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Date

Tuesday, Nov. 4, 2025, at 9 a.m. ET

Call participants

  • Chairman and Chief Executive Officer — Michael Petras
  • Chief Financial Officer — Jonathan Lyons
  • Vice President of Investor Relations — Jason Peterson

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Risks

  • Nelson Labs revenue decline — Segment revenue declined 5%, with management citing "Expert Advisory Services in that RCA business is feeling some of the impact from the FDA lack of activity," according to Michael Petras, resulting in a "material impact on the top line for the company."
  • Nordion margin compression — CFO Jonathan Lyons stated segment income margin for Nordion dropped by approximately 130 basis points, "driven by product mix."
  • Government activity impact — CEO Michael Petras described "a material impact on the top line" and specifically cited delayed activity in Expert Advisory Services due to the "FDA lack of activity".

Takeaways

  • Total revenue -- $311 million in total company revenue, up 9.1% compared to Q3 2024, or 8% on a constant currency basis, driven by double-digit revenue growth in Sterigenics (9.8%) and Nordion (22.4%).
  • Adjusted EBITDA -- Adjusted EBITDA was $164 million, rising 12.2% (11.2% constant currency) compared to Q3 2024, with a margin improvement of 147 basis points to a 52.7% adjusted EBITDA margin.
  • Adjusted EPS -- Adjusted EPS was $0.26, an increase of $0.09 from Q3 2024, a $0.09 increase in adjusted EPS compared to Q3 2024, with approximately $0.04 from adjusted EBITDA growth, under $0.01 from lower interest expense, and the remainder due to a reduced tax rate.
  • Sterigenics segment revenue -- $193 million, up 9.8% (8.4% constant currency) compared to Q3 2024, with a volume/mix benefit of 4.6%, pricing up 3.8% for Sterigenics, and a 140-basis-point FX benefit.
  • Nordion segment revenue -- $63 million in revenue for Nordion, up 22.4% (23.6% constant currency), boosted by an 18.9% volume/mix benefit and 4.7% pricing, partially offset by 120 basis points of adverse FX.
  • Nelson Labs segment revenue -- $56 million, declining by 5%, with a 2.7% pricing contribution, 1.4% FX help for Nelson Labs, and growth in Core Lab testing, more than offset by a fall in Expert Advisory Services.
  • Sterigenics segment margin -- Margin improved 90 basis points year-over-year to 55.6%, supported by top-line growth.
  • Nordion segment income margin -- Margin was 60.6% for Nordion, with a decrease of about 130 basis points year-over-year, attributed to increased equipment and product sales.
  • Nelson Labs segment margin -- Segment income margin expanded 229 basis points to 34.1%, due to mix, lab optimization, and pricing.
  • Debt reduction -- $75 million in debt repaid and term loan repriced, yielding approximately $13 million in annual interest savings.
  • Net income -- $48 million, or $0.17 per diluted share for Q3 2025, up from $17 million or $0.06 per share in Q3 2024; improvement attributed to both improved operating results and tax rate change.
  • Net leverage ratio -- Improved to 3.3x, down from 3.7x at 2024 year-end and 4.2x in Q3 2023.
  • Liquidity -- Over $890 million in available liquidity as of the end of the quarter, comprised of nearly $300 million in cash and $600 million undrawn on a credit facility.
  • Updated full-year 2025 outlook -- Revenue growth maintained at 4.5%-6% constant currency for the full year 2025; adjusted EBITDA growth outlook for fiscal 2025 raised to 6.75%-7.75% constant currency.
  • Sterigenics 2025 guidance -- Constant currency revenue growth for fiscal 2025 is expected in the mid- to high single digits.
  • Nordion 2025 guidance -- Raised to mid- to high single-digit constant currency revenue growth for the full year 2025; management confirmed "no longer any revenue risk associated with Cobalt" for 2025.
  • Nelson Labs 2025 guidance -- Revenues are expected to decline mid-single digits constant currency for the full year 2025 due to persistent headwinds in Expert Advisory Services.
  • Interest expense guidance -- Lowered to $154 million-$158 million for fiscal 2025, from a previous $155 million-$165 million outlook.
  • Adjusted tax rate guidance -- Reduced to 29%-31%, from 31.5%-33.5%, due to recent U.S. tax law guidance adopted this quarter.
  • Adjusted EPS guidance -- Full-year 2025 adjusted EPS guidance increased to $0.81-$0.86, up from $0.75-$0.82, driven by higher adjusted EBITDA, lower interest expense, and an improved tax rate.
  • Capital expenditures guidance -- Outlook for 2025 capital expenditures reduced to $125 million-$135 million, down from $170 million-$180 million, due to project timing and cost savings.
  • Cobalt-60 supply -- Nordion secured a 25-year Class 1B operating license, the longest ever granted by the Canadian Nuclear Safety Commission, ensuring long-term cobalt-60 supply stability.
  • Litigation updates -- For ethylene oxide claims, CEO Petras referred to a recent Georgia Court of Appeals decision, saying, "the court of appeals directed the trial court to apply the correct standard that requires causation experts to reliably identify the levels at which exposure to EO becomes harmful," and described favorable developments in Illinois and Georgia.

