Good morning and welcome to the Sotera Health Fourth Quarter and Full Year 2023 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] after today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Vice President and Treasurer, Mr. Jason Peterson. Please go ahead..

Thank you. Good morning and welcome to today’s call. You can find today’s press release and accompanying supplemental slides on the Investors 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, Jon 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 net income, tax rate applicable to adjusted net income, adjusted EPS, adjusted EBITDA margin, segment income margin, net debt and net leverage ratio as well as constant currency comparisons.

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 to 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 try and give everyone an opportunity to ask questions. As always, if you have any questions post call, please feel free to reach out to me and the Investor Relations team. I will now turn the call over to Sotera Health’s Chairman and CEO, Michael Petras..

In the environmental area, we have been working with a third-party software solution to establish in a first-time published baseline environmental metrics. As previously mentioned, we continue our investment in industry-leading, state-of-the-art emission controls in our EO facilities.

We also published our first environmental management statement in our 2023 corporate responsibility report. With respect to human capital, culture and communities, we published our formal Human Rights statement and disclosed initial human capital data. We completed a global employee engagement survey with 83% participation rate.

Our Sotera Health Women’s Network held an interactive session for our leaders with our Board Director, Ann Klee. We are proud to announce that in 2023, women represented more than 40% of our global leadership promotions. On the governance side, we welcome Karen Flynn to our Board.

Karen brings Board independence to 91% and she adds valuable commercial experience in the pharma services space, which is an important aspect of our long-term strategy. We also launched a formal enterprise risk management process with results that led us to prioritize six initial areas.

These six areas are highlighted in our 2023 corporate responsibility report. And finally, our team completed outreach to institutions holding 60% of the company’s public stock float in 2023, and we held meetings on ESG topics with institutions holding approximately 40% of the public float.

We greatly value these discussions and share the feedback regularly with our Board of Directors, including this past week. We look forward to continuing to share our corporate responsibility accomplishments in the future. Earlier today, we provided our initial 2024 outlook.

For the full year 2024, we expect to deliver another year of top and bottom line growth with total revenues and adjusted EBITDA growth expected to be in the range of 4% to 6% when compared to 2023.

The variability within our full year revenue range will be largely driven by the timing and magnitude of the market recovery in both Sterigenics and Nelson Labs. Now, Jon will take us through the financials in more depth..

Thank you, Michael. I will first cover fourth quarter and full year 2023 results, including updates on capital deployment and leverage. I will then conclude with additional details on the 2024 outlook. On a consolidated total company basis, fourth quarter revenues grew by 23.3% or 21.9% on a constant currency basis to $310 million.

The fourth quarter volume growth was abnormally high with 50% of Nordion’s full year revenues landing in the period, as Michael previously mentioned. Fourth quarter adjusted EBITDA grew by 28.7% to $167 million, and adjusted EBITDA margins expanded by almost 225 basis points to 53.7%. Our reported interest expense for the quarter was $43 million.

Reported net income for the fourth quarter of 2023 was $39 million or $0.14 per diluted share. Adjusted EPS was $0.26 for the quarter, an increase of $0.01. Now let’s take a look at our segment performance for the fourth quarter. In the fourth quarter, Sterigenics delivered 6.5% revenue growth to $172 million.

Revenue growth drivers for the quarter included favorable pricing of 5.8% and favorable changes in foreign currency exchange rates of 1.7%, partially offset by slightly unfavorable volume and mix of approximately 1%.

Segment income grew 6.4% to $95 million, driven by favorable pricing and changes in foreign currency exchange rates, partially offset by higher costs and unfavorable volume and mix.

Nordion’s fourth quarter revenue increased by approximately 134% to $80 million, driven by favorable volume and mix of over 100% and pricing of over 30% as Nordion generated 50% of its full year revenue in the quarter as expected.

Segment income increased by more than 160% to $53 million, and segment income margins expanded by 720 basis points to 66.8%. Nelson Labs returned to growth in the fourth quarter as 2023 revenue improved 4.3% to $58 million compared to the same quarter last year.

Revenue growth was driven by favorable pricing of 3.6% and a foreign currency tailwind of 1.2%, partially offset by unfavorable volume and mix of 0.5%.

