ソテラ・ヘルス（SHC）2026年第3四半期決算説明会：欧州メドテックの軟調さにもかかわらずガイダンスを維持

主要なポイント

• ソテラ・ヘルスの2026年第3四半期の売上高は3億2500万ドルとなり、前年同期比4.4%増加しました（報告ベース、固定為替レートベースともに）。
• 調整後EBITDAは3.9%増加して1億7100万ドル（固定為替レートベースでは4.0%増）となりました。調整後EBITDA率は52.5%となり、前四半期比で約100ベーシスポイント改善しました。
• 調整後EPSは12%増加して0.29ドルとなりました。一方、借入コスト低下と前年のタームローン返済により、四半期の支払利息は500万ドル減少して3400万ドルとなりました。
• ステリジェニクス部門は固定為替レートベースで8.2%の売上増を達成し、セグメント利益率を57ベーシスポイント拡大させました。ただし、経営陣は第3四半期の半ばから後半にかけて欧州顧客の間で医療機器全般が伸び悩んだことを挙げています。
• ネルソン・ラボの売上高は固定為替レートベースで9.2%増加しました。これは販売量の増加、製品ミックス、エキスパート・アドバイザリー・サービスの活発化に支えられたものです。ノルディオンの売上高は固定為替レートベースで11.5%減少しました。これはコバルト60の採取および出荷時期によるものです。
• 経営陣は2026年通期の連結業績予想を再確認しました。これには報告ベース売上高の12億3300万ドル〜12億5000万ドル、調整後EBITDAの6億3200万ドル〜6億4100万ドル、および調整後EPSの0.95ドル〜1.01ドルが含まれます。

主要財務データ

事業および営業業績

ステリジェニクス

ステリジェニクスの売上高は8.5%増加の2億900万ドル（または恒常為替レートベースで8.2%増）となりました。この成長には価格改善による4.8%のプラス効果、数量およびプロダクトミックスによる3.4%の増加、ならびに30ベーシスポイントの為替増益効果が反映されました。

セグメント利益は9.6%増加して1億1,700万ドル（恒常為替レートベースで9.2%増）となりました。セグメント利益率は57ベーシスポイント拡大し、56.1%となり、営業レバレッジと堅実な事業執行がこれを支えました。

経営陣によると、操業停止日数の比較によるプラス影響、顧客のアウトソーシングプログラム、およびノースカロライナ州のX線施設が第3四半期の成長に寄与し、第4四半期においても引き続き寄与する見込みです。一方で、医療機器需要は第3四半期半ばから後半にかけて主に欧州顧客を中心に軟化し、第4四半期初頭も軟調な推移が続きました。なお、米国の需要については比較的安定していると述べられました。

ネルソン・ラボ

Nelson Labsの売上高は8.8%増加して6,100万ドル（または為替変動の影響を除いたベースで9.2%増）となりました。数量およびミックスは6.6%寄与し、価格改定は2.6%押し上げました。為替は成長率を40ベーシスポイント押し下げました。

売上高の伸びは、複雑な規制適合試験プロジェクトを含むExpert Advisory Servicesの活動増が寄与しました。セグメント利益は2.5%増加して1,900万ドル（または為替影響を除いたベースで3.0%増）となりました。セグメント利益率は19ベーシスポイント低下して32.1%となりましたが、主に事業ミックスが原因です。

経営陣は、第4四半期の成長率が第3四半期の水準から減速すると予想していますが、引き続きExpert Advisory Servicesの寄与を見込んでいます。同社は、そうしたプロジェクトベースの事業への持続的な長期的ミックスシフトを想定していません。

同社はまた、クロスセリングも機会として特定しました。SterigenicsおよびNelson Labsの売上高のおよそ70%が共通の顧客から生じており、経営陣はそれらの顧客における浸透率を高める取り組みを進めています。

Nordion

Nordionの売上高は12.4%減少して5,500万ドル（または為替影響を除いたベースで11.5%減）となり、コバルト60の収穫・出荷時期が反映されました。プラスの価格効果2.2%は、13.7%の数量およびミックスの減少と90ベーシスポイントの為替の逆風により相殺されました。

