Sotera Health (SHC) Q2 Revenue Up 6%

Key Points

• GAAP revenue for Q2 2025 was $294 million, beating analyst expectations by $18.1 million, or 6.6%.

• Adjusted EPS was $0.20 for Q2 2025, topping the non-GAAP estimate of $0.17.

• Management raised full-year 2025 revenue and earnings guidance, reflecting improved performance in key segments.

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Sotera Health (NASDAQ:SHC), a global provider of sterilization and lab testing services to the healthcare and life sciences industries, reported its second quarter 2025 results on August 8, 2025. The Q2 2025 earnings release highlighted significant GAAP revenue and adjusted (non-GAAP) earnings beats, with GAAP revenue at $294 million compared to the $275.89 million analyst estimate, and adjusted earnings per share (EPS) at $0.20 versus the expected $0.17 (non-GAAP). The quarter showed continued strength across core businesses, particularly within the Sterigenics sterilization segment, prompting management to raise its outlook for FY2025. While GAAP net income was slightly lower than the prior year, Adjusted profitability improved. Overall, the quarter demonstrated operational momentum, stable customer demand, and progress on strategic priorities, tempered by ongoing legal settlement costs related to EO litigation.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

About Sotera Health and Its Business Priorities

Sotera Health provides sterilization services, lab testing, and radioisotope supply through a network of 62 facilities worldwide. The company’s main customers are medical device and pharmaceutical manufacturers, for whom meeting regulatory requirements is essential. Its three main business segments are Sterigenics (sterilization services), Nordion (supplier of cobalt-60, or Co-60, for radiation sterilization), and Nelson Labs (lab testing for quality, safety, and regulatory compliance).

Recent strategic focus areas include regulatory compliance, network expansion near key customers, securing supply of critical materials, and development of next-generation sterilization technologies. High customer retention, multi-year supply contracts, and innovation in testing and sterilization remain critical factors for success. These factors enable stable revenues and provide a competitive edge, particularly in highly regulated markets.

Quarter Highlights and Segment Performance

Consolidated GAAP revenue increased to $294 million, up 6.4% year over year and exceeded analyst expectations by about $18 million. Adjusted EPS (non-GAAP) rose to $0.20, $0.03 above the consensus forecast. Net income, however, decreased to $8 million (GAAP), mainly due to $34 million in legal settlements related to ethylene oxide (EO) litigation affecting Sterigenics. Adjusted EBITDA improved to $151 million, Adjusted EBITDA (non-GAAP) increased 9.8% to $151 million.

The Sterigenics segment continued to perform strongly, with GAAP revenue up 10.5% to $195 million and segment income up 11.3%. Growth was supported by higher volumes, favorable pricing, and a positive business mix. Segment margins benefited from scale and pricing but faced some inflationary pressures. This segment is significant because it provides essential sterilization services for medical devices, supporting regulatory compliance for clients in a highly controlled industry.

Nordion, which supplies Co-60 used for radiation sterilization, posted GAAP revenue growth of 2.9% to $42 million. While revenues grew versus the prior-year period, margins came under pressure mainly due to unfavorable changes in supplier mix. Year-to-date figures for the first half of 2025 show a stronger picture, but the quarterly slowdown is partly attributed to shipment timing that benefited the previous quarter.

Nelson Labs, the lab testing business, experienced a 3.3% drop in GAAP revenue to $57 million, reflecting continued weakness in its expert advisory services line. Despite the decline in sales, segment income rose nearly 14% and margins expanded, thanks to lab optimization initiatives, pricing, and higher core testing demand. Management cited regulatory changes and new product introductions as positive contributors to testing volumes. This margin performance underscores the impact of lab optimization and favorable pricing.

The company did not experience material supply chain disruptions, citing continued availability of both EO and Co-60. Customer satisfaction and retention levels also remain strong, with management reporting high net promoter scores and ongoing pricing power.

The quarter’s net income was compressed by non-recurring legal expenses. Settlements linked to EO claims totaled $34 million in Q2 2025 and $64.9 million for the first half of 2025. These ongoing legal matters are a significant drag on reported profits but do not affect adjusted earnings or EBITDA.

Financial Outlook and What to Watch Next

Looking ahead, the company raised its fiscal 2025 revenue growth target to 4.5%–6.0% (from 4.0%–6.0%) on a constant currency basis. and now expects adjusted EPS in the $0.75–$0.82 range for full-year 2025, compared to prior guidance of $0.70–$0.76. Adjusted EBITDA is forecast to grow 6.0%–7.5% (non-GAAP) for full-year 2025, reflecting the boost in core segment performance. Management also lowered projected capital expenditures for FY2025 to $170–$180 million, down from $190–$210 million.

Key for investors will be tracking ongoing volume recovery in Sterigenics, margin trends at Nelson Labs, and any changes in Nordion’s product supply or margins. EO-related litigation remains a recurring cost and a potential risk, as does the evolving regulatory picture for sterilization. Management did not indicate any planned dividend payments for the quarter or future periods.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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