Segment income decreased 7.8% to $19 million and segment income margin declined by 420 basis points to 32.1%, which was driven by unfavorable volume and mix, coupled with some inflationary pressure, partially offset by favorable pricing. For the full year, we delivered $1.05 billion in revenue, up 4.5% or 4.2% on a constant currency basis.

We grew adjusted EBITDA 4.3% to $528 million, resulting in an adjusted EBITDA margin of over 50%. Reported interest expense for the full year was approximately $143 million. Reported net income for 2023 was $51 million or $0.18 per diluted share.

Adjusted EPS for the year was $0.81 per weighted average diluted share, a decrease of $0.15 primarily driven by higher interest expense and a higher tax rate. I will now turn to liquidity, net leverage and capital deployment. The company continues to be in a strong liquidity position.

As of year-end, we had approximately $700 million of available liquidity, which included $296 million of unrestricted cash and $400 million of available capacity under our revolving line of credit.

For 2023, after adjusting for the $408 million Illinois settlement, we generated $260 million of operating cash, which is in line with prior years and demonstrates the cash-generating strength of our business. Our net leverage ratio finished the year at 3.8 times within our target range of 2 to 4 times.

As you may recall, our net leverage ratio increased to 4.2 times in the second quarter of 2023 after the financing of our $500 million term loan and subsequent $408 million Illinois settlement payment. Since Q2 of 2023, our net leverage ratio has improved nearly 0.5 turn, which demonstrates our ability to de-lever through growth.

CapEx for the year finished at $215 million. As Michael mentioned, Sterigenics completed four capacity expansions during the year and made significant progress on the EO facility enhancements. We currently have three growth projects in process, two of which are greenfields. Nordion’s Cobalt-60 development programs are progressing well.

As I mentioned during our Q3 call, these are once-in-a-generation long-term projects that won’t yield incremental cobalt until later in the decade. For Nelson Labs, we continue to invest in expanding our pharma capabilities and in our lab information management system that we are deploying across the business segment.

Now, I would like to discuss our 2024 outlook. For the full year, we expect total revenues and adjusted EBITDA to grow in the range of 4% to 6%, with adjusted EBITDA margins similar to 2023 levels.

We expect another year of solid price performance with 2024 being at the lower end of our long-term stated range of 3.5% to 5% due to the moderation in inflation and timing of long-term contract renewals at Nordion.

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 2024. In Sterigenics, we are assuming relatively flat volumes in the first half with slight recovery beginning in the second half of 2024.

Versus 2023, Nordion revenues will be more balanced between the first half and second half with the first quarter again being the lightest quarter of the year but stronger than 2023.

For Nelson Labs, revenues for the first half of the year will be slightly lower than the back half with the first quarter being historically the lightest quarter of the year. In the past couple of years, we have provided visibility to the revenue risk associated with Russian cobalt supply.

As of today, there is an approximate risk of between 0% and 3% of total company 2024 revenue. At this point, I would like to direct you to Slide 18 of the earnings presentation that is posted to our Investor website under Events and Presentations, which outlines a change we are making to the calculation of adjusted net income.

By way of background, during Q2 of 2023, we closed on a $500 million term loan to fund the $408 million Illinois EO settlement. Consistent with our treatment of EO litigation-related costs, we excluded the interest costs related to $408 million of this loan to calculate adjusted net income. Beginning in 2024, we will no longer make this adjustment.

We have presented the impact this change would have had in 2023, so you have the right basis for comparison going forward. As you will see on the slide, adjusted net income is reduced from $230.1 million to $202.3 million.

The effective tax rate applicable to adjusted net income increased from 31.4% to 33.8%, and adjusted EPS changes from $0.81 to $0.71 per weighted average diluted share. These are the appropriate basis for comparison for our tax rate and EPS guidance. For 2024, we expect interest expense between $170 million and $180 million.

We are projecting an effective tax rate applicable to adjusted net income in the range of 31.5% to 34.5%. Adjusted EPS is expected to be in the range of $0.67 to $0.75. We expect a fully diluted share count in the range of 283 million to 285 million shares on a weighted average basis.

From a capital deployment standpoint, we will continue to prioritize organic growth and deleveraging as well as opportunistic M&A. And we expect capital expenditures in the range of $205 million to $225 million in 2024.