セグメント利益は11.4%減少して約3,400万ドル（または為替影響を除いたベースで10.4%減）となりました。減収にもかかわらず、セグメント利益率は71ベーシスポイント拡大して61.3%となり、業務生産性の向上と価格改定に支えられました。

経営陣による業績見通し

経営陣は2026年の連結見通しを維持しました：

公表されたレンジには、通期での推定70ベーシスポイントの為替追い風効果が含まれています。経営陣は、為替が第4四半期に100ベーシスポイントを超える逆風になると予想しています。

通期の調整後EBITDAマージンは2025年比でほぼ横ばいとなる見込みです。SterigenicsおよびNordionで予想されるマージン拡大が、Nelson Labsのマージン低下を相殺すると期待されています。

セグメント別の経営陣の見通しは以下の通りです。

• Sterigenics: 2026年の恒常為替レートベースの売上高成長率は1桁台半ばから後半を予想し、第4四半期は約6%の成長となる見込みです。この第4四半期の見通しは、売上高が第3四半期比でほぼ横ばいとなることを示唆しています。
• Nordion: 通期の恒常為替レートベースの売上高成長率は1桁台半ばを予想。
• Nelson Labs: 通期の恒常為替レートベースの売上高成長率は1桁台前半から半ばを予想し、通期のセグメントマージンは年初来水準と同程度となる見通し。

経営陣は、純レバレッジ倍率が2025年と比較して改善すると予想しています。なお、この見通しにはM&A活動は含まれていません。

リスクおよび注視点

• 欧州の医療機器需要: 経営陣は、第3四半期の半ばから後半にかけて、欧州の複数の顧客全体で広範な需要の軟調さを確認しました。同社は現在の顧客からのフィードバックおよび第4四半期序盤の傾向をガイダンスに反映させています。
• 2027年の見通しの不透明感: Sotera Healthは現在も2027年の計画策定プロセスを進めており、2月に予定されている第4四半期決算発表時に見通しを開示する予定です。
• Nordionのタイミングによる変動性: コバルト60の回収・出荷スケジュールは、四半期ごとの売上高に大きな変動をもたらす可能性があります。第3四半期の一部の出荷は、経営陣の想定よりも早いタイミングで実施されました。
• Nelson Labsのプロジェクト構成: Expert Advisory Services（専門家アドバイザリーサービス）は成長を支援する可能性があるものの、よりプロジェクト主導型であり、売上高やマージンに変動をもたらします。
• 為替変動: 通期では為替のプラス効果が見込まれるものの、経営陣は第4四半期に100ベーシスポイントを超える為替の逆風を予想しています。
• 訴訟問題: 経営陣によると、ジョージア州の控訴裁判所の決定は2027年春に予定されています。カリフォルニア州での最初の公判は2027年1月と4月に予定されており、イリノイ州の訴訟案件は単独の裁判官に割り当てられ、公判前手続きの段階にあります。

アナリスト質疑応答の要点

経営陣は、Sterigenicsにおける医療機器の軟調さは米国ではなく主に欧州に集中していたと述べました。減速は特定の顧客や製品カテゴリーに限られたものではありませんでしたが、需要は十分に安定しており、経営陣は第4四半期のSterigenicsの売上高が前四半期比でほぼ横ばいになると予想しています。

Sterigenicsのアウトソース型顧客プログラムは順調に進展しており、第3四半期の成長に貢献しました。第4四半期においても貢献が期待されています。ノースカロライナ州のエックス線施設は第3四半期に好調でしたが、第4四半期序盤にやや軟調さが見られました。しかし経営陣は、堅調なパイプラインを挙げており、時間の経過とともに稼働率が改善すると予想しています。

Sotera Healthは、主要な施設投資が一巡することに伴い、2027年の設備投資額が大幅に減少すると見込んでいますが、経営陣はその減少額を数値化していません。EO施設の機能強化は2027年第1四半期に完了する予定です。同社はまた、インベスター・デイで掲げた目標である、対象期間中に5億ドルから6億ドルのフリー・キャッシュ・フローを創出することを改めて表明しました。

純レバレッジ比率が2.9倍となるなか、経営陣は特に滅菌サービス分野におけるオーガニック成長と戦略的M&Aを引き続き優先しています。また、長期的な株主価値に基づき、負債の返済や自社株買いについても検討する意向を示しています。

決算説明会文字起こし全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning, and welcome to the Sotera Health Third Quarter 2026 Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference call over to Vice President of Investor Relations, Mr. Jason Peterson. Mr. Peterson, the floor is yours, sir.

