disclose a disaggregation of taxes paid by category (federal, state and foreign taxes) as well as individual jurisdictions. For public business entities, the amendments in this ASU are effective for annual periods beginning after December 15, 2024 and will be reflected in our Annual Report on Form 10-K for the year ending December 31, 2025. This ASU will increase the tax disclosures in the Company’s Annual Report on Form 10-K, but will not impact reported income tax expense or related tax assets and liabilities.
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The amendments in this ASU require entities to disaggregate certain expense captions into specified categories in disclosures within the footnotes to the financial statements. In January 2025, the FASB issued ASU 2025-01, which revises the effective date of ASU 2024-03 and clarifies that entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is in the process of assessing the impact of this ASU on our disclosures and expects that this ASU will increase disclosures in the annual and interim periods when adopted.
10
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this update change the capitalization criteria for internally developed software by removing all references to prescriptive and sequential software development stages. The amendments in this update are effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. The Company is in the process of assessing the impact of this ASU on our financial statements and disclosures.
3.Revenue Recognition
The following table shows disaggregated net revenues from contracts with external customers by timing of revenue and by segment for the three and nine months ended September 30, 2025 and 2024:
| (thousands of U.S. dollars) | Three Months Ended September 30, 2025 | ||||||||||||||||||||||
| Sterigenics | Nordion | Nelson Labs | Consolidated | ||||||||||||||||||||
| Point in time | $ | $ | $ | $ | |||||||||||||||||||
| Over time | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| (thousands of U.S. dollars) | Three Months Ended September 30, 2024 | ||||||||||||||||||||||
| Sterigenics | Nordion | Nelson Labs | Consolidated | ||||||||||||||||||||
| Point in time | $ | $ | $ | $ | |||||||||||||||||||
| Over time | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| (thousands of U.S. dollars) | Nine Months Ended September 30, 2025 | ||||||||||||||||||||||
| Sterigenics | Nordion | Nelson Labs | Consolidated | ||||||||||||||||||||
| Point in time | $ | $ | $ | $ | |||||||||||||||||||
| Over time | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| (thousands of U.S. dollars) | Nine Months Ended September 30, 2024 | ||||||||||||||||||||||
| Sterigenics | Nordion | Nelson Labs | Consolidated | ||||||||||||||||||||
| Point in time | $ | $ | $ | $ | |||||||||||||||||||
| Over time | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
When we receive consideration from a customer prior to transferring goods or services under the terms of a sales contract, we record deferred revenue, which represents a contract liability. Deferred revenue totaled $14.1 million and $15.1 million at September 30, 2025 and December 31, 2024, respectively. We recognize deferred revenue after we have transferred control of the goods or services to the customer and all revenue recognition criteria are met.
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4.Inventories
Inventories consisted of the following:
| (thousands of U.S. dollars) | |||||||||||
| September 30, 2025 | December 31, 2024 | ||||||||||
| Raw materials and supplies | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| Reserve for excess and obsolete inventory | ( | ( | |||||||||
| Inventories, net | $ | $ | |||||||||
5.Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
| (thousands of U.S. dollars) | |||||||||||
| September 30, 2025 | December 31, 2024 | ||||||||||
| Prepaid taxes | $ | $ | |||||||||
| Prepaid business insurance | |||||||||||
| Prepaid rent | |||||||||||
| Customer contract assets | |||||||||||
| Current deposits | |||||||||||
| Prepaid maintenance contracts | |||||||||||
| Value added tax receivable | |||||||||||
| Prepaid software licensing | |||||||||||
| Stock supplies | |||||||||||
| Embedded derivatives | |||||||||||
| Other | |||||||||||
| Prepaid expenses and other current assets | $ | $ | |||||||||
6.Goodwill and Other Intangible Assets
Changes to goodwill during the nine months ended September 30, 2025 were as follows:
| (thousands of U.S. dollars) | Sterigenics | Nordion | Nelson Labs | Total | |||||||||||||||||||
| Goodwill at December 31, 2024 | $ | $ | $ | $ | |||||||||||||||||||
| Changes due to foreign currency exchange rates | |||||||||||||||||||||||
| Goodwill at September 30, 2025 | $ | $ | $ | $ | |||||||||||||||||||
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Other intangible assets consisted of the following:
| (thousands of U.S. dollars) | Gross Carrying Amount | Accumulated Amortization | |||||||||
| As of September 30, 2025 | |||||||||||
| Finite-lived intangible assets | |||||||||||
| Customer relationships | $ | $ | |||||||||
| Proprietary technology | |||||||||||
| Trade names | |||||||||||
| Land-use rights | |||||||||||
| Sealed source and supply agreements | |||||||||||
| Other | |||||||||||
| Total finite-lived intangible assets | |||||||||||
| Indefinite-lived intangible assets | |||||||||||
Regulatory licenses and other(a) | — | ||||||||||
| Trade names / trademarks | — | ||||||||||
| Total indefinite-lived intangible assets | — | ||||||||||
| Total | $ | $ | |||||||||
| As of December 31, 2024 | Gross Carrying Amount | Accumulated Amortization | |||||||||
| Finite-lived intangible assets | |||||||||||
| Customer relationships | $ | $ | |||||||||
| Proprietary technology | |||||||||||
| Trade names | |||||||||||
| Land-use rights | |||||||||||
| Sealed source and supply agreements | |||||||||||
| Other | |||||||||||
| Total finite-lived intangible assets | |||||||||||
| Indefinite-lived intangible assets | |||||||||||
Regulatory licenses and other(a) | — | ||||||||||
| Trade names / trademarks | — | ||||||||||
| Total indefinite-lived intangible assets | — | ||||||||||
| Total | $ | $ | |||||||||
(a)Includes certain transportation certifications, a class 1B nuclear license and other intangible assets related to obtaining such licensure. These assets are considered indefinite-lived as the decision for renewal by the Canadian Nuclear Safety Commission (“CNSC”) is highly based on a licensee’s previous assessments, reported incidents, and annual compliance and inspection results. New applications for a license can take a significant amount of time and cost; whereas an existing licensee with a historical record of compliance and current operating conditions is generally expected to obtain renewal, as Nordion has demonstrated over its 75 years of history. In September 2025, the CNSC renewed Nordion’s Class 1B nuclear license for a 25 -year term.
Amounts include the impact of foreign currency translation. Fully amortized amounts are written off.
Amortization expense for finite-lived intangible assets was $5.7 million and $19.9 million for the three months ended September 30, 2025 and 2024, respectively. $3.1 million and $15.5 million was included in “Amortization of intangible assets”
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in the Consolidated Statements of Operations and Comprehensive Income for the three months ended September 30, 2025 and 2024, respectively, whereas the remainder was included in “Cost of revenues.”
Amortization expense for finite-lived intangible assets was $36.2 million and $59.7 million for the nine months ended September 30, 2025 and 2024, respectively. $27.7 million and $46.7 million was included in “Amortization of intangible assets” in the Consolidated Statements of Operations and Comprehensive Income for the nine months ended September 30, 2025 and 2024, respectively, whereas the remainder was included in “Cost of revenues.”
The estimated aggregate amortization expense for finite-lived intangible assets for each of the next five years and thereafter is as follows:
| (thousands of U.S. dollars) | |||||
| For the remainder of 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total | $ | ||||
The weighted-average remaining amortization periods of the finite-lived intangible assets by major intangible asset class as of September 30, 2025 were as follows:
| (in years) | Weighted average remaining amortization period | ||||
| Customer relationships | |||||
| Proprietary technology | |||||
| Trade names | |||||
| Land-use rights | |||||
| Sealed source and supply agreements | |||||
| Other | |||||
7.Accrued Liabilities
Accrued liabilities consisted of the following:
| (thousands of U.S. dollars) | |||||||||||
| September 30, 2025 | December 31, 2024 | ||||||||||
| Accrued employee compensation | $ | $ | |||||||||
| Reserve for Illinois EO litigation settlements | |||||||||||
| Accrued interest expense | |||||||||||
| Embedded derivatives | |||||||||||
| Professional fees | |||||||||||
| Accrued utilities | |||||||||||
| Insurance accrual | |||||||||||
| Accrued taxes | |||||||||||
| Other | |||||||||||
| Accrued liabilities | $ | $ | |||||||||
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8.Long-Term Debt
Long-term debt consisted of the following:
| (thousands of U.S. dollars) | |||||||||||||||||||||||
| As of September 30, 2025 | Gross Amount | Unamortized Debt Issuance Costs | Unamortized Debt Discount | Net Amount | |||||||||||||||||||
| Secured notes due 2031 | $ | $ | ( | $ | $ | ||||||||||||||||||
| Term loan due 2031 | ( | ( | |||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||
| Less current portion | ( | ( | |||||||||||||||||||||
| Long-term debt | $ | $ | ( | $ | ( | $ | |||||||||||||||||
| (thousands of U.S. dollars) | |||||||||||||||||||||||
| As of December 31, 2024 | Gross Amount | Unamortized Debt Issuance Costs | Unamortized Debt Discount | Net Amount | |||||||||||||||||||
| Secured notes due 2031 | $ | $ | ( | $ | $ | ||||||||||||||||||
| Term loan due 2031 | ( | ( | |||||||||||||||||||||
| ( | ( | ||||||||||||||||||||||
| Less current portion | ( | ( | |||||||||||||||||||||
| Long-term debt | $ | $ | ( | $ | ( | $ | |||||||||||||||||
Debt Facilities
Under the debt agreements summarized below, at September 30, 2025 we and Sotera Health Holdings, LLC (“SHH”), our wholly owned subsidiary, have debt payment obligations under (a) a term loan in the amount of $1,423.0 million, (b) a revolving credit facility, which supported operationally-related letters of credit but was otherwise undrawn, and which provides to us capacity up to $600.0 million for future potential borrowings, and (c) $750.0 million of senior notes. Our debt agreements also include additional covenants, conditions and rights to request additional debt, as summarized below.
Senior Secured Credit Facilities and Indenture
On December 13, 2019, SHH entered into senior secured first lien credit facilities (the “Senior Secured Credit Facilities”), consisting of both a prepayable senior secured first lien term loan (the “Term Loan”) and a senior secured first lien revolving credit facility (the “Revolving Credit Facility”) pursuant to a first lien credit agreement (as amended through Amendment No. 6 (as defined below), the “Credit Agreement”). Amendment No. 6 reduced the applicable interest rate margin under the Term Loan by 0.50 %. The Senior Secured Credit Facilities also provide SHH the right at any time and under certain conditions to request incremental term loans or incremental revolving credit commitments based on a formula defined in the Senior Secured Credit Facilities.
On September 17, 2025, the Company and SHH entered into Amendment No. 6 (“Amendment No. 6”) to the Credit Agreement. Among other changes, Amendment No. 6 provides for refinancing lenders to provide term loans (the “Repriced Term Loans”) to SHH in an aggregate principal amount of $1,423.0 million, which reflects the balance after the Company’s application of $75.0 million of available cash to repay outstanding borrowings under its term loan facility. Amendment No. 6 also reduces the interest rate spread by 0.50 % across term loans under the facility, such that the Repriced Term Loans have an applicable interest rate margin equal to the Adjusted Term SOFR (as defined in the Credit Agreement) plus 2.50 %, with a 0.00 % floor (with optionality for the Company to elect Alternate Base Rate plus 1.50 % or Adjusted Daily Simple SOFR plus 2.50 % (each as defined in the Credit Agreement)). This pricing reflects both the 0.50 % reduction implemented through Amendment No. 6 and a 0.25 % contractual pricing step-down that was triggered in August 2025. The Repriced Term Loans are also subject to a “soft call” premium of 1.00 % for certain repricing transactions with respect to the Repriced Term Loans that occur within the six-month period after the effective date of Amendment No. 6. The Repriced Term Loans amortize at a rate of 1.00 % per annum and matures on May 30, 2031.
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On April 30, 2025, the Company and SHH entered into Amendment No. 5 (“Amendment No. 5”) to the Credit Agreement. Among other changes, Amendment No. 5 provides (i) for an increase in the commitments under the existing Revolving Credit Facility in an aggregate principal amount of $176.2 million, (ii) that certain lenders providing revolving credit commitments shall also provide additional commitments for the issuance of letters of credit under the Revolving Credit Facility in an aggregate principal amount of $186.3 million and (iii) for the extension of the maturity date of the Revolving Credit Facility to April 30, 2030. Amendment No. 5 does not give effect to any other material changes to the terms and conditions of the Credit Agreement, including with respect to the representations and warranties, events of default and the affirmative or negative covenants.
On May 30, 2024, the Company and SHH entered into Amendment No. 4 (“Amendment No. 4”) to the Senior Secured Credit Facilities. Among other changes, Amendment No. 4 provides for term loans (the “Refinancing Term Loans”) to SHH in an aggregate principal amount of $1,509.4 million. Pursuant to Amendment No. 4, the Refinancing Term Loans shall have an applicable interest rate margin per annum equal to (i) ABR plus 2.25 % for ABR Loans (as defined in the Credit Agreement), (ii) daily simple Secured Overnight Financing Rate (“SOFR”) plus 3.25 % for RFR Loans (as defined in the Credit Agreement) and (iii) Term SOFR plus 3.25 % for Term Benchmark Loans (as defined in the Credit Agreement), in each case with a 0.00 % applicable floor and the applicable interest rate margin shall be subject to a pricing step-down of 0.25 % when the Senior Secured Leverage Ratio (as defined in the Credit Agreement) is less than or equal to 3.30 :1.00. The Refinancing Term Loans amortize at a rate of 1.00 % per annum and mature on May 30, 2031.
The weighted average interest rates on borrowings under the Term Loan for the three months ended September 30, 2025 and 2024 was 7.22 % and 8.56 %, respectively, and 7.50 % and 8.56 % for the nine months ended September 30, 2025 and 2024, respectively.
