SHC - NASDAQ

Good morning, and welcome to the Sotera Health Fourth Quarter and Full Year 2024 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. To ask a question, you may press star then one on your touch-tone phone. And to withdraw your question, please press star then two. Over to Vice President of Investor Relations and Treasurer, Mr. Jason Peterson. Jason, please go ahead.

Good morning, and thank you. Welcome to Sotera Health's fourth quarter and full year 2024 earnings call. You can find today's press release and accompanying supplemental slides on the Investor section of our website at soterahealth.com. The webcast is being recorded and a replay will be available in the Investors section of the Sotera Health website. 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. The company will present both GAAP and non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, segment income margin, tax rate applicable to net income, adjusted net income, adjusted EPS, net leverage ratio, and free cash flow, as well as constant currency comparisons. A reconciliation of GAAP to non-GAAP measures for all relevant periods may be found in 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. As always, if you have any questions after the call, please feel free to reach out to me and the investor relations team. I'll now turn the call over to Sotera Health Chairman and CEO, Michael Petras.

Good morning, and welcome to today's call. This morning, we reported both top and bottom line growth for the full year 2024, while delivering $1.1 billion of revenue and approximately 50% adjusted EBITDA margins. 2024 marks the nineteenth consecutive year of annual revenue growth, further evidence of the resiliency of our business model and the critical role we play in healthcare. In addition to the growth we delivered, we continue to make progress in 2024 on our strategic priorities. Throughout the year, our customer satisfaction rates continued to be over 80%, which reflects our focus on serving our customers with excellence. We also strengthened our balance sheet by successfully refinancing our capital structure, extending maturities to 2031. We finished the year with strong liquidity. In our Sterigenics business, we completed a capacity expansion and continue to make significant progress on our US EO facility enhancements. Nelson Labs achieved sequential margin improvement as the year progressed. Embedded Labs and expert advisory services both realized double-digit revenue growth versus 2023. The performance in Embedded Labs demonstrates the cross-business unit synergies we discussed at our Investor Day this past November. Nordion grew revenue to upper single digits for the year, while continuing to make progress on the cobalt development projects. The first installation of cobalt was placed into a Darlington reactor with an expected cobalt-60 harvest in 2028. I want to highlight a few items from our fourth quarter and full year 2024 financial results. I'll begin with the fourth quarter. As expected, total company revenue declined 6.5% and adjusted EBITDA declined 8.3% compared to the fourth quarter of 2023. On a constant currency basis, revenue declined 5.2% and adjusted EBITDA declined 6.7%. As we communicated during our last earnings call, Nordion revenue in the fourth quarter was expected to be down significantly versus the prior year's 50% of Nordion's full year 2023 revenue occurred in the fourth quarter. As a reminder, Nordion revenue can be lumpy from quarter to quarter due to timing of cobalt-60 harvest schedules. Over the long term, Nordion revenue is very consistent. Transitioning to full year 2024 as compared to 2023, total company revenues increased 4.9% or 5.4% on a constant currency basis, and adjusted EBITDA grew by 3.9% or 4.6% on a constant currency basis. Jonathan will take us through the business results in more detail later. I also want to take a moment to highlight progress made on our corporate responsibility initiatives. We welcomed President and CEO of Hemantix Corporation, Chris Simons, to our board in August of last year. Chris brings extensive experience in the medical device industry, which we believe will serve us and our stakeholders well. In January, we named Vince Petrell, Lead Independent Director. Vince has been on our board since 2020 and brings a wealth of experience and deep understanding of Sotera Health's strategic vision and operations. Additionally, we published our third annual corporate responsibility report. Overall, 2024 was a good year for Sotera Health, and we continue to stay focused on serving our customers with excellence, and we look forward to delivering growth once again in 2025. Earlier today, we provided our initial 2025 outlook. For the full year 2025, we expect to deliver another year of top and bottom line growth with total company revenue growth to be in the range of 4% to 6% on a constant currency basis when compared to 2024, with the midpoint being within our long-term 5% to 7% guidance range. Adjusted EBITDA growth is expected to be in the range of 4.5% to 6.5% on a constant currency basis. Now, Jonathan will take us through our fourth quarter and full year 2024 financials and our 2025 outlook in more depth.