Jason Peterson

Good morning, and welcome to Sotera Health's Third Quarter Earnings Call. Today's press release and earnings presentation are available on the Investors section of our website at soterahealth.com. This webcast is being recorded, and a replay will also be available on the Investors section of the Sotera Health website shortly after the call.

Joining me today are Chief Executive Officer, Alton Shader, Chief Financial Officer, Jon Lyons; and Executive Chairman, Michael Petras. During today's 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 statement slide at the beginning of the earnings 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 adjusted net income adjusted net income, adjusted EPS, net debt and net leverage ratio as well as constant currency comparisons. A reconciliation of GAAP to non-GAAP measures for all relevant historical periods may be found in the schedules attached to the company's press release and in the supplemental slides to the earnings 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. For further questions, feel free to reach out to the Investor Relations team.

I will now turn the call over to Sotera Health's CEO, Alton Shader.

Alton Shader

Good morning, and thank you for joining us. Today, we reported solid top and bottom line growth versus the third quarter of 2025. And driven by strong execution and sequential adjusted EBITDA margin improvement of nearly 100 basis points. For the third quarter, we delivered constant currency revenue growth of 4.4% and constant currency adjusted EBITDA growth of 4% versus the same period last year. Sterigenics continued to perform well, generating 8.2% constant currency revenue growth and 57 basis points of segment income margin expansion despite experiencing some softness in the med device market during the quarter, which has continued into the early part of Q4.

Nelson Labs delivered another strong quarter. with revenue increasing 9.2% on a constant currency basis as the team continued to execute on complex projects to support our customers' regulatory needs. As expected, Nordion results reflected the timing of Cobalt 60 harvest schedules. The Nordion team did a great job delivering critical [ cobalt ] shipments for their customers and expanded segment income margins by 71 basis points. Based on our year-to-date performance and our current visibility into the remainder of the year, we are reaffirming our constant currency revenue and adjusted EBITDA outlook for 2026.

At Sotera Health, we worked tirelessly to help ensure the safety and availability of health care products that millions of patients rely on every day. Before John reviews the financials in more detail, I want to provide some additional context around an example we shared on our second quarter call that highlights how our teams make a meaningful difference for customers and patients. As we've discussed previously, customers regularly turn to Nelson Labs when they face time sensitive and complex challenges. During the second and third quarters, a customer of ours faced an urgent regulatory testing need involving a product used in a significant percentage of surgeries performed around the world.

The Nelson Labs team quickly mobilized its scientific and technical expertise, completed the required testing on an accelerated time line and help the customer maintain the availability of a critical health care product. While this is one project, the impact was far broader by helping our customers address a time-sensitive challenge, our team played an important role in supporting tens of millions of patients who rely on these critical medical procedures. This is exactly what we mean when we talk about putting customers first and delivering on our mission of safeguarding global health.

I will now hand it off to Jon, who will walk us through the financials.

Jonathan Lyons

Thank you, Alton. I'll begin with an overview of our consolidated financial results followed by performance highlights from each of our business segments. I'll then review the balance sheet, cash generation and capital allocation before concluding with an update on our 2026 outlook. On a consolidated total company basis, third quarter revenues increased 4.4% on both an as-reported and constant currency basis to $325 million as compared to the third quarter of 2025. Net income on a GAAP basis for the quarter was $58 million or $0.20 per diluted share. Adjusted EBITDA improved by 3.9% to $171 million or 4% on a constant currency basis.

While adjusted EBITDA margins expanded sequentially by nearly 100 basis points to 52.5%. On a year-to-date basis, adjusted EBITDA margins were up 8 basis points. Interest expense for the third quarter was $34 million, a $5 million improvement versus the prior year period, driven by our repricing actions and last year's $75 million term loan pay down. Adjusted EPS increased to $0.29 per diluted share, an improvement of 12% versus the prior year. Now let's review our segment performance. Sterigenics delivered revenue growth of 8.5% to $209 million or 8.2% on a constant currency basis, driven by favorable pricing of 4.8% and increased volume and mix of 3.4% and a foreign currency benefit of 30 basis points. Segment income increased 9.6% to $117 million or 9.2% on a constant currency basis. reflecting continued operating leverage and strong execution. Segment income margin improved 57 basis points year-over-year to 56.1%.

