Sotera Health (NASDAQ:SHC) reported third-quarter 2026 revenue growth and higher adjusted EBITDA, while reaffirming its full-year outlook despite softer demand from medical-device customers in Europe that emerged late in the quarter and continued into the start of the fourth quarter.
Revenue rose 4.4% from the prior-year period, both as reported and on a constant-currency basis, to $325 million. GAAP net income was $58 million, or $0.20 per diluted share. Adjusted EBITDA increased 3.9% to $171 million, while adjusted EBITDA margin expanded by nearly 100 basis points sequentially to 52.5%. Adjusted earnings per share increased 12% year over year to $0.29.
Chief Executive Officer Alton Shader said the results reflected strong execution across the company’s businesses. “Today, we reported solid top and bottom line growth versus the third quarter of 2025,” Shader said, citing margin improvement and growth at Sterigenics and Nelson Labs.
Sterigenics and Nelson Labs Lead Growth
Sterigenics generated third-quarter revenue of $209 million, up 8.5% as reported and 8.2% on a constant-currency basis. The business benefited from 4.8% favorable pricing, 3.4% growth from volume and mix, and a modest foreign-exchange benefit. Segment income rose 9.6% to $117 million, and segment income margin increased 57 basis points to 56.1%.
Shader said Sterigenics benefited during the quarter from favorable shutdown days, an outsourced customer program, and the company’s North Carolina X-ray facility. Those factors are also expected to contribute to fourth-quarter growth.
However, the company said it began seeing softness in the medical-device market in mid-to-late third quarter, primarily among European customers. The trend has continued into the beginning of the fourth quarter, resulting in lower-than-usual expectations for sequential growth.
“We are not expecting the sequential Q4 growth that we normally see in Sterigenics,” Shader said. The company expects approximately 6% constant-currency growth for Sterigenics in the fourth quarter, which it said equates to roughly flat sequential revenue compared with the third quarter.
Management described the softness as broad-based in Europe, though not uniform across every customer or product segment. Shader said U.S. demand has remained relatively stable. The company said the fourth-quarter outlook incorporates its current order trends, customer discussions and market conditions.
Nelson Labs posted revenue of $61 million, up 8.8% as reported and 9.2% on a constant-currency basis. Volume and mix added 6.6% growth, while pricing contributed 2.6%. Revenue exceeded the company’s expectations due in part to increased activity in expert advisory services, which supports customers with complex projects and regulatory needs.
Nelson Labs segment income rose 2.5% to $19 million, but its segment income margin declined 199 basis points to 32.1%, primarily because of business mix. Management expects fourth-quarter growth at Nelson Labs to moderate from the third-quarter pace, though expert advisory services are expected to remain a contributor.
Shader said the company does not expect expert advisory services to become a permanently larger share of the Nelson Labs business, describing the activity as project-based. Sotera Health is also pursuing cross-business selling opportunities, noting that approximately 70% of Sterigenics and Nelson Labs revenue comes from shared customers.
Nordion Revenue Falls on Shipment Timing
Nordion revenue declined 12.4% to $55 million, or 11.5% on a constant-currency basis, reflecting the timing of Cobalt-60 harvest schedules. Pricing increased 2.2%, but was more than offset by a 13.7% decline in volume and mix and a foreign-currency headwind.
Despite lower revenue, Nordion’s results came in ahead of management’s expectations because certain shipments occurred earlier than anticipated. Segment income declined 11.4% to approximately $34 million, while segment income margin improved 71 basis points to 61.3% due to operational productivity and favorable pricing.
Chief Financial Officer Jon Lyons said the margin improvement reflected operational execution and progress addressing items the business had worked through since last year.
Cash Flow, Leverage and Outlook
Sotera Health generated $228 million in operating cash flow through the first nine months of 2026, including $111 million in the third quarter. Capital expenditures totaled $145 million year to date, including $53 million in the quarter, supporting Sterigenics capacity expansions and ethylene oxide facility upgrades, Nordion Cobalt-60 development programs, and a new clean room at the company’s Salt Lake City laboratory.
Net leverage improved to 2.9 times as of Sept. 30, within the company’s stated long-term target range of two to three times. Lyons said Moody’s upgraded the company’s credit rating in early October. Sotera Health expects to complete its ethylene oxide facility enhancements in the first quarter of 2027 and anticipates a meaningful reduction in capital spending next year, though it did not provide a specific figure.
The company reaffirmed its 2026 outlook for constant-currency revenue growth of 5.25% to 6.75%, representing reported revenue of $1.233 billion to $1.250 billion. It also maintained its adjusted EBITDA forecast of $632 million to $641 million, representing constant-currency growth of 5.75% to 7.25%.
- Full-year adjusted EBITDA margin is expected to be approximately flat from 2025.
- Full-year adjusted EPS is expected to be $0.95 to $1.01 per diluted share.
- Interest expense is projected at $137 million to $140 million.
- Capital expenditures are expected to total $200 million to $225 million.
Management now expects Nordion to deliver mid-single-digit constant-currency revenue growth for the full year and Nelson Labs to post low- to mid-single-digit growth. Sterigenics is still expected to produce mid- to high-single-digit constant-currency revenue growth in 2026.
Shader also provided an update on the company’s litigation matters, saying an appellate decision in Georgia is expected by spring 2027, initial California trials are scheduled for January and April 2027, and Illinois cases have been assigned to one judge and remain in pretrial proceedings.
About Sotera Health (NASDAQ:SHC)
Sotera Health Company (NASDAQ: SHC) is a healthcare services company focused on sterilization, laboratory testing and infection prevention. Its services support manufacturers and providers across the medical device, pharmaceutical, tissue, food safety and other healthcare-related industries.
The company operates through three primary businesses. Sterigenics provides outsourced sterilization services, including ethylene oxide, gamma irradiation and electron-beam processing. Nelson Labs offers laboratory testing, analytical services and consulting for medical devices, pharmaceuticals and other healthcare products.