Summary

Sotera Health (SHC 1.08%) reported consolidated revenue growth of 9.1% and adjusted EBITDA growth of 12.2% for Q3 2025, and sharp improvements in interest expense and net leverage. Management raised full-year 2025 adjusted EBITDA and adjusted EPS guidance ranges, while lowering capital expenditure expectations and providing revised interest and tax rate forecasts for fiscal 2025. Nordion's newly secured 25-year operating license for cobalt-60 supply removes a major long-term regulatory uncertainty, and executive commentary clarified that no further revenue risk from cobalt exists for 2025. Segment performance was mixed, with sales and margin gains in Sterigenics and sales growth in Nordion, while Nelson Labs saw revenue decline due to continued government-related disruption in advisory services, though improvements in core lab testing helped segment income and margin. Management highlighted positive developments in major litigation exposures, especially in Georgia and Illinois, claiming the company’s position is reinforced by recent court decisions.

  • CFO Lyons said, "We are raising our constant currency adjusted EBITDA growth outlook to 6.75% to 7.75%, up from the prior range of 6% to 7.5%." This outlook refers to fiscal 2025 and is based on non-GAAP adjusted EBITDA.
  • CEO Petras stated, "We are reaffirming our 2025 revenue outlook and are raising our adjusted EBITDA outlook," referring to the company's non-GAAP adjusted EBITDA outlook for 2025, citing strong visibility for the final quarter.
  • Nelson Labs' expert advisory services generated a "material impact on the top line," with cited dependence on FDA funding and activity delays; the company now projects a full-year 2025 revenue decline for the segment.
  • Net operating cash flow year-to-date reached $184 million for the nine months ended in Q3 2025, supporting both debt reduction and capital deployments, leaving over $890 million in available liquidity.
  • Capital expenditures budget shift will not affect cumulative plans through 2027 or the previously committed $500 million to $1 billion cumulative free cash flow target, per management’s reaffirmation at the 2024 Investor Day.
  • Executive commentary confirmed no direct sales exposure to government shutdowns, but acknowledged minor, non-material indirect effects on the advisory business.

Industry glossary

  • Cobalt-60: A radioactive isotope used in medical device sterilization and radiotherapeutic treatments, central to Nordion's commercial operations and regulatory considerations.
  • Class 1B operating license: A Canadian Nuclear Safety Commission designation granting the right to operate facilities that produce, process, or handle nuclear substances at the highest regulatory safety level applicable to Nordion’s isotope production.
  • Expert Advisory Services: Nelson Labs’ business line focused on regulatory consulting, navigating compliance and approvals with agencies such as FDA, and differentiated from routine laboratory testing.
  • Core Lab testing: Testing and analytical services for medical device, pharmaceutical, and bioprocessing industry clients, excluding regulatory and advisory consulting.

Full Conference Call Transcript

Operator: Good morning. And welcome to the Sotera Health Third Quarter 2025 Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw from the question queue, please note this event is being recorded. I would now like to turn the conference over to Vice President of Investor Relations, Jason Peterson. Jason, please go ahead.

Jason Peterson: Good morning, and thank you. Welcome to Sotera Health Third Quarter 2025 Earnings Call. You can find today's press release and accompanying supplemental slides on the investor section of our website at soterahealth.com. This webcast is being recorded, and a replay will be available in the Investors section of the Sotera Health website. On the call with me today are Chairman and Chief Executive Officer, Michael Petras, and Chief Financial Officer, Jonathan Lyons. During the call, some of our comments may be considered forward-looking statements. The matters addressed in these statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied.