Thank you, Michael. I will first cover fourth quarter and full year 2024 results on a consolidated basis, and then provide some details on each of the business segments, along with updates on capital deployment and leverage. I will then conclude with additional details on the 2025 outlook. On a consolidated total company basis, fourth quarter revenues declined by 6.5% to $290 million or 5.2% on a constant currency basis versus the same period in the prior year. As Michael mentioned previously, this was driven by the year-over-year comparison at Nordion where we had 50% of 2023 revenue in the fourth quarter due to the timing of reactor harvest schedules. Fourth quarter adjusted EBITDA declined by 8.3% to $153 million or 6.7% on a constant currency basis, compared to Q4 2023. Adjusted EBITDA margins were 52.7% in the quarter. Our reported interest expense for the fourth quarter was $41 million, down from $43 million for the same period last year. Reported net income for fourth quarter 2024 was $12 million or $0.04 per diluted share. Adjusted EPS was $0.21 for the quarter, a decrease of $0.02 from Q4 2023. Now let's take a closer look at our segment performance in the fourth quarter. In the fourth quarter, Sterigenics delivered 4.2% revenue growth to $179 million or 5.3% on a constant currency basis, versus Q4 2023. Revenue growth drivers for the quarter included favorable pricing of 4.2%, as well as favorable volume and mix of 1%, partially offset by changes in foreign currency exchange rates of approximately 1%. Compared to the prior year quarter, segment income grew 5.1% to $100 million or 6.4% on a constant currency basis. Drivers for growth were favorable pricing as well as volume and mix, partially offset by inflation and changes in foreign currency exchange rates. While segment margins increased by approximately 50 basis points. As expected, Nordion's fourth quarter revenue decreased by 29% to $57 million driven by unfavorable volume mix of 31% and changes in foreign currency exchange rates of 2.9%, partially offset by favorable pricing of 5.3% compared to the same quarter in the prior year. Nordion segment income decreased by 34% to $35 million and segment income margins contracted by approximately 470 basis points to 62%, primarily driven by unfavorable volume and mix, as well as changes in foreign currency exchange rates. In the fourth quarter, Nelson Labs revenue declined 7.3% to $54 million or 7% on a constant currency basis, compared to the same quarter last year. The decline was driven by unfavorable volume mix of 9.8%, primarily due to an expected change of expert advisory services revenue as we communicated during our Q3 earnings call. Additionally, we consolidated a lab which supported our margin improvement for the quarter. Volume and mix was partially offset by favorable pricing of 2.9%. Segment income decreased 3.3% to $18 million or 2.5% on a constant currency basis, driven by unfavorable volume and mix and higher employee compensation costs, partially offset by favorable pricing and labor productivity. Segment income margin improved year over year by 140 basis points to 33% due to the lower expert advisory services revenue, favorable pricing, and improved labor productivity. Now let's turn to the full year results on a consolidated basis. We delivered $1.1 billion in revenue, up 4.9% or 5.4% on a constant currency basis versus 2023. We grew adjusted EBITDA 3.9% to $548.6 million or 4.6% on a constant currency basis, resulting in an adjusted EBITDA margin of approximately 50%. Reported interest expense for the year was $155 million. Reported net income for 2024 was $44 million or $0.16 per diluted share. Adjusted EPS for the year was $0.70 per weighted average diluted share, a decrease of $0.02 versus 2023, primarily driven by higher interest expense. I will now turn to the balance sheet, cash generation, and capital deployment. The company continues to be in a strong liquidity position that has no borrowings under the revolving line of credit. Capital expenditures for 2024 finished at $179 million. As Michael mentioned, Sterigenics completed one capacity expansion during the year, and we continue to make significant progress on the EO facility enhancements and Nordion cobalt development projects. We generated nearly $225 million of operating cash flow in 2024, and free cash flow generation was positive for the year. Lastly, our net leverage ratio improved slightly versus 2023, finishing the year at 3.7 times. Now I would like to discuss our 2025 outlook. For the full year, we expect total revenues to grow in the range of 4% to 6% on a constant currency basis, with the midpoint being within the three-year target that we provided at our November 2024 Investor Day. We expect to generate operating leverage resulting in margin improvement and adjusted EBITDA growth in the range of 4.5% to 6.5% on a constant currency basis. Based on January average currency rates, we expect foreign exchange to be a headwind of approximately 2.25% on revenue and approximately 2.5% on adjusted EBITDA, with the first three quarters of the year having the most pronounced impact. We continue to monitor the potential impact of tariffs, but at this time, we have not incorporated any impact into our guidance. We expect total company price to be around the midpoint of our long-term stated range of 3% to 4%. From a revenue cadence perspective, Q1 typically is the lightest quarter of the year for the company, and we expect that to be the case again in 2025. Sterigenics' Q1 2025 constant currency revenue growth is expected to be in the low to mid-single digits versus Q1 2024, and we expect gradual improvement throughout the remainder of the year. The proportion of Nordion revenues for the first and second half of 2025 will be similar to what they were in 2024, with constant currency full-year revenue growth expected to be in the mid-single digits versus 2024. We expect Q1 2025 revenue to be up slightly versus Q1 2024. Over the past few years, we have provided visibility to the revenue risk associated with Russian cobalt supply. As of today and similar to prior years, there's an approximate risk of between 0% and 3% of total company 2025 revenue. In Nelson, we expect revenue to be back half-weighted due to the difficult comparisons related to expert advisory services, which we had discussed. From a Q1 perspective, we expect Nelson Labs revenue to be down low double digits and margins to be better versus Q1 2024, with sequential improvement over the course of the year. For 2025, we expect interest expense between $155 million and $165 million based on the current forward rate curve. We are projecting an effective tax rate applicable to adjusted net income in the range of 33% to 35%. Adjusted EPS is expected to be in the range of $0.70 to $0.76. We expect a fully diluted share count in the range of 286 million to 287 million shares on a weighted average basis. From a capital deployment standpoint, we will continue to prioritize organic growth, deleveraging, as well as opportunistic M&A. We expect capital expenditures in a range of $190 million to $210 million in 2025. As we have previously talked about, we have been in a multiyear period of elevated CapEx investment. The peak of that spend is now behind us, and we continue to expect capital expenditures to decrease over the next two years to approximately $110 million in 2027. This decrease in CapEx along with revenue growth will help us achieve our goal of generating between $500 million to $600 million in free cash flow over the next three years. Our guidance does not assume any M&A. Finally, we anticipate slight improvement in net leverage in 2025. I will now turn the call back over to Michael for closing remarks.