On May 30, 2024, SHH, the Company, certain subsidiaries of the Company (the “Guarantors”), and Wilmington Trust, National Association, as trustee, paying agent, registrar, transfer agent and notes collateral agent, entered into an Indenture (the “Indenture”) governing SHH’s $750.0 million aggregate principal amount of 7.375 % senior secured notes due 2031 (the “Secured Notes”), issued in May 2024. The Secured Notes pay interest semiannually in arrears on June 1 and December 1 of each year, which began on December 1, 2024, at a rate of 7.375 % per year, and will mature on June 1, 2031. The Secured Notes may be redeemed, at any time or from time to time, in whole or in part, on or after June 1, 2027 at the redemption prices specified in the Indenture, together with accrued and unpaid interest, if any, thereon to, but excluding, the redemption date. At any time or from time to time, prior to June 1, 2027, the Secured Notes may be redeemed, in whole or in part, at a redemption price equal to 100 % of the aggregate principal amount thereof plus a make-whole premium, together with accrued and unpaid interest, if any, thereon to, but excluding, the redemption date. In addition, at any time or from time to time, prior to June 1, 2027, SHH may redeem up to 40 % of the aggregate principal amount of the Secured Notes (including any additional Secured Notes issued under the Indenture) with an amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 107.375 % of the aggregate principal amount thereof plus accrued and unpaid interest, if any, thereon to, but excluding, the redemption date. Further, at any time or from time to time, on or before June 1, 2027, SHH may redeem up to 10 % of the then outstanding aggregate principal amount of Secured Notes (including any additional Secured Notes issued under the Indenture) during each of the twelve-month periods ending after the issue date, at a redemption price equal to 103 % of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, thereon to, but excluding, the redemption date.
The obligations under the Indenture are secured on a first-lien basis by security interests in substantially all of the assets of SHH, the Company and the Guarantors (other than any excluded assets) that secure the Credit Agreement on a pari passu basis, subject to certain limitations, exceptions and permitted liens. These obligations are secured pursuant to a security agreement, dated as of May 30, 2024, by and among SHH, the Company, the other grantors party thereto, and Wilmington Trust, National Association (the “Security Agreement”), as may be amended from time to time, and related financing statements.
The Company used the combined net proceeds from the Refinancing Term Loans and Secured Notes, along with cash on hand, to refinance its previously outstanding $1,763.1 million Term Loan due 2026 and $496.3 million Term Loan B due 2026.
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The Senior Secured Credit Facilities and the Indenture contain additional covenants that, among other things, restrict, subject to certain exceptions, limitations and qualifications, our ability and the ability of our restricted subsidiaries to engage in certain activities, such as incur additional indebtedness or permit to exist any lien on any property or asset now owned or hereafter acquired, as specified in the Senior Secured Credit Facilities and the Indenture. The Senior Secured Credit Facilities and the Indenture also contain certain customary affirmative covenants and events of default, including upon a change of control. In addition, an event of default under the Senior Secured Credit Facilities and the Indenture would occur if the Company or certain of its subsidiaries received one or more enforceable judgments for payment in an aggregate amount in excess of the greater of (i) $162.6 million or (ii) 30.0 % of consolidated EBITDA or LTM EBITDA (as defined in the Credit Agreement and the Indenture, respectively) and the judgments were not stayed or remained undischarged for a period of 60 consecutive days. As of September 30, 2025, we were in compliance with all of the covenants under the Senior Secured Credit Facilities and the Indenture.
All of SHH’s obligations under the Senior Secured Credit Facilities and the Indenture are unconditionally guaranteed by the Company and each existing and subsequently acquired or organized direct or indirect wholly-owned domestic restricted subsidiary of the Company, with customary exceptions including, among other things, where providing such guarantees is not permitted by law, regulation or contract or would result in material adverse tax consequences. All obligations under the Senior Secured Credit Facilities and the Indenture, and the guarantees of such obligations, are secured by substantially all assets of SHH and the guarantors, subject to permitted liens and other exceptions and exclusions, as outlined in the Senior Secured Credit Facilities, the Indenture and the Security Agreement.
Outstanding letters of credit are collateralized by encumbrances against the Revolving Credit Facility and the collateral pledged thereunder, or by cash placed on deposit with the issuing bank. As of September 30, 2025, the Company had $8.1 million of letters of credit issued against the Revolving Credit Facility, resulting in total availability under the Revolving Credit Facility of $591.9 million.
Term Loan Interest Rate Risk Management
The Company utilizes interest rate derivatives to reduce the variability of cash flows in the interest payments associated with our variable rate debt due to changes in SOFR. For additional information on the derivative instruments described above, refer to Note 15, “Financial Instruments and Financial Risk”— “Derivative Instruments.”
Debt Maturities
Aggregate maturities of the Company’s long-term debt, excluding debt issuance costs and discounts, as of September 30, 2025, were as follows:
| (thousands of U.S. dollars) | |||||
| 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total | $ | ||||
9.Income Taxes
Income tax expense is provided on an interim basis based upon our estimate of the annual effective income tax rate. In determining the estimated annual effective income tax rate, we analyze various factors, including projections of our annual earnings and the taxing jurisdictions where the earnings will occur, the impact of state and local taxes, our ability to utilize tax credits and net operating loss carryforwards and available tax planning alternatives. Our effective tax rates were 33.6 % and 44.0 % for the three and nine months ended September 30, 2025, respectively. For the three and nine months ended September 30, 2024, our effective tax rates were 60.2 % and 53.5 %, respectively.
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Income tax expense for the three and nine months ended September 30, 2025 differed from the statutory rate primarily due to recognition of the cumulative tax effects of the change in U.S. income tax laws under the One Big Beautiful Bill Act ("OBBBA") in the period of enactment associated with the accounting for the valuation allowance attributable to the limitation on the deductibility of interest expense. This was offset by the tax effects for a change in our indefinite reinvestment assertion with respect to a portion of our foreign earnings, the impact of the foreign rate differential and current year permanent differences.
10.Employee Benefits
The Company sponsors various post-employment benefit plans including, in certain countries outside the U.S., defined benefit and defined contribution pension plans, retirement compensation arrangements, and plans that provide extended health care coverage to retired employees, the majority of which relate to Nordion. The interest cost, expected return on plan assets and amortization of net actuarial gain are recorded in “Other income, net” and the service cost component is included in the same financial statement line item as the applicable employee’s wages in the Consolidated Statements of Operations and Comprehensive Income.
Defined benefit pension plan
The following defined benefit pension plan disclosure relates to Nordion. Certain immaterial foreign defined benefit pension plans have been excluded from the table below. The components of net periodic pension benefit for the defined benefit plans for the three and nine months ended September 30, 2025 and 2024 were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (thousands of U.S. dollars) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | |||||||||||||||||||
| Net periodic benefit | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
The Company currently has no funding requirements as the Nordion pension plan has a going concern surplus as defined by Canadian federal regulation, which requires solvency testing on defined benefit pension plans on an annual basis.
The Company may obtain a qualifying letter of credit for solvency payments, up to 15 % of the market value of solvency liabilities as determined on the valuation date, instead of paying cash into the pension fund. As of September 30, 2025, we had no letters of credit outstanding relating to the defined benefit plans as none were required based on the most recent actuarial valuation. As of December 31, 2024, we had $6.4 million letters of credit outstanding relating to the defined benefit plans. The actual funding requirements over the five-year period will be dependent on subsequent annual actuarial valuations. These amounts are estimates, which may change with actual investment performance, changes in interest rates, any pertinent changes in Canadian government regulations and any voluntary contributions.
Other benefit plans
Other benefit plans disclosed below relate to Nordion and include a supplemental retirement arrangement, a retirement and termination allowance, and post-retirement benefit plans, which include contributory health and dental care benefits and contributory life insurance coverage. Certain immaterial other foreign benefit plans have been excluded from the table below.
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All non-pension post-employment benefit plans are unfunded. The components of net periodic pension cost for the other benefit plans for the three and nine months ended September 30, 2025 and 2024 were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (thousands of U.S. dollars) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Service cost | $ | $ | $ | $ | |||||||||||||||||||
| Interest cost | |||||||||||||||||||||||
| Amortization of net actuarial gain | ( | ( | ( | ( | |||||||||||||||||||
| Net periodic cost | $ | $ | $ | $ | |||||||||||||||||||
11. Other Comprehensive Income (Loss)
Amounts in accumulated other comprehensive income (loss) are presented net of the related tax. Foreign currency translation is not adjusted for income taxes.
Changes in our accumulated other comprehensive income (loss) balances, net of applicable tax, were as follows:
| (thousands of U.S. dollars) | Defined Benefit Plans | Foreign Currency Translation | Interest Rate Derivatives | Total | |||||||||||||||||||
| Beginning balance – July 1, 2025 | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | ( | (a) | ( | (b) | ( | ||||||||||||||||||
| Net current-period other comprehensive income (loss) | ( | ( | ( | ( | |||||||||||||||||||
| Ending balance – September 30, 2025 | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Beginning balance – January 1, 2025 | $ | $ | ( | $ | $ | ( | |||||||||||||||||
Other comprehensive income (loss) before reclassifications | ( | ||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | ( | (a) | ( | (b) | ( | ||||||||||||||||||
| Net current-period other comprehensive income (loss) | ( | ||||||||||||||||||||||
| Ending balance – September 30, 2025 | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
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| (thousands of U.S. dollars) | Defined Benefit Plans | Foreign Currency Translation | Interest Rate Derivatives | Total | |||||||||||||||||||
| Beginning balance – July 1, 2024 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | ( | (a) | ( | ( | |||||||||||||||||||
| Net current-period other comprehensive income (loss) | ( | ( | |||||||||||||||||||||
| Ending balance – September 30, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Beginning balance – January 1, 2024 | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | ( | (a) | ( | ( | |||||||||||||||||||
| Net current-period other comprehensive income (loss) | ( | ( | ( | ||||||||||||||||||||
| Ending balance – September 30, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(a)For defined benefit pension plans, amounts reclassified from accumulated other comprehensive income (loss) are recorded to “Other income, net” within the Consolidated Statements of Operations and Comprehensive Income.
(b)For interest rate derivatives, amounts reclassified from accumulated other comprehensive income (loss) are recorded to “Interest expense, net” within the Consolidated Statements of Operations and Comprehensive Income.
12. Share-Based Compensation
Pre-IPO Awards
Restricted stock distributed in respect of pre-IPO Class B-1 time vesting units vests on a daily basis pro rata over a five-year vesting period (20
We recognized an immaterial amount and $0.4 million of share-based compensation expense related to the pre-IPO Class B-1 awards for the three months ended September 30, 2025 and 2024, respectively, and $0.5 million and $1.3 million for the nine months ended September 30, 2025 and 2024, respectively.
A summary of the activity for the nine months ended September 30, 2025 related to the restricted stock awards distributed in respect of the pre-IPO awards (Class B-1) is presented below:
Restricted Stock Pre-IPO B-1 | |||||
| Unvested at December 31, 2024 | |||||
| Vested | ( | ||||
| Unvested at September 30, 2025 | |||||
2020 Omnibus Incentive Plan
We maintain a long-term incentive plan (the “2020 Omnibus Incentive Plan”) that allows for grants of incentive stock options to employees (including employees of any of our subsidiaries), nonstatutory stock options, restricted stock awards, restricted
20
stock units (“RSUs”), performance stock units (“PSUs”) and other cash-based, equity-based or equity-related awards to employees, directors, and consultants, including employees or consultants of our subsidiaries.
We recognized $8.0 million ($1.7 million for stock options, $5.6 million for RSUs and $0.7 million for PSUs) and $9.4 million ($4.5 million for stock options and $4.9 million for RSUs) of share-based compensation expense for these awards for the three months ended September 30, 2025 and 2024, respectively. We recognized $23.0 million ($5.7 million for stock options, $15.5 million for RSUs and $1.8 million for PSUs) and $27.5 million ($13.1 million for stock options and $14.4 million for RSUs) for the nine months ended September 30, 2025 and 2024, respectively, in our Consolidated Statements of Operations and Comprehensive Income, in “Selling, general and administrative expenses.”
Stock Options
Stock options generally vest ratably over a period of to four years . They have an exercise price equal to the fair market value of a share of common stock on the date of grant, and a contractual term of 10 years. The following table summarizes our stock option activity for the nine months ended September 30, 2025:
Number of Shares | Weighted Average Exercise Price | ||||||||||
| At December 31, 2024 | $ | ||||||||||
| Forfeited | ( | ||||||||||
| Exercised | ( | ||||||||||
| At September 30, 2025 | $ | ||||||||||
As of September 30, 2025, there were 6.9
RSUs
Time-based RSUs generally vest ratably over a period of to three years and are valued based on our market price on the date of grant. For RSUs with performance modifiers, management estimated the fair value using a Monte Carlo simulation valuation model. The following table summarizes our unvested RSU activity for the nine months ended September 30, 2025:
Number of Shares | Weighted-average Grant Date Fair Value | ||||||||||
| Unvested at December 31, 2024 | $ | ||||||||||
| Granted | |||||||||||
| Forfeited | ( | ||||||||||
| Vested | ( | ||||||||||
| Unvested at September 30, 2025 | $ | ||||||||||
PSUs
PSUs vest at the end of a three year service period and are valued based on our market price on the date of grant. PSUs awarded to our CEO with vesting conditions dependent upon the achievement of stock price increases were valued using a Monte Carlo simulation valuation model. The following table summarizes our unvested PSUs for the nine months ended September 30, 2025:
Number of Shares | Weighted-average Grant Date Fair Value | ||||||||||
| Unvested at December 31, 2024 | |||||||||||
| Granted | |||||||||||
| Forfeited | ( | $ | |||||||||
| Unvested at September 30, 2025 | $ | ||||||||||
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13. Earnings Per Share
Basic earnings per share represents the amount of income attributable to each common share outstanding. Diluted earnings per share represents the amount of income attributable to each common share outstanding adjusted for the effects of potentially dilutive common shares. Potentially dilutive common shares include stock options and other stock-based awards. In the periods where the effect would be antidilutive, potentially dilutive common shares are excluded from the calculation of diluted earnings per share.