As previously communicated, we expect 2024 to be at an elevated level before we start to see a decline in CapEx spending in 2025 when we will start to see free cash flow generation accelerate. Finally, our guidance does not assume any M&A, and we anticipate net leverage to improve in 2024.

I will now turn the call back over to Michael for closing remarks..

Thank you, Jon. As we look forward to 2024, we will continue to focus on our priorities. A few of these priorities include, expanding our global network through disciplined investment in Cobalt-60 development and additional capacity. We’ll continue to invest in upgrades to our US EO emission control systems.

We will further enhance our one company capabilities through cross-functional business unit initiatives, all while delivering top and bottom line growth with strong cash flow generation. I want to reemphasize the strength and durability of our business model. In 2024, we expect another good year of performance in spite of uncertain demand recovery.

The fundamentals of the criticality of our services remain intact with our customers. We have long-term relationships with the top medical device and pharma companies of the world that are supported by multiyear contracts. We will continue to execute for our customers and when market volumes improve, Sotera Health will benefit from that recovery.

Our focus day in and day out is on our mission of safeguarding global health. This company plays a critical role in healthcare, and we are in a strong position for growth once again in 2024. At this point, operator, let’s open up the call for Q&A..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from Sean Dodge with RBC Capital. Please go ahead..

Yeah. Thanks. Good morning. I just want to start on Sterigenics. Michael, you said the guidance assumes volume recovery in the second half of the year. Can you give us a sense of the proportions of Sterigenics revenue you’re expecting first half to second half? I guess, historically, second half have always been bigger in terms of revenue.

Is 2024 going to be a lot more pronounced? And then maybe if you could just talk about the visibility you have into that? Is it just expecting a market recovery or there’s something else you’re seeing now that indicates that?.

Yeah, good morning, Sean. Yes, it will be similar to what we’ve seen in the past, where the second half is typically a little bit better than first half. I don’t think it’s going to be dramatic, but as we said, relatively flat volumes in the first half for Sterigenics and improving in the second half.

It’s really trying to predict, as I stated in my comments, around the recovery in the market volumes. We still see some destocking occurring in the channels, but we can tell you, overall, we’re not seeing it get worse. It’s very stable, both on the Sterigenics side as well as the Nelson side. It’s not getting worse.

We just -- the question is when the recovery will start to come back? And we just want to give you visibility on how we are thinking about it as the year plays out..

Okay, great.

And then on Nelson, maybe just any updates on the margin outlook there? Aside from just more volumes coming through, are there some cost actions you can take or lever as you can start to pull to drive some improvement in margins in the Nelson business?.

Yeah. As we’ve mentioned in the past, Sean, we got our position early in ‘23 where we’re probably over-resourced based on the volumes. And we did that with an eye towards better service and making sure that the volumes came back. We had the people in place to really take care of that business.

I would tell you that we’ll see improvements as the year progresses. We’re going to -- we will get turnover in that business. We’ll work that down. We’re not going to be backfilling as many jobs until we see the volumes recover. But our goal here is to get to the mid-30s as we’ve mentioned.

It will take us some time to get there, but that’s ultimately where our aspirations are over time..

Okay --.

It’s a fine line there, Sean. We want to make sure we’re there to service the customers. That’s the biggest thing when that volume comes. Okay. Thank you..

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

Hi. Good morning. Thanks for taking my question. Michael, I wanted to start on a little bit more strategic question.

On these long-term cobalt supply initiatives that you are working on, when and if those are successful, I know there’s some development work around new reactors and things like that, what’s the impact of that, I guess? You have a kind of a fairly stable and predictable growth rate, a certain amount of MedTech users’ notification for Sterilization.

Would you expect that to lower your input costs? Would you compete on price for more market share? Does it allow you to supply or to serve volume that you’re not serving today? I guess, I’m wondering, we really haven’t discussed this, I don’t think in much length, because it’s far away, but what’s the lever for you when you get more Cobalt-60 supply?.

Yeah. David, thanks for the question. So just for some folks that aren’t as familiar, our cobalt development programs are really focused around working with OPG, Ontario Power Group, which is one of our longest-term suppliers, getting more capacity there as well as the program we’re working with Westinghouse.

Our goal with these programs is to be able to keep up with the market growth over time. So there’ll be a portion of it that replaces existing reactors that will go out of service for maintenance work, if you will, or just being retired.