In Nelson Labs, revenue grew 8.8% to $61 million or 9.2% on a constant currency basis. Growth was driven by strong volume mix of 6.6% and favorable pricing of 2.6%, partially offset by a 40 basis point foreign currency headwind. Revenue growth exceeded expectations as we saw an increase in expert advisory services activity in the quarter. Nelson Labs segment income rose 2.5% to $19 million or 3% on a constant currency basis. Segment income margin declined 19 Basis points to 32.1% and driven primarily by business mix. Nordion's third quarter revenue was $55 million, down 12.4% or 11.5% on a constant currency basis. Favorable pricing of 2.2% was offset by a volume mix decline of 13.7% and a foreign currency headwind of 90 basis points.

I would also like to mention that although Nordion's revenue was down for the quarter, it did come in ahead of our expectations, driven by earlier-than-anticipated timing of certain shipments. Nordion's segment income decreased 11.4% to approximately $34 million or 10.4% on a constant currency basis. Margin performance remained strong with segment income margin improving 71 basis points versus Q3 2025 to 61.3%, driven by operational productivity and favorable pricing. Turning to the balance sheet, cash generation and capital deployment. Year-to-date, we have generated $228 million in operating cash flow, including $111 million in Q3 and demonstrating solid generation during the period.

Capital expenditures totaled $145 million during the first 9 months of the year, including $53 million in the third quarter. Supporting Sterigenics capacity expansions and EO facility upgrades, Nordion Cobalt 60 development initiatives and the completion of a new state-of-the-art clean room at our Salt Lake City lab. We continue to make great progress strengthening our balance sheet. Net leverage improved to 2.9x as of September 30, 2026, within our long-term target range of 2x to 3x. This progress was recognized with a credit rating upgrade from Moody's in early October. Now I'd like to turn to our 2026 full year outlook.

As Alton mentioned, we are maintaining our 2026 revenue outlook of 5.25% to 6.75% constant currency growth with reported revenue in the range of $1.233 billion to $1.250 billion. We also remain confident in our full year adjusted EBITDA outlook of 5.75% to 7.25% constant currency growth. with adjusted EBITDA in the range of $632 million to $641 million. These reported ranges incorporate an estimated 70 basis point foreign currency benefit for the full year. with foreign exchange anticipated to be a headwind of more than 100 basis points in the fourth quarter. We expect full year consolidated adjusted EBITDA margins to be approximately flat versus last year. with anticipated margin expansion at Sterigenics and Nordion offsetting a reduction in Nelson Labs.

Our outlook continues to assume total company pricing for 2026 to be within our long-term range 3% to 4%. We continue to expect Sterigenics to deliver mid- to high single-digit constant currency revenue growth in 2026, reflecting recent softness we have seen in the med device market fourth quarter constant currency revenue growth is anticipated to be approximately 6%. At Nordion, we now expect full year constant currency revenue growth in the mid-single digits, supported by a year-to-date performance and our demand expectations through year-end. At Nelson Labs, based on our year-to-date performance, we now expect full year 2026 constant currency revenue growth in the low to mid-single digits. As we look to the fourth quarter, we expect growth to moderate from third quarter levels while continuing to benefit from the previously mentioned expert advisory services activity. We now project full year segment income margins to be similar to year-to-date levels.

Turning to several other assumptions underlying our outlook. Based on market rates, we are narrowing our 2026 interest expense outlook to a range of $137 million to $140 million. Our effective tax rate applicable to adjusted net income remains unchanged at 27% to 28%. We anticipate depreciation expense to increase in 2026, modestly above the increase experienced in 2025. On a weighted average basis, we continue to expect a fully diluted share count in the range of 289 million to 291 million shares. Taking these factors into account, we expect to remain on track to deliver adjusted EPS of $0.95 to $1.01 per diluted share in 2026. Capital expenditures are anticipated to be in the $200 million to $225 million range. We continue to expect net leverage ratio improvement compared to 2025. And Finally, as usual, our outlook does not assume any M&A activity. I'll now turn the call back over to Alton.