In periods in which the Company has net income, earnings per share is calculated using the two-class method. This method is required as unvested pre-IPO restricted stock awards have the right to receive non-forfeitable dividends or dividend equivalents if the Company were to declare dividends on its common stock. Pursuant to the two-class method, earnings for each period are allocated on a pro-rata basis to common stockholders and unvested pre-IPO restricted stock awards. Diluted earnings per share is computed using the more dilutive of the (a) two-class method and (b) treasury stock method, as applicable, to the potentially dilutive instruments.
In periods in which the Company has a net loss, the two-class method is not applicable because the unvested pre-IPO restricted stock awards do not participate in losses.
Our basic and diluted earnings per common share are calculated as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| in thousands of U.S. dollars and share amounts (except per share amounts) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Earnings: | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Less: Allocation to participating securities | |||||||||||||||||||||||
| Net income attributable to Sotera Health Company common shareholders | $ | $ | $ | $ | |||||||||||||||||||
| Weighted Average Common Shares: | |||||||||||||||||||||||
Weighted-average common shares outstanding - basic | |||||||||||||||||||||||
| Dilutive effect of potential common shares | |||||||||||||||||||||||
Weighted-average common shares outstanding - diluted | |||||||||||||||||||||||
| Earnings per Common Share: | |||||||||||||||||||||||
| Net income per common share attributable to Sotera Health Company common shareholders - basic | $ | $ | $ | $ | |||||||||||||||||||
| Net income per common share attributable to Sotera Health Company common shareholders - diluted | |||||||||||||||||||||||
Diluted earnings per share does not consider the following potential common shares as the effect would be anti-dilutive:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| in thousands of share amounts | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Stock options | |||||||||||||||||||||||
| RSUs | |||||||||||||||||||||||
| Total anti-dilutive securities | |||||||||||||||||||||||
14. Commitments and Contingencies
From time to time, we may be or are subject to various lawsuits and other claims, as well as gain contingencies, in the ordinary course of our business. In addition, from time to time, we receive communications from government or regulatory agencies concerning investigations or allegations of noncompliance with laws or regulations in jurisdictions in which we operate. We assess these regulatory and legal actions to determine if a contingent liability should be recorded. In making these
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determinations, we may, depending on the nature of the matter, consult with internal and external legal counsel and technical experts.
We establish reserves for specific liabilities in connection with regulatory and legal actions that we determine to be both probable and reasonably estimable. The outcomes of regulatory and legal actions can be difficult to predict and are often resolved over long periods of time, making our probability and estimability determinations highly judgmental. Probability determinations require the analysis of various possible outcomes, assessments of potential damages and the impact of multiple factors beyond our control, including potential actions by others, interpretations of the law, and changes and developments in relevant facts, circumstances, regulations and other laws. If a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability is disclosed, together with an estimate of the range of possible loss if the range is determinable and material. In certain of the matters described below, we are not able to estimate potential liability because of the uncertainties related to the outcome(s) and/or the amount(s) or range(s) of loss. The ultimate resolution of pending regulatory and legal matters in future periods, including the matters described below, may have a material adverse effect on our financial condition, results of operations and/or liquidity. The Company may also incur material defense and settlement costs, diversion of management resources and other adverse effects on our business, financial condition, and/or results of operations.
The information regarding those lawsuits set forth below, including the number of claims, is as of September 30, 2025, except as otherwise indicated.
Ethylene Oxide Tort Litigation
Sterigenics U.S., LLC (“Sterigenics”) and other medical supply sterilization companies have been subjected to tort lawsuits alleging various injuries caused by low-level environmental exposure to EO used at or emitted from sterilization facilities. Those lawsuits, as detailed further below, are individual claims, as opposed to class actions.
California
As of October 31, 2025, subsidiaries of the Company and other parties are defendants in 11 lawsuits in Los Angeles County Superior Court in which the plaintiffs are asserting approximately 83 claims for personal injury or wrongful death allegedly resulting from use, emissions and releases of EO from Sterigenics’ Vernon facilities (the “Vernon Cases”). The Vernon Cases have been assigned to one judge, with initial trials scheduled for January and April 2027. Eight individual claims have been selected as the “First Plaintiff Group” and are being prioritized for discovery.
Georgia
Subsidiaries of the Company and other parties are defendants in lawsuits in Georgia in which plaintiffs allege personal injuries, wrongful death and property devaluation resulting from use, emissions and releases of EO from or at Sterigenics’ Atlanta facility (the “Atlanta Cases”).
As of October 31, 2025, approximately 425 personal injury and wrongful death claims pending in the State Court of Cobb County (the “Georgia Trial Court”) are assigned to a single judge (the “Georgia Personal Injury Cases”). The Georgia Personal Injury Cases are governed by case management orders pursuant to which general causation issues in a pool of eight cases are to be adjudicated in Phase 1 and specific causation issues in those pool cases are to be adjudicated in Phase 2; the remaining Georgia Personal Injury Cases (including 15 cases that include both personal injury and property claims) and one personal injury lawsuit that is pending before a different judge, are stayed.
On November 22, 2024, the Georgia Trial Court issued a Phase 1 ruling on general causation issues granting in part and denying in part defendants’ motions to exclude certain Phase 1 expert testimony and defendants’ motions for summary judgment on Phase 1 issues (the “Phase 1 Ruling”). Plaintiffs and defendants appealed the Phase 1 Ruling to the Court of Appeals of Georgia (the “Phase 1 Appeals”).
While the Phase 1 Appeals were pending, three of the pool cases selected by plaintiffs’ counsel proceeded to Phase 2. On October 17, 2025, the Georgia Trial Court issued its Phase 2 rulings granting Sterigenics’ motions to exclude three of plaintiffs’
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Phase 2 expert witnesses and granting Sterigenics’ motions for summary judgment in all three cases. On October 28, 2025, the Georgia Trial Court entered an order adopting its Phase 2 rulings with respect to Sotera Health LLC.
On October 31, 2025 the Court of Appeals of Georgia ruled on the Phase 1 Appeals, finding that, as Sterigenics contended on appeal, the Phase 1 Ruling failed to apply the proper standard for determining the admissibility of expert testimony on general causation, vacating the Phase 1 Ruling and remanding the pool cases to the Georgia Trial Court with instructions to apply the proper standard in ruling on general causation issues. The Court of Appeals also instructed the Georgia Trial Court to consider whether plaintiffs can prove general causation through epidemiological evidence and background risks of the diseases at issue.
Subsidiaries of the Company and other parties are also defendants in a lawsuit by employees of a sterilization customer of Sterigenics who allege they were injured while working at the customer’s distribution facility by exposure to residual EO allegedly emanating from products of the customer that had been sterilized by Sterigenics. The case has been transferred from the Georgia Trial Court to the Superior Court of Cobb County and is proceeding on plaintiffs’ Fifth Amended Complaint. Pursuant to the customer’s contract with Sterigenics, the customer is indemnifying Sterigenics against this lawsuit.
Approximately 305 property devaluation lawsuits pending in the Georgia Trial Court have been consolidated for pretrial purposes (the “Consolidated Property Cases”). A pool of nine of the Consolidated Property Cases are proceeding under case management orders and are currently in discovery. The remaining cases are stayed.
Illinois
Subsidiaries of the Company and other parties are defendants in lawsuits in the Circuit Court of Cook County, Illinois, in which plaintiffs allege personal injury or wrongful death resulting from purported use, emissions and releases of EO from Sterigenics’ former Willowbrook facility (the “Willowbrook Cases”). The Willowbrook Cases have been assigned to a single judge for coordinated discovery and pretrial proceedings.
On April 3, 2025, Sterigenics agreed to settle the seven cases previously set for trials in April and June 2025 and all of the other claims being pursued by the same plaintiffs’ counsel, including those of the individual plaintiffs in 61 Willowbrook Cases and 29 claimants who asserted claims but had yet to file lawsuits (collectively, the “Eligible April Claimants”) subject to several conditions (the “April 2025 Settlement”). All conditions to the April 2025 Settlement were satisfied, including participation by 100 percent of the Eligible April Claimants, a determination by the Circuit Court of Cook County that the settlement was entered in good faith under the Illinois Contribution Among Joint Tortfeasors Act, and execution of a Confidential General Release, Settlement Agreement and Covenant Not To Sue by each Eligible April Claimant. In September 2025, Sterigenics made the $30.9 million settlement payment, and the April 2025 Settlement was completed.
On July 23, 2025, Sterigenics entered into a binding term sheet (the “July Term Sheet”) to resolve ten Willowbrook Cases set for trials in October 2025 and March 2026, and 119 other claims being pursued by the same plaintiffs’ counsel, including those of the individual plaintiffs in 56 Willowbrook Cases and 63 claimants who asserted claims but had yet to file lawsuits (collectively, the “Eligible July Claimants”). The settlement is subject to the satisfaction of several conditions, including participation by 100 percent of the Eligible July Claimants, stays of the trials scheduled to begin in October 2025 and March 2026 and a determination by the Circuit Court of Cook County that the settlement was entered in good faith under the Illinois Contribution Among Joint Tortfeasors Act. Pursuant to the July Term Sheet, Sterigenics will pay a total of $34.0 million, each Eligible July Claimant participating in the settlement will execute a Confidential General Release, Settlement Agreement and Covenant Not to Sue and the cases will be dismissed with prejudice.If the settlement is finalized one Willowbrook Case will remain pending in the Circuit Court of Cook County.
New Mexico
The Company and certain subsidiaries are defendants in a lawsuit in the Third Judicial District Court, Doña Ana County, New Mexico (the “Trial Court”) in which the New Mexico Attorney General (“NMAG”) alleges that use, emissions and releases of EO from Sterigenics’ facility in Santa Teresa have deteriorated the air quality in surrounding communities and materially contributed to increased health risks for residents of those communities. In April 2024, the Court of Appeals of the State of New Mexico denied the NMAG’s petition for leave to file an interlocutory appeal of the Trial Court’s August 2023 order granting Sterigenics’ motion for summary judgment on strict liability, the Unfair Practices Act claim, and the claims for
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decreased property values, increased healthcare costs and medical monitoring costs, and remanded the case to the District Court of Doña Ana County for further proceedings on the remaining claims. Subsequently, in April 2025, the NMAG filed a motion pursuant to Rule 1-054(B) seeking to modify the Trial Court’s August 2023 summary judgment order to reinstate the NMAG’s claim for recovery of healthcare cost damages. That motion remains pending. The case is set for trial in July 2026.
* * *
Additional EO lawsuits have been threatened relating to Sterigenics’ facilities in the United States and may be filed in the future; these threats of additional EO lawsuits are comparable to threats that have similarly been made against other companies within our industry. Based on our view of the strength of the science and related evidence that emissions of EO from Sterigenics’ operations have not caused and could not have caused the harms alleged in such lawsuits, we believe that losses in the remaining or future EO cases through trials and any appeals that may prove necessary are not probable. Although the Company is vigorously defending against the EO tort claims, future settlements of EO tort claims are reasonably possible. The previously disclosed settlements of certain cases related to our facilities in Willowbrook and Atlanta and the resolution of the tort lawsuit pending in the United States District Court for the District of New Mexico were driven by dynamics unique to the claims that were settled and thus should not give rise to presumptions that the Company will settle additional EO tort claims and/or that any such settlements will be for comparable amounts.
Potential trial and settlement outcomes can vary widely based on a host of factors. EO tort lawsuits will be presided over by different judges, tried by different counsel presenting different evidence and decided by different juries. The substantive and procedural laws of jurisdictions vary and can meaningfully impact the litigation process and outcome of a case. Each plaintiff’s claim involves unique facts and evidence including the circumstances of the plaintiff’s alleged exposure, the type and severity of the plaintiff’s disease, the plaintiff’s medical history and course of treatment, the location of and other factors related to the plaintiff’s real property, and other circumstances. The outcomes of trials before juries are rarely certain and a judgment rendered or settlement reached in one case is not necessarily representative of potential outcomes of other seemingly comparable cases. As a result, it is not possible to estimate a reasonably possible loss or range of loss with respect to any future EO tort lawsuit, trial or settlement. We are vigorously defending the EO tort lawsuits.
Insurance Coverage for Environmental Liabilities
An environmental liability insurance policy under which we have received coverage for the EO tort lawsuits in Georgia, Illinois and New Mexico described above had limits of $10.0 million per occurrence and $20.0 million in the aggregate. Those per occurrence and aggregate limits were fully utilized in the defense of the Georgia, Illinois and New Mexico litigation. Our insurance for future alleged environmental liabilities excludes coverage for EO claims.
We are pursuing additional insurance coverage for our legal expenses related to EO tort lawsuits. In 2021, Sterigenics filed an insurance coverage lawsuit in the U.S. District Court for the Northern District of Illinois (the “Illinois District Court”) relating to two commercial general liability policies issued in the 1980s (the “Northern District of Illinois Coverage Lawsuit”). The Illinois District Court issued an order declaring that the defendant insurer owes a duty to Sterigenics and another insured party to defend the Willowbrook Cases (the “Duty to Defend Order”) and entered judgment for Sterigenics in January 2024 in the amount of $110.2 million for certain defense costs incurred in the Willowbrook Cases as of August 2022 (the “Defense Costs Judgment”). The defendant insurer appealed the Duty to Defend Order and Defense Costs Judgment to the United States Court of Appeals for the Seventh Circuit. On April 11, 2025, the Seventh Circuit Court of Appeals issued a decision certifying a question of Illinois law to the Illinois Supreme Court.