Thank you, Jonathan. As we look forward to 2025, we will continue to focus on our priorities. As we highlighted during our Investor Day this past November, our priorities are: excellence in serving our customers with end-to-end solutions, winning in growth markets, driving operational excellence to enhance free cash flow, and continuing to be disciplined with respect to our capital deployment initiatives. At this point, operator, let's open the call up for Q&A.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then two. And at this time, we will pause momentarily to assemble our roster. The first question will come from Patrick Donnelly with Citi. Please go ahead.

Hey, guys. Thanks for taking the questions. Michael, maybe one just on the overall volume backdrop, both that you saw in the quarter and then also as you think about the guidance for the year, helpful to hear some of that Q1 commentary particularly on Sterigenics and Nelson. But just how are you mapping out the volume recovery, obviously, things like destocking? You know, how you think about that piece as you work your way through 2025, and what's the underlying assumptions there?

Yes. Good morning, Patrick. I would say overall, when you reflect on 2024, the year played out pretty much like we thought it would be with gradual improvement throughout the year. As we stated on the last earnings call, we would have liked to see a little bit more volume growth in Sterigenics and Nelson. But as we look forward into 2025, we continue to see gradual improvement. We may hang over a little bit in the Sterigenics going into the first quarter. But by and large, that is the vast minority. We're not hearing a lot of comments around that, and we think we'll see continued volume improvement as the year progresses like we did in 2024.