Please refer to Sotera Health's SEC filings and the forward-looking statements slide at the beginning of the presentation for a description of these risks and uncertainties. The company assumes no obligation to update any such forward-looking statements. Please note that during the discussion today, the company will present both GAAP and non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, tax rate applicable to net income, adjusted net income, adjusted EPS, net debt, and net leverage ratio in addition to constant currency comparison. A reconciliation of GAAP to non-GAAP measures for all relevant periods may be found in the schedules attached to the company's press release and in the supplemental slides of this presentation.

The operator will be assisting with the Q&A portion of the call today. Please limit yourself to one question and one follow-up so that we can give everyone an opportunity to ask questions. If you have any questions after the call, please feel free to reach out to me and the investor relations team. I will now turn the call over to Sotera Health Chairman and CEO, Michael Petras.

Michael Petras: Good morning, and thank you for joining us today. I'm pleased to report another excellent quarter for Sotera Health, marked by strong top-line growth, double-digit adjusted EBITDA growth, margin expansion of approximately 150 basis points, and a $0.09 adjusted EPS increase compared to 2024. Total company revenues increased 9.1% for the quarter, while adjusted EBITDA increased 12.2%. Sterigenics delivered another strong quarter, achieving 9.8% top-line growth compared to 2024, driven by consistent performance across our core medical device customers. Nordion delivered revenue growth of 22.4%, which was primarily driven by the timing of the reactor harvest schedules versus 2024.

Revenue was ahead of our expectations as certain customer deliveries originally scheduled for the fourth quarter were fulfilled in the third quarter. While Nelson Labs delivered third-quarter revenue that was modestly below our expectations, our growth in Core Lab testing and operational improvements drove segment income growth and margin expansion. This marks the fifth consecutive quarter of year-over-year margin expansion for Nelson Labs, highlighting our focus on execution. In addition to our strong performance during the quarter, we strengthened our balance sheet by paying down $75 million of debt and lowered our interest expense by approximately $13 million annually. Jonathan will elaborate more on this shortly.

Given our strong year-to-date results and visibility in the remainder of the year, we are reaffirming our 2025 revenue outlook and are raising our adjusted EBITDA outlook. Each quarter, I've emphasized Sotera Health's vital role in global healthcare. I'm pleased to share that Nordion recently secured a 25-year renewal of its Class 1B operating license, the longest Class 1B license ever granted by the Canadian Nuclear Safety Commission. This milestone reflects our deep, trusted partnership with the CNSC and their confidence in Nordion's safety culture and operational excellence.

With this renewed license, Nordion will continue to secure the global supply of cobalt-60, supporting critical sterilization processes, including those performed by Sterigenics, and enabling lifesaving radiotherapeutic treatments for brain tumors and early-stage breast cancer. This achievement reinforces our mission of safeguarding global health by ensuring a reliable supply of critical cobalt-60 for our customers, the healthcare system, and patients for decades. Now I'll turn it over to Jonathan, who will walk us through the financials.

Jonathan Lyons: Thank you, Michael. I'll start with a review of our consolidated third-quarter 2025 results, followed by a breakdown of performance across each business segment. On a consolidated basis, third-quarter revenues increased 9.1% to $311 million, or 8% on a constant currency basis, as compared to 2024. Adjusted EBITDA increased by 12.2% to $164 million, or 11.2% on a constant currency basis, versus 2024. Adjusted EBITDA margins reached 52.7%, an increase of 147 basis points over the prior year, driven by improved margins in both Sterigenics and Nelson Labs. Interest expense for the third quarter was $39 million, an improvement of approximately $2.4 million versus the same period last year.

Net income for Q3 2025 was $48 million, or $0.17 per diluted share, compared to net income of $17 million, or $0.06 per diluted share in Q3 2024. Adjusted EPS was $0.26, an increase of $0.09 from 2024. Nearly $0.04 of this benefit came from adjusted EBITDA growth, less than $0.01 came from lower interest expense, while the remainder relates to a reduced tax rate. Now let's take a closer look at our segment performance. Sterigenics continued its strong performance in the third quarter, delivering 9.8% revenue growth to $193 million, or 8.4% on a constant currency basis compared to Q3 2024.