But then more importantly, it’s also to bring out some additional capacity for longer-term flexibility in our global supply chain. So we think ultimately, David, it’s needed to keep up with the market growth over the long run..

Okay. Okay. And then maybe on Sterigenics and following-up on Sean’s question. The volume and the destocking that you’re seeing, do you have -- it sounds like you emphasized it’s not getting any worse, that’s good news.

Do you have visibility into your customers? How much more destocking they need to do, any quantification of that to give you comfort that the volume kind of the correlation of your order patterns, the underlying MedTech order patterns might start to tighten up a little bit in the second half?.

Yeah, David, it’s pretty complicated the supply chain with your customers who have inventory, their distribution channels as well as the health systems. We are not seeing it to get worse, as I stated.

One example would be, I met late in the year -- actually, I’m sorry, it was the beginning of this year with one major MedTech customer CEO, and he said, “Listen, I took out $500 million of inventory in the back half of the year focused on working capital,” right. So we saw that, and we are seeing it across multiple customers.

I think many of you who follow the MedTech space see that as well and bioprocessing space as well, where people are taking it out and trying to get back to pre-COVID levels or slightly below. As I mentioned, we’re not seeing it get worse.

We’re not able to draw a great correlation in R squared, David, because of some of the pockets in between us, if you will, but we are seeing that stabilize. We’re not seeing it get worse. We’re starting to see a little bit of recovery.

But again, we feel pretty confident where we are and calling the visibility for the year on Sterigenics, and it’s really tied to volumes. We feel very good about our ability. If the volumes come, we’re going to be in a position to service that, which will help us get more margin improvement over time as well..

Great. Appreciate the answers. Thank you..

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

Great. Thanks, guys. I want to follow-up on that with the destocking. I mean after we’re dealing with it with the bioprocessing side and seeing on the devices.

So, is there any way that you guys could estimate like as to how much has been stocked? Or from a normal cadence, is this like over a full year that’s been stocked up and they’re working down, six months, something like that, so we can get -- I understand you’re not going to call there on the timing, but just from a magnitude like have -- and going back in history, have you ever seen anything like this where we can kind of use that as a framework?.

Luke, unfortunately, we can’t. Like I think all of you are struggling with it. As you look at these big MedTech companies and pharma companies, right, they’re global in nature, they’ve got multiple product lines with its pharma and med device. We look at -- we have conversations with them.

We look at their public filings around their inventory levels, their days sales on hand, and we try to do the best job we can. And we’ve talked to a lot of our investors. They’re having the same struggles looking through that with our customer base. But I would just tell you, we don’t see it getting worse.

So that would be the part that I want you to leave with as we continue to work through this overall throughout the channels..

All right. Great. And then just on the margin guidance, flat margin year-over-year. As the volumes come back in the back half and your growth there accelerates throughout the year, obviously, the pacing there should pick up in the margins. But I’m just wondering why we’re not getting back to more normalized levels there.

Is there any -- from an investment standpoint, if you guys can bucket out like the puts and takes there from the margin dynamics throughout the year?.

Yeah. So I would look at it when you look at ‘22 and ‘23, the margins are pretty consistent with that 50 -- just slightly over 50%. That’s kind of where our guides lead you in 2024. We’re focused on really driving margin dollar growth, not necessarily rate expansion.

But over time, if we get more operating leverage, as I mentioned minutes ago, I think that will help us with margin improvement. But right now, our guide is expecting flat margins at 50%-plus..

Okay. Thanks..

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

Hey, guys. Thanks so much for taking the questions. Just wanted to start off on one more follow-up around the revenue growth guidance. I’m just hoping if you could walk through some of the moving pieces, particularly around Nelson Labs and Nordion and thoughts for the year? I think you gave some commentary on the phasing.

But maybe if you could just give a little bit more on full year expectation and how to think about whether the step-up in Nelson Labs performance in 4Q could proceed into 2024?.

Yeah. Brett, I think it’s all predicated on the volume recovery. As I stated in my remarks, that’s the pluses and minuses around the guide that we’ve given. We expect Nelson will continue to improve over time. We’ve had good growth in our RCA business has been able to help us offset some of the volume on the Sterility side.

As I’ve also mentioned, some of the MDR compliance timing that’s played out. On Nordion, Nordion will be a consistent performer for us. It will be the lightest quarter, but -- in the first quarter, but it will be over what you saw last year because, as you know, last year was a really slow quarter.