Okay. That's helpful. And then, Jonathan, maybe just on the margins, you know, as we think about progression through the year, can you just talk about the moving pieces? Always curious to hear about the pricing assumptions in the guide, and just how we should think about margins as we work our way through 2025. Appreciate it, guys.

Yeah. No. We're excited for this year. We definitely see some progress in margins as we look forward on a constant currency basis. To some solid improvement in margins as you get from the guide of top line with EBITDA growing a little bit further than the top line. As we look, you know, I just remind you that Q1 is typically the lowest quarter. I think that's both on a revenue side and on the margin perspective as well. And that's probably the biggest piece I point you to at this point, Patrick. The other thing I'd call out, Patrick, is just the performance you saw at Nelson where they could continue to improve their margins and we'd expect sequential improvement as the year progresses. On that side of the business as well. Joe and the team are executing along the lines we communicated previously.

Understood. Thank you, guys.

The next question will come from Sean Dodge with RBC Capital Markets. Please go ahead.

Yeah. Thanks. Good morning. Maybe, Michael, just following on what you just talked about there in Nelson and margin improvement. It sounds like Jonathan mentioned some work you all did there recently that should create some kind of durable longer-term benefits in Nelson margins. Maybe just give us a little bit more detail on what you've done there and what you kind of expect.

Yeah. Okay, Sean. Yeah. I would just recall back if you think back to early last year, the latter part of '23, one of the challenges we had is we didn't really manage the labor productivity as well as we would have liked because we were expecting volumes to recover faster than they did. And Joe and the team reacted to that in 2024. You saw the improvements in the margins. And I think that sets us up at a pretty good spot for 2025. So I think the biggest thing is the labor productivity and just making sure we have alignment with the labor needs relative to the order patterns. And, you know, our service has been outstanding there. You know, the highest numbers of you know, we sold January even. Just the record number of performance on service that ended last year in a very strong place. So I'd say that's the biggest thing. Jonathan also referenced that we had a smaller lab that we did consolidation around and brought some of that volume back into the core business operations. So those would be the biggest thing. But I'd say the biggest impact is just balancing the labor productivity with the order patterns.

Okay. And then within Nelson, the three divisions that I think before you talked about having expert advisory, routine, and validation, I think before you mentioned expert advisory was kind of low double digits of the proportion of revenue. What's the rough mix of the other two? And is there a big margin differential between all of those? So is mix changes amongst the different Nelson divisions or functions? Does that have a big impact on overall segment margins too?

No, I would not say so. It's fifty-fifty, I'd say, but it can vary from quarter to quarter depending on where the validation goes on trends. But clearly, the expert advisory is the lowest margin business of those three categories if you look at it. And like you mentioned, it's in that low double digits as a percent of total. The key is really driving that core lab volume because that is more favorable mix in expert advisory services. But the key part with expert advisory services is our ability to generate leads that help go across business units for Sterigenics and Nelson. It's another big value opportunity. But, you know, as that volume, you know, is a little lumpier on the expert advisory services side, you know, that's why we want to call that out and let you know as we did in the fourth quarter as well as what we look forward on the first quarter.

Okay. Great. Thanks again.

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

Great. Thanks. I just kind of want to follow-up again on what Jonathan was talking about there with the Nelson Lab and the lab closure. I mean, I thought that the fear here is basically as volumes starting to come back and, like, you know, the demands coming on, like, are you guys going to have enough capacity within Nelson to meet that demand and get back to normal, and if you're closing it because that's kind of what the current demand environment is like, there's something structurally or more long-term within the Nelson demand and those volumes that are just causing you to right-size that in your capacity to go forward lower demand level.

Yep. So, Luke, this is Michael. We're in a good spot in capacity in that business. We had a lab that was generating revenue, not a lot of EBITDA, and we're able to consolidate that and get some more operating leverage in the business. That's the biggest thing. So we're good on capacity-wise.

Okay. And then I guess just to clean up here as you guys think about the full year and the guide, do you guys break out kind of jumped in here a little bit late. But did you break out anything on by segment and how you're looking at it?