Alton Shader

Thank you, Jon. We're pleased with our performance through the first 3 quarters of the year and remain focused on executing against our priorities. I continue to be impressed with our team's focus on delivering for our customers and the essential nature of our offerings across the company. With that, operator, let's open the line for questions.

Operator

[Operator Instructions]. The first question we have will come from Sean Dodge of BMO.

質疑応答

Sean Dodge

Maybe just on the guidance. Your range for EBITDA this year is a little wider going into Q4 than it has been historically. Is that just a philosophical change? Do they have to do something with timing unknowns around Nordion? Maybe just kind of wide the wider outlook. And then if you could just kind of walk us through what the bigger unknowns are at this point going into kind of late Q4.

Alton Shader

Sean, thanks for the question. I'll have to go back and look, I'm pretty sure we haven't narrowed our EBITDA consistently over the years. I think it's a pretty typical range for us, if you look over the last 3 to 5 years. And there are some, of course, moving pieces as we finish up the year here. So nothing's changed really that led to this.

Sean Dodge

Okay. And then maybe on Nordion. I know revenue was down because of the timing around harvest. But if you can share just a little bit more detail on how you were able to improve margins there despite the lower revenue.

Alton Shader

Yes. No, thanks, Sean. We had some good operational execution really in the quarter and year-to-date. We had a couple of things that we had to work through from last year. that the team has been focused on just in the day-to-day execution of the operation, and we've managed to improve that, and that really is the performance. So really good work by the team to drive that.

Operator

We have Luke Sergott of Barclays.

Luke Sergott

Thanks for the question here. I guess to start off, you guys talked about seeing some softness in the Med Vice side, excuse me if I missed this, something jumping around between calls. But can you talk about the visibility and how that frames into your 4Q, but more importantly, what your customers are saying, like what the bookings of the orders, I know it's more short cycle. But like how you're thinking about this flowing through to '27?

Alton Shader

Yes. Thanks for the question. I'll take that one. So high level, we performed well in Q3 and continue to have confidence in our full year outlook. And I'll call out really strong quarters from Sterigenics with the 8.2% constant currency growth and Nelson Labs with a 9.2% constant currency growth. As we look to we do expect some moderation in the Nelson Labs growth versus the 9.2% we delivered in Q3, but we do expect that business to grow in Q4.

For Sterigenics, we remain confident in our full year outlook for the mid- to high single digits of growth. But we did experience some softness at the end of and beginning of Q4 here. And based on what we're seeing in the business and what our customers are communicating to us, we are not expecting the sequential Q4 growth that we normally see in Sterigenics. And this really informed our guide.

Luke Sergott

Okay. And then I guess from -- as you think about that, lack of sequential growth. Is this like -- I mean, look, it's a big question is just how this decel keeps going through? Or if this is like -- are we going to bottom out here in the mid of 27% and pick up from there?

Alton Shader

Yes. I mean our -- we're obviously in the midst of our planning processes for 2027 now, and we'll communicate what we expect in 2027 during our Q4 earnings call here in February of obviously, we're staying very close to our customers and doing all we can to understand the kind of the reduction in optimism that they have communicated to us as we head here into Q4.

Operator

The next question will come from Evie Koslosky of Goldman Sachs.

Elizabeth Koslosky

So I wanted to start on Nelson Labs. I know you mentioned the 1 large customer in the quarter, I guess, and it sounds like a deceleration is expected next quarter. But maybe if you could help us quantify how much impact that was in 3Q? And then what was sort of the underlying growth in that market?

Alton Shader

Yes. So for Nelson Labs, we're obviously pleased with the third quarter performance of the 9.2% constant currency growth. The team is doing a really nice job of serving their customers and really helping them out with critical testing and remediation needs. As you mentioned, we do not expect another quarter in Q4 of growth like we saw here in Q3. But we do have a lot of confidence in that business as we move forward. As you know, we increased our guide from low single digits to low to mid-single digits. And we did see some strength out of the EAS business here in Q3, and we do expect to see additional growth from that business in Q4 as well.

Elizabeth Koslosky

Okay. Great. And then on the 4Q guide for Sterigenics, like I understand the med device comments. I think that's something we've seen on a broad basis. But maybe if you could talk through some of the more idiosyncratic to like the x-ray facility coming online, the larger customer that was coming online in the back half and how those should impact 4Q? And then also on pricing, that came in a bit above our expectations for the quarter. So maybe just talk through what's baked into that 6% for pricing in fourth quarter?