The revenue growth was driven by a favorable volume mix of approximately 4.6%, increased pricing of 3.8%, and a 140 basis point benefit from foreign currency exchange. Segment income increased 11.6% to $107 million, or 10.2% on a constant currency basis, with margins improving 90 basis points year-over-year to 55.6%, driven by strong top-line growth partially offset by inflation. Nordion's third-quarter revenue increased 22.4% to $63 million, or 23.6% on a constant currency basis compared to 2024. Nordion's revenue increase was driven by a volume and mix benefit of 18.9% and favorable pricing of 4.7%, partially offset by an unfavorable impact of 120 basis points from changes in foreign currency exchange rates.

Nordion segment income increased 19.9% to approximately $38 million, or 21.2% on a constant currency basis versus 2024. Segment income growth was driven by increased volume and mix as well as customer pricing. Segment income margin was 60.6%, reflecting a decrease of approximately 130 basis points driven by product mix. On a year-to-date basis, Nordion segment income margins have increased more than 70 basis points. Nelson Labs reported third-quarter 2025 revenue of $56 million, a 5% decline compared to the same period last year. Favorable contributions from pricing of 2.7%, foreign exchange of 1.4%, and core lab testing growth were offset by the decline in expert advisory services.

Nelson Labs' third-quarter 2025 segment income rose 1.9% to $19 million, or flat on a constant currency basis, with margins expanding 229 basis points year-over-year to 34.1%. Segment income and margin improvement were driven by volume and mix improvements, lab optimization, and favorable pricing. Let's now turn to our balance sheet, cash generation, and capital deployment activity. Year-to-date, we have generated $184 million in positive operating cash flow, while capital expenditures totaled $87 million. The company continues to be in a very strong liquidity position.

As of the end of the third quarter, we had over $890 million in available liquidity, which included almost $300 million in unrestricted cash and nearly $600 million of available capacity on a revolving line of credit. We continue making progress toward our long-term net leverage target range of two to three times. Our net leverage ratio improved to 3.3 times at quarter-end, down from 3.7 times at the end of 2024 and down from 4.2 times as of Q3 2023. As Michael mentioned, we took strategic actions this quarter to strengthen our balance sheet and lower interest expense.

First, continued adjusted EBITDA growth and cash generation helped us achieve a contractual net leverage target, earning our 25 basis point reduction in our term loan interest rate. Then in September, we repriced the term loan for an additional 50 basis point reduction and repaid $75 million of the facility. These steps are expected to generate approximately $13 million in annual interest savings. Now I'd like to turn to our 2025 full-year outlook. We are maintaining our full-year constant currency revenue growth outlook range of 4.5% to 6% and anticipate revenue growth will land near the midpoint of this range.

With continued benefits from volume growth and operational improvements, we are raising our constant currency adjusted EBITDA growth outlook to 6.75% to 7.75%, up from the prior range of 6% to 7.5%. Foreign currency is expected to contribute approximately 25 basis points to revenue and adjusted EBITDA growth versus the prior outlook of no impact. Total company pricing for 2025 is still expected to be near the midpoint of our long-term stated range of 3% to 4%. For Sterigenics, we continue to expect 2025 constant currency revenue growth of mid to high single digits. For Nordion, we've raised our full-year 2025 constant currency revenue growth outlook and now expect mid to high single-digit growth.

Additionally, I'm pleased to report that for 2025, there is no longer any revenue risk associated with Cobalt. For Nelson Labs, we now expect full-year 2025 constant currency revenues to decline mid-single digits as the impact from Expert Advisory Services more than offsets the continued growth in Core Lab testing and improved pricing. We expect segment income margin to finish in the low to mid-thirties percent range for the full year. Turning to other guidance items, driven by our balance sheet initiatives discussed earlier, we are improving our interest expense range to $154 million to $158 million from our previous outlook of $155 million to $165 million.

Our effective tax rate on our adjusted net income is expected to be in the range of 29% to 31%, improving from the prior range of 31.5% to 33.5%. The lower tax rate on adjusted net income reflects the adoption of recent accounting guidance related to the US tax law changes enacted in July. We now expect adjusted EPS to be in the range of $0.81 to $0.86, an increase from the previous range of $0.75 to $0.82. The $0.05 improvement from the midpoint of the prior EPS range reflects $0.02 driven by incremental EBITDA generation and reduced interest expense, with the balance driven by the favorable tax rate change.