Sterigenics is also a party in insurance coverage lawsuits pending in the Circuit Court of Cook County, the Delaware Superior Court and the Los Angeles County Superior Court relating to insurance coverage from various historical commercial general liability policies for certain EO litigation settlement amounts and defense costs that the insurer against which a judgment has been secured in the Northern District of Illinois Coverage Lawsuit may fail to fund. The Delaware Superior Court case has been stayed pending resolution of the coverage lawsuit in the Circuit Court of Cook County. The Cook County Circuit Court lawsuit and the Los Angeles County Superior Court lawsuit have now been stayed pending resolution of the certified question currently pending before the Illinois Supreme Court. It is not possible to predict how much, if any, of the insurance proceeds sought will ultimately be recovered.
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Sotera Health Company Securities Litigation and Related Matters
In January 2023, a stockholder class action was filed in the U.S. District Court for the Northern District of Ohio (the “Ohio District Court”) against the Company, certain past and present directors and senior executives, the Company’s private equity stockholders and the underwriters of the Company’s initial public offering (“IPO”) in November 2020 and the Company’s secondary public offering (“SPO”) in March 2021 (the “Michigan Funds Litigation”). In April 2023, the Ohio District Court appointed the Oakland County Employees’ Retirement System, Oakland County Voluntary Employees’ Beneficiary Association, and Wayne County Employees’ Retirement System (the “Michigan Funds”) to serve as lead plaintiff to prosecute claims on behalf of a proposed class of stockholders who acquired shares of the Company in connection with our IPO or SPO between November 20, 2020 and September 19, 2022 (the “Proposed Class”). The Michigan Funds allege that certain statements made regarding the safety of the Company’s use of EO and/or the EO tort lawsuits and other risks of its EO operations violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 (when made in the registration statements for the IPO and SPO) and Sections 10(b), Section 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 (when made in subsequent securities filings and other contexts). On March 19, 2025, the Ohio District Court issued a Memorandum Opinion and Order granting the Company’s motion to dismiss the Amended Complaint and entered judgment dismissing the Michigan Funds Litigation with prejudice (the “Dismissal Order and Judgment”). The Michigan Funds have appealed the Dismissal Order and Judgment to the United States Court of Appeals for the Sixth Circuit.
In May 2024, a stockholder derivative lawsuit was filed in the Court of Chancery of the State of Delaware (the “Delaware Chancery Court”) for the benefit of the Company as the nominal defendant (the “May 2024 Derivative Litigation”). The plaintiffs allege breaches of fiduciary duties, insider trading, unjust enrichment and other violations by certain past and present directors and senior executives of the Company and the Company’s private equity stockholders. On June 25, 2024, the Delaware Chancery Court stayed the May 2024 Derivative Litigation pending a ruling on the merits on the motion to dismiss the Amended Complaint in the Michigan Funds Litigation.
The Company is vigorously defending the Michigan Funds Litigation and, if necessary, plans to vigorously defend the May 2024 Derivative Litigation.
The Company has also received demands pursuant to 8 Del. C. §220 for inspections of its books and records (“220 Demands”) from shareholders purporting to investigate potential wrongdoing by Company fiduciaries and other issues relating to the Company’s statements regarding the safety of its use of EO and/or the EO tort lawsuits and other risks of its EO operations. The Company has produced documents in response to the 220 Demands and may produce additional documents.
15. Financial Instruments and Financial Risk
Derivative Instruments
We do not use derivatives for trading or speculative purposes and are not a party to leveraged derivatives.
Derivatives Designated in Hedge Relationships
From time to time, the Company utilizes interest rate derivatives designated in hedge relationships to manage interest rate risk associated with our variable rate borrowings. These instruments are measured at fair value with changes in fair value recorded as a component of “Accumulated other comprehensive income (loss)” on our Consolidated Balance Sheets.
In March 2025, we entered into an interest rate swap agreement with a notional amount of $400.0 million. The interest rate swap became effective on August 31, 2025 and expires on August 31, 2027. We have designated the interest swap as a cash flow hedge designed to hedge the variability of cash flows attributable to changes in the SOFR benchmark interest rate of our Term Loan (or any successor thereto). We receive interest at the one-month Term SOFR rate and pay a fixed interest rate under the terms of the swap agreement.
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In March 2023, we entered into an interest rate swap agreement with a notional amount of $400.0 million. The interest rate swap was effective on August 23, 2023 and expired on August 23, 2025. We designated the interest swap as a cash flow hedge designed to hedge the variability of cash flows attributable to changes in the SOFR benchmark interest rate of our Term Loan (or any successor thereto). We receive interest at the one-month Term SOFR rate and pay a fixed interest rate under the terms of the swap agreement.
In May 2022, we entered into two interest rate cap agreements with a combined notional amount of $1,000.0 million for a total option premium of $4.1 million. The interest rate caps were effective on July 31, 2023 and expired on July 31, 2024. We designated these interest rate caps as cash flow hedges designed to hedge the variability of cash flows attributable to changes in the benchmark interest rate of our Term Loan (or any successor thereto). Under the current terms of the Credit Agreement, the benchmark interest rate index transitioned from LIBOR to Term SOFR on June 30, 2023. Accordingly, the interest rate cap agreements hedged the variability of cash flows attributable to changes in SOFR by limiting our cash flow exposure related to Term SOFR under a portion of our variable rate borrowings to 3.5 %.
Derivatives Not Designated in Hedge Relationships
The Company also routinely enters into foreign currency forward contracts to manage foreign currency exchange rate risk of our intercompany loans in certain of our international subsidiaries and non-functional currency assets and liabilities. The foreign currency forward contracts expire on a monthly basis. These foreign currency derivatives are not designated in hedge relationships.
Embedded Derivatives
We have embedded derivatives in certain of our customer and supply contracts as a result of the currency of the contract being different from the functional currency of the parties involved. Changes in the fair value of the embedded derivatives are recognized in “Other income, net” in the Consolidated Statements of Operations and Comprehensive Income.
The following table provides a summary of the notional and fair values of our derivative instruments:
| September 30, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (in U.S. Dollars; notional in millions, fair value in thousands) | Fair Value | Fair Value | |||||||||||||||||||||||||||||||||
| Notional Amount | Derivative Assets | Derivative Liabilities | Notional Amount | Derivative Assets | Derivative Liabilities | ||||||||||||||||||||||||||||||
| Derivatives designated as hedging instruments | |||||||||||||||||||||||||||||||||||
| Interest rate swaps | |||||||||||||||||||||||||||||||||||
| Derivatives not designated as hedging instruments | |||||||||||||||||||||||||||||||||||
| Foreign currency forward contracts | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Embedded derivatives | (a) | (a) | |||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(a)Represents the total notional amounts for certain of the Company’s supply and sales contracts accounted for as embedded derivatives.
Embedded derivative assets/liabilities and foreign currency forward contracts are included in “Prepaid expenses and other current assets” and “Accrued liabilities” on our Consolidated Balance Sheets depending upon their position at period end. Interest rate swaps are included in “Other assets” and “Noncurrent liabilities” on the Consolidated Balance Sheets depending upon their position at period end.
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The following table summarizes the activities of our derivative instruments for the periods presented, and the line item they are recorded in the Consolidated Statements of Operations and Comprehensive Income:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (thousands of U.S. dollars) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
Realized gain on interest rate derivatives recorded in interest expense, net(a) | ( | ( | ( | ( | |||||||||||||||||||
| Unrealized loss (gain) on embedded derivatives recorded in other income, net | ( | ( | |||||||||||||||||||||
| Realized loss (gain) on foreign currency forward contracts recorded in foreign exchange gain | ( | ( | |||||||||||||||||||||
Unrealized loss (gain) on foreign currency forward contracts recorded in foreign exchange gain | ( | ||||||||||||||||||||||
We expect to reclassify approximately $0.3 million of pre-tax net losses on derivative instruments from accumulated other comprehensive income (loss) to income during the next 12 months associated with our cash flow hedges. Refer to Note 11,“Other Comprehensive Income (Loss)” for unrealized gains and losses on interest rate derivatives, net of applicable tax, recorded in other comprehensive income (loss) and amounts reclassified from accumulated other comprehensive income to interest expense, net of applicable tax, during the three and nine months ended September 30, 2025.
Credit Risk
Certain of our financial assets, including cash and cash equivalents, are exposed to credit risk.
We are also exposed, in our normal course of business, to credit risk from our customers. As of September 30, 2025 and December 31, 2024, accounts receivable was net of an allowance for uncollectible accounts of $2.1 million and $2.5 million, respectively.
Credit risk on financial instruments arises from the potential for counterparties to default on their contractual obligations to us. We are exposed to credit risk in the event of non-performance, but do not anticipate non-performance by any of the counterparties to our financial instruments. We limit our credit risk by dealing with counterparties that are considered to be of high credit quality. In the event of non-performance by counterparties, the carrying value of our financial instruments represents the maximum amount of loss that would be incurred.
Our credit team evaluates and regularly monitors changes in the credit risk of our customers. We routinely assess the collectability of accounts receivable and maintain an adequate allowance for uncollectible accounts to address potential credit losses. The process includes a review of customer financial information and credit ratings, current market conditions as well as the expected future economic conditions that may impact the collection of trade receivables. We regularly review our customers’ past due amounts through an analysis of aged accounts receivables, specific customer past due aging amounts, and the history of trade receivables written off. Upon concluding that a receivable balance is not collectible, the balance is written off against the allowance for uncollectible accounts.
Fair Value Hierarchy
The fair value of our financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The valuation techniques we would use to determine such fair values are described as follows: Level 1—fair values determined by inputs utilizing quoted prices in active markets for identical assets or liabilities; Level 2—fair values based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable; Level 3—fair values determined by unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants.
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The following table discloses the fair value of our financial assets and liabilities:
| As of September 30, 2025 | Fair Value | ||||||||||||||||||||||
| (thousands of U.S. dollars) | Carrying Amount | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
Derivatives designated as hedging instruments(a) | |||||||||||||||||||||||
| Interest rate swap asset | |||||||||||||||||||||||
| Interest rate swap liability | |||||||||||||||||||||||
Derivatives not designated as hedging instruments(b) | |||||||||||||||||||||||
| Foreign currency forward contract assets | |||||||||||||||||||||||
| Foreign currency forward contract liabilities | |||||||||||||||||||||||
| Embedded derivative assets | |||||||||||||||||||||||
| Embedded derivative liabilities | |||||||||||||||||||||||
Current portion of long-term debt(c) | |||||||||||||||||||||||
| Term loan, due 2031 | |||||||||||||||||||||||
Long-Term Debt(c) | |||||||||||||||||||||||
| Senior secured notes, due 2031 | |||||||||||||||||||||||
| Term loan, due 2031 | |||||||||||||||||||||||
Finance Lease Obligations (with current portion)(d) | |||||||||||||||||||||||
| As of December 31, 2024 | Fair Value | ||||||||||||||||||||||
| (thousands of U.S. dollars) | Carrying Amount | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
Derivatives designated as hedging instruments(a) | |||||||||||||||||||||||
| Interest rate swap assets | |||||||||||||||||||||||
Derivatives not designated as hedging instruments(b) | |||||||||||||||||||||||
Foreign currency forward contract assets | |||||||||||||||||||||||
| Foreign currency forward contract liabilities | |||||||||||||||||||||||
| Embedded derivative assets | |||||||||||||||||||||||
| Embedded derivative liabilities | |||||||||||||||||||||||
Current portion of long-term debt(c) | |||||||||||||||||||||||
| Term loan B, due 2031 | |||||||||||||||||||||||
Long-Term Debt(c) | |||||||||||||||||||||||
| Term loan, due 2031 | |||||||||||||||||||||||
| Term loan B, due 2031 | |||||||||||||||||||||||
Finance Lease Obligations (with current portion)(d) | |||||||||||||||||||||||
(a)Derivatives designated as hedging instruments are measured at fair value with changes in fair value recorded as a component of accumulated other comprehensive income (loss). Interest rate swaps are valued using pricing models that incorporate observable market inputs including interest rate and yield curves.
(b)Derivatives that are not designated as hedging instruments are measured at fair value with gains or losses recognized immediately in the Consolidated Statements of Operations and Comprehensive Income. Embedded derivatives are valued using internally developed models that rely on observable market inputs, including foreign currency forward curves. Foreign currency forward contracts are valued by reference to changes in the forward foreign currency exchange rate over the life of the contract.
(c)Carrying amounts of current portion of long-term debt and long-term debt instruments are reported net of discounts and debt issuance costs. The estimated fair values of these instruments are based upon quoted prices for the Term Loan and the Secured Notes in inactive markets as provided by an independent fixed income security pricing service.
(d)Fair value approximates carrying value.
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16. Segment Information
We identify our operating segments based on the way we manage, evaluate and internally report our business activities for purposes of allocating resources and assessing performance. We have three reportable segments: Sterigenics, Nordion and Nelson Labs. We have determined our reportable segments based upon an assessment of organizational structure, service types, and internally prepared financial statements. Our chief operating decision maker, the Chairman and Chief Executive Officer of Sotera Health Company (“CODM”), evaluates performance and allocates resources based on net revenues and segment income after the elimination of intercompany activities. The CODM uses these performance measures to inform decisions about the operations of the business and dedication of resources to selling and general administrative matters pertinent to the Company. The accounting policies of our reportable segments are the same as those described in Note 1, “Significant Accounting Policies” of the Company’s annual consolidated financial statements and accompanying notes in our 2024 10-K.