Yeah. We did, you know, I would just tell you, first quarter, we gave some visibility in the first quarter. Right? The cost of goods currency revenue basis, we expect low to mid-single digits for Sterigenics. When we think as the year goes on, we should see total year in mid-single digits. Revenue growth in constant currency. On the Nordion side, I think of that the comments that we made was first half second half from a percent of total is going to be similar to 2024. And again, in this business, we expect mid-single digits in constant currency revenue growth. Yep. And a little growth in Q1. Yes. And then on the Nelson Lab side, you will have low decline of low double digits in the first quarter versus last year. But margins are expected to be better than last year first quarter. And the revenue growth is expected to be back-end loaded because of the expert advisory comparisons. And we just see for the total year, they'll be thinking about low single digits, mid-single digits in revenue growth in constant currency. And then I'd say also other than keep in mind the point I made is we'll see sequential margin improvement over the course of the year with the Nelson side. So that's kind of how I think about the segments. Jonathan, anything else that they're I think that covers it.

Great. Thank you.

The next question will come from Matthew Sykes with Goldman Sachs. Please go ahead.

Hi. This is Evian from Matthew. Thanks for taking my questions. So the first one, could you provide an update on how the cross-selling initiative is going between Sterigenics and Nelson Labs? And then is this benefit included within the 2025 guide?

Yes. Good morning. Yeah. It's going well. The XPU activity is going well. We referenced our prepared remarks about the embedded labs continued growth that we're seeing there within the Nelson Labs, which really benefits from Sterigenics volume uplift as well. So and it is included in the 2025 guide.

Okay. Great. And then understand tariffs are not baked in. If there is a negative impact, do you have the capabilities to shift things around a little bit? And then is there also a risk that there'd be a pause in demand if customers needed to shift their manufacturing around due to tariffs?

Yeah. I still think we haven't contemplated a positive demand aspect, but I don't I'm just I think through my answer here, I don't see that scenario playing out. I just keep in mind, you know, we don't have clarity yet on exactly what tariffs could look like. We're being prepared for that. Think about in the context of Canada, would be the largest place that we'd feel the impact of that, and we feel pretty good about our ability to have the customers be able to absorb that tariff. It would be on cobalt, for example, coming into the United States. So we think that's something we manage. And then I would say that would be the biggest thing. On tariffs that I'd be thinking about right now.

Great. Thank you.

Your next question will come from Casey Woodring with JPMorgan. Great. Thank you for taking my questions. Can you maybe just talk about the you expect the different end markets you serve in Sterigenics to perform at 2025? I know you probably should have an easier comp coming up in bioprocessing, albeit it's a lower proportion of revenue there. So maybe just walk us through the different end markets and how you expect those to trend. And then I have one follow-up. Thanks.

Yep. Great. I'd say pharma, which is a smaller piece of our business, we think that will continue to improve as the year goes on. Med device as well. I think all of them, Casey, overall, we think will improve generally speaking on the Sterigenics side. Med device, pharma, Commercial will be a little bit choppier. We see some dynamics there in the commercial side that might make it a little choppier. And then our bioprocess we did see growth sequentially as the year progressed in the fourth quarter again on a volume basis. So we'd expect that to continue in 2025 as well.

Got it. That's helpful. And then, you know, my follow-up here is just how should we think about the pacing of CapEx over the course of the year given the greenfields you're expected to come online and can you maybe just talk us how you expect those field additions to impact margins both in the near term and then you know, as volume ramps over the medium to long term at those facilities? Thank you.

Yeah, Casey, so we mentioned we've got one greenfield coming online this year. We're getting that wrapped up here in the next few months. You know, from a pacing perspective, I probably won't get into the details of, you know, quarter by quarter. We feel good about the guide for the year. We definitely feel good about their direction for CapEx as we continue to work this down to our objectives in 2027 and our overall free cash flow objective. Bringing this greenfield online doesn't have a huge margin impact. There are some startup related costs, but it's nothing significant that I would call out. And then we continue to work on the last greenfield for Sterigenics. Where we would expect that to come online probably into 2027 at this point if we continue to make sure we got the, you know, good process in place and getting the returns that we need out of that project.