We expect the fully diluted share count to remain in the range of 286 million to 287 million shares. We now expect capital expenditures in the range of $125 million to $135 million, below our prior outlook of $170 million to $180 million, driven by project timing and incremental cost savings. While spending cadence has shifted, our expectation for cumulative capital expenditures from 2025 through 2027 remains unchanged, and we are on track to achieve our $500 million to $100 million cumulative free cash flow commitment provided at our 2024 Investor Day. We continue to expect the year-end 2025 net leverage ratio to improve compared to 2024. Finally, as usual, our outlook does not assume any M&A activity.

Now I'll turn the call back over to Michael.

Michael Petras: Thank you, Jonathan. We're very pleased with the quarter's performance. I would now like to give an update regarding the ethylene oxide (EO) personal injury claims in Cobb County, Georgia. Although this is a lengthy and detailed update, the key point is while the case is pending in Cobb County still have a ways to go. We believe the recent phase one and phase two rulings align with our long-standing position that when science is considered fully, fairly, and properly, the evidence refutes the plaintiff's claims in these matters. As a reminder, the Cobb County Court ordered phased proceedings in eight bellwether cases selected by the plaintiff's counsel. Phase one was devoted to general causation.

The court required the plaintiffs to prove that EO emissions from our Atlanta facility are capable of causing the diseases alleged by the plaintiffs. In November 2024, the court excluded two of the plaintiff's three general causation experts but allowed the third expert under a "new standard" created by the court for these cases that did not require the plaintiffs to establish exposure levels at which EO becomes harmful to humans. Both sides appealed. On Friday, October 31, the Georgia Court of Appeals rejected the trial court's "new standard" and vacated the trial court's phase one orders.

Consistent with our position, the court of appeals directed the trial court to apply the correct standard that requires causation experts to reliably identify the levels at which exposure to EO becomes harmful. The court of appeals also instructed the trial court to consider whether plaintiffs can prove general causation using epidemiologic evidence and background risk of the diseases at issue, which all occur in the general population without exposure to EO emissions. While the phase one appeals were pending, three of the bellwether cases proceeded to phase two, which was devoted to specific causation. Plaintiffs were required to present admissible expert testimony that the plaintiffs were exposed to doses of EO from the Atlanta facility that caused their diseases.

On October 17, the trial court excluded all three of the plaintiff's causation experts and dismissed all three cases for failure to present reliable and admissible evidence of specific causation. The court also dismissed the plaintiff's claims for nuisance, noting that the plaintiffs had not presented any evidence that the Atlanta facility had violated EPA, Georgia EPD, or Cobb County requirements. Although the phase two orders apply only to three bellwether cases, we believe the substantive grounds for rulings apply with equal force to the remaining personal injury claims. This will be decided in due course by the Cobb County Court and, if necessary, the Georgia Appellate Court.

We will continue to put the science front and center as we defend Sterigenic's safe and essential operations. This statement, the trial court's phase one and phase two orders, and the decision of the Georgia Court of Appeals are all available on our website. At this point, operator, I'd like to open it up for questions and answers.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then 2. At this time, we will pause momentarily to assemble our roster. And your first question today will come from Patrick Donnelly with Citi. Please go ahead.

Patrick Donnelly: Hey. Great. Thanks for the question. Maybe just one on the volume recovery. Nice to see that continue. Are there certain areas you guys are seeing kind of outsized recovery? I think last quarter, you talked a little bit about medtech and bioproduction. Maybe what you're seeing there and what the expectations on the volume trajectory are from here.

Michael Petras: Hey, Patrick. Good morning. This is Michael. We are seeing pretty consistent performance across Sterigenics and across almost all categories, bioprocessing, med tech broadly. Overall, you know, we're seeing a good recovery in volumes, and we expect that to continue going forward.

Patrick Donnelly: Great. And then just a quick one, you know, helpful on the litigation update there. I guess maybe a quick one is just in terms of where some of the other cases are. Again, it sounds like we can continue to see some of these updates. We would love to just hear the latest on the broad litigation side and how you're feeling on those.

Michael Petras: Patrick, you know, Illinois is wrapping up. We've got the April 2025 settlement that we did that's been completed and closed out. The July 2025 one is progressing well. That'll leave us with only one remaining case in Illinois. In Georgia, I just gave you a lengthy update there. On New Mexico, right now, there's no personal injury claims currently. There's only the one suit brought by the AG for public nuisance that's set for trial in July 2026. And then in California, we recently have been informed that the first trials are expected in January and April 2027.