Sterigenics
Sterigenics provides outsourced terminal sterilization and irradiation services for the medical device, pharmaceutical, food safety and advanced applications markets using three major technologies: gamma irradiation, EO processing and E-beam irradiation.
Nordion
Nordion is a leading global provider of Co-60 used in the sterilization and irradiation processes for the medical device, pharmaceutical, food safety, and high-performance materials industries, as well as in the treatment of cancer. In addition, Nordion is a leading global provider of gamma irradiation systems.
Nelson Labs
Nelson Labs provides outsourced microbiological and analytical chemistry testing and advisory services for the medical device and pharmaceutical industries.
Segment Revenue Concentrations
For the three months ended September 30, 2025, two customers reported within the Nordion segment individually represented 10% or more of the segment’s total net revenues. These customers represented 29.5 % and 10.0 % of the total segment’s external net revenues for the three months ended September 30, 2025. For the three months ended September 30, 2024, three customers reported within the Nordion segment individually represented 10% or more of the segment’s total net revenues. These customers represented 27.4 %, 13.8 %, and 12.9 % of the total segment’s external net revenues for the three months ended September 30, 2024.
For the nine months ended September 30, 2025, two customers reported within the Nordion segment individually represented 10% or more of the segment’s total net revenues. These customers represented 32.4 % and 10.7 % of the total segment’s external net revenues for the nine months ended September 30, 2025. For the nine months ended September 30, 2024, two customers reported within the Nordion segment individually represented 10% or more of the segment’s total net revenues. These customers represented 30.2 % and 11.7 % of the total segment’s external net revenues for the nine months ended September 30, 2024.
Financial information for each of our segments is presented in the following table:
| Three Months Ended September 30, 2025 | |||||||||||||||||||||||
| (thousands of U.S. dollars) | Sterigenics | Nordion | Nelson Labs | Total | |||||||||||||||||||
Net revenues(a) | $ | $ | $ | $ | |||||||||||||||||||
Segment expenses(b) | |||||||||||||||||||||||
Corporate expense allocation(c) | |||||||||||||||||||||||
Segment income | $ | $ | $ | $ | |||||||||||||||||||
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| Three Months Ended September 30, 2024 | |||||||||||||||||||||||
| (thousands of U.S. dollars) | Sterigenics | Nordion | Nelson Labs | Total | |||||||||||||||||||
Net revenues(a) | $ | $ | $ | $ | |||||||||||||||||||
Segment expenses(b) | |||||||||||||||||||||||
Corporate expense allocation(c) | |||||||||||||||||||||||
Segment income | $ | $ | $ | $ | |||||||||||||||||||
| Nine Months Ended September 30, 2025 | |||||||||||||||||||||||
| (thousands of U.S. dollars) | Sterigenics | Nordion | Nelson Labs | Total | |||||||||||||||||||
Net revenues(a) | $ | $ | $ | $ | |||||||||||||||||||
Segment expenses(b) | |||||||||||||||||||||||
Corporate expense allocation(c) | |||||||||||||||||||||||
Segment income | $ | $ | $ | $ | |||||||||||||||||||
| Nine Months Ended September 30, 2024 | |||||||||||||||||||||||
| (thousands of U.S. dollars) | Sterigenics | Nordion | Nelson Labs | Total | |||||||||||||||||||
Net revenues(a) | $ | $ | $ | $ | |||||||||||||||||||
Segment expenses(b) | |||||||||||||||||||||||
Corporate expense allocation(c) | |||||||||||||||||||||||
Segment income | $ | $ | $ | $ | |||||||||||||||||||
(a)Revenues are reported net of intersegment sales. Our Nordion segment recognized $3.1 million and $15.1 million in revenues from sales to our Sterigenics segment for the three months ended September 30, 2025 and 2024, respectively, and $23.3 million and $43.0 million in revenues from sales to our Sterigenics segment for the nine months ended September 30, 2025 and 2024, respectively, that is not reflected in net revenues in the table above. Intersegment sales for Sterigenics and Nelson Labs are immaterial for both periods presented.
(b)Segment expenses are comprised of direct materials, labor, utilities, other costs of revenues, selling, general and administrative (“SG&A”) expenses and other expenses (income) attributable to each segment.
Capital expenditures by segment for the nine months ended September 30, 2025 and 2024 were as follows:
| Nine Months Ended September 30, | |||||||||||
| (thousands of U.S. dollars) | 2025 | 2024 | |||||||||
| Sterigenics | $ | $ | |||||||||
| Nordion | |||||||||||
| Nelson Labs | |||||||||||
| Total capital expenditures | $ | $ | |||||||||
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Total assets and depreciation and amortization expense by segment are not readily available and are not reported separately to the CODM.
A reconciliation of segment income to consolidated income before taxes is as follows:
| (thousands of U.S. dollars) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Segment income | $ | $ | $ | $ | |||||||||||||||||||
| Less adjustments: | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
Depreciation and amortization(a) | |||||||||||||||||||||||
Share-based compensation(b) | |||||||||||||||||||||||
Loss on refinancing of debt(c) | |||||||||||||||||||||||
Gain on foreign currency and derivatives not designated as hedging instruments, net(d) | ( | ( | ( | ( | |||||||||||||||||||
Business optimization expenses(e) | |||||||||||||||||||||||
Professional services relating to EO sterilization facilities(f) | |||||||||||||||||||||||
Illinois EO litigation settlements(g) | |||||||||||||||||||||||
Accretion of asset retirement obligation(h) | |||||||||||||||||||||||
| Consolidated income before taxes | $ | $ | $ | $ | |||||||||||||||||||
(a)Includes depreciation of Co-60 held at gamma irradiation sites, and excludes accelerated depreciation associated with business optimization activities.
(b)Represents share-based compensation expense related to employees and Non-Employee Directors.
(c)Represents the write-off of unamortized debt issuance costs and discounts, as well as certain other costs incurred related to refinancing activity for the Term Loans, the Secured Notes and the Revolving Credit Facility.
(d)Represents the effects of (i) fluctuations in foreign currency exchange rates and (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion.
(e)Represents (i) certain costs related to divestitures, acquisitions and the integration of acquisitions, (ii) professional fees and other costs associated with business optimization, cost saving and other process enhancement projects, and (iii) legal, consulting, and other fees associated with the secondary offerings and shareholder engagement.
(f)Represents litigation and other professional fees associated with our EO sterilization facilities.
(g)Represents (i) the cost to settle 97 pending and threatened EO claims against Sterigenics in Illinois pursuant to the term sheet entered into on April 3, 2025 and (ii) the cost to settle 129 pending and threatened EO claims against Sterigenics in Illinois pursuant to the term sheet entered into on July 23, 2025. See Note 14, “Commitments and Contingencies.”
(h)Represents non-cash accretion of ARO related to Co-60 gamma and EO sterilization facilities, which are based on estimated site remediation costs for any future decommissioning of these facilities and are accreted over the life of the asset.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis in conjunction with our consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our 2024 Form 10-K. This discussion and analysis contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of various factors, including the factors we describe in the section entitled Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q, as well as Part I, Item 1A, “Risk Factors” in our 2024 Form 10-K.
OVERVIEW
We are a leading global provider of mission-critical end-to-end sterilization solutions, lab testing and advisory services for the healthcare industry. We are driven by our mission: Safeguarding Global Health®. We provide end-to-end sterilization as well as microbiological and analytical lab testing and advisory services to help ensure that medical, pharmaceutical and food products are safe for healthcare practitioners, patients and consumers in the United States and around the world. Our services are an essential aspect of our customers’ manufacturing processes and supply chains, helping to ensure sterilized medical products reach healthcare practitioners and patients. Most of these services are necessary for our customers to satisfy applicable government requirements.
We serve our customers throughout their product lifecycles, from product design to manufacturing and delivery, helping to ensure the sterility, effectiveness and safety of their products for the end user. We operate across two core businesses: sterilization services and lab services. Each of our businesses has a longstanding record and is a leader in its respective market, supported and connected by our core capabilities including deep end market, regulatory, technical and logistics expertise. The combination of Sterigenics, our terminal sterilization business, and Nordion, our Co-60 supply business, makes us the only vertically integrated global gamma sterilization provider in the sterilization industry. This provides us with additional insights and allows us to better serve our customers. For financial reporting purposes, our sterilization services business is comprised of two reportable segments, Sterigenics and Nordion, and our lab services business constitutes a third reportable segment, Nelson Labs.
For the three and nine months ended September 30, 2025, respectively, we recorded net revenues of $311.3 million and $860.2 million, net income of $48.4 million and $43.1 million, Adjusted Net Income of $75.3 million and $170.4 million, and Adjusted EBITDA of $164.2 million and $436.8 million. Adjusted Net Income and Adjusted EBITDA are financial measures not based on any standardized methodology prescribed by GAAP. For the definition of Adjusted Net Income and Adjusted EBITDA and the reconciliation of these non-GAAP measures from net income, please see “Non-GAAP Financial Measures.”
CONSOLIDATED RESULTS OF OPERATIONS
Three Months Ended September 30, 2025 as compared to Three Months Ended September 30, 2024
The following table sets forth the components of our results of operations for the three months ended September 30, 2025 and 2024.
| (thousands of U.S. dollars) | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||
| Total net revenues | $ | 311,312 | $ | 285,468 | $ | 25,844 | 9.1 | % | |||||||||||||||
| Total cost of revenues | 133,751 | 127,444 | 6,307 | 4.9 | % | ||||||||||||||||||
| Net income | 48,400 | 16,998 | 31,402 | 184.7 | % | ||||||||||||||||||
Adjusted Net Income(a) | 75,270 | 48,943 | 26,327 | 53.8 | % | ||||||||||||||||||
Adjusted EBITDA(a) | 164,190 | 146,361 | 17,829 | 12.2 | % | ||||||||||||||||||
(a)Adjusted Net Income and Adjusted EBITDA are non-GAAP financial measures. For more information regarding our calculation of Adjusted Net Income and Adjusted EBITDA, including information about their limitations as tools for analysis and a reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted Net Income and Adjusted EBITDA, please see the reconciliation included below in “Non-GAAP Financial Measures.”
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Total Net Revenues
The following table compares our revenues by type for the three months ended September 30, 2025 to the three months ended September 30, 2024.
(thousands of U.S. dollars) | |||||||||||||||||||||||
Net revenues for the three months ended September 30, | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||
| Service | $ | 255,529 | $ | 238,790 | $ | 16,739 | 7.0 | % | |||||||||||||||
| Product | 55,783 | 46,678 | 9,105 | 19.5 | % | ||||||||||||||||||
| Total net revenues | $ | 311,312 | $ | 285,468 | $ | 25,844 | 9.1 | % | |||||||||||||||
Net revenues were $311.3 million in the three months ended September 30, 2025, an increase of $25.8 million, or 9.1%, as compared with the three months ended September 30, 2024. Excluding the impact of foreign currency exchange rates, net revenues in the three months ended September 30, 2025 increased approximately 8.0% compared with the three months ended September 30, 2024.
Service revenues
Service revenues increased $16.7 million, or 7.0%, to $255.5 million in the three months ended September 30, 2025 as compared to $238.8 million in the three months ended September 30, 2024. The growth in net service revenues was driven by increases in volume/mix in the Sterigenics and Nordion segments and core lab testing service volume/mix in the Nelson Labs segment. In addition, favorable pricing and changes in foreign currency exchange rates contributed to the increase in net service revenues. Partially offsetting these factors was a decline in expert advisory services revenue in the Nelson Labs segment.
Product revenues
Product revenues increased $9.1 million, or 19.5%, to $55.8 million in the three months ended September 30, 2025 as compared to $46.7 million in the three months ended September 30, 2024. The increase was driven by higher revenues from Co-60 in the Nordion segment due to the timing of reactor harvest schedules.
Total Cost of Revenues
The following table compares our cost of revenues by type for the three months ended September 30, 2025 to the three months ended September 30, 2024.
(thousands of U.S. dollars) | |||||||||||||||||||||||
Cost of revenues for the three months ended September 30, | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||
| Service | $ | 114,337 | $ | 111,080 | $ | 3,257 | 2.9 | % | |||||||||||||||
| Product | 19,414 | 16,364 | 3,050 | 18.6 | % | ||||||||||||||||||
| Total cost of revenues | $ | 133,751 | $ | 127,444 | $ | 6,307 | 4.9 | % | |||||||||||||||
Total cost of revenues accounted for approximately 43.0% and 44.6% of our consolidated net revenues for the three months ended September 30, 2025 and 2024, respectively.
Cost of service revenues
Cost of service revenues increased $3.3 million, or 2.9%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase was attributable to inflation, which primarily impacted direct materials, energy and employee compensation costs. Partially offsetting these factors was a decrease in labor costs related to expert advisory services in the Nelson Labs segment.
Cost of product revenues
Cost of product revenues increased $3.1 million, or 18.6%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase was attributable to a change in product revenue volume and mix, partially offset by a decline in amortization of intangible assets that were fully amortized as of December 31, 2024.
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SG&A Expenses
SG&A expenses increased $1.3 million, or 2.1%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The change was the result of an increase litigation and other professional services expense associated with EO sterilization facilities, partially offset by a decline in share-based compensation expense.
Amortization of intangible assets
Amortization of intangible assets decreased $12.4 million, or 80.1%, to $3.1 million for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The decline was primarily due to certain intangible assets that were fully amortized in May 2025.
Interest Expense, Net
Interest expense, net decreased $2.4 million, or 5.8%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024, primarily due to a lower interest rate on our Term Loan, partially offset by a decreased benefit from interest rate derivatives. The weighted average interest rate on our outstanding debt was 6.91% and 7.86% as of September 30, 2025 and 2024, respectively.