Alton Shader

Sure. So again, pleased with our results in Q3 here, 8.2% constant currency growth, 120 basis points of sequential growth at the top line. So the team did a really nice job. We have benefited from the 3 factors we've discussed in the past with the favorable shutdown days, the outsourced customer that we have as well as the North Carolina X-ray facility. So those did contribute to our growth in Q3, and we expect them to contribute to the growth in Q4.

I'll note that even though we're talking about a 6% constant currency growth in Q4, we are seeing relatively stable demand in this business. So we are looking at -- we mentioned that we're not seeing the sequential growth that we normally expect. We are seeing essentially a flat revenue performance in Q4 from Sterigenics versus Q3. So overall, while we have seen a little bit of softness here at the beginning of Q4, we've got a pretty stable environment right now, and this is an incredibly resilient business. It has been over the years, and we continue to see that here as we finish up the year.

Elizabeth Koslosky

Great. And then just pricing baked into that? Is it kind of still the upper end of the -- the 3% to 4%? Or is there upside leverage to that?

Alton Shader

Yes. I mean pricing in Sterigenics is really been consistent, and it obviously reflects a number of factors at the top of that list is the value that we deliver to our customers every day. We are at the higher end of that range, and we would expect to stay at the higher end of that range here in Q4 as well.

Operator

Next, we have Casey Woodring of JPMorgan.

Casey Woodring

Great. Maybe just to follow up on some of the comments around med device. You said that the softness started at some point in 3Q. Can we just get a sense of when in the quarter you started to see that? And then kind of thoughts around the more recent performance that you called out in 4Q? Is there any sort of, I guess, chance that things could get worse than things deteriorate further based on some of the medtech prints we've seen so far this quarter?

Alton Shader

Sure. So we started seeing some of the softness kind of mid to late Q3. And primarily that softness came from our European customers. So that's been the primary impact that, again, that we saw at the end of Q3 and here at the beginning of Q4. Our guide includes what we're seeing in the marketplace and what we are hearing from our customers. And again, we are at in Q4, sequentially, we're going to be flat to Q3. So we're not seeing anything really much more than a pretty stable demand environment here.

And again, as we've gone and really gotten close to our customers here, essentially, this is a reduction in some of their optimism for Q4. it's not uniform across any specific segment or any set of customers, but you bring all the data together and you've got this reduction in optimism, and we diluted that in our guide and we're confident in our guidance.

Casey Woodring

Got it. Understood. And then maybe just one more for me. Any just update on litigation in terms of number of plaintiffs in California, anything along those lines?

Alton Shader

Yes, absolutely. So regarding litigation, we've got a strategy to defend the company, and we are executing against that strategy. And I can give you an update on a couple of the key cases here. So in Georgia, we've got a deadline for an appellate decision in spring of 2027. And in California, we've got our first trials are scheduled for January and April of 2027. And in Illinois, we've got all our cases are assigned to a single judge at this point, and we're in the midst of pretrial proceedings.

Operator

Next, we have David Windley of Jefferies.

David Windley

I was wondering if you could comment on the progress of you've referenced a large customer, the progress of the outsourcing decision and execution and has that event, I'll call it, driven or catalyze any additional conversations of the same ilk.

Alton Shader

Yes. So I'm assuming you're commenting on the one outsourced customer we've talked about previously, that's all on track. That's going well. And that was a contributor to our growth in Q3 and will be a contributor to our growth in Q4. Our commercial team continues to do everything they can to build our commercial pipeline. And within that commercial pipeline are a number of programs and products that would require customers to outsource. I don't have any specific updates for you around specific programs, projects, et cetera.

David Windley

And can I ask on Nelson, with EAS having shown some strength for a couple of quarters running now, I think, and you're expecting again in the fourth quarter, how are you viewing the mix evolution in that business? In Nelson, to be clear, the mix in Nelson.

Alton Shader

So just to clarify, we really saw strength in EAS here in Q3. We did not see strength in the AS in Q2. So some of that growth that we saw in Q2 was in our core lab testing. So -- but yes, we did see growth here and more growth associated with EAS in Q3 than we had previously. We do expect growth to be driven in some part by EAS in Q4 as well.