But overall, we’re going to result in a growth rate that’s slightly better than what you saw last year out of the Nordion business..

All right. Thanks for the color. And then just one follow-up I had. Maybe if you could just give a little bit more on how we should be thinking about the free cash flow setup for 2024.

I think obviously, you had a pretty big adjustment or a moving piece in 2023 around the settlement, but maybe outside of that, is there anything changing significantly that we should be thinking about for 2024 outside of the ongoing CapEx projects that you have going? Thank you..

Yeah. Brett, thanks for the question. It’s Jon Lyons. We do see a favorable position on free cash flow for the year. I think when you pull out the settlement, we are somewhere around $40 million or $50 million in 2023. A couple of moving pieces inside that as I look going into 2024. Number one, we do have the Georgia settlement that paid out in January.

So that’s a moving piece. And then interest is going to be slightly elevated for the year compared to last, and taxes will be slightly elevated. On the flip side, we’ll have some EBITDA growth that will generate some cash, and we have less of a headwind on working capital going into the year.

And we’re very focused on generating free cash flow, and we’ll keep driving it. And as we -- as I said before, in Q3, we see CapEx coming down over the next couple of years, and our free cash flow performance will really accelerate as we move into ‘25 and ‘26..

All right. Thanks for taking the questions. Appreciate it..

Thanks, Brett..

The next question will come from Casey Woodring with JPMorgan. Please go ahead..

Hi. Thank you for taking my questions. Just - yeah, to follow-up on the CapEx guide, the $205 million to $225 million this year.

Is that the floor or could the finalized NESHAP ruling drive that high potentially? And then maybe if you could just break down for us how much of that number is on EO facility enhancements versus the capacity expansion projects and the cobalt development programs underway? And then you just mentioned now that the elevated CapEx this year will take a step down in 2025.

Can you just give us a sense for how many of these costs this year are not repeating?.

So Casey, I guess you got the one question out of 15 compounds. I’ll try to answer as best we can. We’re expecting the guide to be $205 million to $225 million on CapEx. We’ve got about $40 million in there for GFE. The cobalt development is a significant investment this year, as we stated, this last year and this year, the biggest years around that.

As far as NESHAP, we expect to hear something in NESHAP sometime in the month of March. It could be earlier March. We’re waiting for the final guide from the government. There could be incremental cost on it depending on exactly where that comes from.

But based on what we know today, we feel pretty confident of our position and our ability to meet the requirements. Again, we took a very industry-leading approach on this on how we’re trying to resolve the emission challenges that are expected by the EPA. But overall, we feel pretty good about the cap guide that we’re giving for 2024.

I think I got all your questions, there were several of them in there. I’m sorry if I missed one..

Yeah. No, that was helpful. Just as a follow-up, too. So you completed four Sterigenics capacity expansion projects in ‘23. You have three left to finish. I think you mentioned at our conference last month that you have one of those coming online this quarter.

Just curious if you can quantify the increase in overall Sterigenics capacity by the end of these expansion projects? And then if you could walk through what your capacity utilization expectations are for 2024, and if the softer volume environment is weighing on margins at all and would then create an easier comp once demand normalizes? Thank you..

Okay. So yes, we have one of the three capacity projects in process that’s coming live in the first quarter. We don’t get into particulars of how much incremental capacity that will generate for the market. But overall, again, we try to get commitments to our customers for approximately 40% of those expansions before we do that.

That doesn’t mean it happens at everyone, but that’s what our guide is. And I would tell you that as we look at those programs, one of them will come this year and then we’ll have one late in ‘24 and into ‘25 for the other ones. I think I got all of them. The capacity utilization, I think, was your other question. We target about 80%..

Okay, got it. Thank you..

The next question will come from Patrick Donnelly with Citi. Please go ahead..

Hey, guys. Thanks for taking the questions. Michael, maybe one just on the pricing side. It sounds like this year is going to be a little more at the low end of kind of that long-term 3.5% to 5% algorithm. Is that just -- I know you touched on some of the timing stuff.

Is that all -- I just want to kind of talk through what you’re hearing from customers on the core business. It sounds like the Nordion piece is maybe dragging that down a little bit.