Yeah. Got it. Thank you.

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

Hey, guys. Excuse me. Thank you very much for taking the questions. Just wanted to start off with one on the guidance. Just more broadly thinking about the 4% to 6% constant currency growth range. Curious on what you would call out as some of the biggest swing factors you're thinking, you know, maybe could enable growth toward the higher end of that range or maybe a little bit better versus those the low end.

Yeah. Brett, this is Michael. I would say it's all about volume. If the volume comes in and the med device side will be very well positioned in both Nelson and Sterigenics that would be able to give us outperformance.

Alright. Excellent. And then just a follow-up here on pricing. I think you indicated you're expecting, you know, kind of total company pricing around the midpoint of that 3% to 4% long-term range. Maybe if you could just break that down a little bit by segment, like, where you're expecting to see more pricing growth, in context some of the moving pieces you've discussed. Thank you very much.

Great. Just on the pricing side, 3% to 4%, I'd see Sterigenics would be on the high end of that. Nelson would be on the low end of that, and then Nordion would be on the low end of that. So I would be thinking about it, which is a little bit different than we've historically had with the Nordion side. As you know, we talked about that Investor Day. But as we look out for short term, you could expect that Nordion would be on the low end now versus being on the high in the past. But that's how you think about it. Sterigenics high end, Nelson and Nordion on the low end of that range.

Alright. Great. Thank you.

The next question will come from Dave Windley with Jefferies. Please go ahead.

Hi. Good morning. Thanks for taking my questions. I wanted to follow-up on CapEx first. Your comments your guidance for 2025 and then I think your comments for the longer term are both lower than you talked about at the Investor Day, which seems positive relative to your free cash flow generation goals. Wondering if that was just efficiency in some of your projects or timing related. Just wanted to make sure I understood why those were different from November. Thanks.

David, I would just this is Michael. Good morning. I would just see we continue to scrutinize our CapEx. It's the largest portion of our free cash flow outside of EBITDA, right? So we're going to continue to scrutinize that. And as Jonathan mentioned, one of the programs we're looking at out to 2027, and we're going to make sure that we get the returns on these programs and the commitments from the customers before we fully deploy all that capital. So that's had a little impact and we'd be able to get some efficiencies we've gone through. And as we look at CapEx, if the programs don't come into the returns we expect, we're not going to deploy the capital. So we feel good about where we're at in 2027 guide, and we're going to continue to work towards that.

Okay. And so on that appreciate the return discipline. Is it right to think that that a how should I ask? So is it right to think that at any lack of deployment of capital against certain projects would not impact your LRP thought process? Or could it adjust what you think you could achieve from a growth standpoint?

No. I think we feel good about our capacity. As you know, we've got capacity in place. Volumes have been a little softer. So we're continuing to make sure that we have a good understanding of what capacities our customers need. There's a couple of spots that are challenging, but we're going to work through that overall. But we don't see the change in capital deployment impacting the LRP revenue guide that we've put out there.

Okay. On the Cobalt program or project, you mentioned I think, first harvest from Darlington in 2028 maybe. Is that a I I'm curious about the process. Is that a test case as in you'll harvest it and then need to test to see whether it produced product that date, you know, the quality that you need, or has that already been validated? In which case, you know that that 2028 harvest is good to go?

Yeah. It's more of the latter. We feel very good about our ability to harvest that music cobalt in 2028. That program is going very, very well. Its timing is on track. Capital deployment a little lighter than we had expected, which is another positive to your earlier comment. And OPG has been a long-standing partner with us. We get a lot of cobalt from them today. Darlington is just another reactor, but we feel pretty darn good about where we sit today in the yield that'll come out in 2028. There's always things that could happen on that, but I'd tell you where we sit today and all the testing and the work that's been done, the team feels really good about it.

Great. Last question for me. Slightly more nuanced to a prior question, but the growth for 2025 constant currency about a point below your LRP, you mentioned to an earlier question, you know, it's primarily volume is the swing factor. It looks to us that maybe Nelson is the segment at least it would be performing under its target to get to your LRP. Is that the right thought process and therefore you need volume in Nelson? Or is your volume comment really across the segments? Just trying to pinpoint the area that could drive you into the LRP.