Loss on Refinancing of Debt
Loss on refinancing of debt for the three months ended September 30, 2025 was $1.1 million relating to the write-off of certain unamortized debt issuance costs and discounts on the Term Loan in connection with Amendment No. 6 to the Credit Agreement.
Foreign Exchange Gain
Foreign exchange gain was $1.5 million for the three months ended September 30, 2025 as compared to $1.1 million in the three months ended September 30, 2024. The change in foreign exchange gain in our Consolidated Statements of Operations and Comprehensive Income mainly relates to short-term gains and losses on transactions denominated in currencies other than the functional currency of our operating entities. As described in Note 15, “Financial Instruments and Financial Risk” to our consolidated financial statements, we enter into monthly U.S. dollar-denominated foreign currency forward contracts to manage foreign currency exchange rate risk related to our international subsidiaries.
Other Income, Net
Other income, net decreased $2.4 million, or 83.6%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The fluctuation was mainly driven by unfavorable changes in the fair value of embedded derivatives in certain of Nordion’s customer and supply contracts.
Provision for Income Taxes
Provision for income tax decreased $1.2 million to a net provision of $24.5 million for the three months ended September 30, 2025 as compared to $25.8 million in the three months ended September 30, 2024. The change was attributable to recognition of the cumulative tax effects of the change in U.S. income tax laws under the OBBBA in the period of enactment associated with the accounting for the valuation allowance attributable to the limitation on the deductibility of interest expense. This was offset by higher pre-tax income, the tax effects for a change in our indefinite reinvestment assertion with respect to a portion of our foreign earnings, and an increase in current year permanent tax differences.
Provision for income taxes for the three months ended September 30, 2025 differed from the statutory rate due to recognition of the cumulative tax effects of the change in U.S. income tax laws under the OBBBA in the period of enactment associated with the accounting for the valuation allowance attributable to the limitation on the deductibility of interest expense. This was offset by the tax effects for a change in our indefinite reinvestment assertion with respect to a portion of our foreign earnings, the impact of the foreign rate differential and an increase in current year permanent tax differences. Provision for income taxes for the three months ended September 30, 2024 differed from the statutory rate primarily due to a net increase in the valuation allowance attributable to the limitation on the deductibility of interest expense, the foreign rate differential, and GILTI, partially offset by a benefit for state income taxes.
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Net Income, Adjusted Net Income and Adjusted EBITDA
Net income for the three months ended September 30, 2025 was $48.4 million, as compared to net income of $17.0 million for the three months ended September 30, 2024 due to the factors described above. Adjusted Net Income was $75.3 million for the three months ended September 30, 2025, as compared to $48.9 million for the three months ended September 30, 2024. Adjusted EBITDA was $164.2 million for the three months ended September 30, 2025, as compared to $146.4 million for the three months ended September 30, 2024. Please see “Non-GAAP Financial Measures” below for a reconciliation of Adjusted Net Income and Adjusted EBITDA to their most directly comparable financial measure calculated and presented in accordance with GAAP.
Nine Months Ended September 30, 2025 as compared to Nine Months Ended September 30, 2024
The following table sets forth the components of our results of operations for the nine months ended September 30, 2025 and 2024.
| (thousands of U.S. dollars) | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||
| Total net revenues | $ | 860,176 | $ | 810,238 | $ | 49,938 | 6.2 | % | |||||||||||||||
| Total cost of revenues | 380,562 | 372,308 | 8,254 | 2.2 | % | ||||||||||||||||||
| Net income | 43,102 | 32,075 | 11,027 | 34.4 | % | ||||||||||||||||||
Adjusted Net Income(a) | 170,376 | 139,759 | 30,617 | 21.9 | % | ||||||||||||||||||
Adjusted EBITDA(a) | 436,764 | 395,640 | 41,124 | 10.4 | % | ||||||||||||||||||
(a)Adjusted Net Income and Adjusted EBITDA are non-GAAP financial measures. For more information regarding our calculation of Adjusted Net Income and Adjusted EBITDA, including information about their limitations as tools for analysis and a reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted Net Income and Adjusted EBITDA, please see the reconciliation included below in “Non-GAAP Financial Measures.”
Total Net Revenues
The following table compares our revenues by type for the nine months ended September 30, 2025 to the nine months ended September 30, 2024.
(thousands of U.S. dollars) | |||||||||||||||||||||||
Net revenues for the nine months ended September 30, | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||
| Service | $ | 736,713 | $ | 703,027 | $ | 33,686 | 4.8 | % | |||||||||||||||
| Product | 123,463 | 107,211 | 16,252 | 15.2 | % | ||||||||||||||||||
| Total net revenues | $ | 860,176 | $ | 810,238 | $ | 49,938 | 6.2 | % | |||||||||||||||
Net revenues were $860.2 million in the nine months ended September 30, 2025, an increase of $49.9 million, or 6.2%, as compared with the nine months ended September 30, 2024. Changes in foreign currency exchange rates had no material impact on consolidated net revenues in the nine months ended September 30, 2025 compared with the nine months ended September 30, 2024.
Service revenues
Service revenues increased $33.7 million, or 4.8%, to $736.7 million in the nine months ended September 30, 2025 as compared to $703.0 million in the nine months ended September 30, 2024. The growth in net service revenues was primarily driven by favorable pricing in the Sterigenics and Nelson Labs segments, favorable volume/mix in the Sterigenics and Nordion segments and improvements in volume/mix related to core lab testing services in the Nelson Labs segment. Further contributing to these growth factors was a favorable impact from foreign currency exchange rates. Partially offsetting these factors was a decline in expert advisory services revenue in the Nelson Labs segment.
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Product revenues
Product revenues increased $16.3 million, or 15.2%, to $123.5 million in the nine months ended September 30, 2025 as compared to $107.2 million in the nine months ended September 30, 2024. The increase was driven by favorable volume/mix and pricing in the Nordion segment, partially offset by an unfavorable impact from changes in foreign currency exchange rates.
The following table compares our cost of revenues by type for the nine months ended September 30, 2025 to the nine months ended September 30, 2024.
(thousands of U.S. dollars) | |||||||||||||||||||||||
Cost of revenues for the nine months ended September 30, | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||
| Service | $ | 335,259 | $ | 331,068 | $ | 4,191 | 1.3 | % | |||||||||||||||
| Product | 45,303 | 41,240 | 4,063 | 9.9 | % | ||||||||||||||||||
| Total cost of revenues | $ | 380,562 | $ | 372,308 | $ | 8,254 | 2.2 | % | |||||||||||||||
Total cost of revenues accounted for approximately 44.2% and 46.0% of our consolidated net revenues for the nine months ended September 30, 2025 and 2024, respectively.
Cost of service revenues
Cost of service revenues increased $4.2 million, or 1.3%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The increase was attributable to inflation, which primarily impacted energy, direct materials, and professional services costs. Partially offsetting these factors was a decrease in labor costs related to expert advisory services in the Nelson Labs segment.
Cost of product revenues
Cost of product revenues increased $4.1 million, or 9.9%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The increase was attributable to a change in product revenue volume and mix, partially offset by a decline in amortization of intangible assets that were fully amortized as of December 31, 2024.
SG&A expenses
SG&A expenses increased $14.5 million, or 8.0%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. A $15.2 million increase in litigation and other professional services expense associated with EO sterilization facilities was the main driver of the increase in SG&A expenses, partially offset by a decline in share-based compensation expense.
Amortization of intangible assets
Amortization of intangible assets decreased $18.9 million, or 40.6%, to $27.7 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The decline was primarily due to certain intangible assets that were fully amortized in May 2025.
Illinois EO litigation settlements
On July 23, 2025, the Company agreed to resolve 129 pending and threatened EO claims in the State of Illinois. Pursuant to the terms of the July Term Sheet, which is subject to the satisfaction of several conditions, the Company agreed to pay $34.0 million to settle the claims.
On April 3, 2025, the Company agreed to resolve 97 pending and threatened EO claims in the State of Illinois. Pursuant to the terms of the April Term Sheet, which have been satisfied, the Company paid $30.9 million in September 2025 to settle the claims.
Interest Expense, Net
Interest expense, net decreased $3.1 million, or 2.5%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to a lower interest rate on our Term Loan and a decrease in the amortization of debt issuance costs, partially offset by a lower benefit from interest rate derivatives. The weighted average interest rate on our outstanding debt was 6.91% and 7.86% as of September 30, 2025 and 2024, respectively.
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Loss on Refinancing of Debt
Loss on refinancing of debt for the nine months ended September 30, 2025 was $1.2 million relating to the write-off of certain unamortized debt issuance costs and discounts on the Term Loans in connection with Amendment No. 6 to the Credit Agreement. Loss on refinancing of debt for the nine months ended September 30, 2024 was $24.1 million and occurred in connection with the refinancing of our capital structure in May 2024. This refinancing activity resulted in the write off of certain unamortized debt issuance costs and discounts on the Term Loans due 2026 and the expensing of certain new debt issuance costs and discounts upon the issuance of the Refinancing Term Loans and Secured Notes.
Foreign Exchange Gain
Foreign exchange gain was $0.6 million for the nine months ended September 30, 2025 as compared to $2.2 million in the nine months ended September 30, 2024. The change in foreign exchange gain in our Consolidated Statements of Operations and Comprehensive Income mainly relates to short-term losses and gains on transactions denominated in currencies other than the functional currency of our operating entities. As described in Note 15, “Financial Instruments and Financial Risk” to our consolidated financial statements, we enter into monthly U.S. dollar-denominated foreign currency forward contracts to manage foreign currency exchange rate risk related to our international subsidiaries.
Other Income, Net
Other income, net increased $2.4 million, or 59.9%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The primary driver of this increase was a favorable change in the fair value of embedded derivatives in certain of Nordion’s customer and supply contracts.
Provision for Income Taxes
Provision for income tax decreased $2.9 million to a net provision of $33.9 million for the nine months ended September 30, 2025 as compared to $36.8 million for the nine months ended September 30, 2024. The change was attributable to recognition of the cumulative tax effects of the change in U.S. income tax laws under the OBBBA in the period of enactment associated with the accounting for the valuation allowance attributable to the limitation on the deductibility of interest expense. This was offset by higher pre-tax income, the tax effects for a change in our indefinite reinvestment assertion with respect to a portion of our foreign earnings and an increase in current year permanent tax differences.
Provision for income taxes for the nine months ended September 30, 2025 differed from the statutory rate due to recognition of the cumulative tax effects of the change in U.S. income tax laws under the OBBBA in the period of enactment associated with the accounting for the valuation allowance attributable to the limitation on the deductibility of interest expense. This was offset by the tax effects for a change in our indefinite reinvestment assertion with respect to a portion of our foreign earnings, the impact of the foreign rate differential and an increase in current year permanent tax differences. Provision for income taxes for the nine months ended September 30, 2024 differed from the statutory rate primarily due to a net increase in the valuation allowance attributable to the limitation on the deductibility of interest expense, the foreign rate differential and GILTI, partially offset by a benefit for state income taxes.
Net Income, Adjusted Net Income and Adjusted EBITDA
Net income for the nine months ended September 30, 2025 was $43.1 million, as compared to net income of $32.1 million for the nine months ended September 30, 2024 due to the factors described above. Adjusted Net Income was $170.4 million for the nine months ended September 30, 2025, as compared to $139.8 million for the nine months ended September 30, 2024. Adjusted EBITDA was $436.8 million for the nine months ended September 30, 2025, as compared to $395.6 million for the nine months ended September 30, 2024. Please see “Non-GAAP Financial Measures” below for a reconciliation of Adjusted Net Income and Adjusted EBITDA to their most directly comparable financial measure calculated and presented in accordance with GAAP.
SEGMENT RESULTS OF OPERATIONS
We have three reportable segments: Sterigenics, Nordion and Nelson Labs. Our CODM evaluates performance and allocates resources within our business based on Segment Income, which excludes certain items which are included in income before tax as determined in our Consolidated Statements of Operations and Comprehensive Income. The accounting policies for our reportable segments are the same as those for the consolidated Company.
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Our Segments
Sterigenics
Sterigenics provides outsourced terminal sterilization and irradiation services for the medical device, pharmaceutical, food safety and advanced applications markets using three major technologies: gamma irradiation, EO processing and E-beam irradiation.
Nordion
Nordion is a leading global provider of Co-60 used in the sterilization and irradiation processes for the medical device, pharmaceutical, food safety, and high-performance materials industries, as well as in the treatment of cancer. In addition, Nordion is a leading global provider of gamma irradiation systems.
As a result of the time required to meet regulatory and logistics requirements for delivery of radioactive products, combined with accommodations made to our customers to minimize disruptions to their operations during the installation of Co-60, Nordion sales patterns can often vary significantly from one quarter to the next. However, timing-related impacts on our sales performance tend to be resolved within several quarters, resulting in more consistent performance over longer periods of time. In addition, sales of gamma irradiation systems occur infrequently and tend to be for larger amounts.
Results for our Nordion segment are also impacted by Co-60 mix and harvest schedules, as well as customer, product and service mix.
Nelson Labs
Nelson Labs provides outsourced microbiological and analytical chemistry testing and advisory services for the medical device and pharmaceutical industries.
For more information regarding our reportable segments, please refer to Note 16, “Segment Information” to our consolidated financial statements.