Patrick Donnelly: Alright. Perfect. Thanks, buddy.

Operator: Your next question today will come from Casey Woodring with JPMorgan. Please go ahead.

Casey Woodring: Hi. This is Jayden on for Casey. Thank you so much for taking my question. Just first on Sterigenics, are you just wondering, are you factoring any expectation of budget flush in 4Q? And given you've reaffirmed your revenue outlook for the year, after your 3Q beat, can you touch on how conservative your guidance is for '25 and the puts and takes behind that? Thank you.

Michael Petras: I'm sorry. Can you repeat the question on Sterigenics? I wasn't sure I understood that first question.

Casey Woodring: I was just wondering if you're factoring in any expectation of a budget flush in April. A budget flush, are you talking about the government shutdown? Is that what you're referencing when you say budget flush?

Casey Woodring: No. I'm talking from the med tech or bio. We're not expecting a budget flush, no. And then when I look forward, you know, we feel confident in our guidance and outlook that we're giving you here for the rest of the year. I wouldn't say it's aggressive. I wouldn't say it's conservative. We just feel confident where it is with one quarter to go.

Casey Woodring: Got it. And then just on that government shutdown since you mentioned it, are you seeing any impact from that in your RCA business? Or anywhere across your portfolio?

Michael Petras: You know, when we look at it, remember, we have no direct government sales in the business. There's some indirect impact, but it's pretty minimal. It's not a material impact. We do feel a little bit of it in the expert advisory services with some of the delays going on and activity there. But overall, we don't see a material impact on the company. We do not have direct sales to the government.

Casey Woodring: Alright. Got it. Thank you.

Operator: Your next question today will come from Luke Sergott with Barclays. Please go ahead.

Luke Sergott: Great. Thanks for the question. Just two for me. It's about the one on the expert advisory business. It seems to have gotten worse here. Is that just related to, you know, the lack of FDA funding, lack of inspection, and kind of the government shutdown? And then the second one is on the implied 4Q EBITDA margin step down. Just want to know what's going on there, and I assume it's probably just not the Nordion volumes, but just wanted to see if anything else is going on.

Michael Petras: Good morning, Luke. Yeah. I would say, you know, Expert Advisory Services in that RCA business is feeling some of the impact from the FDA lack of activity. So that's clearly impacting. It was worse than we expected. But overall, you know, it's had a material impact on the top line for the company. It's about 10 points of impact, John. Is it roughly about ten points of impact on the top line? So but overall, you know, the core lab testing is improving, which is what we had hoped for and we're continuing to see. John, you want to address the margin question at Luke as well?

Jonathan Lyons: Yeah. Luke, as we look at the margins in Q4, we anticipate that Nelson will step back a bit from where they are at this peak in Q3. Q3 has the benefits from pretty low expenses inside of that. And then, you know, we've been running really well in Steri. We could see a little bit of a step back in that, but nothing alarming there. Still stable margins for the year. Maybe even slight growth for the year for Sterigenics?

Luke Sergott: Okay. Great. Thanks.

Operator: Your next question today will come from Dave Windley with Jefferies. Please go ahead.

Dave Windley: Hi, good morning. Thanks for taking my questions. Maybe follow-up on Nelson and ask the, I guess, the other side of the coin, Michael, the Core Lab testing and the pickup there. So just kind of thinking about the balance if Expert Advisory is feeling this headwind and, you know, that's kind of prisoner to what the government does on funding and FDA. What does the rest of the business look like? And what's the demand quotient there?

Michael Petras: Yeah. Thanks, David. I'd say overall core lab testing is doing pretty well. We'd like to continue to see more growth. The routine volumes or some of the flow volumes are picking up like we see in the sterilization volumes. Validation has been a little bit choppy. We got some pockets, particularly with some of the new regulations. You know, some of the requirements of extractable leachable tests and bioprocessing components and things of that nature are all doing well. So overall, we're seeing some nice growth in the lab testing core. We'd like to see it better. But overall, it's going in the right direction. And, you know, fundamentally, we're seeing the Embedded Labs growth continue.

The linkage with the Sterigenics piece and the volumes there are clearly having an impact in a positive way.