David Windley

And how do you expect that to evolve?

Alton Shader

So in the -- so going forward, I mean obviously, let me take a step back here. So we've got a project component to the Nelson Labs business. And within EAS, those tend to be higher concentration of project-based programs and opportunities. We don't expect long-term EAS to be a larger percentage of the business and have this be a consistent mix shift towards EAS going forward. Thank you.

Operator

Next, we have Ryan Halsted of RBC.

Ryan Halsted

Sticking with Nelson Labs and following on the strength in that segment over the past few quarters being somewhat broad-based across the different business lines. Can you just confirm how are you viewing that business in the lens of cross-business unit selling? Do you kind of see this as opportunity to cross-sell and how are you executing on kind of your kind of refreshed strategy to really try to drive that XPU strategy.

Alton Shader

Yes, absolutely. So the cross business unit opportunity is significant for our organization. We've got approximately 70% of our Sterigenics and Nelson Labs revenue comes from shared customers. And we obviously need to focus on penetrating these accounts with our full offering, and Nelson Labs absolutely will benefit from this work. we would expect over time, core lab testing to benefit from the work that we're doing across business unit. And we've got a number of initiatives in place now to drive this growth across the overall organization, which, again, Nelson Labs will benefit from.

Ryan Halsted

Great. And then turning to capital allocation. Can you just confirm, are you on track to complete all the facility upgrade investment? And then just looking ahead, obviously, you're now within your leverage range. How are you thinking about capital priorities into 2027?

Alton Shader

Yes, sure. So we are on track to complete the EO facility enhancements here in -- be completed here in Q1 2027. So team's done a very nice job of that. We're also pleased with our progression of our balance sheet. So we're at 2.9x net leverage today and we're within our long-term target of 2x to 3x. And our approach to capital deployment is ultimately driven by where we see the best opportunities create long-term shareholder value. And we have not materially changed our approach. We continue to prioritize the organic growth investments as well as strategic M&A opportunities where we can drive clear value with a focus on sterilization services. We'll continue to work with our Board to evaluate the full range of other capital deployment opportunities, including share repurchase, debt paydown, et cetera. But ultimately, we're going to deploy this capital to the areas where we think we can optimize our long-term shareholder value.

Operator

Next, we have Jason Bednar of Piper Sandler.

Jason Bednar

A couple of follow-ups here from us, just on some topics that have been discussed this morning. So First, maybe the obligatory question and then the device topic. Alton, you mentioned, I think the softness is mostly tied to your European customer base. I hope I didn't hear that wrong. But have you seen any shifts in volume demand from your U.S. customer device customer base? Or is that more stable? And then I just want to be clear that what you're seeing is specific to end market volumes in September that persisted here in the fourth quarter. It's not a function of channel destocking like one of your peers has been referencing with their business.

Alton Shader

Yes. Thanks for the question. So again, we saw the softness starting in Q3 and extending here into Q4, and it is primarily in Europe. So we're seeing the softness more in Europe than we are seeing here in the U.S. And when it comes to segments, again, it's -- I mentioned this before, but it's not uniform. So within our customer base, we're seeing variability across the segments and end markets. But overall, the balance here is we are seeing an overall reduction in optimism from our customers in Q4. And I think that's pretty consistent to what we've seen from a number of the med tech companies who have announced results over the course of the last few weeks. And it's pretty in line with what we're seeing externally here.

Jason Bednar

Got it. And then a bit of a follow-up on the prior question. Can you talk a little bit about your CapEx plans here I think you -- in the past, you've referenced a significant or a meaningful step down in spending now that you're through a lot of these facility investments, you're rolling off some other big CapEx projects. As we think about the magnitude of inflection in cash flow next year, can you give us any guardrails to think about what this actually looks like? I think The Street is modeling like a $50 million step down in CapEx, is that a fair number? Would you have us any lower or any higher than that? Just trying to get a sense as we think about '27 cash flow.