Yeah. So I would just I want to make sure the LRP, you know, we gave a revenue of 5% to 7%. Our aspiration long term is to get this thing back to where we were high single digit right, low double digits. But we're not there yet today, which is why we gave the LRP. But it's really around Nelson and Sterigenics. That's the key, right? As those volumes come in, we'll be able to execute on that and outperform. That's what our goals and that's what our team is set up to do. Nordion is in a pretty good spot of where we're at. We have a really good view on that, and the demand has been pretty wholesome throughout. It's really around the Nelson and Sterigenics side.

Helpful. Thank you. Appreciate the answers.

Your next question will come from Michael Polark with Wolfe Research. Please go ahead.

Morning. Follow-up on tariffs. So cobalt was the thing I had identified. Has cobalt historically been exempted when stuff like this happens? And then is there tariff risk elsewhere? I mean, Sterigenics and Nelson are service businesses. So what's the nature of the tariff risk for those two, if any?

Yeah. So, Mike, to answer your question, yes, it has been exempt in the past. That's why we don't want to get too far out in front and giving comments exactly the of the company because we don't know exactly what these tariffs, if they do come, what they're going to look like. They have been exempted in the past. We feel confident in the way the contracts are structured that the customers will bear the cost of that as it comes in. The case of Sterigenics, though their customer, Nordion's, that would be a CapEx impact. But we feel that's very manageable within the guide that we're giving you here today. We'll look at that as we understand more about tariffs. The only other spot there's some materials that come in from China in particular around some of the supply side with Nelson Labs that we know of that could be impacted as well. But we don't think these are really big material numbers, but we don't have clarity in exactly how it's to play out. That's why we have not incorporated in our guide. As we get more visibility, we'll give clarity to any CapEx impact as well as any operating cost impact. But overall, we feel pretty good about it, although it's a challenge. Right?

Appreciate that. Sterigenics, the competitor, STERIS, sped up notably Q over Q, you have the solid mid-single digit growth profile again. And guiding low to mid-singles for Q1. So what's the disconnect there? We're seeing 10% growth. You know, the numbers from your competitor, Sterigenics, haven't always lined up perfectly quarter to quarter. Trend seems to be friend, but I'm curious for how you assess maybe disconnects in the quarter and short term out. I'm there. Thank you.

Yep. Yeah. Thanks, Mike. I would say, as we've talked about in the past, if you look over multiple quarters, they kind of balance out. When you look at the revenue performance on both businesses, they kind of balance out. That doesn't mean that one quarter wouldn't be up versus us or vice versa. When we look at kind of where we're at today and if I look at the first quarter, I get a couple of factors go into it. Bioprocessing would be one of them and maybe some other geographies where they've got some positions that we don't that I think are growing a little bit better. And then the other one I would just say is I'd reference in some of my earlier comments, we've got a couple of customers I think have a little challenges. Again, that's the minority. It's not the majority. We're not seeing that from a destocking perspective. But, you know, I feel very good about where we're at when we look forward in our competitive position and listen, our competitors have put out comments about growth rates that, unfortunately, didn't materialize for them. And in this current quarter, they've got something that came out. We'll see how it plays out over periods of time. But I feel good about our position. We got to continue to execute commercially and operationally, and that's what we're focused on. Taking care of our customers.

Thank you, Michael.

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

Thank you. Thank you, everybody, for your support. Appreciate your time and your questions today. Obviously, we finished out in 2024 pretty darn consistent with what we told you a year ago what 2024 was going to look like. Right? We said we'd continued gradual improvement throughout the year. We're consistent within our guide. We continue to generate free cash flow in this business and are very disciplined on our capital allocation. We look forward to 2025. We feel we're well positioned as the markets continue to improve. We're going to capitalize on those opportunities, but we thank you for your continued support, and we look forward to having more positive conversations with you in 2025. So thanks for your time today, and have a good day. Bye-bye.