But what are you hearing on pricing? And again, what’s the right way to just think about that going forward beyond this year as well?.

Yes. Patrick, thanks for the question. Yeah, we feel confident in 3.5% to 5%. We just wanted to signal to you this year, it could be on the lower end of it range, driven by the point that you just referenced. The longer-term, it’s just the nature of what it’s been the longer-term contracts for Nordion rolled off.

We had a very strong Nordion price performance in 2023, which would just soften a little bit in ‘24. We are not concerned about our long-range ability to generate price based on the value proposition we offer to our customers..

Okay. That’s helpful. And it sounds like over the past couple of quarters maybe you had some good dialogue with investors. Obviously, there’s a pretty concentrated holding at the top there.

I mean, any intel or insight into kind of what the initial holders are kind of thinking about in terms of potentially things like secondaries, things like that in terms of just the concentration of the holdings up top, given that you seem like you can chat with them a good amount?.

Yeah. Well, they’re on our board. So I do chat with them quite a bit. At the end of the day, they’re our shareholders, they’ve got to make decisions on when they sell the stock. They’re not going to be reckless about it, they’re very thoughtful on that. It’s been a great investment for them. They’re very supportive of the company.

And over time, they’ll eventually sell their position, as we all know, they’re private equity firms, and that’s what they do. But overall, they’re being very thoughtful on how they ramp that down. They want to make sure they’re not doing it in a reckless manner..

Understood. Thanks, Michael..

Thanks, Patrick..

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

Thank you. Good morning. Nordion 1Q look, I hear the thematic comment, but the range we could paint you could drive a bus through.

So like what’s the right number for Nordion revenue in the first quarter? Should we look at ‘22 and ‘21, $25 million, $30 million, something like that or not quite that high?.

Yeah. So we’re -- Michael, we’re not going to get into particulars on individual businesses by quarter. It will be up from last year. It won’t be as high as 2022, is the way I would think about it.

It’s just -- last year wasn’t really abnormally low because we came in a position., As you recall, last year, we hardly had any inventory at all coming into the year..

The follow-up below the line interest expense and tax. The question on tax is why is the tax rate so high? And is there a path to get it lower? And then on interest expense, I’m just trying to do the bridge ‘23 to ‘24. Jon, here, the comment is clear on Illinois, it was excluded last year, it’s included this year.

If I do that, $116 million of interest expense last year, if Illinois is probably $35 million. So now I’m $150 million and you’re guiding $170 million to $180 million.

What else is going on there? Is that just cycling in kind of higher rates generally on the overall balance, or are you modeling an incremental draw at some point in the year? I just want to fully understand the bridge from ‘23 to ‘24 on interest?.

Yeah. Thanks for the question. And I just want to make sure that folks understand and clarify. As we look at this, we reported today $0.81 of EPS on an adjusted basis for 2023. When we make these adjustments, right, the new baseline for comparison is $0.71. And yeah, the tax adjustment there sticks out a little bit leading to a higher tax rate.

The trick we have here on our tax rate and why it’s elevated is our excess interest expense that we can’t deduct for US tax purposes that -- because of our outlook, not being able to deduct that in the future and get the benefit, we have to take a valuation allowance against that, which leads us to a higher tax rate.

Continuing to grow is a path to reducing the tax rate over time and lowering things like interest expense that drive up US taxable income and our ability to use the interest deductions will help improve it..

So Mike, the other thing I would just add, there’s no incremental new debt contemplated in the guide.

And the number that we finished last year at $143 million compared to the guide of $170 million to $180 million, that’s just the timing run out of the loan that we put in last year and that rolling out is for a full year and also the higher interest rate environment. That’s all..

Got it. Thank you..

Okay, great.

Any other questions, operator? Is that it, Chuck?.

That is it. I would like to pass the call back over to Mr. Petras for any closing remarks..

Great. Thank you, everybody for getting together this morning. As you can see, we’re really proud of what we accomplished in 2023. We’re excited and optimistic about 2024. We have a great business here that plays a critical role in healthcare. We have sticky customer relationships. We continue to bring real value to our customers day in, day out.

But really, we’re providing a safe environment for our employees, the patients and the communities where we operate. So we’re really proud of what the team is doing, and we look forward to more conversations with you all in 2024. Thank you, and have a great day. Bye-bye..

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