Alton Shader

Jason, thanks. Good I appreciate the question. We definitely see a meaningful step down in CapEx next year. We're well on track to deliver the free cash flow objectives that we laid out at Investor Day of $500 million to $600 million of free cash flow over the period. One of the moving pieces is just seeing exactly where we land this year. and then finalizing our plans with the Board on the different programs. So we expect a meaningful step down. It's a little premature for me to tell you exactly how much just given the uncertainty related to just closing out the year, we feel good about the execution, but you can always have a few moving pieces as we close out the year and then again finalizing the budget with the Board.

Operator

Next, we have Michael Polark of Wolfe Research.

Michael Polark

On the topic of the other medical device customer trend in Sterigenics out of Europe heard, we've heard labor strikes war government budget tightness in Europe, and so we can corroborate that. But it sounds like you're not seeing or saying anything in the U.S., are you bracing for? In the guidance for Sterigenics bracing for any U.S. softness or no this modeling is contained to what you're hearing out of your European customers?

Alton Shader

We're seeing relative stability out of the U.S. at this time. And everything that we, again, are seeing from our data we're seeing in the first month of the quarter and what we're hearing from our customers is captured within our guide. And again, that 6% constant currency growth in Sterigenics translates to a relatively stable flat revenue from sequential from Q3 to Q4. Again, I'll just highlight the fact that over time, the Sterigenics business and really Cetera Health overall has been incredibly resilient through different economic challenges, and we do see, again, some of this softening here in Q4. But overall, we feel like we've got a handle on it, and the business remains very healthy and strong.

Michael Polark

On Expert Advisory Services, I'm recalling from a couple of years ago when growth was significant. If I'm recalling correctly, it was attributed at the time to some regulatory actions that customers were dealing with, so three calls, remediation stuff like that, that created a tough comp and now we've rebased and growing again. Is there a thematic behind the uptick that you would have us think about? Or no, it's a project-based business and you kind of troughed out last year, and now you're growing off of that? Just any more color on what's driving the rebound there, I'd appreciate it.

Alton Shader

Sure. I mean this is a project-based business, and the team has done a really nice job of responding to the needs of our customers. And Again, some of these projects did come into the business here in Q3, and we do expect additional business from these customers here in Q4 as well. I mean, we are very focused on having a durable business here in Nelson Labs and focused on ensuring that we have core lab growth within this business. We've had a number of initiatives in place, including new commercial leadership within Nelson Labs to ensure that we are best-in-class commercially here and again, got a lot of confidence in the team to drive durable growth in the business.

Operator

We'll go ahead and proceed to Brett Fishbin of KeyBanc.

Brett Fishbin

Sorry to be a little bit of a dead horse here. I just had one more question on the med device comments. I wanted to ask if the slowdown or softness you're commenting on in Europe, is this very broad-based across the customers? Or would you say it's more specific to a few different product areas or customers in Europe where you may have more concentration.

Alton Shader

Yes. This is more broad-based. Again, we can't say that it's happening with every customer that we have in Europe. But it's not limited to just a couple. So again, it's not uniform across specific segments. But overall, when you add up the information that we have, the conversations we're having with the customers, the data that we're seeing, there is softness there overall in Europe.

Brett Fishbin

All right. Great. And then just one more question on the x-ray facility project, which I believe is now online. I was hoping you could just provide a little bit of an update on how the ramp has gone so far, and then how you're doing in just progressing towards filling more of the overall capacity on a longer-term basis there?

Alton Shader

Sure. So we continue to be optimistic with our investment here in the x-ray facility in North Carolina. We had a really strong Q3. We have seen a bit of softness here in Q4 in that facility. That said, we've got a very strong pipeline and we are confident that we're going to be able to continue to improve the utilization in that facility. n

Operator

This will conclude our question-and-answer session. I would now like to turn the conference call back over to Mr. Alton Shader for any closing remarks. Sir?

Alton Shader

Thanks, operator. So we delivered another quarter of solid financial performance, and I wanted to note that I've enjoyed being on the road and connecting with many of our shareholders, and I look forward to continued engagement in the coming months. As we move forward, we remain focused on delivering outstanding service, strengthening our customer partnerships and delivering value for both our customers and the patients that they ultimately serve. Thanks for your continued interest in Sotera Health. Take care, everybody.

Operator

And we thank you, sir, and to the rest of the management team for your time also today. Again, the conference has now concluded. Thank you all for attending today's presentation. At this time, you may disconnect your lines. Thank you. Take care, and have a great day, everyone.