Segment Results for the Three Months Ended September 30, 2025 and 2024
The following tables compare segment net revenue and segment income for the three months ended September 30, 2025 to the three months ended September 30, 2024:
Three Months Ended September 30, | |||||||||||||||||||||||
| (thousands of U.S. dollars) | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||
| Net Revenues | |||||||||||||||||||||||
| Sterigenics | $ | 192,845 | $ | 175,574 | $ | 17,271 | 9.8 | % | |||||||||||||||
| Nordion | 62,805 | 51,313 | 11,492 | 22.4 | % | ||||||||||||||||||
| Nelson Labs | 55,662 | 58,581 | (2,919) | (5.0) | % | ||||||||||||||||||
| Segment Income | |||||||||||||||||||||||
| Sterigenics | $ | 107,155 | $ | 95,989 | $ | 11,166 | 11.6 | % | |||||||||||||||
| Nordion | 38,048 | 31,733 | 6,315 | 19.9 | % | ||||||||||||||||||
| Nelson Labs | 18,987 | 18,639 | 348 | 1.9 | % | ||||||||||||||||||
| Segment Income margin | |||||||||||||||||||||||
| Sterigenics | 55.6 | % | 54.7 | % | |||||||||||||||||||
| Nordion | 60.6 | % | 61.8 | % | |||||||||||||||||||
| Nelson Labs | 34.1 | % | 31.8 | % | |||||||||||||||||||
Net Revenues by Segment
Sterigenics net revenues were $192.8 million for the three months ended September 30, 2025, an increase of $17.3 million, or 9.8%, as compared to the three months ended September 30, 2024. The increase was attributable to a 4.6% increase in volume and mix, a 3.8% favorable impact from pricing and a 1.4% benefit from changes in foreign currency exchange rates.
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Nordion net revenues were $62.8 million for the three months ended September 30, 2025, an increase of $11.5 million, or 22.4%, as compared to the three months ended September 30, 2024. The increase was driven by favorable volume and mix of 18.9% and a 4.7% impact from pricing, partially offset by a 1.2% unfavorable impact from changes in foreign currency exchange rates.
Nelson Labs net revenues were $55.7 million for the three months ended September 30, 2025, a decrease of $2.9 million, or 5.0%, as compared to the three months ended September 30, 2024. Favorable pricing, a benefit from changes in foreign currency exchange rates and growth in core lab testing service were offset by a decline in expert advisory services revenue.
Segment Income
Sterigenics segment income was $107.2 million for the three months ended September 30, 2025, an increase of $11.2 million, or 11.6%, as compared to the three months ended September 30, 2024. The increase in segment income and segment income margin was primarily a result of an increase in volume and mix coupled with favorable customer pricing, partially offset by inflation.
Nordion segment income was $38.0 million for the three months ended September 30, 2025, an increase of $6.3 million, or 19.9%, as compared to the three months ended September 30, 2024. The increase in segment income was attributable to growth in volume and mix and benefits from customer pricing. Segment income margin decreased as a result of product mix.
Nelson Labs segment income was $19.0 million for the three months ended September 30, 2025, an increase of $0.3 million, or 1.9%, as compared to the three months ended September 30, 2024. Segment income and segment income margin increased as a result of volume and mix improvements, lab optimization and favorable pricing.
Segment Results for the Nine Months Ended September 30, 2025 and 2024
The following tables compare segment net revenue and segment income for the nine months ended September 30, 2025 to the nine months ended September 30, 2024:
Nine Months Ended September 30, | |||||||||||||||||||||||
| (thousands of U.S. dollars) | 2025 | 2024 | $ Change | % Change | |||||||||||||||||||
| Net Revenues | |||||||||||||||||||||||
| Sterigenics | $ | 557,368 | $ | 518,425 | $ | 38,943 | 7.5 | % | |||||||||||||||
| Nordion | 137,793 | 116,564 | 21,229 | 18.2 | % | ||||||||||||||||||
| Nelson Labs | 165,015 | 175,249 | (10,234) | (5.8) | % | ||||||||||||||||||
| Segment Income | |||||||||||||||||||||||
| Sterigenics | $ | 302,904 | $ | 278,585 | $ | 24,319 | 8.7 | % | |||||||||||||||
| Nordion | 78,947 | 65,938 | 13,009 | 19.7 | % | ||||||||||||||||||
| Nelson Labs | 54,913 | 51,117 | 3,796 | 7.4 | % | ||||||||||||||||||
| Segment Income margin | |||||||||||||||||||||||
| Sterigenics | 54.3 | % | 53.7 | % | |||||||||||||||||||
| Nordion | 57.3 | % | 56.6 | % | |||||||||||||||||||
| Nelson Labs | 33.3 | % | 29.2 | % | |||||||||||||||||||
Net Revenues by Segment
Sterigenics net revenues were $557.4 million for the nine months ended September 30, 2025, an increase of $38.9 million, or 7.5%, as compared to the nine months ended September 30, 2024. The increase was mainly attributable to favorable impacts from pricing and volume and mix of 4.0% and 3.5%, respectively.
Nordion net revenues were $137.8 million for the nine months ended September 30, 2025, an increase of $21.2 million, or 18.2%, as compared to the nine months ended September 30, 2024. The increase was driven by favorable changes in volume and mix of 16.7% and pricing of 3.1%, partially offset by an unfavorable impact from changes in foreign currency exchange rates of 1.6%.
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Nelson Labs net revenues were $165.0 million for the nine months ended September 30, 2025, a decrease of $10.2 million, or 5.8%, as compared to the nine months ended September 30, 2024. Growth in core lab testing services, favorable pricing and a benefit from changes in foreign currency exchange rates were offset by a decline in expert advisory services revenue.
Segment Income
Sterigenics segment income was $302.9 million for the nine months ended September 30, 2025, an increase of $24.3 million, or 8.7%, as compared to the nine months ended September 30, 2024. The increase in segment income was driven primarily by favorable customer pricing and improvements in volume and mix, partially offset by inflation.
Nordion segment income was $78.9 million for the nine months ended September 30, 2025, an increase of $13.0 million, or 19.7%, as compared to the nine months ended September 30, 2024. The increase in segment income and segment income margin were primarily attributable to higher volumes and mix of Co-60 and benefits from customer pricing.
Nelson Labs segment income was $54.9 million for the nine months ended September 30, 2025, an increase of $3.8 million, or 7.4%, as compared to the nine months ended September 30, 2024. Segment income and segment income margin increased as a result of volume and mix improvements, lab optimization and favorable pricing.
NON-GAAP FINANCIAL MEASURES
To supplement our consolidated financial statements presented in accordance with GAAP, we consider Adjusted Net Income and Adjusted EBITDA, financial measures that are not based on any standardized methodology prescribed by GAAP.
We define Adjusted Net Income as net income before amortization and certain other adjustments that we do not consider in our evaluation of our ongoing operating performance from period to period as discussed further below. We define Adjusted EBITDA as Adjusted Net Income before interest expense, depreciation (including depreciation of Co-60 used in our operations) and income tax provision applicable to Adjusted Net Income.
We use Adjusted Net Income and Adjusted EBITDA, non-GAAP financial measures, as the principal measures of our operating performance. Management believes Adjusted Net Income and Adjusted EBITDA are useful because they allow management to more effectively evaluate our operating performance and compare the results of our operations from period to period without the impact of certain non-cash items and non-routine items that we do not expect to continue at the same level in the future and other items that are not core to our operations. We believe that these measures are useful to our investors because they provide a more complete understanding of the factors and trends affecting our business than could be obtained absent this disclosure. In addition, we believe Adjusted Net Income and Adjusted EBITDA will assist investors in making comparisons to our historical operating results and analyzing the underlying performance of our operations for the periods presented. Our management also uses Adjusted Net Income and Adjusted EBITDA in its financial analysis and operational decision-making, and Adjusted EBITDA serves as the basis for the metric we utilize to determine attainment of our primary annual incentive program. Adjusted Net Income and Adjusted EBITDA may be calculated differently from, and therefore may not be comparable to, a similarly titled measure used by other companies.
Adjusted Net Income and Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. There are a number of limitations related to the use of Adjusted Net Income and Adjusted EBITDA rather than net income, the nearest GAAP equivalent. For example, Adjusted Net Income and Adjusted EBITDA primarily exclude:
•certain recurring non-cash charges such as depreciation of fixed assets, although these assets may have to be replaced in the future, as well as amortization of acquired intangible assets and asset retirement obligations (“ARO”);
•costs of acquiring and integrating businesses, which will continue to be a part of our growth strategy;
•non-cash gains or losses from fluctuations in foreign currency exchange rates and the mark-to-fair value of derivatives not designated as hedging instruments, which includes the embedded derivatives relating to certain customer and supply contracts at Nordion;
•impairment charges on long-lived assets, intangible assets and investments accounted for under the equity method;
•loss on refinancing of debt incurred in connection with refinancing or early extinguishment of long-term debt;
•expenses incurred in connection with the secondary offering of our common stock and other shareholder activities;
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•expenses and charges related to the litigation, settlement agreements, and other activities associated with our EO sterilization facilities, including those related to Willowbrook, Illinois, Atlanta, Georgia, Santa Teresa, New Mexico and Vernon, California;
•in the case of Adjusted EBITDA, interest expense or the cash requirements necessary to service interest or principal payments on our indebtedness; and
•share-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring expense and an important part of our compensation strategy.
In evaluating Adjusted Net Income and Adjusted EBITDA, you should be aware that in the future, we will incur expenses similar to the adjustments in this presentation. Our presentations of Adjusted Net Income and Adjusted EBITDA should not be construed as suggesting that our future results will be unaffected by these expenses or any unusual or non-recurring items. When evaluating our performance, you should consider Adjusted Net Income and Adjusted EBITDA alongside other financial performance measures, including our net income and other GAAP measures.
The following table presents a reconciliation of net income, the most directly comparable financial measure calculated and presented in accordance with GAAP to Adjusted Net Income and Adjusted EBITDA, for each of the periods indicated:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (thousands of U.S. dollars) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Net income | $ | 48,400 | $ | 16,998 | $ | 43,102 | $ | 32,075 | |||||||||||||||
| Amortization of intangibles | 5,648 | 19,858 | 36,246 | 59,737 | |||||||||||||||||||
Share-based compensation(a) | 8,047 | 9,860 | 23,465 | 28,723 | |||||||||||||||||||
Loss on refinancing of debt(b) | 1,087 | 70 | 1,167 | 24,160 | |||||||||||||||||||
Gain on foreign currency and derivatives not designated as hedging instruments, net(c) | (167) | (2,231) | (1,294) | (1,699) | |||||||||||||||||||
Business optimization expenses(d) | 3,098 | 2,949 | 7,575 | 4,733 | |||||||||||||||||||
Professional services relating to EO sterilization facilities(e) | 11,152 | 8,200 | 37,515 | 22,357 | |||||||||||||||||||
Illinois EO litigation settlements(f) | — | — | 64,943 | — | |||||||||||||||||||
Accretion of asset retirement obligations(g) | 601 | 636 | 1,738 | 1,914 | |||||||||||||||||||
Income tax benefit associated with pre-tax adjustments(h) | (2,596) | (7,397) | (44,081) | (32,241) | |||||||||||||||||||
| Adjusted Net Income | 75,270 | 48,943 | 170,376 | 139,759 | |||||||||||||||||||
| Interest expense, net | 39,147 | 41,572 | 120,674 | 123,731 | |||||||||||||||||||
Depreciation(i) | 22,642 | 22,693 | 67,726 | 63,074 | |||||||||||||||||||
Income tax provision applicable to Adjusted Net Income(j) | 27,131 | 33,153 | 77,988 | 69,076 | |||||||||||||||||||
Adjusted EBITDA(k) | $ | 164,190 | $ | 146,361 | $ | 436,764 | $ | 395,640 | |||||||||||||||
(a) Represents share-based compensation expense related to employees and Non-Employee Directors.
(b) Represents the write-off of unamortized debt issuance costs and discounts, as well as certain other costs incurred related to refinancing activity for the Term Loans, the Secured Notes and the Revolving Credit Facility.
(c) Represents the effects of (i) fluctuations in foreign currency exchange rates and (ii) non-cash mark-to-fair value of embedded derivatives relating to certain customer and supply contracts at Nordion.
(d) Represents (i) certain costs related to divestitures, acquisitions and the integration of acquisitions, (ii) professional fees and other costs associated with business optimization, cost saving and other process enhancement projects, and (iii) legal, consulting, and other fees associated with the secondary offerings and shareholder engagement.
(e) Represents litigation and other professional fees associated with our EO sterilization facilities.
(f) Represents (i) the cost to settle 97 pending and threatened EO claims against Sterigenics in Illinois pursuant to the term sheet entered into on April 3, 2025 and (ii) the cost to settle 129 pending and threatened EO claims against Sterigenics in Illinois pursuant to the term sheet entered into on July 23, 2025. See Note 14, “Commitments and Contingencies.”
(g) Represents non-cash accretion of ARO related to Co-60 gamma and EO sterilization facilities, which are based on estimated site remediation costs for any future decommissioning of these facilities and are accreted over the life of the asset.
(h) Represents the income tax impact of adjustments calculated based on the tax rate applicable to each item. We eliminate the effect of tax rate changes as applied to tax assets and liabilities and unusual items from our presentation of adjusted net income.
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(i) Includes depreciation of Co-60 held at gamma irradiation sites, and excludes accelerated depreciation associated with business optimization activities.
(j) Represents the difference between the income tax provision or benefit as determined under U.S. GAAP and the income tax provision or benefit associated with pre-tax adjustments described in footnote (h).