Dave Windley: And then maybe zooming out a little bit and just thinking more broadly to the question on kind of the fourth quarter sequential progression. I think as Luke highlighted, there's a little bit of margin pullback. John, you addressed that. The revenue growth indicated by your guidance also steps back a little bit. And so I wondered if you could just comment on cadence, timing, you know, things that for the year were, you know, reflected in 3Q that you maybe thought were gonna land in April, that kind of thing relative to, you know, kind of what's the smooth trajectory that fits through what is a higher 3Q and a lower 4Q? Thanks.

Michael Petras: Yeah. Thanks, David. I would just say, you know, we talked about the Nelson comments and things that we're seeing on Expert Advisors. The other big factor that we talked about last quarter, we're reentering today is the Nordion. The Nordion lumpiness, you know, we said it was gonna be down significantly versus last year's fourth quarter, and that's what you're referencing. That's the piece we so we had a portion of it as we referenced on our comments here that pulled into the third quarter from customers' requests. Overall, you know, we still expect to be down significantly from last year, all due to timing.

But overall, when you look at the total year for Nordion, it'll be actually above our expectations as we also comment on here today. So I think that's the other piece.

Dave Windley: Okay. Great. Thanks.

Operator: Your next question will come from Brett Fishbin with KeyBanc. Please go ahead.

Brett Fishbin: Hey guys, good morning. Thank you so much for taking the questions. Just had a quick one on Nordion. Notice the very strong revenue growth in the quarter, in excess of 22%. But I think you noted that there were some margin pressures from the mix. And I'm just curious, kind of like what type of mix shift with Nordion was causing some margin compression? And does that persist moving forward?

Michael Petras: Hey, Brett. It's Michael here. So when you look at the business, it's tough to talk about margin pressure in the Nordion business when you see the margins that we put up in that business. What we're referencing there is product sales, in particular, production of radiators, equipment sales. That's a lower margin, and we saw some growth in that in the quarter. We'll see that sporadically here and there, but we don't see that as a material impact long term. The margin rates continue to be very strong in that business, as you know.

Brett Fishbin: That is a very fair point. And then just on Sterigenics, it was really great to see the second quarter of really improved trends for the segment. I was just curious how you think about the overall sustainability of, call it, mid to high single-digit or high single-digit type of growth as we look ahead into 2026? And maybe sort of giving guidance if there's any key moving pieces that you would call out for next year other than potentially more challenging comparisons? Thanks again.

Michael Petras: Yeah. Great. You know, listen, we're proud of what the Sterigenics team is doing. They're executing very well. You know, we set our long-range guide there would be mid-single-digit to high-single-digit growth. We're reiterating that. And I would just say, you know, overall, you know, we'll give guidance when we give, you know, guidance at the beginning of next year. But overall, when we look at our long-range commitments we made in the Investor Day last November, we still feel pretty confident around that. So we're well situated. We'll talk about '26 when we get there.

Operator: Your next question will come from Jason Bednar with Piper Sandler. Please go ahead.

Jason Bednar: Hey, morning, guys. Thanks for taking the questions, and congrats on the quarter here. I wanted to first start on Sterigenics. Pricing decelerated ever so slightly. I know we're talking tens of basis points on a sequential basis. But I think you've been trending down fifty percent sixty basis points year on year in the last few quarters. I think this has also the smallest pricing tailwind we've seen in at least a few years. And look, it's still good. It's better than a lot of other healthcare verticals. But where do you think this pricing contribution stabilizes? Is this the level? Do we need to drift lower?

And then, you know, maybe the follow-up there would be, I think you've talked in the past about stronger opportunities in pricing in Sterigenics in light of the investments you've been making in your facilities. Is that potentially a reversal of sorts as we think about pricing going forward?

Michael Petras: Yeah. Hey. Thanks, Jason. You know, we said last year, November, we talked about price...Michael Petras: ...increases being in that 3% to 4% range, and we continue to see that. I think what you're seeing is just some of the timing of when those price increases are implemented and how they flow through the P&L. But overall, we feel confident in that 3% to 4% range. And as you mentioned, it's still a very strong pricing environment compared to other healthcare verticals. We continue to invest in our facilities, and we believe that supports our ability to maintain and potentially enhance pricing power over time. So, we feel good about where we are with pricing.

Operator: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Michael Petras for any closing remarks.

Michael Petras: Thank you, everyone, for joining us today and for your continued interest in Sotera Health. We are pleased with our performance this quarter and remain focused on executing our strategy to drive growth and create value for our shareholders. We look forward to updating you on our progress in the coming quarters. Thank you, and have a great day.

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