(m) $24.1 million and $25.8 million of the adjustments for the three months ended September 30, 2025 and 2024, respectively, and $72.7 million and $73.0 million of the adjustments for the nine months ended September 30, 2025 and 2024, respectively, are included in cost of revenues, primarily consisting of amortization of intangible assets, depreciation, and accretion of asset retirement obligations.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Cash
The primary sources of liquidity for our business are cash flows from operations and borrowings under our credit facilities. As of September 30, 2025, we had $299.2 million of unrestricted cash and cash equivalents. This is an increase of $22.0 million from the balance at December 31, 2024. The increase in unrestricted cash and cash equivalents was a result of $184.1 million of cash flows provided by operating activities and a $14.9 million increase due to favorable change in foreign currency exchange rates, partially offset by $87.3 million in cash paid for capital expenditures and $92.4 million in cash used in financing activities. Our foreign subsidiaries held cash of approximately $230.6 million at September 30, 2025 and $259.8 million at December 31, 2024. No material restrictions exist to accessing cash held by our foreign subsidiaries notwithstanding any potential tax consequences.
Uses of Cash
We expect that cash on hand, operating cash flows and amounts available under our credit facilities will provide sufficient working capital to operate our business, meet foreseeable liquidity requirements (inclusive of debt service on our long-term debt), make expected capital expenditures including investments in fixed assets to build and/or expand existing facilities, and meet litigation costs that we expect to continue to incur for at least the next twelve months and the foreseeable future thereafter. Our primary long-term liquidity requirements beyond the next 12 months will be to service our debt, make capital expenditures, and fund suitable business acquisitions. As of September 30, 2025, there were no outstanding borrowings on the Revolving Credit Facility. We expect any excess cash provided by operations will be allocated to fund capital expenditures, potential acquisitions, debt paydown or for other general corporate purposes. Our ability to meet future working capital, capital expenditures and debt service requirements will depend on our future financial performance, which will be affected by a range of macroeconomic, competitive and business factors, including interest rate changes and changes in our industry, many of which are outside of our control. As of September 30, 2025, our interest rate derivatives limit our cash flow exposure of our variable rate borrowings under the Term Loans. Refer to Note 15, “Financial Instruments and Financial Risk”, “Derivative Instruments” for additional information about changes in interest rate risk.
Capital Expenditures
Our capital expenditure program is a component of our long-term strategy. This program includes, among other things, investments in new and existing facilities, business expansion projects, Co-60 used by Sterigenics at its gamma irradiation facilities, cobalt development projects and information technology enhancements. During the nine months ended September 30, 2025, our capital expenditures amounted to $87.3 million, compared to $113.2 million for the nine months ended September 30, 2024.
Cash Flow Information
| (thousands of U.S. dollars) | Nine Months Ended September 30, | ||||||||||
| 2025 | 2024 | ||||||||||
| Net Cash Provided by (Used in): | |||||||||||
| Operating activities | $ | 184,091 | $ | 168,447 | |||||||
| Investing activities | (84,445) | (113,126) | |||||||||
| Financing activities | (92,359) | (44,016) | |||||||||
| Effect of foreign currency exchange rate changes on cash and cash equivalents | 14,874 | (4,477) | |||||||||
| Net increase in cash and cash equivalents, including restricted cash | $ | 22,161 | $ | 6,828 | |||||||
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Operating activities
Cash flows from operating activities increased $15.6 million to net cash provided of $184.1 million in the nine months ended September 30, 2025 compared to net cash provided of $168.4 million for the nine months ended September 30, 2024. The increase in cash flows from operating activities in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was mainly attributable to an increase in gross profit coupled with a decrease in cash paid for interest, partially offset by an increase in cash paid for income taxes.
Investing activities
Cash used in investing activities decreased $28.7 million to net cash used of $84.4 million in the nine months ended September 30, 2025 compared to $113.1 million for the nine months ended September 30, 2024. The variance was primarily driven by a decrease in cash paid for capital expenditures of $25.9 million in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.
Financing activities
Cash used in financing activities increased $48.3 million to net cash used of $92.4 million in the nine months ended September 30, 2025 compared to net cash used of $44.0 million for the nine months ended September 30, 2024. The increase in cash used in financing activities was mainly attributable to an increase $81.3 million of principal repayments on the Term Loans in 2025, which included a $75.0 million voluntary paydown in connection with Amendment No. 6 to the First Lien Credit Agreement. Partially offsetting these cash outflows, was a decrease in cash paid for debt issuance costs of $28.1 million due to the incremental debt issuance costs paid in connection with the Refinancing Term Loans and Secured Notes in the second quarter of 2024. In addition, in the first quarter of 2024, the Company paid $6.7 million to acquire certain facilities through the settlement of a finance lease.
Debt Facilities
Under the debt agreements summarized below, at September 30, 2025 we and Sotera Health Holdings, LLC (“SHH”), our wholly owned subsidiary, have debt payment obligations under (a) a term loan in the amount of $1,423.0 million, (b) a revolving credit facility, which supported operationally-related letters of credit but was otherwise undrawn, and which provides to us capacity up to $600.0 million for future potential borrowings, and (c) $750.0 million of senior notes. Our debt agreements also include additional covenants, conditions and rights to request additional debt, as summarized below.
Senior Secured Credit Facilities and Indenture
On December 13, 2019, SHH entered into senior secured first lien credit facilities (the “Senior Secured Credit Facilities”), consisting of both a prepayable senior secured first lien term loan (the “Term Loan”) and a senior secured first lien revolving credit facility (the “Revolving Credit Facility”) pursuant to a first lien credit agreement (as amended through Amendment No. 6 (as defined below), the “Credit Agreement”). Amendment No. 6 reduced the applicable interest rate margin under the Term Loan by 0.50%. The Senior Secured Credit Facilities also provide SHH the right at any time and under certain conditions to request incremental term loans or incremental revolving credit commitments based on a formula defined in the Senior Secured Credit Facilities.
On September 17, 2025, the Company and SHH entered into Amendment No. 6 (“Amendment No. 6”) to the Credit Agreement. Among other changes, Amendment No. 6 provides for refinancing lenders to provide term loans (the “Repriced Term Loans”) to SHH in an aggregate principal amount of $1,423.0 million, which reflects the balance after the Company’s application of $75.0 million of available cash to repay outstanding borrowings under its term loan facility. Amendment No. 6 also reduces the interest rate spread by 0.50% across term loans under the facility, such that the Repriced Term Loans have an applicable interest rate margin equal to the Adjusted Term SOFR (as defined in the Credit Agreement) plus 2.50%, with a 0.00% floor (with optionality for the Company to elect Alternate Base Rate plus 1.50% or Adjusted Daily Simple SOFR plus 2.50% (each as defined in the Credit Agreement)). This pricing reflects both the 0.50% reduction implemented through Amendment No. 6 and a 0.25% contractual pricing step-down that was triggered in August 2025. The Repriced Term Loans are also subject to a “soft call” premium of 1.00% for certain repricing transactions with respect to the Repriced Term Loans that occur within the six-month period after the effective date of Amendment No. 6. The Repriced Term Loans amortize at a rate of 1.00% per annum and matures on May 30, 2031.
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On April 30, 2025, the Company and SHH entered into Amendment No. 5 (“Amendment No. 5”) to the Credit Agreement. Among other changes, Amendment No. 5 provides (i) for an increase in the commitments under the existing Revolving Credit Facility in an aggregate principal amount of $176.2 million, (ii) that certain lenders providing revolving credit commitments shall also provide additional commitments for the issuance of letters of credit under the Revolving Credit Facility in an aggregate principal amount of $186.3 million and (iii) for the extension of the maturity date of the Revolving Credit Facility to April 30, 2030. Amendment No. 5 does not give effect to any other material changes to the terms and conditions of the Credit Agreement, including with respect to the representations and warranties, events of default and the affirmative or negative covenants.
The Company and SHH had previously entered into Amendment No. 4 on May 30, 2024, respectively. See Note 8, “Long-Term Debt,” to the Financial Statements for a description of these amendments.
On May 30, 2024, SHH, the Company, certain subsidiaries of the Company, and Wilmington Trust, National Association, as trustee, paying agent, registrar, transfer agent and notes collateral agent, entered into an Indenture (the “Indenture”) governing SHH’s $750.0 million aggregate principal amount of 7.375% senior secured notes due 2031 (the “Secured Notes”) issued in May 2024.
The Senior Secured Credit Facilities and the Indenture contain certain covenants and events of default. Additionally, all of SHH’s obligations under the Senior Secured Credit Facilities and the Indenture are unconditionally guaranteed by the Company and certain domestic restricted subsidiaries. For additional information about our Senior Secured Credit Facilities, the Indenture and the Secured Notes, including the covenants and events of default, refer to Note 8, “Long-Term Debt,” to our Financial Statements.
Outstanding letters of credit are collateralized by encumbrances against the Revolving Credit Facility and the collateral pledged thereunder, or by cash placed on deposit with the issuing bank. As of September 30, 2025, the Company had $8.1 million of letters of credit issued against the Revolving Credit Facility, resulting in total availability under the Revolving Credit Facility of $591.9 million.
Term Loan Interest Rate Risk Management
The Company utilizes interest rate derivatives to reduce the variability of cash flows in the interest payments associated with our variable rate debt due to changes in SOFR. For additional information on the derivative instruments described above, refer to Note 15, “Financial Instruments and Financial Risk”— “Derivative Instruments.”
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of consolidated financial statements and related disclosures in conformity with GAAP requires management to make judgments, estimates and assumptions at a specific point in time and in certain circumstances that affect amounts reported in the accompanying consolidated financial statements. In preparing these consolidated financial statements, management has made its best estimates and judgments of certain amounts, giving due consideration to materiality. The application of accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.
A comprehensive discussion of the Company’s critical accounting policies and management estimates made in connection with the preparation of the financial statements is included in Item 7 of the Company’s 2024 Form 10-K. There have been no significant changes in critical accounting policies, management estimates or accounting policies since the year ended December 31, 2024.
NEW ACCOUNTING PRONOUNCEMENTS
For a description of recent accounting pronouncements applicable to our business, see Note 2, “Recent Accounting Standards” to our consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risks are described within “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A of our 2024 Form 10-K. These market risks have not materially changed for the three and nine months ended September 30, 2025.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s “disclosure controls and procedures,” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control
During the three months ended September 30, 2025, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be subject to various legal proceedings arising in the ordinary course of our business, including claims relating to personal injury, property damage, workers’ compensation, employee safety, and our disclosures as a Nasdaq-listed, publicly-traded company. In addition, from time to time, we receive communications from government or regulatory agencies concerning investigations or allegations of noncompliance with laws or regulations in jurisdictions in which we operate. At this time, and except as is disclosed herein, we are unable to predict the outcome of, and cannot reasonably estimate the impact of, any pending litigation matters, matters concerning allegations of non-compliance with laws or regulations and matters concerning other allegations of other improprieties, or the incidence of any such matters in the future. Information regarding our legal proceedings is included below.
Legal Proceedings Described in Note 14, “Commitments and Contingencies”, of Our Consolidated Financial Statements
Note 14, “Commitments and Contingencies” to our consolidated financial statements for the three and nine months ended September 30, 2025 contained in this Quarterly Report on Form 10-Q includes information on legal proceedings that constitute material contingencies for financial reporting purposes that could have a material effect on our financial condition or results of operations. This item should be read in conjunction with Note 14, “Commitments and Contingencies” for information regarding the following legal proceedings, which information is incorporated into this item by reference:
•Ethylene Oxide Tort Litigation – California, Georgia, Illinois and New Mexico;
•Insurance Coverage for Environmental Liabilities; and
•Sotera Health Company Securities Litigation and Related Matters.
Legal Proceedings Not Described in Note 14, “Commitments and Contingencies” to Our Consolidated Financial Statements
In addition to the matters that are identified in Note 14, “Commitments and Contingencies” to our consolidated financial statements for the three and nine months ended September 30, 2025 contained in this Quarterly Report on Form 10-Q, and incorporated into this item by reference, we report matters, if any, that constitute material pending legal proceedings, other than ordinary course litigation incidental to our business, to which we are or any of our subsidiaries is a party. SEC regulations require disclosure of environmental proceedings that involve a government authority and potential monetary sanctions that the Company reasonably believes will exceed a specified threshold. The Company uses a threshold of $1.0 million to determine whether the disclosure of any such proceedings is required because we believe matters under this threshold are not material to the Company.
Item 1A. Risk Factors.
There have been no material changes from the risk factors previously described under Item 1A of our 2024 10-K filed with the SEC on February 27, 2025.
Item 5. Other Information.
Rule 10b5-1 Trading Plans
During the three months ended September 30, 2025, none of the Company’s directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted terminated
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Item 6. Exhibits.
The exhibits listed in the following Exhibit Index are filed, furnished, or incorporated by reference as part of this Quarterly Report on Form 10-Q.
| Incorporated by Reference | |||||||||||||||||||||||||||||
| Exhibit No | Description of Exhibits | Form | File No. | Exhibit | Filing Date | Furnished/Filed Herewith | |||||||||||||||||||||||
| 10.1 | 8-K | 001-39729 | 10.1 | 2025-09-18 | |||||||||||||||||||||||||
| 31.1 | * | ||||||||||||||||||||||||||||
| 31.2 | * | ||||||||||||||||||||||||||||
| 32.1 | ** | ||||||||||||||||||||||||||||
| 101.INS | Inline XBRL Instance Document - The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | * | |||||||||||||||||||||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | * | |||||||||||||||||||||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | * | |||||||||||||||||||||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | * | |||||||||||||||||||||||||||
| 101.LAB | Inline XBRL Taxonomy Label Linkbase Document | * | |||||||||||||||||||||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | * | |||||||||||||||||||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | * | |||||||||||||||||||||||||||
* Filed Herewith
** Furnished Herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SOTERA HEALTH COMPANY | |||||||||||
By: | /s/ Jonathan M. Lyons | ||||||||||
| Name: | Jonathan M. Lyons | ||||||||||
| Title: | Senior Vice President and Chief Financial Officer | ||||||||||
| (Principal Financial Officer) | |||||||||||
Date: November 4, 2025
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